澳洲Australia property You must have deep pockets to invest in M


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


Just thought I'd share a place we came across earlier this year:

This place sold at auction in April for $585K, quoting range $500-550K, so typical inner city Melbourne. Our summary notes after inspection said: old kitchen and bathroom (crap). v.small block. not interested. exc public transport++.
http://www.realestate.com.au/property-house-vic-brunswick-106418073

It is now up for rent for $360/week.
http://www.realestate.com.au/property-house-vic-brunswick-404681981

Doing the sums (I have been quite generous to the investor):

Purchase costs - $585K + $30K (stamp duty) + $3K (transfer fee, b&p, solicitor) = $618K

Interest on $618K @ 7% = $43260/annum
Rent minus 7% management fee = $17410/annum
Other outgoings (insurance, maintainence etc) = $3000/annum

Total negatively geared = $28850/annum = $555/week :eek::eek::eek:
I haven't considered the tax benefits, but even in the highest tax bracket it is still a lot to bank on capital gains.

Yield = 3.2% on purchase price, 3.0% on total purchase costs

Suffice to say, we stopped looking in Melbourne and purchased in Brisbane instead :)  

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on the highest tax bracket (47 cent?) requires 2.6% growth in first yr.
What has melb done recently? like 15% in the last yr or even higher.

One thing i noticed from my asian friends its very desirable to move to melb and you know these people have $$$  

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Wow! Dumb money paying dumb prices, goodluck to them.

If it smells like a bubble, acts like a bubble, looks like a bubble, then it's probably a reasonable price to pay because everyone wants to live in Melbourne :D  

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585k for an inner city terrace doesn't sound unreasonable at all to me  

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^^^ not wrong!!!!!

that'd be $750k here.....  

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How much would the same thing have sold for say 4 years ago? Although it doesn't seem cheap to me,it doesn't look expensive either for a PPOR. You'd have to hold it for awhile to make any money though - just don't see it tripling in 5-10 years.  

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I agree that it's stupid money, but thats what the market's paying ATM.

The question is, do you want to gamble on how many years to get decent CG, given recent rises and current non affordability.  

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Ridin-High said: ↑
on the highest tax bracket (47 cent?) requires 2.6% growth in first yr.
What has melb done recently? like 15% in the last yr or even higher.

One thing i noticed from my asian friends its very desirable to move to melb and you know these people have $$$Click to expand...
Why's that Ridin-High?

Every time I've ever been there it's wet n miserable ;)  

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redwing said: ↑
Why's that Ridin-High?

Every time I've ever been there it's wet n miserable ;)Click to expand...
yeah i have no idea, i haven't been myself  

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redwing said: ↑
Every time I've ever been there it's wet n miserable ;)Click to expand...
You need to come in Summer, it's lovely then! :p

Nowhere is warm enough for me in Winter, not even Cairns! :(  

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andrew_de_a said: ↑
585k for an inner city terrace doesn't sound unreasonable at all to meClick to expand...
i agree, $585K is not out of the ordinary. What I was highlighting was that it was most likely bought by an investor (unless someone is renting it out prior to moving in as PPOR), and the holding costs involved. Many of my mates are paying $500-700K for their (first) PPOR in Melbourne - but that is PPOR, not IP with big holding costs.

I guess Melb is popular with Asians as there are lots of Asian hubs/communities around.

Melb is definitely wet and miserable today!:(  

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Ski-bum said: ↑
Total negatively geared = $28850/annum = $555/week :eek::eek::eek:Click to expand...
Welcome to purchasing investment property in Melbourne at the moment. Your calculations arent to unusual from what I have seen.

Yet, there are still lots of people throwing money into 'investments' like this. I still havent managed to figure out why.  

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So is property expensive or are rents cheap?
It will be interesting to see what the next few years have in store for rental figures.  

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So it's going to cost a higher rate tax payer about $15k pa to hold this property.

Now as they're a higher rate tax payer, earning over $180k pa, they generally have spare cash to invest, and would look upon $15k pa as fairly small beer.

They're a realistic investor, not expecting a doubling every 7-10 years, but a more modest 5% annual growth. When they sell it in 10 years time, they expect to sell it for about $925k - hardly an unreasonable assumption.

That 5% growth gives them an IRR of 9.8%. Not stellar, but much better than sticking it in the bank and roughly comparable to direct investment in equities. Of course if property continues to grow strongly (and I don't believe it will) then the IRR would be much higher.

