Join Australia's most dynamic and respected property investment community

Expense vs. Rent ratio - anyone know what their portfolio average is? (not a thread about yield)

Discussion in 'Property Management' started by jaybean, 6th Aug, 2015.

  1. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    981
    Location:
    Melbourne
    I just calculated mine, it's sitting at 65%. That means on average, 35% of all my rental income goes to repairs, agency fees etc (excl. interest).

    A further breakdown:
    • Worse is 57% - my only apartment - due to...you guessed it, body corporate fees...which is funny considering gross yield is a very reasonable 6% (lesson here is be careful about using a gross yield calc, it can be very misleading)
    • Best is 73% - a regular run of the mill house that hasn't needed much maintenance in recent years
    I'm curious whether anyone else has run their numbers before?

    Note that I've disregarded the first few months of any recently purchased properties so that upfront renovation / holding costs don't skew the numbers.
     
    Last edited: 6th Aug, 2015
    srirang likes this.
  2. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    902
    Location:
    Perth, WA
    Wow those are your figures excluding interest? I'll have to crunch mine, but my expenses are lower than that.
     
    Gibson likes this.
  3. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    981
    Location:
    Melbourne
    Yup. I need to figure out why it's costing me so much. I think the biggest one are my expensive management fees, in QLD they run high at about 8-9% no matter where you go.
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,104
    Location:
    Melbourne, Nationwide
    Whilst I haven't done exact calculations I have given it some thought and figured out it's roughly around 70%.

    What's also interesting is the banks use figures around 80%. This would suggest they're overly optimistic. Don't tell APRA (although I suspect APRA is already telling them to adjust this as well).

    This is one of the reasons why a 6% yield isn't cash flow positive in most cases.
     
  5. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    981
    Location:
    Melbourne
    Good point! I should probably delete this thread...:)
     
  6. bob shovel

    bob shovel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,381
    Location:
    Somewhere in the land of Oz
    House nsw 22%

    Expenses (excl interest) / total income
     
  7. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,277
    Location:
    Sydney
    House + GF (GF is new build (1.5 years old now), house was gutted and fully renovated)
    Total % to Expenses: Council Rates + Water + Agent Fee + Land Tax / Total Rent = 11.38%
    (Gross yield, based on purchase price + reno cost + stamp duty = 6.8%

    House + GF (GF was new build (6 years old now), total repairs $150 (new oven light) over 5 years. House, bit old, total repairs $10 for a tube of liquid nails.
    Total % to Expenses: Council Rates + Water + Agent Fee + Land Tax / Total Rent = 12.45%
    (Gross yield, based on purchase price + reno cost + stamp duty = 7.76%
     
    Last edited: 6th Aug, 2015
  8. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    981
    Location:
    Melbourne
    As I said this isn't a thread about yield, it's about non-interest expenses...
     
  9. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,277
    Location:
    Sydney
    Was following your lead... you put down yield in your first post.

     
  10. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    981
    Location:
    Melbourne
    yeah I just said that as a "interesting note" sort of thing.

    I must have misread your post. I saw positive numbers and misinterpreted them, sorry.
     
  11. Roosterman

    Roosterman Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    53
    Location:
    Brisbane
    72% for a renovated unit in a 70's block in Sydney
    68% for a renovated unit in a 70's block in Brisbane
     
  12. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,740
    Location:
    Perth
    I have not finalised 2015, but I have my 2014 figures. Both old houses. Both with cosmetic renos. Self managed.

    Melbourne: 34%
    Perth: 119%

    Melbourne was rented out for the full year, so taking a bath on that one. Perth is a bad example. It was vacant for months while being renovated. Numbers should be better this year.
     
  13. Roosterman

    Roosterman Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    53
    Location:
    Brisbane
    So to answer the question, 70%
     
  14. srirang

    srirang Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    123
    Location:
    Melbourne
    Interesting ratios.

    Mine are 32%, 21%, 26% and 19%. Total for the portfolio is 23%. If I were to self-manage, it would be 17% for the portfolio. So, not a huge difference for the additional headache of managing IPs.
     
  15. Chilliblue

    Chilliblue Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,579
    Location:
    Australia
    Just checked the spreadsheets (channelling @Simon Hampel ) and mine are:

    Worst 2+1+1 1970's NSW strata unit 29%
    Best 2+1+1 1980's NSW triplex 18%

    Working on Sriang calcs
     
    Last edited: 6th Aug, 2015
  16. srirang

    srirang Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    123
    Location:
    Melbourne
    BTW, the calc I did was:

    (Agents Fees + Body Corporate + Insurance + Gardening + Land Tax + Water Rates + Council Rates + Sundry Expenses) / Rental Income
     
    sammmeee likes this.
  17. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    981
    Location:
    Melbourne
    What are the numbers once you've taken the renovation out of the equation? What I'm looking for is the long term average cost of expenses minus the big ticket stuff.
     
  18. jaybean

    jaybean Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    981
    Location:
    Melbourne
    Yup that's exactly what I have. Basically everything except major renovation costs, initial holding costs while renovating, and interest. Just your run of the mill "normal" costs.
     
  19. Perthguy

    Perthguy Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    4,740
    Location:
    Perth
    Melbourne is still 34%. It's high.
    Perth is hard to tell because I didn't seperate out day to day repairs and maintenance vs repairs and maintenance that I picked up during the reno (excl capital costs of course). Still, at a guess I would say: Perth 23% . I will have a better idea once I lock down this year's figures, so I will post them up when done.
     
  20. Pistonbroke

    Pistonbroke Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    395
    Location:
    Guangzhou
    Serviced apartments = 50-60% of turnover goes to management, cleaning, mntnce, council, electricity, gas, water, resort management, ASCAP fees.