Accounts summary - real numbers from a real property.

[cube]

All being well, attached to this post are the real figures from a real property over the past 6 years.

Hopefully this will provide a useful baseline for someone, possibly a first time investor, wondering how those lovely charts they show you at Property Investment seminars (you know, where the rent goes up every year and you spend $300 a year on maintenance) look in real life.

Obviously I won't reveal the actual property, except to say it is a 3 bed house in West Auckland. I'm sure anyone with a modicum of private investigation skills could work it out, but that isn't the point!

Accounts Summary.pdf

[donna]

I know it's not the point you're making but just looking at cashflow isn't the total position either....isn't it also relevant to consider capital gain? And if you sold the property you'd do quite well from your initial investment aye.

cheers

Donna

[cube]

Absolutely - but I guess the point is that even if mortgage, rates & insurance are covered, it isn't the whole story.

[BigDreamer]

Thanks for sharing, Cube. Rent has really increased over those 6 years but I bet your capital gains far exceeds this increase

[Wayne]

Your depreciation suddenly droped in 2012 then jumped back to trend - missing a 0?

[PC]

Pity we can't invest in Council rate bills. Almost 100% return in 6yrs - nice.
Good to see the rent also doubled.

Have to be able to survive that 6-10yrs negative gearing and pray & hope for rents to rise and tenants not to trash the house!
(then you get clobbered with more tax).

[BigDreamer]

Pity we can't invest in Council rate bills. Almost 100% return in 6yrs - nice.

Ah yes that would be great!

You know, I have properties all over NZ and some even small towns in which I have seen GV drop yet council rates ALWAYS increased on a year by year basis. I have not owned one property in which the council rates have dropped in a particular year.

[klauster]

Negative geared investments are quite unique and only for somebody like in this example who is able to offset 19k loss. To speculate that capital gain will do the magic can change on the blink of an eye, see ring fencing and so on.
Another aspect is for many very remote - keeping a property in line with current and future lifestyle requirements (upgrades and WOF issues). That amount would challenge the capital gain - one reason that rentals have lower standards.

Upgrading a dated bungalow (100 m2) to current requirements (main pressure hot-water 5k, bath 10k, kitchen 15k, floor cover 1.5k, range slider 4.5k, insulation 4k, deck 6k), who would spend that sort of money (40-50k) for a rental that is not rent deductible?

And it does not end here – remember replacements/maintenance of the building body, windows, gutters, roof, fencing and garaging or such things like electrical wiring, fixed installed heating, ventilation.

As you notice, I don’t speak about minor thing like redecorating (painting, repairing damage, etc) – but still real costs for landlords, apart from vacancies for doing all that sort of things.

[Rosco]

Hi Cube,

Total Position - I would add back the depreciation as this isn't a cash cost. So for example true 2014 cash surplus is $1,707.

So except for 2008, the cash position would be close to neutral.

- Did you buy in 2008? If so the repairs would really be a cost of buying the property and not a repair. So really taking out the repair and depreciation, this would be slightly cash positive too.

- How much money did you initially put in? I'm guessing this isn't a 100% loan?

- Looking at 2014. What is your total equity? You are getting $1,707 cash return on maybe $250,000 equity, so a 0.7% return after tax.

- What is your Gross yield on market value?

I'm not saying this is bad, but as others have put you need to look at more than just the accounting numbers.

Also, do you have big repairs coming up? Normal rentals long term run at about 1% of the property value, so I'm guessing for you $3k to $4k per year. As you have only spent $7k (excluding the $8k initial) over the last 6 years!

As others have asked, how much capital gain, less the extra assets you have purchased?

Ross

[Damap]

Looks pretty good to me. Guessing say a 300K buy you have probably made 150K equity that you could crystallize as a minimum. Not a bad return on 60K deposit. remove notional costs and you have it paying its way and doubling in value. I hope you have another 10 like it!

[cube]

Property has been held since 2003 but I've only got detailed figures easily available from 2008.

Capital gain more than compensates for the cash loss

Property is one from a portfolio, but for various reasons the simplest one to be able to provide figures for.

Analysis is appreciated, but unasked for - I was simply hoping to provide some real numbers as a reality check for others.

[donna]

I was simply hoping to provide some real numbers as a reality check for others.

And it's appreciated Cube - there are costs that are often overlooked or ignored so thanks a lot for sharing.

cheers,

Donna

[ivanp]

Thanks for sharing, though the numbers are not obvious.

For instance, rent in 2014 of 20160/52=390 per week and also insurance of just $638 suggest that this is a low-end 3-bedroom house, while annual rates of 2496 are more applicable to a $800-900K house in much nicer area where 3-bedroom house would rent for $650-750...

[cube]

I suspect that the rates line includes water rates which may include some outstanding payments from the tenant at the end of the year. Actual rates are in the region of $1,300

[ivanp]

Yeah, every year since 2008. That's a mistake in data, obviously.
Or water is just included in rent - in this case the house is so badly under-rented that it's not funny.

I have a 3bdrm house in West Auckland, that's why I have numbers to compare with.