Thursday, May 22, 2014

What Renters look like in 2014

Ever wondered what renters look like compared to buyers? 

Could you tell if you were walking past a renter on the street? 

www.realestateview.com.au has recently surveyed 1,216 Australians in the property market to gauge consumer sentiment on a range of issues such as pet peeves, lifestyle preferences, and affordability concerns.

Take a look at the infographic below and you can see that our beloved SOUTH MELBOURNE is one of the top 10 most searched suburbs to rent in the past six months.

Wednesday, April 30, 2014

Residential OR Commercial?

Which property purchase will give me the best financial return on my investment?

Comparisons between these property types over the years have largely been performed without factual foundation.  Using real data and applying discounted cash flow analysis to calculate the internal rate of return which delivers a tangible metric these two property types can be evenly compared.

The properties compared are:
 
1.  A 2 bedroom Strata Flat in Port Melbourne
2.  An Office/Warehouse of 277m² in Port Melbourne
 
The data has been compiled from 2006 to March 2014.

Property Type
2006
Purchase Price
$
2006
Income at time of purchase
$
2014
Sale Price
$
2014
Income at time of sale
$
Flat
340,000
13,000
490,000
16,120
Office/Warehouse
590,000
38,000
690,000
45,000

 
Assumptions:
  • The flat has experienced no vacancy and arguably could earn more rent per week;
  • Flat income is a gross annual rent – landlord pays water rates, council rates and owners corporation charges;
  • All costs save for Land Tax, are paid by Lessee of office/warehouse;
  • When the office/warehouse is re-let circa 2010, an allowance of 4 months vacancy plus 3 months’ rent free is factored in, and subsequently circa 2013 a further 3 months’ rent free is provided to the Lessee.
  • No loan repayments, purchase or sale costs have been factored in.  Nor have any capital improvements been undertaken to either property. 

The Result:
The annualised internal rate of return on equity over the investments life, is:
 
1.       Flat – 8.71%;
2.       Office/Warehouse – 9.14%.

Conclusion:
Acknowledging there are a host of items which can “financially engineer” a “potentially” more attractive outcome, if property is purchased observing the basic fundamentals property provides stable and reliable returns.  Noting the above internal rates of return have been achieved throughout the GFC and its aftermath.

Whilst I have undertaken this comparison between only two property types, it is not conclusive as there are numerous other property types where vacancy periods may be non-existent yet the initial yield on purchase is lower, or alternatively certain property types can experience prolonged vacancy yet are high yielding on initial purchase.

However the ultimate reason to invest should be predicated on understanding what you are investing in, which will provide you with a greater degree of comfort and certainty – ultimately a decision you alone should make with some practical reasoned advice from a known and trusted advisor; being fully cognizant of what you can comfortably manage.

Simon Regan
Director - Sales & Leasing

Sunday, February 23, 2014

Should I make property investments with family and friends?

It sounded like a great idea at the time, but....
 
Get Michael Yardney's take on the ups and downs for keeping it "in the family".  He covers the important questions such as:

  1. Is it worth it?
  2. Have you documented the plan?
  3. Do you really know them...financially?
  4. How will this team borrowing affect my financial future?
  5. Begin with the end in mind - how do we all get out?
  6. What's plan B?

Read the full article here:
http://blog.realestateview.com.au/2014/02/will-investing-property-loved-ones-stretch-friendship/
 
There are pros and cons so please make sure you do your homework, as you would any major financial commitment.
 
The last thing you want is to be left holding the baby...



ExpertView Blog courtesy of www.realestateview.com.au