Is this a good deal??

[The_General]

Hi all

I am in the market for my first IP and have found what I think is a good deal. As i an very new to the game I thought I would put the numbers out there to see what you all think.

The property is a house converted into 2 flats, handy to university. The combined rent is $460 a week. The asking price is $260,000 obviously I would be aiming to buy it cheaper than that!!

So here are the numbers:

Purchase price: $250,000 (hopefully less!)

Rent P/A: $23,000 (2 weeks vacancy)

Rates, Maintenance, Insurance: $3000

Interest (7.5%): $18750

So if my numbers are right it should be CF+ by around $25 a week.

I guess what i am asking is all you PI's out there would consider this investment or whether i am better waiting for something better to come along?

[McDuck]

How well can you cope with a interest rate rise of say 2%?

And will students be there 12 months straight...how may vacant months can you cope with?

What sort of maintenance work will it need?

[spurner]

What city is it in? What is the location like for proximity to town? (I read it's close to uni)

[The_General]

Hi McDuck

If interest rates did go up by 2% it would end up costing me around $60 per week. But I intend to fix the mortgage for 5 years so i should need to worry about that for a while.

The current tenants are on 12 month leases. So I would hope to be able to get 12 month leases in the future, I could probably only go for a month or so without any rent. But with two flats there is less of a chance that they will both be untenated at the same time.

The place has just been recarpeted, painted and rewired so hopefully it shouldn't need much maintenace in the next year or two.

Spurner

It is in Dunedin, a few kms from the centre of the city.

[Chemill]

As it is in Dunedin you should have no trouble letting it on 12 monthy leases. Uni students even sign up on leases a couple of months before the place is vacant to secure themselves accommodation while they are on the summer break.

Your numbers are good. I like that deal.

[The_General]

Hi Chemill

Thanks for the reply. Glad you think the numbers stack up.

[drelly]

Let us know how it goes!

[Stevegoodey]

It may be worth asking the agent how long it's been on the market.
I've been negotiating on some Dunedin property lately and noticed theres been stock sitting around a bit.

If it's been on the market for 4 months with no offers that may affect your starting price.

Also check stuff like water rates and cleaning cost's they are sometimes extras for your expenses.

Lastly I would say that in Dunedin student market at the moment you should be negotiating your way into a 10+% yeild.

Good luck.

Steve

[The_General]

Hi Steve

Has been on the market around 2 months.

Being a 2 flat property the rates are $1800 per year.

If it sold at $250 K the yield would be 9.5%. So I guess I should be aiming for a lower price to get a yield of more than 10%.

Have you brought anything in Dunedin lately?

If so, would you mind put some numbers up for me to have a look at?

Cheers

[Stevegoodey]

Sure,

Paid $1,375,000 valued at $1,680,000.

Rents for $5620 per week so 21% yeild but with huge expenses so net it's 11.7%

It's a 28 bedroom student hostel 2 blocks from the front gates of the uni.

We bought well because theirs not many people in the price level but it shows you what you can get if you find well, and negotiate well.

Steve

[Stevegoodey]

PS you seem to know lots about the property but what do you know about the persons motivation.

Why are they selling?

What are they going to do with the money?

Is the purchase price the only point of negotiation?

S

[The_General]

Thanks Steve

That sounds like a very good buy with good returns - although, well out of my price range.

I am not in a hurry to buy so I will continue searching for a deal with a yield of 10% or better.

More about property:

I was told the owner is selling because he is part of a syndicate and he bought it without consulting others and hence needs to sell, i was also told he is in no hurry to sell and wont accept anything less than $250 K.

I guess the money goes back to the bank??

Yep the price seems to the main point at the moment. Can't decide whether to offer and if so what price.

[cube]

If he is part of a syndicate, and has bought the property with the syndicate's money, he'll be in a hurry because they'll be wanting their money back.

If he bought it with his own money, then the syndicate doesn't come in to it.

Look for the story within the story that the agent tells you - I sniff that there is something else that you haven't found out.

cube

[The_General]

I checked the last sale on QV website and he has owned it since December 2005. So I guess he must have just his own money other it would have probably have been sold by now.

[Josko]

recarpeted, painted and rewired

I checked the last sale on QV website and he has owned it since December 2005. So I guess he must have just his own money other it would have probably have been sold by now.

Reads more like a flick to me, what did he pay for it?