But, instead of buying this property, where else would they put their spare cash?

Super? Well perhaps they already put $25k there, the maximum per year.

Margin loan? Perhaps, but maybe after the last crash they're a little weary of that avenue.

There is a lot of wealth in this country, and they have to invest it somewhere.

It really struck me an an immigrant, arriving here 5 years ago, just how wealthy Australia is. I'm an accountant, working for a large firm, so I have a pretty good idea of what people earn and are worth across all sectors of the economy, rich and poor, and I've worked around the world, so I can put it in a global context. A lot of Aussies are financially secure - not rich by any means, just very secure, and have excess cash to invest. Add in tax rules that encourage investment in property and you have the reason for people to buy a house like this one.

Cheers
Jonathon  

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Jonathon said: ↑
But, instead of buying this property, where else would they put their spare cash?Click to expand...
How about simply "Not borrowing it"? You don't have to find a home for money that isn't yours.

To be fair, you are not really discussing property investing but "tax efficiency" and that is not what this forum should be about.  

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Sunfish said: ↑
To be fair, you are not really discussing property investing but "tax efficiency" and that is not what this forum should be about.Click to expand...
In Australia the two are inextricably linked.  

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I dont care what anyone else says, to be on the hook for 600K and getting only $370 rent doesn't make sense. Whoever bought this is banking on CG, but in a world economy where money supply is actually shrinking...he really is taking a big chance.

What if this guy loses his job? What if interest rates rise another 3 times this year?

I don't know, to me the numbers are pathetic.  

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looks a pretty good buy to me, those properties are irreplaceable and the building as well as the land increase over time due to scarcity factors.

Also can be capitally improved by doing some clever renovations which would add to their tax advantages as well.

If that property is not worth double that at least in 10 years i would be amazed.  

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DanielG said: ↑
I dont care what anyone else says, to be on the hook for 600K and getting only $370 rent doesn't make sense. Whoever bought this is banking on CG, but in a world economy where money supply is actually shrinking...he really is taking a big chance.

What if this guy loses his job? What if interest rates rise another 3 times this year?

I don't know, to me the numbers are pathetic.Click to expand...
Ok, so let's say that another $100 a week makes it less pathetic to you. That's $5200 a year, but let's say that after fees and vacancies it comes to about $4,500 a year, but then after tax it's more like $2,400 to a high rate tax payer.

So do you really think that $2,400 a year makes a difference to an asset that will be even more sought after in 10-15 years time? Really?  

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Jonathon said: ↑
Ok, so let's say that another $100 a week makes it less pathetic to you. That's $5200 a year, but let's say that after fees and vacancies it comes to about $4,500 a year, but then after tax it's more like $2,400 to a high rate tax payer.

So do you really think that $2,400 a year makes a difference to an asset that will be even more sought after in 10-15 years time? Really?Click to expand...
Why would you just add $100 a week to the rent? That's ridiculous, if achievable why wouldn't they advertise it as such. Maybe I am reading your post wrong, it's not very clearly worded. If we consider the place rented for the first 12 months at $360, at a reasonable growth rate of 6%pa it's not until the 5th year that it's returning an extra $100 per week.

A few of the more switched on investors on this board I have seen treading a little more cautiously recently, some even have mentioned that we might be heading into an early 1990s period where prices slow or even trend backwards for a few years.

The 1990s saw around a 5% pullback in prices with a 7 year stagnation period for Melbourne (1989-1996) if data at this link is to be believed.

What sort of return would the owner of this property expect to achieve over a similar period? Here's a quick table (rushed, so if any figures wrong please let me know):

[​IMG]

Rent increasing at 6%pa as are outgoings. $180k shortfall over 7 years! Of course after tax benefits at the highest rate that would almost knock this figure in half however keep in mind:

- The outgoings that Ski-bum started with and I've used are VERY generous
- Allows no potential for gaps between tenants
- Allows for no increase in rates or we could look at a 5 year fixed rate at 7.75% that's around an extra $4600 in interest per year ($32k over 7 years)

Let's hope that this investor:
- Has buffered for rate rises or is using a fixed rate
- Won't get bored in a prolonged downturn/stagnation in prices
- Doesn't lose their income forcing a sale while they are in negative equity  

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