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Re: [sharechat] Residential Property

From:	"Chris Donald" <cdonald@hotmail.com>
Date:	Mon, 07 May 2001 16:31:28 +1200

Andrew, here are 2 examples for you. Both properties that I own and both with very different results.

Property 1

Currently rented for $160 per week (8320 per year)

Costs (so far on average for the last 4 years) $1540

Capital cost $95,000 (1997) Valuation as of last year $95,000

Giving a return of 7.1% (providing 100% occupancy, currently sitting at 97.5% over 4 years)

Exclude depreciation etc from the equasion because it comes back to bite you when you sell anyway.

Interest costs = 7552. based on 100% being borrowed.

About 55% of the money is on loan from the bank but this shouldnt be taken into the equasion either as you should be looking at the Gross return.

In this case we have seen no capital gain but we are lucky enough to hold value over this period. In hindsight, not the best of investments and certinally not worth the hassles. If we sold up today we would loose money due to legal/real estate fees.

Property 2

The one that we live in.

Cost 160,000 2 years ago, Valuation now 185,000

Estimated cost of renting it $10400 per year

Cost to us in owning it. Expense $1200, Interest $12720 (based again on 100% finance)

So you can see we are out of pocket about $3000 per year just by owing the house. However, if we didnt buy the house we would not have the capital gain on the house either.

So, its only really worth buying a house (moneywise) if there is a capital gain to be made and that is really hard in todays market.

Chris

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