Investing Under $400,000 - A Case Study
8 August 2019
Case Study – Community Title Villa in Regional City
Situation - Our client Julie, a 30 something professional, was looking for an investment property that would rent easily, offer good returns and capital growth. The budget of $400,000, was considered suitable to acquire the type of property that would achieve the desired investment outcome.
Julie has busy job Monday to Friday, which limited her time to travel and investigate different property markets across NSW, although she could recognize a great investment when one was presented.
Proposal – Using Aspect Buyers Agency, Julie was presented with the following property as a suitable.
This property was identified as having a great investment return and cash flow.
Regional City Location (60,000 + Population) – 3-bedroom Villa
|
Property Location |
Regional Centre |
|
Asking Price |
$395,000 (3 bed Villa) |
|
Sale Price |
$380,000 |
|
Gross Rent |
$400/week ($20,800 pa) |
|
Outgoings |
$4,469 pa |
|
Net Rent |
$16,331 pa |
|
Net Return Cash Required |
4.30% pa |
|
10% Deposit |
$38,000 |
|
Stamp Duty |
$12,819 |
|
Legal Expenses |
$1,800 |
|
Pest& Building |
$660 |
|
Total Cash Cost |
$53,279 |
|
Neighbourhood Profile |
Source: (ABS) |
|
Median Weekly Income |
$2,078 (ABS) |
|
% of social housing in the area |
0.0% |
|
Dominate dwelling type |
Separate House |
|
% of home ownership |
73% |
|
% of private rentals |
27% |
|
Unemployment rate |
1.6% |
Benefits – Julie was able to have suitable options presented to her which were analysed and had passed background checks. The investment options were pretested to guarantee they, met suitable returns, were structurally sound, positioned in suitable environments and in markets that are offer diverse economic base.
Overall about 700 properties were initially considered, of which about 80 where analysed and 20 short listed.
The client saved significant amount of time and money by not having to travel vast distances to inspect property and learn the markets of different towns and different sectors in each town.
Multiple markets, housing types and locations were considered in detail to help Julie feel comfortable with her investment decision.
Local knowledge and the ability to determine the right cities
and right parts of each city, is critical if you are acquiring in regional
markets.
As the property was brand new, the full depreciation benefits were available, thus nearly $12,000 of tax depreciation allowances are available in the first full year of ownership, significantly contributing to reducing the level of taxable income produced from this property.
The property was leased in 48 hours, during the settlement period thus significantly reducing the vacancy period, resulting in the property generating cash flow within a fews days of taking ownership.
As the property is new, the property is under builder warranty and any building issues are covered between the 12 months and 7 years, depending on the item.
This gave Julie great peace of mind, knowing that it would be unlikely to have any unexpected maintenance expenses for several years, assuming all goes well.
