If you’ve read my last blog on student accommodation, you will have seen the power of multiple incomes from the one property towards getting positive cashflow. For this analysis, I thought I’d stick with that theme and check out this dual-income property at 7 Cook Street in St Marys, NSW.
The agent suggests that this property is undervalued. Maybe. Asking price is $359,950. What makes this property jump out at me, though, is the granny flat hiding around back. The power of dual income allows our hypothetical investor, described here in my first post, to receive an existing combined rental income of $640 a week. Take out the average expenses (such as insurance, maintenance, etc), and we’re still sitting pretty with some decent positive cashflow.
We probably won’t get much out of depreciation, as the building looks fairly old and dated. Even the extension looks a little old, but we’ll still use a rough figure in using our favourite depreciation calculator. This property won’t give us much there. And, unfortunately, the assumed age of this building will also result in higher repairs and maintenance costs. The other expense I’m expecting to be higher than usual is property management fees, as it might require a little extra effort to manage the dual-income situation. More advertising, letting fees, etc. Even so, after these assumptions, our hypothetical investor (I’m beginning to think we need to give him a name! Suggestions?) can enjoy a net yield before interest of almost dead on 7%.
Can’t complain, I’m sure. More or less neutral for the first year, after tax and all other expenses. With all the usual assumptions over time (and again, these are assumptions, not expectations), after ten years we could have the investor sitting on a property earning almost $6k in positive cashflow per annum, with around $270k equity. Nice.
By the way, if you think that I’m doing some pretty interesting stuff with these analyses, and are hoping to either get into the property market or expand your existing portfolio, you might be interested to know that one of the many services we offer is around in-depth property analysis and strategy. Just give us a shout if you think we could help you out.
Hey mate, good work. I do like your style and the way that you keep finding these deals.
I don’t think that you saw it, but there was a thread on Somersoft a few weeks ago that actually covered the very same property.
From memory, the theory was that the rent was maybe a little over what it should be. But, that said, if the rental is already signed and being paid, then your results will still stand in the short term. The issue would only come about when these come up for renewal.
Hypothetical investor suggestions:
(Name, origin, meaning)
“Darius”, Greek, wealthy
“Gerik”, Polish, swords & riches
“Alameda”, Irish, ambitious
“Dareh”, Armenian, wealthy one
“Otto”, German, wealthy
…. and my personal favourite…
“Rafferty”, Celtic/Gaelic, wealthy