NSW Average percentage of ongoing costs

Discussion in 'Property Management' started by Anae, 25th Nov, 2019.

Join Australia's most dynamic and respected property investment community
  1. Anae

    Anae New Member

    Joined:
    25th Nov, 2019
    Posts:
    4
    Location:
    Gold Coast
    Hi all, I have been searching the internet for what would be the average percentage of ongoing costs of a residential investment property as compared to the income. Is more then 40% annual ongoing costs considered too high? Or is it more about the ROI? Cheers
     
  2. Michael Mitchell

    Michael Mitchell Well-Known Member

    Joined:
    17th Sep, 2018
    Posts:
    1,130
    Location:
    Brisbane
    % doesn't fit, there are many variables, here are some:

    Mortgage Repayment
    Bank Fees
    Council Rates
    Water Charges
    Electricity Charges
    Body Corporate Levies
    Building Insurance
    Contents Insurance
    Landlord Insurance
    Loan Protection Insurance
    Property Management Fee
    Smoke Alarm Compliance
    Gas Compliance
    Asbestos Compliance
    Pool Compliance
    .
    .
    .

    When you buy, you're generally looking at capital gain(/equity) or cashflow, or both
     
    Pumpkin likes this.
  3. Tony3008

    Tony3008 Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    890
    Location:
    Docklands, Victoria
    For my properties: house, townhouse, unit and apartment, the expenses (no interest) for last year came out at 33-37% of rent. I was quite surprised that the range was so small.
     
  4. VB King

    VB King Well-Known Member

    Joined:
    8th Jul, 2015
    Posts:
    399
    Location:
    St Marys
    Strata title, excluding interest but including land tax, about 30% of my rent.
     
  5. Anae

    Anae New Member

    Joined:
    25th Nov, 2019
    Posts:
    4
    Location:
    Gold Coast
    The high ongoing cost is is affecting my cashflow, and capital gain is not much, therefore I suppose not a good long term investment unless I can either reduce the costs, or improve the value of the property.
     
    Michael Mitchell likes this.
  6. Anae

    Anae New Member

    Joined:
    25th Nov, 2019
    Posts:
    4
    Location:
    Gold Coast
    Thank you. Good benchmark to know.
     
  7. Anae

    Anae New Member

    Joined:
    25th Nov, 2019
    Posts:
    4
    Location:
    Gold Coast
    Thank you!
     
    VB King likes this.
  8. Michael Mitchell

    Michael Mitchell Well-Known Member

    Joined:
    17th Sep, 2018
    Posts:
    1,130
    Location:
    Brisbane
    Difference between strata and non-strata titled properties (re: body corp levies) is the biggest profit eating factor. Strata titled are generally cheaper to buy, but then the levies smash cashflow(erode profit). Other factors are roughly the same I've found.
     
  9. New Town

    New Town Well-Known Member

    Joined:
    8th Sep, 2015
    Posts:
    646
    Location:
    QLD & NSW
    The higher the value of the rent the smaller the overall proportion of outgoings. $1000pw might be 25%, $500pw might be 40%

    A very cheap $100k IP could yield an impressive 10% or say about $200pw - but can have outoings exceed all the rent, ie before any mortgage paid
     
    Michael Mitchell likes this.
  10. VB King

    VB King Well-Known Member

    Joined:
    8th Jul, 2015
    Posts:
    399
    Location:
    St Marys
    Strata fees cover things like insurance, repairs, and maintenance. You just pay these costs directly on a non strata property.
    As long as you’re not into a property with lifts, gym, concierge, etc I would say overall on par.
     
  11. Michael Mitchell

    Michael Mitchell Well-Known Member

    Joined:
    17th Sep, 2018
    Posts:
    1,130
    Location:
    Brisbane
    IMO far cry, I've only owned 4 though. The 'problem' with strata is the scheme is mandated to have a sinking fund forecast and owners are mandated to contribute to the sinking fund, in this regard, you have no control over when you choose to do [sic: pay for] maintenance, also, that is maintenance for the common property, maintenance on your own lot is still required and external to body corp levies and on your own dime. The only aspect I would say is congruent between strata titled and non-strata titles is the respective 'building insurance component' of the strata levies. Every other aspect that makes up a strata levy is unique to strata titled properties, and goes towards the common property aspect of the scheme.
     
