Dear fellow investors,
I would like to share with you my story on 2 separate multi-unit purchases, 5 doors down from each other, purchased 8 years apart, and the rationale behind choosing these particular properties. Buying blocks of units on one title has played a significant role in helping me achieve my investment objectives over the last 13 years. Let’s look at why it can be so powerful.
In May 2004, I found a block of 4 2 bedroom units on one title in Sale Victoria. Over the next few years I set about separating the titles and on this particular property, completing some renovations. I love this strategy because it allows me to increase the value of the asset quite quickly which provides additional equity I can use to invest in the next project.
I purchased all 4 units for $245,000 in 2004 and spent around $100,000 completing the subdivision and renovation. Last year the units were valued by a bank at $620,000, which is an increase in value over 8 years of 153%, or 80% after allowing for subdivision and renovation costs.
To highlight the advantage of adding value to a property like this is to compare the 2004 project against what I have just purchased.
My recent purchase is an identical block of 4 units in the same street only 5 doors down. On this basis, it is fair to say that in 2004 it would have also been valued at around $245,000. In December 2012 I purchased this block for $392,000, so over the same period its value has increased by 60% – quite a difference from the figures mentioned before.
We can also compare the 2 blocks from a rental return point of view as well. The units purchased in 2004 receive a weekly rent of $180 each and the units purchased in 2012 receive a weekly rent of $160 each, a difference approx. 11%. By making the property more appealing to tenants, results in a better cash flow for the investor.
Take a look at the numbers on my most recent purchase:
Purchase price: $392,000
Purchase costs: $23,000 – stamp duty, transfer fee, legal fees etc.
Total cost: $415,000
Annual rental income: $33,280
Interest per annum on $415,000 at 5.6% is $23,240
Other ongoing cost per annum, I allow 25% of my annual rent: $8,320 – council & water rates, insurance, agent fees etc.
Total income per annum: $33,280
Total cost per annum: $31,560
Total profit per annum: $1,720
This investment is genuinely cash flow positive from day 1.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now
Back in 2000, Garry Harvey was a 26-year-old Victorian looking to buy his first home. Now, still shy of his 40th birthday, YIP’s runner-up for Investor of the Year 2012 has amassed a diverse portfolio of 39 properties that return more than $500,000 a year in rental income and have given him $2.75million in equity to work with. Garry is a fan of buying in bulk, and he has made the most of a strategy centred on subdividing blocks of units.
Top Suburbs :
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.
We value your privacy and treat all your information seriously - you can check out