Thoughts on this proposed deal.

Hi All,

Looking at purchase our first Investment property and looking for some "peer review" on this proposal.

Purchase 2 bedroom unit for $265K private sale referred to me from a work colleague. Will be purchasing well under median for this suburb and I am confident in capital gains.

Very close to all amenities and a no frills unit with nothing to do in terms of repairs at this point in time.

Strata $484.00 p/quarter
Rates $2330.00 p/annum

Rent $280.00 p/week

Interest Only Rate of 4.09%

Using equity in our PPOR towards purchase with IO on the investment loan with offset accounts set aside.


Any thoughts?

 

The strata is the killer in this deal.
Its pretty much break even?

This is where I would be looking closely at comparable sales, growth etc. If you are buying under market value, then how much equity can you take from the deal? How much under market value? can you flip it, take the money and run, I suspect NOT, due to stamp duty etc.

If the market has already moved then don't buy it, no point as you are not generating cash flow and living on hope for growth. Can you share the area.

Don't mean to be negative but I think its good to go in with your eyes wide open.

MTR

 

All good @MTR

Yep pretty much break even.

I've ran a RP data CMA report and similar properties have sold in the past 3 months for

$256,000 & $271,000

There is similar properties on the market for

$299,000, $320,000 & $325,000.

Median price listen on re.com is $295,000

 

Might help if you can provide the city the property is located in so people can give opinions on potential capital growth.

 

@Foxdan Sawtell NSW coastal town just south of Coffs Harbour.

n.b Property is not advertised online yet.

 

I don't get the relevance of the median price to your analysis?

 

@thatbum just for information sake as much as anything.

 

So you aren't necessarily buying below market value - would that be part of your strategy in a private sale?

 

Regional area, cash flow neutral with low interest rates. It will be Cash flow negative if rates start to go up. I can't comment on capital gains because I don't know the area.
I wouldn't be interested because if there's no predicted capital growth soon, you will be parking your deposit money down with zero return on investment from rent and when rates go up, you will be negatively geared. Even if it's below market value, I see no investment value.
If you can afford a larger loan, send your money up north to Brisbane or keep saving and start looking at Perth in 12-18months.

When you look at potential investments, you need to work out if you are wanting capital growth or if you are after cash flow. I'm not sure which you are after but I don't think this property provides much potential for either.

 

@thatbum strategy is to purchase below market for sure, desktop valuation is due to come back this afternoon ill wait and see what that comes in at.

 

@Foxdan thanks for your honest feedback.

 

Ditto

 

Frankly, if your strategy is to buy below market value, its not good enough to be relying on desktop valuations - you need to be very in tune with the market and essentially be very confident of your own ability to value the property.

 

@thatbum I am quite confident I am purchasing below market value however I do want my belief backed up some independent evidence also.

 

Why is he selling?

 

@Phil_22 - there are plenty of people here that can help you. I think you might benefit from providing some more information about your situation and what your long term goals for property investment are. Maybe post some more about your income / borrowing limits, family situation (kids, single etc) and people can guide you better on where to start looking or narrow down your search. General strategies can be very simple if people know more about your situation.
If you can get a ppor that is under market value and where you want to live, that's great. But the same property might not be a good investment.

 

@S.T elderly lady who owns property is moving to palliative care housing facility, she has no next of kin and has decided she wants to offload her assets before the "time comes"

 

+1
Not great cashflow. High strata fees relative to rental income IMO.
Not BMV, not that it matters too much but is it the best use of your hard earned deposit?
You need to think about is it one of the best locations to buy in presently or is it under valued? I can't comment on the cg prospects for Coffs Habour but I like to ask myself am I buying because its convenient or because I think its a good deal?