Positively geared properties - do they exist?

[Belu]

fjficm you are doing well and seem to have built up a lot in a short time!

http://www.somersoft.com/forums/showthread.php?p=527852#post527852

you have done so much in 1 year! mind asking how you paid off the debt?

 

[MTR]

after tax you only get to keep 63% net at best. if the margin is say 20% AND the dev goes well, you will clear how much? not likely to be enough to own 1 unit. And if the market drops on you whilst building you may do your dough completely.

Hi Aus
I presume OC1 has been doing these developments in Melb where the market has been rising some areas as much as 30%, I am assuming the margin would be much great than 20%.

Cheers, MTR

 

[Legs]

Dont know if you know the Bass Coast Area of Victoria.

Big Desal Plant being built here.

This article was in last weeks paper.. BIG +vely geared properties here.


Still easily done too.

This one is $175,000 according to article you could get $500-$685/wk:

http://www.realestate.com.au/cgi-bi...t=&header=&cc=&c=96787018&s=vic&tm=1266028333

 

[yadreamin]

Hi yadreamin
What worked for me was changing the way I did things, which meant I had to stop buying -ve properties and educate myself on ways to bring cashflow in the door.

Look at properties or whatever asset class of your choice to bring cashflow in the door to balance your situation. This will require more work but once you move from the buy and hold -ve properties it can also bring many more opportunities.

McKnight pretty much sums it up "success comes from doing things differently".

Yes MTR you seem to be flying along.

I find +cf but then many of them are in postcodes that require a lot of my cash to be put into the deal how are you and others over comming this?

I have had a bit of a mindset shift in the last few days and already l see an oportunity.
I will chat with you soon.
cheers
yadreamin

 

[HomeBuyAU]

These two homes would rent for $250 pw, fully renovated and the price has dropped as these were for sale for around $230k a couple of months ago. I think with some haggling you might get them for $200k each or 390k for both. Most of the homes in the street have been painted and new roofs installed so it has improved the overall value. These are good rental homes as the renovations would have cost quite a bit as can be seen in the pictures. Also this area is due for dramatic CG increases soon

first one

second one

 

[MTR]

Yes MTR you seem to be flying along.

I find +cf but then many of them are in postcodes that require a lot of my cash to be put into the deal how are you and others over comming this?

I have had a bit of a mindset shift in the last few days and already l see an oportunity.
I will chat with you soon.
cheers
yadreamin

Getting finance is the most challenging at the moment.
With my 2 land and house packages where most banks will not finance due to postcode I can only use CBA 80% LVR lo doc, however must have BAS statements.

Other loans are all lo docs, most recent Westpac, once again need to provide BAS statements.

Unfortunately I can not access equity from any lo docs, I am hoping this will change soon.

Cheers, MTR

 

[fjficm]

work hard work smart
buy low sell high
share market - i love using 10% capital to trade market
risky i know but i love small caps pump and dump, technical analyst
looking to commercial and business maybe but atm the risk is not worth my time
a commercial will have to yield at least 15%, preferably 20%+ for me to even consider
business too risky for not much money

 

[steveadl]

When you get to know an area really well, you'll also be able to recognise that odd freak bargain property that comes up. Saw one in Blair Athol year ago that sold for $312k that by all intents and purposes was worth $350k probably rent for $330pw. A unit in Prospect that sold for $197k worth $230k easy, probably rent for $240pw. Even last week, saw a property in Elizabeth sell for $175k even though it should have gone for $200-210k - will rent out for $230pw, a 6.8% yield which is just about positively geared depending on what your IR is.

No development or construction needed and these certainly aren't regional/rural/mining towns.

Doesn't happen often and I can't really explain why it does at all, but when you know the areas you're looking at well, they do come up for whatever reason (desperate seller in many cases I imagine), and as only one buyer you should be able to get your fill.

 

[fjficm]

When you get to know an area really well, you'll also be able to recognise that odd freak bargain property that comes up. Saw one in Blair Athol year ago that sold for $312k that by all intents and purposes was worth $350k probably rent for $330pw. A unit in Prospect that sold for $197k worth $230k easy, probably rent for $240pw. Even last week, saw a property in Elizabeth sell for $175k even though it should have gone for $200-210k - will rent out for $230pw, a 6.8% yield which is just about positively geared depending on what your IR is.

No development or construction needed and these certainly aren't regional/rural/mining towns.

