Sydney Based Growth Portfolio

I sometimes use current assest value to see if I should hold onto it or sell it and buy another one at the same price as the current assest value minus selling fees and tax which has better yield and/or CG potential.

 

Yield based upon current asset value is only relevant when looking to purchase something. Once you've made the purchase, all that matters is yield on debt.

 

So yield on debt, not purchase price? My yield on debt for the same property is ~7%. It's getting better and better today

 

I agree with Simon. I don't measure yield based on prevailing market rates, because it doesn't tell you what you are returning or the quality of your original acquisition. Measuring yield at prevailing market rates, means that your yield will be forever at market yields.

I actually like to measure yield against debt outstanding. This is the best way to determine how your asset is performing in your particular circumstances, and correctly shows higher yield as debt is paid down.

I should add as an investor with a growth bias: the other function of yield, when you are purchasing is just to indicate whether you are over or under paying given rents are often easier to estimate.

 

Yes, I meant current equity value.

 

If you're paying P%I, these days, you need that figure to be 9% or more.

 

Yes, you then add expenses etc which depending on whether land tax is involved equates to 2-2.6% (for me).

 

Why so high and I'm on IO so property is cash flow positive month to month and negatively geared come tax time (largely C/O depreciation).

 

Interest rates 4-4.5%, add 2-2.5% for expenses, add P&I premium 1.6% or so. That's where my hurdle's at for a property to be FULLY self sustaining under a P&I regime.

Other assumptions abound eg how much your loan is, whether you pay land tax, whether your property is high maintenance, whether you pay super high strata levies, etc.

 

You also have to allow capX and refurbishment to maintain income (repainting , bathroom refurbishment, kitchen renovation, roof replacement, HWC replacement etc)

 

In general and on average, that's encapsulated in the 2.5%.

 

Well done John!

Really happy to see you sharing your story on PropertyChat

Cheers,
Michael

 

What is your point of difference?

As in how are you different to other BAs?

If one was to use your business what advantages can they expect over standard research.

I feel identifying your competitive advantage, unique attributes is key to selling your self.

 

Hi Illusivedreams,

Thanks for your question/comment. You are quite right about citing the unique selling point.

I don't want to use this property forum to solicit, so I will be very limited in any self promotion on this thread.

One thing most good BA's would concede, is that it is an industry with very low barriers to entry, around experience, education and credentials.

I am a Chartered Accountant, and my partner is a lawyer and banker. The end-to-end insights across the property acquisition sphere does give us an edge in terms of credentials and analysis.

I would also add that many BA's rarely themselves own property. As substantial property investors ourselves, we can judge a property through the lens of whether we would buy the property for ourselves.

These are attributes that we are proud of, and best limited to the above discussion in this forum.

Kind regards,

John