Hi fellow PCs, I have a question in relation to serviceability of your loans. Does most people's rent cover most of the loan and expenses? Or is it all dependent on how much capital they put In first up. I personal leave around 50-60 k in savings or offset for a 600 k property just in case. Most of my rent pays mortgage and the extra are covered by work. What does everyone else do? Thanks in advance! Matt
Most of our portfolio builders used to run quite negative These post apra days there is more of a focus on reliable income options rather than focus on growth mainly CG isnt out the window, it just cant be the sole driver anymore for average Mum and Dad. Active/Managed Debt Recycle strategies can help a little to a lot ta rolf
@Matt87 Depends on your strategy and affordability. In recent times, most of our clients have been targeting from mid 300s to mid 400s, so lower end of the market, offering better returns. At the same time, these properties have been well located, in sought after areas, and have been zoned for future development or have subdivision potential. Not all properties in an area are made equal, so you need to be picky. I know higher the purchase price, higher the return from a capital growth perspective (assuming property is located in areas well sought after by owner occupiers, as emotion plays some role in pushing prices up). However, there is only so many of those properties you can hold. One can still target good quality properties that offer an upside, e.g. zoned for future development, lower price bracket, offering decent rental return to cover the mortgage.
Depends on what you buy and where, but when I'm doing my servicing models for clients, I assume a 3.5% rental yield unless I know there's more too it. I do see rental yields ranging from about 1.5% to 6.0% of the purchase price though. By rental yield, I mean the rent as a percentage of the full purchase price. Even 5% is negatively geared by these criteria. Investment loans can be as low as 4.3%, but you've still got to cover numerous other holding costs.
