|
|
Hi!! I have just been made redundant and I'm so glad to be out of their Rat Race at last! You see they just paid me $10,000 to leave a job I was going to leave anyway. What can I do with $10,000? I could pay off my visa cards and that would eliminate some bad debt. And I will do that for sure! However, how else could I use that $10,000? You could buy a couple of houses with that much money! We have just purchased a house for $38,000 and with the stamp duty and legals and contingency we allowed $41,000 (we always add 8%to the purchase price). This house has a LOC on it at 7.07% which is $2898.70 a year in interest. That's $55.75 a week. The rent is $120 a week which is $6,000 assuming only 50 weeks a year tenancy. Take away insurances of $400 and rates of $600 and that leaves $5,000. Also another 8% goes to the property manager. That's $480. So we are down to $4520 year net rent. Subtract the interest of $2898.70 and you have a profit of $1621.30. That's $31.18 a week. If you buy right. You shouldn't have any maintenance to contend with in the first year. However, that isn't always the case so we always make sure that the usual things like tap washers and toilets, hot water systems and baths and showers, along with stoves and heaters are all in excellent working order before purchase. If not allow for renovations in your initial loan amount. What happens if we add $3,000 to our loan for the renovations? It becomes $44,000 and at 7.07% the loan now costs $3110.80 a year. How does that affect the bottom line? Well the rent is the same at $6,000 and the rates and insurances are the same at $600 and $400 and the property manager is the same at $480, so the bottom line should look like this: $1409.20 profit! That's still $27.10 a week. And you just borrowed the lot and didn't even put down a deposit to achieve that result!!!! What about the $10,000? $38,000 plus 8% is $41,040 but I rounded it off to $41,000. Take $10,000 off and the figure is $31,000. Still allow the $3,000 for renovations and you have a LOC of $34,000 and at 7.07% you will pay $2,403.80 a year in interest. And the bottom line is now a profit of $2116.20 or $40.70 a week. That's over 21% return on your investment of $10,000! If you have another property you could use as security for the purchase so you didn't have to use the $10,000 your return would be infinite as you haven't put in any money to make a profit! All you need to do is repeat this little exercise over and over until it becomes second nature. The numbers will change with each purchase you make a long the way and you will have ups and downs, but the concept is simple to follow. You just have to go looking......and think outside the square. $30 a week multiplied by 20 properties is $600 a week. So where will you be in 5 years time? |
|
