Positive Cash Flow 500 Metres From The Beach
Today we are looking at a dual income property built on a 480 square metre block of land right near the shops and under 500 metres from the beach.
0:00 – Introduction
1:20 – The details on this investment
3:51 – The client’s ultimate goals
4:48 – Everybody needs to invest considering their financial situation and financial goals
7:07 – Some things to look for to find a great local area
8:43 – Good cash flow allows you to continue to make money through turbulent times
11:50 – Property walkthrough (kind of)
Purchase Price: $340,000
Build Cost: $250,000
Total Investment: $610,000
4 Bedroom Rent: $465/week (estimated)
1 Bedroom Rent: $270/week (estimated)
Total Rental Income: $735/week (estimated)
Here we are at a dual income property that Ben and the team have Pumped on Property have helped a client purchase, knock down the existing property and rebuild. This is on a logical hirslanden, a previous walkthrough that we’ve done around 480 square meters. And they were able to build a four bedroom home with a very decent sized backyard, as well as a one bedroom granny flat, I guess you would call it, which has quite a small backyard. So unfortunately, the larger home and senators are not allowed in there. And we were not given the keys to the single unit. And so we can’t get in there either. So but we are going to talk about the numbers and we can walk down the side and show you the little backyard from the granny flat. And we have done previous walkthroughs of granny flats which you can see so sorry about that. But let’s talk a bit about the numbers on this one. Do you have it off the top of your head? Or do we need to get the vapors in the car. So this property was purchased and there was an existing property on it. So they did have to pay $20,000 to get the existing property removed. And to turn this into vacant land before they could go ahead and build this jewel lock. But otherwise, they wouldn’t have been able to get the dual income property. So it wasn’t suitable for an existing property and a granny flat from what I’ve heard.
Yeah, so sorry, guys. So basically, we picked up this existing home for 340,000. Now, like most suburbs, there’s really high quality pockets of a suburb and there’s more affordable pockets, this part of the suburb is very, very, very close to the water, very, very close to the shops as well. So you can
actually see the shops right up there. So the shops are literally right there walking distance, we’re less than 500 meters walk from the ocean.
so you know, $340,000 for a home in this particular part of the suburb was an absolute steal. Most of the time, something on the side of that major road would be more like 400k 450k for a knockdown minimum, so 340,000 for the home. And then as Ryan said, $20,000 for the knockdown and removal of the home as well as the new connections. And then the four bedroom home as well as a one bedroom granny flat came in at just over $250,000. So the thing I like about this is sometimes when you spend a little bit more, you can actually get a lot more longer term. And I think in this particular situation, the client from Melbourne was able to do something a little bit different, you know, by bit closer to the beach bind a slightly better part of the suburb and long term that’s going to pay dividends in terms of the capital gains he can get.
So does that mean all up? We’re looking at around 700,000 invested into this property? Is my math correct on that? Or 600? No 600,000?
Yeah, so just a little bit over 600 that are just just a little bit over $600,000. Yeah. Now because the home is literally just being rented this week, we don’t have feedback on what it rented for. But I’m assuming I own a four bedroom home, just down the road that I built recently. I’m getting $465 a week for that four bedroom home. So I’d be assuming that that’s very similar. And then I’d be assuming that we’ll be getting at least 270 bucks a week from the granny flat as well. So
yeah, well the granny flat here is actually slightly more spacious or at least with the outside space then the previous walkthrough we did it’s also closer to the shops and the beach and those are expected to rent for 270 so we may even get slightly higher for the granny flat here.
Yeah, so again, I’m just doing the numbers it’s been a few long videos in a row but I think we’re sort of sitting at mid seven hundreds dollars a week like 750 a week in rent type thing combined which on a $600,000 span particularly this close to the water is you know a neutrally geared property with the deposit the client put down after tax positively good but as always, you know, it was a long term capital growth play. Ultimately though the client just wants to own this property outright get that you know passive income stream for life you know, by any couple of days they should be in a position where they can have much better choices in their future
and that’s the thing so many people do it so differently based on what their desires are. So for this one more of I guess a long term capital growth play being close to the shops and being close to the beach means that slightly more money is invested than some of the existing properties with granny flat builds that we’ve shown in previous walkthroughs slightly more money invested the cash flow the rental yield isn’t quite as high but they’ve got a new build jewel occupancy properties still with really good cash flow compared to the area and still cashflow neutral. Obviously you get the depreciation as well which can help with cash flow and assume like low maintenance property as well. Really easy to manage and really easy to rent out.
