Not making any money in IP

Discussion in 'Introductions' started by paulose, 17th Sep, 2021.

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  1. paulose

    paulose Member

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    Hi

    I have 2 IP in Werribee. Planning to sell in next 3-4 years.

    I am just curious how do people make money in IP, specially with interest payments to Bank.

    One of my calculation for 1 property (3 bedroom, 1 bathroom - seperate house but part of body corporate - Approx 240m2) is. This is 10 mins walk from train station. Purchased it for $339k in 2017. Bank is valuing it at $380k now. Sale price now is possibly $370k. So Average is around $10k capitals gain each year.

    Rental 15084
    Interest 9769.79
    Body Corporate 2022
    Water 639.91
    Council rates 1300
    Insurance - $350
    agent Fees - 995.52
    Repairs - 0
    Stationary/phone 15
    Total 14742.22
    Difference - Negative aprrox 10.

    Should I Sell it? Would love to hear from someone who follows markets in Werribee, Melbourne. This is a good quality house, hence 0 repairs last financial year.
     
  2. Trainee

    Trainee Well-Known Member

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    Sometimes, properties go up in price.
     
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  3. sash

    sash Well-Known Member

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    Hmmm that sounds pretty cheap....I sold my ****** box reno'd for $420k in 2020...bought for 130k in 2007.

    Talk to someone like Petar Krjeta at Ray White Werribee. I suspect you are underpricing it.

     
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  4. samiam

    samiam Well-Known Member

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    If you are going to sell at that price I am interested to buy :D
     
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  5. Beano

    Beano Well-Known Member

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    Easy they invest in Commercial
    Borrow 100% off equity make $10k each week Recent yields on comm property.
     
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  6. sash

    sash Well-Known Member

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    Even a unliveable crap box virtually unliveable got 400k

    https://www.realestate.com.au/sold/property-house-vic-werribee-136887974

     
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  7. paulose

    paulose Member

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  8. Ruby Tuesday

    Ruby Tuesday Well-Known Member

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    Hmmm sounds very expensive for a property that is only making 290 a week. It didnt make much sense paying more than $250k for something only paying 15k a year in earnings when you could fall over properties in good locations for 250k that did. Paying too much wrecks your service ability and and abiity to leverage. Could only have been paying 150k for a 2 x 1 unit in 2017 in good location for that rent. $250k could get you something earning 350-450 a week.
     
  9. sash

    sash Well-Known Member

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    Generally these properties don't get growth...and are few and far in between.

    Having said that I got a block of land....last year in a high demand regional in Victoria. I bought the block of land for 159k...building a house 4brm house for 220k. Rent on this is expected to be 460pw plus depreciation....end value is 680-700k.

     
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  10. skater

    skater Well-Known Member

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    Who did you use for your 'valuation'?
     
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  11. momentum26

    momentum26 Well-Known Member

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    What did you decide? Did you end up selling your both?
     
  12. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The key to quality IPs is ensuring you buy quality cashflows when you choose to buy. That means neutral or positive !! Let it be self sustaining vs a cashflow burden. A cashflow neutral property will possibly have just as much growth as a bad one but involves it paying its own way. I see loads of investors whose whole portfolio may cost them $200 a month unless big repairs occur etc. They have patience and have no interest in selling since its treading water. They wait for the growth to continue. They dont even consider selling in 2-3 years. They dont consider selling at all. Then they pull equity from their two properties to buy number three.... Compound growth with minimal cost to wait

    I just reviewed the OP and it didnt make sense...
    rental income $15K, Expenses $14700. A negative $10K ? Huh ?? According to me thats not correct. Those numbers indicate the cost of ownership could be $6.57 a week...I spend more than this on coffee each day. After selling costs to take a modest rise in value thee profits not that big. So why sell if its costing $7 a week ? The agent is the winner not the owner.

    I did note the OP didnt mention adjusting costs for depreciation deductions and P&I v IO etc. These can change cashflows up or down. (P&I will decrease cashflow for the principle reductions and depreciation is a non-cashflow deduction that enhances cashflow through tax refunds)
     
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