NSW Average percentage of ongoing costs

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

 

% 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

 

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.

 

Strata title, excluding interest but including land tax, about 30% of my rent.

 

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.

 

Thank you. Good benchmark to know.

 

Thank you!

 

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.

 

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

 

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.

 

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.

 

Touché!

 

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...

 

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.

 

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 :/

 

Houses around 20% of rent usually (ex. mortgage costs).

Strata titled probably a bit more.

Land tax on top !

 

I wouldn't put the benchmark @ 35%. I would put it at more like 20-25%.

 

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%)