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What assumptions do people use for 1st IP calcs?

Discussion in 'Real Estate' started by Samwise, 20th May, 2009.

  1. Samwise

    Samwise Member

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    Perth, WA
    OK, further to my previous post, i'm having my first attempt at crunching some numbers for our possible first investment property.

    I need a reasonable first stab at some assumed values for the following parameters - would anyone care to help provide some reasonable figures? My numbers are in (brackets)... just something to throw rocks at ;)

    For a 1bed unit close to the city centre, purchase cost around $250K:

    - Annual rental increase (2.5%)
    - Strata/Water fees/yr ($1800)
    - Maintenance costs/yr ($1500)
    - Annual Increase in fees/costs (2.5%)
    - Annual property appreciation, long term averaged (3/5/7%) - need pessimisic/mid/optimistic here

    Any more that i've missed here? I just want to do some rough calcs to evaluate some properties.

    Cheers, Sam
     
  2. Billv

    Billv Getting there

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    Samwise

    Most of those figures would depend on the type of property and it's location.
    Also, if you have strata fees, your maintenance wouldn't be very high.

    Here are my figures
    - Council rates $1100
    - Annual rental increase (4%)
    - Strata/Water fees/yr ($1800)
    - Maintenance costs/yr ($500)
    - Annual Increase in fees/costs (2.5%)

    - Annual property appreciation, long term averaged (7%)
    The long term trend is for property values to increase at 6-7% but depending on timing some years you could have 15% and some 0% or even negative growth.

    You've also got to watch inflation because if inflation is high then wages grow faster and so do rents and interest rates...
     
  3. Jacque

    Jacque Team InvestEd

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    Don't forget to allow for vacancy rates (4wks p/a is what I work on) and PM fees, though the latter are tax deductible. To lighten the load on your back pocket, also consider having a QS report done for on paper losses.
     
  4. Samwise

    Samwise Member

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    Thanks guys - seems like i was being a little conservative with my figures 9no bad thing eh)... any more for any more?

    Jacques - can you explain your last comment about the QS? Is this something to do with tax deductions for depreciation of items inside the property? If so will this be significant in a unit of around $250k?
     
  5. Jacque

    Jacque Team InvestEd

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    Hi Sam

    Always best to speak with a QS surveyor to learn more but basically the fittings, fixtures and buildings are depreciable over time. Depending on the age of the building, you may be able to write off this over a period of time as well. For more reading on this check out this site and speak to Scott and his team:

    www.depreciator.com.au
     
  6. Samwise

    Samwise Member

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    Thanks for the info Jacque.

    I was aware that some items and/or the building itself are able to be depreciated but didnt want to include it in my IP cashflow calcs... i.e. I was trying not to rely on it to make a property CF neutral or positive.

    This seems sensible, yes?

    Still, if anyone has a rough-as-guts figure for depreciation of a $250K unit that might help.

    Cheers, Sam
     
  7. Saskatoon

    Saskatoon Well-Known Member

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    Sam,
    have a look at the Information Resources sub-forum on the Somersoft forum.
    Lots of information over the whole site for property investors:
    Somersoft Property Investment Forums
     
    Last edited by a moderator: 27th May, 2009
  8. Samwise

    Samwise Member

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    Cheers, heaps of info over there :)
     
  9. joanmc

    joanmc Well-Known Member

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    brisbane
    HI Sam
    I believe there are many paths to wealth. For me I bought local, mainly because I caould only afford real cheapies at the start that needed a lot of work and it was easier with school age kids. I only could work on the houses between 9 am and 3 pm so local was the way to go. Also I had studied our area for a while so I was confident that we were buying well.

    We bought in our own names. First one in hubbys name as he was working and I wasn't and there was negative gearing. I know a lot of people use trusts but we don't at present for our real estate.

    We mainly looked for:
    will tenants rent it?
    will it go up in value?
    is there strong rental demand in that area?

    All our proerties bar one are in the bottom quarter of the market value wise. MY reason is that in an economic downturn people will rent a cheaper house so all it does is increase demand for my properties therefore pushing the rent up.

    Good luck with your search:)
     
  10. Samwise

    Samwise Member

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    Hi Joan

    Thanks for your experience... I guess thats kind of where i'm coming from also - I feel comfortable buying in areas that I know, and am happy that we can pick a place with long term growth potential that will always rent easily. A cheapie, as you say.

    My current mental block is the lousy rental yields in Perth... I cant see why anyone would buy-to-let in Perth for rental returns, because basically CF- seems to be the only option.

    I guess people have a lot of faith that they will make their money not now, but in the future with the capital growth...

    Time to meditate at the top of a mountain somewhere :rolleyes:
     
  11. joanmc

    joanmc Well-Known Member

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    LOL take a blankie with you - it gets cold up there!:D