Regretting buying property?!

When you actually run the figures it costs a lot more than I thought to hold a property. Here is an example (rough figures) of $330k house renting for $350 PW. 100% LVR

$7k per year holding costs!

 

Is this based on an actual property ?

 

What about depreciation? If we assume that you can claim $2500 per year your on paper loss is $9500.

At a marginal tax rate of 37% you would receive a tax refund of approximately $3515 so you would be out of pocket by $5985.

Less if your marginal tax rate or depreciation higher.

 

Yep, that is why you need higher yield, there are even more costs sometimes than what you put down, and renos people do, etc etc

 

@Logan - I based it on a 10 year old house in the Ipswich LGA

 

For a relatively new house you would have substantial depreciation claimable.

 

Newsflash - This just in: Properties returning 5% are not cashflow neutral. More at 11.

If you want to be at least neutral, you need to be at high 6's gross. CF+ mid 7's upwards.

 

Yeah in that example I would need to be getting $513 PW in rent for a $330K house. 8% yield

 

The maintenance seems very high, 4 weeks vacancy is a long time, you didn't include depreciation and NG, rates seem low and I find insurance to be around 1100 with somersoft discount.

Based on your figures plus 3500 depreciation (this is being very conservative) and a tax rate of 37% you are looking at -$3192. Is this a house you own or are looking at ?

 

Maintenance panic is a good example of why it can be a good idea to give yourself time to get accustomed to being a landlord with your first IP before you race in and buy heaps of property. With one property you might get the odd maintenance call. You might find yourself a little irritated you have to spend any money but then you notice your property has risen in value by more than the cost of maintenance and anxiety is eased. You realize the plan is working and switch off your panic brain and let the property do its thing while you get on with enjoying your life.

Folks that opt to buy their first IP swiftly followed by more don't enjoy the phase of getting used to things. (That maintenance costs tend to be less than the property growth. The process of getting tradies in. What a property management statement looks like. The information to include at tax return time. The process of tenancy changeover.) Someone with heaps of IPs might receive several maintenance calls in one week and get stressed out about it. It is a good idea to determine your personality type and give yourself a little bit of time to breathe and get used to things before you jump in big time. There is little point investing for the future if you will stress yourself out so much that you have a heartattack and don't survive it.

 

I based it on 7-10 year old properties currently seeing in the Goodna / Redbank Plains area. I guess you could use this one as an example 2 Carney Circuit Redbank Plains Qld 4301 - House for Sale #122348358 - realestate.com.au

Assume it sells for $330k.
It is currently renting for $350 PW.
Built in 2010 (6 years old)

Yes you would need to factor depreciation in and then tax savings due to it being negatively geared.

 

Hi Logan - I can't say I'd heard of the Somersoft discount - is that something that is still available under the PropetyChat banner and if so, how do PC members find out more?

 

I don't see the appeal in investing in Springfield or areas further out like Redbank Plains. The same yield levels are achievable in BNE less than 5km out of the CBD & over the last 10+ years it seems like the land hasn't really appreciated at all (probably because there is huuuuuge amounts of undeveloped land out there for new greenfield developments) & the appreciation in property values seems more like a combo of inflation + rising build costs.

Is it purely for lower cost of entry? What am I missing? Am I being an inner city snob by writing off western suburbs 30km+ from the cbd?

 

You are 100pc correct
It taken me over a decade to be relaxed on large maintenance bills
Replacing hotwater cylinders , broken drains , painting the house all use to stress me out as I never had the cash reserves to pay for then
Capital gains are great but you still need the profit
My personality (when the yields were low) did not suit residential
It was not until i went commercial (high yields) i become relaxed with IP
A tidy profit changes all

 

So you're regretting buying. (I didn't read the preceding replies) so what are you going to do about it?

 

Trying to switch to ground leases with thd hassle of maintaining buildings
One third of the way there !

 

Yeah the difference is in the entry price. House out further can be had for low $300k inner city house and your looking at $500k+. Not affordable for all.

 

@JacM You can get a discount on building /landlord insurance with EBM if you mention somersoft / property chat - for me it worked out to be about $100 pa for each IP house

 

Yes, you can, but only for new policies, not renewals. It is 2 months fee waived IIRC.