What are your thoughts on this deal

I would like some advise/comments on this deal, this will be my first IP. Plan is to build a 3 bedroom house. These are the figures.

Land cost 195000
Build cost 150000


total 345000

20% deposit 69000
Closing costs 13000

Cash needed 82000

Rent 23400 per annum

Cash outflows

Outgoings 2000
Repairs 500
Interest 13116

Total cash outflow 15616

cash on cash return

Cash inflows 23400
Cash outflows 15616
Net cashflow 7784
Initial cash down 81800
Cash on cash return 9.5%

Looking to build in Caloundra on the Sunshine Coast, 5 minutes from new hospital due to open next year. Close to school and 5 minutes from the highway.

Any thoughts would be much appreciated.

 

6.7% yield is good.
Have you factored in all costs - landscaping, clothes lines, curtains etc
COC should be infinity as you shouldn't be using any cash - borrow the deposit if it is an investment.
Sunshine coast - do you think the growth will come?
What have previous capital growth figures been for the area.
What are the vacancy rates.

 

That's a very small/cheap home for 150

 

Have you included site costs and floor coverings?

 

Without wanting to sound stupid, when you say borrow the deposit are you suggesting a personal loan?

 

No - I was assuming you have a main residence, but this may not be the case. But you could still borrow - see
Tax Tip 61: How to borrow 105% on your first purchase Tax Tip 61: How to borrow 105% on your first purchase

 

Sorry, you are dreaming about the anticipated rent return figure. Who's going to rent at $450/w when you can build your own at interest holding costs of $270/w ?

 

Hhmmm the build and numbers / cash-on-cash sound good.

But what of the location? Isn't there a truckload of house-and-land going in, in those parts of SC?

Stockland are marketing a massive H&L estate in Caloundra at the moment I believe.

 

Not a fan of building.
Utilising your 80k deposit if you went into LMI territory @88% LVR you could by a place around 600-650k.

Pegging it back to 450k surely you would be able to find a property with better growth prospects with only slightly less cashflow.
I would rather an extra 20k capital growth per year than 2k cashflow (38pw)...

I don't think a vanilla 3br house will appeal to owner occupiers in the future for resale purposes.
You should be thinking about what mum and dad would want to live in. Otherwise it will just be another investor or bottom of the barrel buyer who your target market will be.
Plus by not having a 4th bedroom a tenant may choose a different property for $10 more per week to simply have that 4th bedroom/study..
Don't skimp on the extra build cost for a extra room.
@sash is the guru in this area. He maximises the house footprint on the block. That way your property has some competitive advantage over others when selling down the track.
Don't be too fixated on cashflow etc, real estate is not shares. There is a human aspect/psychology to consider also. It is an investment for you, but a home for your tenant or potential buyer in the future.

But given you are proposing a decent deposit maybe you should consider not going down the new build path. What is new will be old soon enough.

 

Probably rethink using a 20% deposit if you don't have a PPOR yet.

 

Without wanting to sound flippant but why do you say I'm dreaming. There are 3 or 4 houses on realestate.com.au renting for $450, $500 for 4 beds

 

You have outgoings of $2000 a year. What are the rates, water, insurance and PM fees?.

 

@Jason Muller

3 bed house for $150K - Does Not sound right

Also, $450 per week Rent - Net or Gross?

 

I would review your numbers, does not sound right at all.

$150K for a build sounds more like the price to build a villa, QLD currently most expensive State to build.

Stamp duty on land?

Holding costs during the build process, should take at least 10-12 months to build?

This does not sound like a turnkey product, by this includes everything, blinds, carpets, letter box, clothes line, telephone connection, TV antenna etc.

MTR