IP Comparison Ratios

Hi Community,

Interested to understand what ratio’s people use to compare prospective IP’s against each other?

At the moment, I am largely running with the rent ratio (monthly rent/total purchase cost). However as this does not consider rental yield or capital growth, I feel its good for a very quick evaluation but limited when comparing property in different regions.

 

For apartments (walk ups only), the most important factors for me are...
area
rent
sinking fund
and probably the most important of all - Body Corp costs.

I also like to look at what is for rent in the area and compare similar looking places to make sure the rental potential is correct. The RE's guess is always high. sometimes up to 50 dollars over, so that is definitely something to be careful about.

Once I've got all this info, I do a yearly balance that minuses, REA fees, insurance, rates, water, BC and misc. which I put at 4,000 per place.

 

I would add expenses such as maintenance, property management fee, council rate and water.
At the moment I'm using a blanket rule, which is 20% of the rent income.