returns on investment property
- Thread starter lovelykym
- Start date
I don't know of any calculation for working out what is good, but that works out at 9.6%.
Anything above the cost of the borrowed funds is good.
In city areas around 5% is acceptable, 7% or more is very good
returns
Hi
Thanks for your response.
The costs are I guess the average costs such as insurance , $900 a year, I dont use an agent so there are no costs there. Basically the tenants pay the rent each week and thats pretty well it. The property is a large double block which has a very solid tidy renevated 3 bedroom house at one end and at the other end is a new 2 bedroom home. Each have there own entrances and utilities. There is as I said no maintanance as the property is in perfect order.
Hi
Thanks for your response.
The costs are I guess the average costs such as insurance , $900 a year, I dont use an agent so there are no costs there. Basically the tenants pay the rent each week and thats pretty well it. The property is a large double block which has a very solid tidy renevated 3 bedroom house at one end and at the other end is a new 2 bedroom home. Each have there own entrances and utilities. There is as I said no maintanance as the property is in perfect order.
The question for me is what is "a property", before even looking at the return.
Hi
The property is a very large block of land in East Maitland nsw, which has on it 2 seperate homes. One is a very tidy solid 3 bedroom home and the other is a new 2 beroom home . Each has its own utilities and access. Both are rented out to seperate families, rent is paid weekly. No maintanance as they are in perfect condition.
Cost was 300,000 , borrowed all but 20,000. Fixed ,interest only for 5 years.
The property is a very large block of land in East Maitland nsw, which has on it 2 seperate homes. One is a very tidy solid 3 bedroom home and the other is a new 2 beroom home . Each has its own utilities and access. Both are rented out to seperate families, rent is paid weekly. No maintanance as they are in perfect condition.
Cost was 300,000 , borrowed all but 20,000. Fixed ,interest only for 5 years.
I hope you're right, but don't count on it!
And don't forget council rates, water and sewerage charges, and land tax (if applicable).
Yes you are right even houses in perfect order require maintanance, however my question was is that return a good return for the outlay.
A lot of people pay 300,000 plus for one home and get only half that return . My original question was - What is considered a good return on out lay for investment property's. thanks Kym
A lot of people pay 300,000 plus for one home and get only half that return . My original question was - What is considered a good return on out lay for investment property's. thanks Kym
Well, that depends.
The yield you have described is good, but I don't know the area you are talking about and whether or not that is average for the area. I don't know what the quality of the homes are, nor the quality of the tenants.
Generally there is a perception that the yield can be looked at as a direct response to the quality of a property/area and that high yeild equals high risk. There is also a perception that high yield equals low CG.
While this is not necessarily true, you do need to weigh it up when you do your DD on a property. In the past, I have purchased 2 properties with in excess of 20% yield. While the yield was good, I onsold both for a small CG mainly because there were problems with the neighbours, which probably explains why they were priced so low at the start. I still came out with a substantial profit, but the annoyance factor with both these properties was quite high, so it was a relief when they were sold.
Risk = RewardA good return would be 100% return p.a.
It depends on how you look at return on investment. My take on it is something like this (assuming )
You invested 20k
Your gross return is 32k + capital growth
Your costs are around 4k per yr (rates,water,insurance,landtax etc)
Interest costs are 300 x 6% = 18k
Your nett return is therefore 10k
Your return as a percentage is 10k/20k (not including Capital gains)
= 50% per year
As you can see the less money you put into a property the higher the Return On Investment. If you didn't put the 20k into the property would it be sitting in the bank getting 5%
Well done.
Bushy
You invested 20k
Your gross return is 32k + capital growth
Your costs are around 4k per yr (rates,water,insurance,landtax etc)
Interest costs are 300 x 6% = 18k
Your nett return is therefore 10k
Your return as a percentage is 10k/20k (not including Capital gains)
= 50% per year
As you can see the less money you put into a property the higher the Return On Investment. If you didn't put the 20k into the property would it be sitting in the bank getting 5%
Well done.
Bushy
