Quick math on how to buy a $500k property
1. Property Cost:
Purchase price: $500,000
Stamp duty (5%): $25,000
Legal fees: Included in stamp duty
Total initial cost: $525,000
2. Rental Income:
Weekly rent: $600
Annual rental income: $31,200
3. Expenses:
Rental agent fees (8%): $2,500
Insurance: $1,000
Rates: $1,000
Maintenance: $500
Vacancy cost (2 weeks): $1,000
Total expenses: $6,000
All these numbers are laid for the sake of the example to make it easier to understand.
So in this blog on how to buy A $500k rental property it’s important to note, all these numbers are laid for the sake of the example to make it easier to understand. Always seek financial advice when making large purchases. TIP: Look for properties where you can buy under market value to increase your immediate returns!
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Step 4-8 is next. Keep reading…
4. Net Return:
Annual rental income: $31,200
Minus expenses: $6,000
Net rental return: $25,200
5. Financing:
Loan amount (80% LVR): $400,000
Cash needed: $100,000 (deposit) + $25,000
(stamp duty) = $125,000
6. Loan Interest:
Interest rate: 6%.
Annual interest payment: $24,000
7. Profit Calculation:
Net rental return: $25,200
Minus loan interest: $24,000
Annual profit: $1,200
8. Return on Cash:
Annual profit: $1,200
Cash invested: $125,000
Return on cash: 1%
This example demonstrates the importance of detailed financial planning and seeking professional advice when investing in rental properties. For more insights and strategies, continue reading our blog or visit our YouTube channel for additional videos on property investment. Remember, finding properties below market value can enhance your immediate returns and overall investment success.