What would you offer?

[ivanw]

There is an opportunity I have seen in Waitakere, and I am trying to value from an investment point of view. Its two homes completely separated and private one 4 bedroom and then one 5 bedroom on a huge section 2+ acres. I am guessing the rents would return around $900 per week.

What sort of price would make this a good deal?

[essence]

That's a bit of a "How long is a piece of string" question.

How much are you willing to pay?

Work out mortgage payments, add rates, insurance, maintenance (R, I, M), add vacancy.

What's the RV?? Can you buy it well under RV and Market Value.

Now is the property cashflow positive?

Find out if the vendor is desperate or not. Is it a mortgagee sale, a "don't want it" sale, divorcing sale, etc.

[Green Fish]

Allow for two weeks without rent: Gross annual rental return is 45k.

Deduct rates and maintenance: Maybe 7k? If so, the net return is 38k.

Assume you are loaded, with millions in the bank, currently getting 4%. You get that for doing nothing, so you want more. Let's assume that you want 2% more: 6%.

If a thing purchased for $x earns 6% per year, and if 6% of x is 38k, then x = 633k.

In other words, 633k would be a reasonable price to pay for a property with a net yield of 6%.

Note that this assumes a low interest-rate environment. It should also be noted that buyers of factories/offices/shops won't usually accept a yield of 6%.

[ivanw]

Thanks! looks like it will be cashflow positive after doing numbers as suggested. Thanks