Just bought IP #1.

About 10 years ago I bought a house and land package which was heavily negatively geared... I managed to get out of that with a small profit. But, to get back into property investing I wanted a completely different strategy. It is not my strategy, but it made sense to me... The strategy is:

1. Buy within 1 hour of CBD
2. Buy with gross yield of ~7%
3. Buy below market value (?)

1 & 2 seemed easy enough. I am not so sure about 3. I figure the property market is pretty efficient with realestate.com.au these days. I've spoken to people that have forked out up to $13k on buyer's agent fees to buy a sub $300k property and it doesn't make sense to me.

When I was looking at properties, I just kept asking myself, would I live here? I ended up buying this one - 1/65 Park Road, Slacks Creek, Qld 4127 - Property Details

Got a tenant in at $300/week which achieved my target yield of 7% and so far the numbers look like this, assuming a long-term tenant and no major repairs to be undertaken in the year.

Item Amount Frequency Yearly
INGOING
Rent $300.00 Weekly $15,600.00

OUTGOING
Interest $740.18 Monthly $8,882.16
Council Rates $655.01 Quarterly $2,620.04
Body Corporate $561.13 Quarterly $2,244.52
Management Fees $24.75 Weekly $1,287.00
Statement fee $5.50 Monthly $66.00
Water $222.00
Landlord insurance $300.00


TOTAL $15,621.72

DIFFERENCE
-$21.72

I think I've done well, but then again I'm not sure if I'm overlooking anything. I am aware that there will be some maintenance costs, etc. but any losses can be deducted against income for ~40% back in tax rebates, or will only cost me ~60% after tax. I'm happy to receive any feedback from people as I am very new to this game and would appreciate more experienced people providing insight.

 

Grats !

What's the plan for #2?

 

Well, I bought this one completely sight unseen... a couple of little issues which I am chalking up as a learning experience:

- leaking toilet
- tap for washing machine not working
- owner only had 1 key for the front door, had to have keys cut for the rest of the locks
- paid for it to be professionally cleaned before tenant moved in.

So for #2, I am planning to fly up and inspect the properties and use the defects as a leverage in negotiating.... and, I will be attending settlement so I will get all these issues fixed before I accept hand over of the property.

Now I am very specific in what I want to buy. I see things like carpet as a liability for example, would prefer floor boards.

#2 I will be on the hunt for in mid-late December when everyone is busy with Christmas. It will be in the Logan area again.

 

Congratulations @pwnitat0r

Will you be looking to buy a similar IP #2?

I understand you are looking at cash flow neutral to positive deals.

What were your reasons for selecting a townhouse over a house in the Logan region?

 

PS - in terms of minor repairs - there will always be issues. You can always get a B&P done and see what the vendors are willing to fix (prior to going unconditional).

 

Well done, you had a plan and you stuck to it.

 

I'm all for good yields but just watch that yield requirement doesn't have you buying sub optimal investments that may limit your investing in the future. You have to look at each deal as a package e.g. it may have great yield and be within your 1hr to CBT but may be subject to local oversupply etc vs something with poor yield but potential to make money in the short term. Up to you, I'm just saying don't let your past experience make you too rigid on strategy. Look at what the market's doing. Anyway, very well done on what you've achieved so far

 

Congrats on your first IP.
I am looking forward to seeing what else you do in the future.

 

Awesome. Don't forget your depreciation schedule. Looks like the place will make you money after tax

Those council rates look expensive? Is that the norm for Qld?

 

Council rates are charged every quarter and every time it's around $800 for a typical Logan house. So it is the norm.

 

I second this question.

I believe most tenants like to live in big house, big yard. But it's good that @pwnitat0r has already got a tenant paying $300.

I'd like to see how it will do in terms of the value growth, which is a stepping stone for you to extract equity and invest more.

 

The hour of CBD is probably not relevant in Bris, the cut off seems to be about 20ks out, after that the CBD is less important, area will do it's own thing.

I do not follow Logan area much, but I know it has already had quite good gains.

Regarding yield, you need that return on units there. I say it is a negative geared.

Buying Truly under market takes quite a bit of work, but you do get people who want quick sales from time to time and also those where prior sales do not complete. For those short on time with good income may not be worth mucking about though.

Anyways, not a bad looking place

 

the body corp takes nearly 15% of the rent

 

All these charges add up and come off the bottom line. No matter how much debt you pay off the cash flow will always be minus these. Same with BC. Important to know if a state/region has higher than usual rates, higher than usual insurance if you're planning on holding long term.Doesn't necessarily mean it's not a good buy. You just need to know how it's going to help you reach your goal.

Also I think BAs can be worth their weight in gold and make the difference between a killer $300k investment and a total lemon.

 

Strata fees and council etc are expensive in many Bris surrounds, that is why the rents (seem) are high on units. Some of them cause a lump in the throat !

 

I guess the following reasons:

- if you compare growth in units versus houses, there's not much difference... a few percentage points
- units/townhouses are lower/easier maintenance as a lot of the stuff is taken care of by body corporate
- I've lived in a number of units for the last 7-8 years, so I feel I understand them better than houses

I'm flirting with the idea of a house for #2, but nothing is concrete yet. I'll consider everything I come across.

 

For a property built in 1988? It would still have depreciation?

I believe the council rates are the norm, but I have no idea.

 

Just be careful with #1 because there are some CBDs that an hour away would be too far imo so I would try to be flexible on that point depending on which CBD you're looking at.

 

The growth rate of houses vs units - are you referring to this generally or the Logan region? Growth is dependent on supply and demand.

Brisbane strata properties are different ball game to Sydney in my view, and Logan is a different market to say Mount Druitt (the suburb itself) in Sydney.

 

Yes a deprecation schedule would be worth while and will improve your cashflow position.

The council rates sound high to me? I'm not familiar with LCC rates but that's considerably higher than BCC or Ispwich CC for a house let alone a TH.
The Body coporate fees are possibly elevated because you are paying for up keep of a tennis court and swimming pool.