Doesn't happen often and I can't really explain why it does at all, but when you know the areas you're looking at well, they do come up for whatever reason (desperate seller in many cases I imagine), and as only one buyer you should be able to get your fill.

absolutely

exactly what ur talking about steve, sometimes i get more than 50% off purchase price too, instant equity.

thats what happens to areas where investors havent discovered yet but u know the market very well. to really make money u have to know ur stomping grounds BETTER than the REAs there. i get deals that other agents in the same are go WTF??!! and ask how i do it.

u cant really explain it. rpdata etc helps but like steve says u have to be there and when it comes up u go bang thats it.

it comes to a point that some deals are so ridiculously cheap that u go why the hell is anyone selling it for that price. i have properties that double in bank valuation within less than 1 year of owning it.

its not easy for 99% of the population to do what most of us here do. its the combination of believe, passion, foresight and street smarts

 

[jaycee]

When you get to know an area really well, you'll also be able to recognise that odd freak bargain property that comes up. Saw one in Blair Athol year ago that sold for $312k that by all intents and purposes was worth $350k probably rent for $330pw. A unit in Prospect that sold for $197k worth $230k easy, probably rent for $240pw. Even last week, saw a property in Elizabeth sell for $175k even though it should have gone for $200-210k - will rent out for $230pw, a 6.8% yield which is just about positively geared depending on what your IR is.

No development or construction needed and these certainly aren't regional/rural/mining towns.

Doesn't happen often and I can't really explain why it does at all, but when you know the areas you're looking at well, they do come up for whatever reason (desperate seller in many cases I imagine), and as only one buyer you should be able to get your fill.

Yeah none of those are actually cashflow positive are they ?

Unless you ignroe a whole heap of expense you pay out of your own pocket - who pays the rates ? pm ? insurance and maintenance (not to mention the shortfall in intrest charges (let's assume depreciation fills that gap)

I have 2 x villas, 1 ws near new, the 2nd brand bew, depreciation does not come close to filling the gap from rent, and they are renting out for about the same rates you mention above, I didnt think your fugres were that impressive to find, and I definitley mean in the close to the CBD of a capital city only

what am I missing ?

 

[steveadl]

Yeah none of those are actually cashflow positive are they ?

Unless you ignroe a whole heap of expense you pay out of your own pocket - who pays the rates ? pm ? insurance and maintenance (not to mention the shortfall in intrest charges (let's assume depreciation fills that gap)

I have 2 x villas, 1 ws near new, the 2nd brand bew, depreciation does not come close to filling the gap from rent, and they are renting out for about the same rates you mention above, I didnt think your fugres were that impressive to find, and I definitley mean in the close to the CBD of a capital city only

what am I missing ?

Oh ok sorry, if you want to get antsy over every cent then by my calcs the Eliz property would be about $1k negative over the whole year, and that's assuming no rent rise in 6 months (which there will be, so bring that loss down to about $8-900) - and this is before any depreciation deductions. Prospect was similar figures back when it was on the market and rates were lower, even at fixed levels for that extra security. I'm not saying they're the best deals out there, but I am saying they were positively geared (or perhaps a few hundred $'s off) and were all capital city suburb properties without the added nasties of regional issues.

Going back to your first line - yes, all were cashflow positive. Positively geared, what the OP was talking about - yes or just about.

 

[jaycee]

I must be working it out wrong then


Purchase price $175,000.00
Purchase Costs $10,500.00
TOTAL MORTGAGE $185,500.00

Interest Rate 6%
Income Tax Rate 30%
Rent $210.00


Expenses
Interest $11,130.00
Water Rates $ 1,000.00
Council Rates $ 1,000.00
Building Insurance $ 1,000.00
Landlord's Insurance $ 300.00
Property Manager $ 1,638.00
TOTAL EXPENSES $16,068.00

RENT $10,920.00

GROSS SHORTFALL $5,148.00

Depreciation $2,000.00

TAXABLE SHORTFALL $7,148.00


Tax Return $600.00

NETT SHORTFALL $4,548.00


Seriously, what am I missing ?

 

[steveadl]

Haven't actually written them out yet, for my post above I did it in my head, but here goes:

Purchase price $175,000.00
Purchase Costs $7,000.00 ($5,830 Stamp Duty and I'll round up to incl. conveyancer etc)
TOTAL MORTGAGE $182,000.00

Interest Rate 6%
Income Tax Rate 30%
Rent $235.00 (I stated $230pw above (not $210??) but if we're going to get specific I'll be more accurate)


Expenses
Interest $10,920.00
Water Rates $ 520.00
Council Rates $ 850.00
Building & LLInsurance $ 400.00 (I get it cheaper than this, but I'll add back as I get it wholesale)
Landlord's Insurance $ above
Property Manager $ 1,370.00
TOTAL EXPENSES $14,060.00 (Note: These can be taken as fact as I own a property 3 doors down from the example I'm using that is virtually identical down to the same m2 block size)

