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

*shudders*

 

Of sorts jb

 

This is why I pretty much ignore gross yield. It's the true end figures you should be looking at. That 7.5% yield on a 200k property isn't going to look to flash after you take out all the expenses for maintenance, rates, BC's etc. 7.5% yield on a 200k cheapie can end up looking the same in your hand as a 5.5% yield on a 400k property at the end of the year. The costs are eating a bigger percentage of your yield at the lower levels.

 

Am i missing some thing from my calcs? Everyone's expense % seems really high. My highest is 12.45%. ??

 

Maybe list them out for one property to see if there's anything you've missed.

 

Ok added a few more things in.

Council Rates = $1,800
Water Rates = $600
Agent Fee = $2,688
Sundry = $144
Land Tax = $500
Insurance = $1000
Misc Expenses = $44 (average over 5 years)
Total Expenses = $6,776

Rental Income = $940 x 52 = $48,880

$6,776 / 48,880 = 13.86%

 

5% agent fees helps, but otherwise it's your really high rent that pushes down the % of expenses. So your numbers look fine, good work! I hope one day my properties are all this cheap to run.

 

NSW Townhouse - 17%
QLD House - 27%

 

ACT House 35%
ACT Unit 41%

Interestingly, the sinking fund costs pretty much bridge the delta between the two.

Loving ACT land tax

 

I am almost too scared to do the calculations! Our new tenants are demanding heaps of random repairs despite a recent freshen up. It is an old house (and a cheap one).

 

Strata fees seem to be the difference in most cases here. Ill take my 200k cheapie standalone houses any day

 

Rule of thumb is the cheaper the rent, the higher the proportion of expenses to rent. That's why I'm generally not a fan of very low end IPs in regional towns and the like.

 

Hey DT, what do the numbers on your $200k cheapies look like?

 

In my experience, this is normal. They are finding out what kind of landlord you are. I'm always careful about how many of these requests I actually say yes to. I have found with some of my tenants if I say yes to some things, they keep asking! Of course urgent maintenance and repairs must be done though.

 

Could anyone tell me how gross and nett yields are calculated? The expense ratio in combination with the yields might be a good way to judge deals.

 

Brisbane house, about 40% of rent or 2% of value.
Breakdown as % of rent:
- Mgmt 8.5%
- sundry mgmt 1%
- rates 8%
- water 6%
- building insurance 4%
- landlord insurance 1%
- maint. 10%

 

$115,000/$130,000=88.5%

I think you have it the wrong way around. Ideally, you'd like a 0% ratio, as that would mean that you don't have any expenses.

 

I am a tenant myself so I find the behaviour mystifying but you may well be right!

 

Rule of thumb i've developed as I have had similar tenants. I only say yes if:
1. it is a safety hazard
2. it will increase my bank valuation/capital value
3. it will increase my rental yield

and more recently i've added:
4. it will cause tenants to vacate from exasperation (eg. pest control)
Though I ask them to attempt it themselves first using store bought stuff from woolies first time round, only pay if there is a serious pest problem.

 

So you wouldn't for example fix a curtain rail that has fallen down?

Things I have said yes to include the above example and many more. I guess I am just a soft touch!