Hi all
I would like any opinions on the purchase of Pensioner Rental Units.
Background
The units are located in a bayside location in Brisbane. The complex consists of 83 one bedroom fully furnished units, with two community buildings - recreation and dining and on site management. There are two rental increases per year. The rent paid is 85% of aged pension + 85% of rental assistance. The rent is paid directly by the Federal Government fortnightly. The rents normally increase inline with the increase to the aged pension. Then tennants reside in their own fully furnished one bedroom unit which includes livingroom, bathroom, 64.4M2 with outdoor area 18M2. the tennants also receive three meals per day and weekly linen service.
The offer is the sale of two units on one title for $198,000.00 plus usual purchase costs. total costs $206935.00.
Financials
Weekly rent per pair of units $448.12
Total annual rent $$23302.24 (assume 100% occupancy)
Total annual expenses $10443.43 (assume 100% occupancy) net return on investment is 6.5%
other deductions: depreciation of building $1848 and depreciation of fixtures $5711.
Based on 80% borrowing with an interest rate of 7%, should be a positive cash flow of $96 per week.
Negatives:
The major bank will only lend 60% of purchase price, second tier banks will lend 80%. I am interested in opinions on the future viability of this type of investment and any obvious risks that I may have overlooked.
Regards
Mick A.
I would like any opinions on the purchase of Pensioner Rental Units.
Background
The units are located in a bayside location in Brisbane. The complex consists of 83 one bedroom fully furnished units, with two community buildings - recreation and dining and on site management. There are two rental increases per year. The rent paid is 85% of aged pension + 85% of rental assistance. The rent is paid directly by the Federal Government fortnightly. The rents normally increase inline with the increase to the aged pension. Then tennants reside in their own fully furnished one bedroom unit which includes livingroom, bathroom, 64.4M2 with outdoor area 18M2. the tennants also receive three meals per day and weekly linen service.
The offer is the sale of two units on one title for $198,000.00 plus usual purchase costs. total costs $206935.00.
Financials
Weekly rent per pair of units $448.12
Total annual rent $$23302.24 (assume 100% occupancy)
Total annual expenses $10443.43 (assume 100% occupancy) net return on investment is 6.5%
other deductions: depreciation of building $1848 and depreciation of fixtures $5711.
Based on 80% borrowing with an interest rate of 7%, should be a positive cash flow of $96 per week.
Negatives:
The major bank will only lend 60% of purchase price, second tier banks will lend 80%. I am interested in opinions on the future viability of this type of investment and any obvious risks that I may have overlooked.
Regards
Mick A.