ACT Investment in Canberra or elsewhere?

- It's not the holding costs that matter or what anyone thinks "is reasonable", it's your overall end position that matters, after costs, interest, rent, depreciation and your tax refund. If you were to pay $600,000 for a house in Latham for example, here is an estimation of your cashflow position per annum:

Land tax (value of land $300,000) - $3,032
Rates - $2351
Water - $750
Insurance - $900
PM fees (on rent of $520/week @8%) - $2,160
Repairs and maintenance - $500
Interest on $480,000 @4% (assuming you put 20% cash down)- $19,200
Total holding costs per annum = $28,893

Rent @ $520/week - $27,040

You have made a cashflow loss of $1,853.

However if you add in depreciation, which will be approximately $3,000pa on a 30 year old house, you have made an on paper loss of $4,853.

If i assume you are in the 37% tax bracket, you will receive 37% of this money back in your tax refund (assuming no other capital gains etc in that tax year). That is $1,795. Meaning your overall cashflow position is approximately negative $58/annum. Not cashflow positive but pretty close.

Or another way to look at it is your cash return on the $120,000 cash deposit = $-58.

If you get 3% capital gain pa over 5 years, house will be worth $695,000 and $806,00 in 10 years. If you get 5% pa growth, it will be worth $765k in 5 years and 977k in 10 years!

Personally I would never self manage, unless you know eviction and tenancy laws and are willing to vet tenants, do inspections, arrange repairs, etc etc. Its the best $2160 you will ever spend and it's tax deductible!

 

I handed potential tenants the following:


"To secure the property:

email to (insert my email)
1) 100 points of ID

2) Copy of your latest payslip

3) Mobile number of Rental Referee




If your referee check is positive, and you are the successful applicant/s, I will then write to you requesting:

a) One (1) months rent in advance

b) One (1) months rent refundable bond


I will then arrange to meet you at the property to:
c) Sign a 12 months’ lease
d) Complete an entry condition report

e) Hand you the keys "

- I have a list of plumber, electrician, gas fitter, locksmith that i use if there is a problem.
- Both complete the exit condition report
Bob's your mothers brother!

 

Nice way to put things Todd great job!

Conversely, I have been willing to do all those things and have thus far been a good enough judge of character to not have to go through the eviction process.

All the best

 

like most have said I wouldn't think buying a townhouse is a good idea either. high body corp and low cap gains is a no deal. i almost made that mistake (in roughly 2013) but thankfully bought an old 3x1 in evatt. If you buy new you might average 7k depreciation the first 10 years..thats only about 1% on 650k purchase. from that 7k you will prob only save 3k tax or so anyhow depending on your tax bracket. that is, even minimal capital gains will poop all over some crappy depreciation.

I am a (bias) belconnen fanboy (page, evatt, sculllin etc) in terms of value for money / location etc. Due to excessive and and forever becoming more excessive land tax/rates, i would only buy something in ACT that I could get dual cashflow from (primarily speaking with the addition of a granny flat as the building laws here are ok (but not as good/easy as NSW). A bonus would be a block in Rz2 zoning if you don't have to pay too much of a premium (which if i recall correctly would be even more flexible in terms of building a secondary dwelling)

 

What are people's opinions on the increased VR budgets for APS over next few years and their impacts on the cbr market?

 

Hi there

Personally - I wouldn’t bother with units or townhouses in Canberra. Generally speaking (and from my own experience) the growth isn’t as good and the holding costs are huge (land tax, rates and body corp!).

If it were me - I’d only look at freestanding homes. Preferably something with a bit of land that can be renovated for extra value add.

That’s just me though - please do your due diligence.

Cheers

Jamie

 

Hi Melissa,
Like most suggestions on this thread, I would stick firmly away from apartments or even townhouses in newly developed suburbs. I saw you suggest Moncrieff - it’s a new suburb but it is also rated with the highest length of properties on the market, cookie cutter houses and public housing splattered amongst residential properties. With your price, look to the older suburbs - Flynn, Holt, Evatt and even Charnwood. My husband and I bought an investment last year in Charnwood for $465,000. 3 bedroom 1 bathroom, 2 car garage, fully renovated. It’s rented for $520 a week with a great tenant. Charnwood has been consistently rising in house prices over the last couple of years and with bigger blocks and houses with great potential, it’s a suburb on the up. You will also get great rent $$$. On the south side, Kambah is a great suburb with house prices on the rise. If you do want to go down the town house road, look in Braddon, Turner or even Kingston (older part) Good luck!

 

I'm positive long term for Charny also.

I think great value for money and solid CF, and likely to shake off its social stigma long term

 

My husband and I feel exactly the same about the ‘charny’ stigma. In another 5+ years it will be hopefully full of renovated houses with young/older families. We are super happy with our IP in Charnwood and our tenant.

 

Thanks Todd for giving me a good breakdown and answering the rookie question of mine. Appreciate it.

 

@Jamesaurus
@Flynn Investor
Thanks for giving those locations suggestions. It's definitely something I have a difficult time deciding but after reading everyone's suggestions, it definitely helps. Honestly, I'm still holding the Charny social stigma simply because everyone that I asked gives me the same response but good to hear a different perspective.

Just wondering what is everyone's thoughts about Molonglo Valley (Coombs and Wright). My friend bought a house at Wright where they built the house and it has increased quite a fair since they last bought it.

 

@Jamie Moore Thanks heaps. That's definitely something that most ppl seem to suggesting here, no apartments or townhouse (maybe depending on location). I have to agree after doing the calculations, adding in the body corporate doesn't seem to really cut it for me.

@S1mon Thanks!
What about buying just one of the dual occupancy, would you recommend it?
For granny flat, what's the price range for building one and do you find it more difficult renting the main house (esp with families) having a someone else living in the backyard?

 

Hi Melissa,

I would personally stay away from Coombs or Wright. Same old cookie cutter houses, high density, full of townhouse and apartment blocks. I also believe Wright has large apartment public housing blocks which isn’t always great for house prices....
Close to Woden which is the only upside. Others may have different perspectives though!

 

No i don't think i would recommend one half of a dual occy. i think you would find stock standard stuff does better...which contradicts my granny flat comment a bit. Granny flat i did was about 150k all up (i did post on it a few years ago with lots of details). you need the right block with good side access, house positioned to front or rear of block, or ideally corner block with room on one side. good to have options if nothing else down the track a bit. not for everyone but just my opinion / something else to consider...particularly if you don't have to pay any premium for such features.

 

I got a lot out of that particular post, and will look to replicate in the coming years.

I would absolutely agree- you'd rather own the block with the two dwellings than just one of those dwellings

 

More well paid private employees or contractors?

 

+1 I think could only be a good sign for demand for property in CBR

 

I would recommend a house in central Belco for your budget - Page, Scullin, Florey, Macquarie - especially one that you can add value to. High demand, good rents and close to amenities and jobs. The last time our house was advertised we got a good tenant in two days.