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Rough Figures

Discussion in 'Investing Strategies' started by Redwing, 1st Sep, 2007.

  1. Redwing

    Redwing Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    476
    Location:
    PERTH..WA
    Just playing around with some figures and scenario's;

    Investment Property Loans
    $904,500
    Investment Property Value
    $1,630,000.00
    Equity
    $725,500

    LVR 55.5%

    Managed Funds Loans
    Via LOC $100,000
    ML $170,000
    Total Value $270,000


    Take another $120,000 out of equity via a new LOC and purchase another Investment Property up to $450,000

    This should take the IP LVR to 71.1% but total LVR to around 73.4%

    Assuming a 80% loan I’m presuming I would have to put in $92,400 from equity, plus 10% purchase costs of $45,100 = $137,500 ? I guess you could capitalise the purchase costs but not sure where this would come from..

    Assuming a “rough return” of 10% return from Managed Funds and 2% from all Property this should cost around $22,300 P/A ($430 p/wk) or so; less after tax?

    How does the above look as rough figures :confused:
     
  2. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Redwing

    Are you borrowing the 80% deposit + purchasing costs?

    If your IP's purchase price is $450K and you wish to go for an 80% loan then you will need $90K as a deposit plus purhasing costs.

    a $450K loan will cost approx $35K PA in interest minus rent
    so it will probably cost you $16K PA before tax or depreciation.

    With tax and depreciation depending on your tax scale
    you could get back $6-7K so you will be out of pocket by $8-10K

    What is the 2% you mentioned (from all IP's)
    and where did you get the $22000 from?

    Cheers
    Bill
     
  3. Redwing

    Redwing Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    476
    Location:
    PERTH..WA

    Hi Bill,

    Yes borrowing the 80%, the rest is coming via a LOC

    I went ahead with the purchase (settlements soon)

    Stamp Duty was $18,200
    Settlement/Deposit costs will be around $94k

    With the costs/portfolio outlined I've used 10% as a return from the Managed Funds (so approx $27k) and for Property a 2% return from the complete portfolio as a guide (which is minus miscellaneous costs for IP's).

    using those figures I'm estimating that the whole portfolio will cost me around $22k per annum or $427 per week (not taking tax or depreciation into account).

    The new IP will be let as a fully furnished rental property (beds, lounges, TV's, tables, chairs, cuttlery etc).

    Tax Rate last year was just into the double figures, however, this year there's more income coming in and on the flip side more depreciation, interest etc

    How do the figures look?
     
  4. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Redwing,

    It seems to me that you are over estimating your costs.
    How much rent do you expect to get?

    Cheers
    Bill
     
  5. Redwing

    Redwing Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    476
    Location:
    PERTH..WA
    :D

    I usually overestimate costs and underestimate yields to give me some fudge factor, yield divided across the properties is about 6.05%

    The new IP will most likely rent at around $350+ p/wk
     
  6. Billv

    Billv Getting there

    Joined:
    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    Redwing,

    If you are borrowing 100% and the interest is 8% the loan will cost you $35K,
    minus rent (after management) of $17K so you will be $18K out of pocket before tax.

    At 30% tax you will get about $6K back and if you have lets says $3K depreciation PA you will get another $1K back so your net loss will be around $10-11K which is still a lot.

    However, since you are furnishing the place, I would have expected a higher rent.

    Cheers
    Bill