  12. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,412
    Location:
    Melbourne
    I agree you lose the control of "when" and the "what" - but there is IMHO some advantage in getting things like driveways and painting etc done when it should without waiting for me - because if it were up to me, I might wait until it got so bad that I needed to spend a whole lot extra to fix collateral damage.

    Out of the dozen or so apartments and units we have owned (and still do own some), I think we only struck sinking funds on 2 of them (I could be wrong but....and note these are/were all in VIC where rules may differ).

    Ironically (here we go first world problem) what is (a lot) worse than strata costs is the land tax on my IP houses!!

    The Y-man
     
    Michael Mitchell and VB King like this.
  13. Michael Mitchell

    Michael Mitchell Well-Known Member

    Joined:
    17th Sep, 2018
    Posts:
    1,130
    Location:
    Brisbane
    Touché!
     
  14. Ace in the Hole

    Ace in the Hole Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,710
    Location:
    Sydney
    I'm just finalising 2018/19 tax right now so can give some accurate figures.
    For our Brisbane resi properties in this case:
    6 townhouses + 5 townhouses.
    303k in - 112k out = 37%

    Land tax was pretty high at close to 20k and that also includes 10k of accounting fees cos we have quite a few structures.
    Another resi property, duplex in Sydney had land tax go from $1,500 in 17/18 to $8,000 in 18/19 due to buying another Sydney property and killing the threshold, that hurt.

    The last 2 properties we bought were commercial.
    The Sydney commercial brings in more rent than our 11 Brisbane properties at higher yield, all outgoings paid by tenant, virtually no maintenance to deal with, 5 year lease with annual increases.
    Resi is really unappealing now...
     
    Beano and The Y-man like this.
  15. Kelvin Cunnington

    Kelvin Cunnington Well-Known Member

    Joined:
    18th Nov, 2019
    Posts:
    361
    Location:
    Australia
    A general guide I once saw was to allow 20% of rent to cover outgoings. That's what I work on.
    If the numbers still work after applying this, then the property is worth considering.
    If the maintenance portion is very low (as with newer Properties - which also have better Depreciation to factor in later), then happy days.
    Prepare for the worst, and hope for the best.

    Plus you have the loan interest as well.
     
    Michael Mitchell likes this.
  16. Michael Mitchell

    Michael Mitchell Well-Known Member

    Joined:
    17th Sep, 2018
    Posts:
    1,130
    Location:
    Brisbane
    Commercial looks really good when you've got good tenants, something I've not dealt in yet, what are vacancies like through in your experience? I see so many commercial buildings sit empty for years sometimes, that would be killer :/
     
  17. KJA182

    KJA182 Well-Known Member

    Joined:
    5th Sep, 2018
    Posts:
    126
    Location:
    Sydney
    Houses around 20% of rent usually (ex. mortgage costs).

    Strata titled probably a bit more.

    Land tax on top !
     
  18. Fargo

    Fargo Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,304
    Location:
    Vic
    I wouldn't put the benchmark @ 35%. I would put it at more like 20-25%.
     
    Michael Mitchell likes this.
  19. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    2,992
    Location:
    Brisbane
    Slightly off the topic but the actual vacancy range for commercial is extremely wide .
    You are best to look at the industry vacancy figures the real estate companies produce.
    They break it down by type , grade and location.
    (Using these numbers mine would currently be 3%)
     
    Michael Mitchell likes this.

It seems that the levelling out of property price rises hasn’t deterred celebrities from investment properties. Nicole has bought her fifth apartment in a complex in Milsons Point in Sydney. This article explains why she may have done that.