RENT $12,220.00
GROSS SHORTFALL $1,840.00
Depreciation $2,000.00

TAXABLE SHORTFALL $3,840.00

Tax Return $1,150.00 (I could be working this out differently to you, on my spreadsheets I would use $3,840 taxable loss x 30% = $1,152.00 tax back - but am open to correction here)

NETT SHORTFALL $688 (I use gross shortfall it's costing me out of pocket, less the tax owning the property will give me back ie. $1,840 - $1,152)


So I was almost spot on with my rough guesstimate unless I've made a mistake somewhere?

 

[jaycee]

I got the rent wrong and overstated the rates (and insurance, i meant to use $400 for building & $300 for landlord's insurance)

You didn;t include a figure for Lanldord's insurance.
Your pm is cheaper than Perth pm's also.

So i worked out it owuld cost $1800 pa after you get a tax return, $4400 before you get that tax return.

$1800 = about $30 / week, not long till it's purely cash flow positive obviously, 1 rent rise I'd say

i wish my water/council rates were lower too

 

[steveadl]

I got the rent wrong and overstated the rates (and insurance, i meant to use $400 for building & $300 for landlord's insurance)

You didn;t include a figure for Lanldord's insurance.
Your pm is cheaper than Perth pm's also.

So i worked out it owuld cost $1800 pa after you get a tax return, $4400 before you get that tax return.

$1800 = about $30 / week, not long till it's purely cash flow positive obviously, 1 rent rise I'd say

i wish my water/council rates were lower too

I combined LL & Building Insurance into the one figure (it comes on the one statement undissected). I pay around $330, I've then rounded up as I only pay 80% on insurance, not 100% of policies. So yes, $400 for building and LL is correct, bare in mind it's a small house and it's pretty cheap rent.

Yeah PM fees are ok @ 8.8%, though I pay 6.6% in a better area. I hear they're a killer in WA.

Council and water rates would come down to the fact that it's a cheaper property I guess.

So for me the figures would be $13pw negative at $688 for the year. In reality the property I own in the street went positive a while back as I paid substantially less.

 

[RumpledElf]

There's one here for $130k that needs a fair bit of elbow grease in a cosmetic reno (paint, flatpack kitchen etc - maybe $10k of work) but would then rent for $200pw or more, which strikes me as pretty positive without running any figures. Its been for sale forever. Noone wants it. We're building a 4x2 that will cost $160k if we also had to buy the land ($110k for the house alone), and would rent for $280pw - we're adding lots of extras so that cost could come down heaps. And there's one in the next town for sale at $105k that is rented for $140pw, has also been for sale forever. They're around. And water bills here are $47 a quarter, which helps

 

[jaycee]

I combined LL & Building Insurance into the one figure (it comes on the one statement undissected). I pay around $330, I've then rounded up as I only pay 80% on insurance, not 100% of policies. So yes, $400 for building and LL is correct, bare in mind it's a small house and it's pretty cheap rent.

Yeah PM fees are ok @ 8.8%, though I pay 6.6% in a better area. I hear they're a killer in WA.

Council and water rates would come down to the fact that it's a cheaper property I guess.

So for me the figures would be $13pw negative at $688 for the year. In reality the property I own in the street went positive a while back as I paid substantially less.

PM's are arounf 8.5% + gst

But, add up all the extra charges (lease fee/inspections etc), and your looking at closer to 16%

 

[RumpledElf]

But, add up all the extra charges (lease fee/inspections etc), and your looking at closer to 16%

Yeah. I worked it out to be slightly over 20% for mine (low rent and they had a minimum fee and lots of fixed price charges) and decided to self manage. I actually need a passive income in the short term ...

 

[james_w]

I am currently looking at 1 3 units in the one block rents $590 a week asking $425000 returning 590 area has population of 13000 expected to increase to 15000 property is for sale by out of town agent and rent is $70-$100 under market for each unit once strata will be worth 200k each

 

[steveadl]

PM's are arounf 8.5% + gst

But, add up all the extra charges (lease fee/inspections etc), and your looking at closer to 16%

Grossed up our 6.6% fees turn into 8.9%. The 8.8% fees gross out to 11.2%. That's just the 1 week per year let/re-let and the $5pm petties. The agent we have a few with is great though - we get out of some of the petties fees and she's not religious with the relet fees either from memory.

In SA not too many PM's charge for inspections yet, so we're fortunate there, though I think it is becoming more prevelant.