Hi everyone,
I have a question, to which I hope your answers will help enlighten me on some of the things that are and aren't important to you as property investors - I've made some mistakes but I will learn, eventually. I don't think anyone has a perfectly 'right ' or 'correct' way to go about property investing. So your way will not always be right for me. However, it's always useful to hear from experience, and there is almost always something to be gained from knowing how anyone has succeeded or failed....
QUESTION:
If you know in a given sought-after area that rent potential for a 3-bedroom house is $350 p/w max (that's the going price, hasn't changed much in a few years despite house values skyrocketing, so can't really count on more), what is the maximum you would, could or should pay?
Some considerations:
-was always a very popular suburb for families, young professionals and the elderly alike, but now increasingly sought after as most houses are now done up or getting done up, more cafes and other desired amenities springing up, and location for both outdoor lifestyle choices AND proximity to CBD (less than 10 minutes) pretty much unbeatable.
-Plus the suburb has unique geographical feature that surrounds it and defines it (and makes it 'secure'), and the schools are good. So both short and long-term outlook for house values better than most anywhere else, even in 'down' periods.
- Real potential still exists to add value, as a) the rare houses not yet done are selling up to $100,000+ less than done houses, and b) 4+ bedroom houses are rare & highly sought after - and there is often potential to add or incorporate 4th bedroom/ convert garages/ add sleepouts as sections are generally 600sm - 800sm (subdivision pretty much not possible)
- prices are $250K to $350K (undone 3-BR) , $350K to $550K+ (done-up 3- or 4BR) and still rising (2003 prices = $130K to $230K undone, and up to $330K done). 'Done' houses (and many undone as well) are still (meaning as of yesterday) being snapped up on same day offered.
OK, so please tell me what you would pay maximum for a PI in this neighborhood and why? Would you consider the potential to immediately increase equity by $50K to $100K with some cosmetic work? Would you ever consider putting in more of your own money/borrowing less to purchase? Would you risk negative cash flow now for likely positive in a few years if large capital gain is almost a certainty (i.e. would capital gain - and DOES capital gain for that matter - every figure into your calculations?). Are there any other considerations you would have to take into account?
I guess ultimately I'm trying to figure out if any of you would even think of purchasing in this sort of price range with these returns and at today's interest rates. And how you work backwards from the expected rent to a comfortable purchase price, while possibly taking into account other factors such as capital gains and/or putting in more money and taking smaller mortgage (I haven't seen this last question discussed before - do you ALWAYS choose to buy property with minimum of your own cash and maximum borrowing? I can see how again certain considerations, such as whether or not you have your own house mortgage still to pay off, might come into play, but are there other considerations as well?)
cheers
I have a question, to which I hope your answers will help enlighten me on some of the things that are and aren't important to you as property investors - I've made some mistakes but I will learn, eventually. I don't think anyone has a perfectly 'right ' or 'correct' way to go about property investing. So your way will not always be right for me. However, it's always useful to hear from experience, and there is almost always something to be gained from knowing how anyone has succeeded or failed....
QUESTION:
If you know in a given sought-after area that rent potential for a 3-bedroom house is $350 p/w max (that's the going price, hasn't changed much in a few years despite house values skyrocketing, so can't really count on more), what is the maximum you would, could or should pay?
Some considerations:
-was always a very popular suburb for families, young professionals and the elderly alike, but now increasingly sought after as most houses are now done up or getting done up, more cafes and other desired amenities springing up, and location for both outdoor lifestyle choices AND proximity to CBD (less than 10 minutes) pretty much unbeatable.
-Plus the suburb has unique geographical feature that surrounds it and defines it (and makes it 'secure'), and the schools are good. So both short and long-term outlook for house values better than most anywhere else, even in 'down' periods.
- Real potential still exists to add value, as a) the rare houses not yet done are selling up to $100,000+ less than done houses, and b) 4+ bedroom houses are rare & highly sought after - and there is often potential to add or incorporate 4th bedroom/ convert garages/ add sleepouts as sections are generally 600sm - 800sm (subdivision pretty much not possible)
- prices are $250K to $350K (undone 3-BR) , $350K to $550K+ (done-up 3- or 4BR) and still rising (2003 prices = $130K to $230K undone, and up to $330K done). 'Done' houses (and many undone as well) are still (meaning as of yesterday) being snapped up on same day offered.
OK, so please tell me what you would pay maximum for a PI in this neighborhood and why? Would you consider the potential to immediately increase equity by $50K to $100K with some cosmetic work? Would you ever consider putting in more of your own money/borrowing less to purchase? Would you risk negative cash flow now for likely positive in a few years if large capital gain is almost a certainty (i.e. would capital gain - and DOES capital gain for that matter - every figure into your calculations?). Are there any other considerations you would have to take into account?
I guess ultimately I'm trying to figure out if any of you would even think of purchasing in this sort of price range with these returns and at today's interest rates. And how you work backwards from the expected rent to a comfortable purchase price, while possibly taking into account other factors such as capital gains and/or putting in more money and taking smaller mortgage (I haven't seen this last question discussed before - do you ALWAYS choose to buy property with minimum of your own cash and maximum borrowing? I can see how again certain considerations, such as whether or not you have your own house mortgage still to pay off, might come into play, but are there other considerations as well?)
cheers
) things like that. I can also stick in the purchase price and market value and it spits out related info. so basicly what I'm saying is I take a good look at the figures to see where it works and where it doesn't and what would be required to make it work.
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