You know, I think it’s really important to remember that everybody’s situation is so different and Ryan and I certainly aren’t financial advisors or accountants but you effectively start with where you are now if your borrowing capacities 400 $1,000 and your annual combined salaries $80,000 then you know that enables you to enter a marketplace here and because you’re entering the marketplace at a lower price point there’s obviously positives and negatives of that you know but there’s other people we work with it and 200k to a million dollars a year and they’re in a position where they’ve got good equity or cash from other properties or assets or shares or businesses and sometimes they want something a little bit high quality that is going to get them that extra 1% per year of capital growth on a you know on a $600,000 property over the next 20 years so it’s about understanding where you’re at and then making the right plan realizing there’s no one size fits all approach to investing it’s really a bespoke approach of creating value based on you know what your particular goals are and where your financial situation is at the time
and that’s why it can be so hard when people say well is this property a good investment and you answer that is this suburb a good investment because it’s what it’s so depends on the investor and what the investor is trying to achieve what the risk profile is of an investor so this investment may be great for this client may not be so great for another client who has a different situation and who has different goals as well so when looking at different suburbs looking at different properties looking at different strategies it’s really important to understand you where you’re at and where you want to be as well and what your risk profile is and what sort of property you want to purchase so whether it’s a good investment obviously there’s a lot of things that we look for in every investment we want to be in a suburb that is likely to grow we were just actually talking to a local here talking about this area specifically he grew up here talking about how dodgy it was back in the day and how much has changed and how much nicer the suburb is and that you know right near the water and stuff like that and so that’s obviously just anecdotal evidence but there’s a lot of things that we look for in suburbs in particular you know despite what your strategy is but then when it comes to the particular property it’s going to be so nuanced based on what your goals are and who you are as an investor
you know some of the things that i like about a quality area whether you’re starting with a $400,000 budget or a $4 million one is you can always look at things like rental vacancy rates and find an area with a nice vacancy rate below 2% you can have a look on realestate.com for the suburb you’re focusing on and you can kind of begin to map out the suburb in terms of where the most expensive properties are and where the cheaper ones are you can get that antidotal evidence from locals and from real estate agents and talk to them about the good pockets and the cheap pockets and talk to the property managers you can look at how long properties are sitting on the market and what the dsr scores are and you know the housing commission is where the housing commission is like where the bushfire issues are in sydney or melbourne or whether flooding issues could be in southeast queensland or queensland you know and you can get a really good picture of what your highest and best use of your funds is based on you know collecting some of the qualitative and quantitative stuff to make the best decision for you because i bought properties for 213 grand on the central coast that i sold for higher $500,000 you know six years after i bought them and that was supposed to be the worst suburb on the central coast that was supposed to be the africa australia according to the sydney morning herald like there were some demographic issues there you know in that particular time the rising tide lifted all of the boats around it my thought for you is don’t just let the rising tide lift up your boat find a high quality vote that’s actually going to enable you to get to where you want to be at the same time as the market moves for you
and then something like this which is new build and which is cashflow neutral as well will allow you to see through those turbulent times as well so the market does stay flat or if it goes backwards or even if it grows or something happens in your life i talk a lot about life risk sometimes things happen and you lose jobs we’re just talking about someone that we know recently who has you know lost a high paying job and ended up in a very difficult financial position but something like this that takes care of itself if you lose your job if you go through one of those you know life life risk scenarios where you end up worse off something like this not only takes care of itself but can actually help see you through those times with a bit of extra cash flow or maybe the buffer fund that you’ve built up or whatever it is you decide to do but it’s not stripping money away from you and demanding money of you when you’ve just lost your job and got no income
that’s so important man because like let’s look at these properties in example it’s a $600,000 investment the client put down $100,000 cash so they effectively owe the bank 500k now interest rates at the moment for investor if you’ve got the right mortgage broker you know generally between 3.5 and 5% but let’s just say it’s at 5% on 500k is effectively 25 grand you’re an interest now we’ve just said 750 bucks a week in terms of rent written i’m not a mathematician but you know that somewhere over about $35,000 a year of income
