Here’s a 3 bedroom property at 2/83-85 Warrandyte Road, in Ringwood, VIC. Jumping straight into the figures; at a fully borrowed purchase price of $460,000 and estimated weekly rent of $440, we’re getting a gross rental yield of about 4.97%. Average, but not too bad as a starting point.

We’ll make some standard assumptions about rates, body corp, maintenance and property management expenses, etc, and suddenly our net position is down to about $9,600 pa negative. Ouch. The beautiful thing here is, though, that the property is brand new. So depreciation could be a shade over $15,000 (for all fittings and the building itself) and combined with the capitalised borrowing costs and the tax benefit of the net loss above, this actually brings the property into a neutrally geared situation from year one. Over time, of course, the rents should increase and that should bring this property into positively geared territory in a fairly short amount of time.

You might have noticed James talking in his latest blog post about the effect council and state plans can have on property prices and local growth. Well, it turns out the government has grand plans for Ringwood to become a Central Activity District, detailed in the Melbourne 2030 project. Good news? Make of it what you will, but the powers that be are looking to encourage growth and investment in the area.

My aim with these posts is to provoke a bit of thought and encourage a little discussion. So by all means, please give your input and share your thoughts. I’m sure you’ve got something to add…