Doing the sums #2

I had some great responses to my post on October 13th about doing the sums when looking at investment properties and how important (and sometimes surprising) it is to get an idea of how much it will cost you to start and also to maintain. I’m always keeping an eye out for great examples so will post them when I come across something which shows a simple and affordable approach.

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This property is a simple one bedroom unit in a complex of 12 units. It’s in a well established suburban area which is well regarded and in the same city as my first example. The area again demonstrates good infrastructure and is close to necessary facilities (shops, hospitals, schools etc). 

On face value the unit appears to be well maintained but of course you would want to inspect not only the property itself but also look around the complex and the units around it. It is for sale for $142,500 and is returning a healthy $190/week. Let’s say that it ticks the boxes as far as the quality and standard of the complex and we manage to get a realistic offer of $140k accepted. What do the figures look like and is it affordable?

How Much Will It Cost Me?
 Property Price – $140,000 Deposit (10%) – $14000 Mortgage – $126,000
Stamp Duty – $3470 Interest Rate – 4.69%
Conveyancing – $800
Mortgage Insurance – $1800
Total Costs (estimated) $20070

Once again, these are the main costs with a deposit of 10%, if you can get to 20% for a deposit the mortgage insurance disappears and the total estimated cost would then be $32,270. So you could get this property for an initial outlay of between $20,070 and $32,270. This is all great but let’s once again look at how you maintain this. Rather than being overly conservative, this time I’ve gone with one of the better interest rates that I can find at the moment of 4.69%

How Much Will It Cost To Service?
 Loan Amount
– $126,000/$112,000
Council Rates – $900 Rent Income – $190/wk
 Interest Rate – 4.69% Water Rates – $900
 Repayments/Wk (10% deposit)
– $150.50
Body Corp – $800
 Repayments/Wk (20% deposit)
– $134.00
Property Mgmt. – $700
 Yearly Repayments – $7826/6968 Yearly Costs – $3300  Rent/Yr – $9880

For a 1 bedroom unit the rent is very good and in a tight rental market this is becoming increasingly realistic. If you started with the 10% deposit you would find yourself out of pocket $1246 a year (or $24 a week). If you managed to pull together the 20% deposit you would be out of pocket $388 a year or less than $7.50 a week! A dollar a day really is loose change! Come tax time and factoring in some depreciation I’d think it could even be likely to end up being cost neutral.

Again remember this is a ‘one moment in time’ scenario and things can change, but even with some unforeseen expenses and the odd maintenance request a property like this has the potential to be a great starter for an investment portfolio!

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