At present, based on one bank I recently talked to, a 8% gross yield is minimum required if you want to buy a rental with a plan to recycle the equity to buy another.
This is based on bank using rent income taken as 75% gross rent (which might vary between banks).
And based on the bank using 7.5% as the assumed interest rate (which may also vary between banks).
E.g Want to buy 250k rental without reducing servicability ability so can buy another once equity created:
200k loan at 80%.
15k interest expense to service to keep bank happy.
rent required = (15k/52)/0.75 = 384 per week min rent required for sustainable investing. Works out at 8% gross of purchase price.
No too bad for a 250k property, a 4 bed in PN could easy achieve this as an 'off the shelf buy'.
Any brokers or other who may have had different experience with other banks or a different take on this?
I'm happy if 8% gross is enough to keep banks happy as I aim for above this anyway.
This is based on bank using rent income taken as 75% gross rent (which might vary between banks).
And based on the bank using 7.5% as the assumed interest rate (which may also vary between banks).
E.g Want to buy 250k rental without reducing servicability ability so can buy another once equity created:
200k loan at 80%.
15k interest expense to service to keep bank happy.
rent required = (15k/52)/0.75 = 384 per week min rent required for sustainable investing. Works out at 8% gross of purchase price.
No too bad for a 250k property, a 4 bed in PN could easy achieve this as an 'off the shelf buy'.
Any brokers or other who may have had different experience with other banks or a different take on this?
I'm happy if 8% gross is enough to keep banks happy as I aim for above this anyway.
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