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Great discussion for a Sunday night, what is a good deal today?
If you were going to buy a rental in the next month, what would you consider?
1) 10% below market value?
20% below market value?
30% below market value?
2) A property that generates $5,000 positive cashflow? - this is rent less all expenses (property management, fair repairs too, travel and everything), including interest on 100% loan but no principal repayments. If you put in money you want a return, so hence the 100%. If you manage yourself, you still need a return on your time.
Or $10,000 positive cashflow? Or $15,000?
To make this an easy comparison, we will say the property is purchased for $500,000. So $5,000 is 1%, $10,000 is 2% or $15,000 is 3%.
$655 per week or 6.07% gross yield based on 51 weeks to get the $5,000 positive cashflow
$760 per week or 7.05% = $10,000
$870 per week or 8.06% = $15,000
3) A property that you can add value. Subdivision, house on back, 2 bedroom to a 3 bedroom etc etc
On the $500,000 cost, you add value
- $50,000?
- $100,000?
- $200,000?
Say you spend the same amount of money to achieve the gain.
So $500,000 cost , plus $50,000, to be worth $600,000
$500,000 cost plus $100,000 to be worth $700,000
$500,000 cost plus $200,000 to be worth $900,000
What do you think?
Ross
If you were going to buy a rental in the next month, what would you consider?
1) 10% below market value?
20% below market value?
30% below market value?
2) A property that generates $5,000 positive cashflow? - this is rent less all expenses (property management, fair repairs too, travel and everything), including interest on 100% loan but no principal repayments. If you put in money you want a return, so hence the 100%. If you manage yourself, you still need a return on your time.
Or $10,000 positive cashflow? Or $15,000?
To make this an easy comparison, we will say the property is purchased for $500,000. So $5,000 is 1%, $10,000 is 2% or $15,000 is 3%.
$655 per week or 6.07% gross yield based on 51 weeks to get the $5,000 positive cashflow
$760 per week or 7.05% = $10,000
$870 per week or 8.06% = $15,000
3) A property that you can add value. Subdivision, house on back, 2 bedroom to a 3 bedroom etc etc
On the $500,000 cost, you add value
- $50,000?
- $100,000?
- $200,000?
Say you spend the same amount of money to achieve the gain.
So $500,000 cost , plus $50,000, to be worth $600,000
$500,000 cost plus $100,000 to be worth $700,000
$500,000 cost plus $200,000 to be worth $900,000
What do you think?
Ross
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