don’t look at me let me get the calculator look at that problem now what do we say around 750 times 50 times 50 to 39,000
yeah so if you got 100% occupancy but being a bit more conservative you know you’d be looking at about 35 grand a year of income on with 25 grand a year of interest repayments
obviously you got property manager fees you’ve got insurances council rates and things like that as well
yeah which represent about 20% of the 35 grand but even so like it’s kind of a property that if it’s interesting the home loan would be pretty much breakeven even before tax and then the tax benefit of a 250k property go and talk to you depreciation specialists but from my experience of building similar things would be over $5,000 a year in the first three years so it’s kind of you know just interesting to consider all weather properties and you know when i have gone through harder times financial times whether it’s been the market and it’s affected my business so i’ve lost the job or i’ve just had a low paying job because i’ve had to move and start a family fired if i got fired you know it’s enabled me to just continue to hold the properties without stressing on them without thinking about them because ultimately we want to own properties outright we want to get a credit passive income stream forever so that the next time those harder times come we’re not stressing yourself out about it but not even for that worst case scenario or insurance policy it’s more even just when you’ve got enough money coming in then you can start making really good quality choices in your life
yeah and then you don’t have to work anymore so let’s have a walk around i will link up down below to the walkthrough of the 45 square meter one bedroom unit which was part of a jewel off just not too far off the street and was one of those examples of someone with a lower budget that pushes a bit further away and so we’ve got the front entrance here with parking for the one bedroom unit and then we’ve got the garage as well as some parking on the driveway for the four bedroom home and so they enter the front door for them is right here front door for the one bedroom units here so separate entrances unfortunately we can’t go through the front door maybe i’ll just try and poke the camera through the window so you can see exactly what it looks like so as you can see poking through the window a bit of a different layout to the last one bedroom unit that we did with a bit more living space in there and obviously you will then walk through to the bathroom and the bedroom and then off the bedroom actually is where the backyard is so i’ll show you that so obviously usually you would have a yard of your living area and a door off your living area given a layout of this block 480 square meters their backyard is actually we go down the side here because they do have side access just not access we can see this little space here so a little bit of backyard space here and then actually that i correct me i think that’s the laundry not the bedroom so that would be that looks like a bathroom window there so probably bathroom laundry which would then come out onto the backyard here where you can hang up your washing and then you’ve got the bedroom window over here which i put my hand into the bedroom not really i get the blinds the blinds are a bit close on that one and then if we look over the top here you can see quite a huge wraparound yard for the four bedroom property so they’ve got quite a good amount of space for the back yard whereas a four bedroom property highly likely to have children yeah and people are going to want that outside space one bedroom property people are less concerned with outside space and the previous unit we looked at didn’t have any but they still tend to rent quite well this one has a bit of outside space obviously it would be ideal if it came off the living area it doesn’t but still even having this as definitely a plus you can come out here have a couple of years if you want
yeah they have a little dog or something like that enables them to have that all walkable so again it’s about creating functionality and as ryan said you want the space out the back for the big for better but a lot of people renting one betters want like very low maintenance property and this really serves that purpose
yeah so very unique property here getting the jewel income in such a good location rather than buying vacant land they purchase you know a knockdown rebuild is effectively what they did so really cool to see this happen i hope that you enjoy this sorry that we didn’t actually get to walk through it but it is something that you’re interested in if you either want to build exists build new build or if you want to purchase existing properties maybe build a granny flat then ben simon and the team over pumped on property do offer free strategy session so you can get on the phone to them talk about your situation where you’re at and how a property investment like this may or may not see you what’s going to be best for you and your property investment journey so go to onproperty com au forward slash session to learn more about those free sessions and book a time over there that suits you otherwise until next time stay positive