Positive geared property in Melbourne with 105% loan

[italianstylezz]

Hi all,

I think I have found a property in the outskirts of Melbourne that has the prospects of being a positively geared property - straight off the bat.
To make things even more interesting... I've done all my figures based on borrowing 105% of the purchase price.
Without going into the specifics of the lending side of things, here's the details of the property.
I'm interested to hear people's thoughts on the topic as I haven't been able to find something like this for the past 3 years at least.

3-bedroom home, brick veneer, 14 years old, stumps, large block, good views, and well maintained (sorry for summarising, but I don't have the time to give specifics right now as I'm at work)
Similar homes (age, condition etc..) in the area with similar criteria and location are selling for $180,000 - $220,000

*Note that my estimate figures are rounded off. My actual figures are on my home PC*

Purchase price $156,000 (Asking price was $166)
Stamp duty $5,850
Cosmetic renovation costs $4,500
Other costs $2,500
APPROX TOTAL PURCHASE PRICE $168,850

Weekly loan repayments (Interest only) $236.55
*Based on 7.3% over 30 years*
I work for a major bank, so my rates will be slightly lower at the moment, and there are no fees involved, so the mortgage repayments are slightly higher than what I'll actually be paying, but better to be safe with estimate figures.

Another perk is that this town currently has 3 rental vacancies, and one of the 3 listed has only been up for 2 days.
I've also reviewed the amount of homes for sale and it's very modest with only 20 - 30 at any given time over the last month.
These figures are even better when I say that this town has a population of over 40,000 people and according to a recent census, over 26% of the population are renting! Can it get any better!!??

So basically I'd need at least $240 rental p/week to make this a positive geard property (excluding rates costs, water etc..)
And looking at the current homes available for rent, I'm quite sure I'll be able to get at least that.

Would any of you jump at this kind of investment (assuming that the home is structurly sound, no known problems with surrounding homes, neighbours, or any other specifics that are included in a due diligence report)?

Cheers,


Rick

 

[Gentle_Chief]

That sounds like a sure WINNER.
good on ya,

With depreciation claimable that will end up in positive territory.

Cheers,
GC.

 

[tubs]

Are you satisfied with the capital growth prospects?

With the latest interest rate cut, a lot more properties will be entering the +ve gearing territory shortly.

 

[italianstylezz]

There's not much growth in that area over the past few years, but there is something never the less.
My investment scheme was actually to aim for a yield property because I'm worried that our market might drop as the US' has.
I'd rather have a high yield property with no shortfall repayments and no growth, then have a low-yield property with no growth and a massive shortfall from my hip pocket =)

 

[Ajax]

Are you including managing agents fees/legal fees to purchase the property/cost of repairs/insurance costs (lanlord insurance and building insurance)?

Even so if there is another 1% drop in interest rates and our economy and rents hold up it should be a good buy.

I have a unit in Sydney with slightly similar figures (yours are better). Purchase cost $172k, rents for $250/week...but a fair way to go until cashflow positive.

Not sure you would qualify for capital works allowance (building may be too old). Check with your accountant.

 

[Tman]

i think i know where you have bought it
i saw the property was on the market for about 1 and 1/2 week and now it is under the contract.. do you live in Melbourne ? if i was in melbourne i would go for this house as well..my next IP would be in Melbourne for sure..

yeap it was a bargain in that location..most of the houses there would cost you around 200-250k

congrats for a good buy

 

[Bayside]

Can I ask how far it is from the city? Is it Frankston North?

 

[GordonGekko]

it could be ... but the houses in fr.north does not sell for these prices any more... they did in 2006

or who knows ... but indeed it smells like frankston....

 

[Peter Parker]

it could be ... but the houses in fr.north does not sell for these prices any more... they did in 2006

or who knows ... but indeed it smells like frankston....

I'd guess Melton. Sunbury and Wyndham are both more expensive and have lower and higher populations respectively. Frankston also has a higher population.

 

[italianstylezz]

Close guesses but you'll have to guess further out in order to match the figures I provided above
Melton has over 120+ vacant rentals. I would only buy in Melton if I had an "edge" or a chance to sub divide in the heart of Melton, or West Melton.
I wouldn't go near Frankston - just my personal views and Sunbury is a great option also, but prices there have also risen too great in the past 12 months to buy now...

 

[Tman]

location was in South west of Melbourne

am i right ?

 

[ILoveProperty]

Not doubting your facts and figures, but a town of 40,000 people with only 3 properties for rent at the moment? Hard to believe.

 

[italianstylezz]

Ok I have finished going over the figures and research and unfortunately the data is not a true represntation of the area. The suburb in which I was searching for rental vacancies also shares the same postcode as about 4 other nearby suburbs. So when I search for population, I search for postcode and when I search for rentals, I search by suburb name.
The figures now seem to be more realistic and dissapointing =(

Tman - You're close... I'd say it's more North West

 

[BayView]

Hi all,

I think I have found a property in the outskirts of Melbourne that has the prospects of being a positively geared property - straight off the bat.
To make things even more interesting... I've done all my figures based on borrowing 105% of the purchase price.
Without going into the specifics of the lending side of things, here's the details of the property.
I'm interested to hear people's thoughts on the topic as I haven't been able to find something like this for the past 3 years at least.

3-bedroom home, brick veneer, 14 years old, stumps, large block, good views, and well maintained (sorry for summarising, but I don't have the time to give specifics right now as I'm at work)
Similar homes (age, condition etc..) in the area with similar criteria and location are selling for $180,000 - $220,000

*Note that my estimate figures are rounded off. My actual figures are on my home PC*

Purchase price $156,000 (Asking price was $166)
Stamp duty $5,850
Cosmetic renovation costs $4,500
Other costs $2,500
APPROX TOTAL PURCHASE PRICE $168,850

Weekly loan repayments (Interest only) $236.55
*Based on 7.3% over 30 years*
I work for a major bank, so my rates will be slightly lower at the moment, and there are no fees involved, so the mortgage repayments are slightly higher than what I'll actually be paying, but better to be safe with estimate figures.

Another perk is that this town currently has 3 rental vacancies, and one of the 3 listed has only been up for 2 days.
I've also reviewed the amount of homes for sale and it's very modest with only 20 - 30 at any given time over the last month.
These figures are even better when I say that this town has a population of over 40,000 people and according to a recent census, over 26% of the population are renting! Can it get any better!!??

So basically I'd need at least $240 rental p/week to make this a positive geard property (excluding rates costs, water etc..)
And looking at the current homes available for rent, I'm quite sure I'll be able to get at least that.

Would any of you jump at this kind of investment (assuming that the home is structurly sound, no known problems with surrounding homes, neighbours, or any other specifics that are included in a due diligence report)?

Cheers,


Rick

Do you mean pos geared, or pos cashflowed? Two different situations.

Pos geared means rent is more than total outgoings.

Pos cashflowed means after the tax return has been applied.

If it is managed for you by a PM, then I'd be allowing around 20% of the rent to be eaten up by holding costs - not including loan interest.

That's a nett rent of $192 p/w.

Your loan repayments are $236 if you average 7.3% for the life of the loan.

Not pos geared by those calcs at this point in time.

But it may be pos cashflowed after the tax return, and if the interest rates drop down a bit more. There is decent depreciation as well.

At 6.5% you are still short about $20 a week before tax return, so I'd say it's pos cashflowed after tax at that figure.