PIA Help

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From: Trina Blum


Hi,

Hope someone can help me out. I've purchased the PIA but think I am going wrong somewhere putting figures in. I am looking at a property that would return a min 6.5% gross rent return which I was told should basically cover all the outgoings.

When I put the figures in it is showing that I would be out of pocket over $30 each year and it would only become cashflow positive in about year 30. Is this unusual? The capital growth is good but it would be costing me too much money. Is this due to the tax bracket my husband is on?

Would someone be able to run the figures for me and see what they get so I know I am using the programme correctly:

Price: $100 000
Rent pwk: $130
Rates: $653.70
Water: $578.60
Strata: $578.60
Int rate: 6.99%
Borrow: 106% of purchase price
Investors Income: $45976 (one name only)

I would really appreciate it if someone could see what result they get. I've tried the programme for a couple of places and always end up with a similiar result i.e. costing over $30 pwk.

Thanks
Trina
 
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Reply: 1
From: Trina Blum


Woops I meant out of pocket $30 each week not each year.
Trina
 
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Reply: 1.1
From: Michael Croft


Hi Trina,

You're about right with the figures as I get $37 p/w out of pocket in year one and $22 down per week at year 10.

It's a typical neg gearer!

regards, Michael Croft
 
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Reply: 2
From: Jude H


On 10/18/01 1:43:00 PM, Trina Blum wrote:

>I am looking at a property
>that would return a min 6.5%
>gross rent return which I was
>told should basically cover
>all the outgoings.


Trina who told you this?


Jude

~ Never take no for an answer from someone not empowered to say yes ~
 
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Reply: 2.1
From: Jude H


Well that's interesting. Trina gets $30 pw, Michael gets $37 pw and I get $26 pw (IO, P&I was $57 pw).


Jude

~ Never take no for an answer from someone not empowered to say yes ~
 
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Reply: 2.1.1
From: Trina Blum


Hi

Thanks for running the figures for me at least I know I'm somewhere in the ballpark and not too far off with how I'm putting things into the programme. The reference to the 6.5% gross rent covering all outgoings was incorrect on my part. The person who told me is a fellow IP investor and he did actually tell me that he looks for a min 6.5% rent return before looking into the property any further (I just presumed it was gross but perhaps he meant net - I'll have to check with him). I think this is how he weeds out the ones that are nowhere near positive cashflow.

So can someone tell me what return I should be looking for so that a property is positive cashflow or near to. Some of the properties I've been told about by agents are a lot less than 6.5% so I thought this one seemed quite good. However although we can afford to put in the $30 odd a week it means being negative geared and unable to buy as many IP's. That is obviously not such a good thing.


Regards
Trina
 
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Reply: 2.1.1.1
From: Michael Croft


Hi Jude and Trina,

Firstly the discrepancies in the figures are easily explained; the great number of variables and any changes to default settings will explain all.

Trina, there are so many variables to determine a cash flow positive property that it's a bit hard to draw a rule of thumb. But a good start would be a gross return of 1% or better above your interest rate. So at 6.99%(assuming 100%+ borrowings) I'd want to see at least 8%, not easy to do in this market - but not impossible either.

Good luck, Michael
 
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Reply: 2.1.1.1.1
From: Rixter ®


Hi Trina,

On those figures you mentioned, you did not show any capital or plant depreciation. Maybe this is why PIA shows your costs at $30 /w to hold IP with a 6.5% gross rental return. Did you include any, if so how much? Not having the PIA software myself I dont know if it factors any non-cash depreciation deductions in. It is imperative that all legitimate tax deductions are claimed if you want to maximise your cashflow.

Happy Investing,
Rixter :)
 
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