Every day I search the Brisbane property market for good investment properties for my clients.

Every Monday I send one out for free to give you an insight into how an investor finds and assesses properties.

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Property of the Week #8 – 17th August 2015

Address: Central Villas, Buderim, Sunshine Coast, QLD, 4556

Property Type:

  • Townhouse Type A: 3 Bed, 2.5 Bath, 2 Car
  • Townhouse Type B: 2 Bed, 2.5 Bath, 1 Car

Listing: The Central Villas site can be found here: http://www.centralvillas.com.au/

Listed Price:

  • Townhouse Type A: $399,500
  • Townhouse Type B: $349,500

Rental Return:

  • Townhouse Type A: $410 to $440 per week
  • Townhouse Type B: $390 to $410 per week

Affordability: The estimated rental return and tax deductions ARE enough to cover the interest on the investment loans and all the rental expenses in full (when averaged out over a full financial year) so the property will cost you nothing to own and actually put $8 per week back into your pocket (calculated for an investor with an income of $50k/yr).

The Verdict

The strategy for this property is quite a bit different from the previous properties we’ve analysed. It’s focused on Positive Cash Flow and Buying off the Plan.

Positive Cash-Flow

On its own, the rental income from this property is NOT enough to cover all of your costs (mortgage repayments and rental expenses) directly. However, this negative cash-flow is then turned into positive cash-flow once you add the tax credits you receive from this property after claiming interest expenses, rental expenses and depreciation.

See a worked example in our Beginner’s Guide to Positive Cash-Flow Property.

The main reason this property is Positive Cash Flow is due to the large amount of tax deductions that come with buying a brand new property, namely: depreciation.

Buying off the plan

Construction of this development has only recently commenced, meaning it’s not due for completion and settlement for another 6 or 7 months. Therefore, you would be purchasing this property ‘’Off the Plan’’. Off the plan can be a smart way of capitalising on time with minimal upfront cost. This strategy enables you to purchase today with a small holding deposit (from $1,000 to $5,000) and lock-in today’s prices, with the idea of settling in the future once construction is complete (anywhere from 6 months to 3 years) when the property is (ideally) worth more than you paid thanks to time in the market.

NOTE: This strategy only works in a market that is moving up! Investors can run into problems at settlement time if the market has gone backwards during the construction period. That’s why it’s important that we chose this property in a high-growth area.

Capital Growth

The Sunshine Coast market is returning to growth for the first time in six years.

The market is being helped by multiple factors. The tourism industry is stronger; the market is more balanced in terms of supply–demand; price decline has made property more affordable; apartments are increasing in popularity with both home-buyers and investors; many FIFO mine workers are choosing to settle on the Sunshine Coast; and some serious infrastructure is being built in the area. See the report for more details about Sunshine Coast property growth.

Tax advantages

The tax advantages are a key strength of this property, but remember that Capital Growth Potential is still your main reason for investing. The importance of the tax credits received here is to improve your cash-flow rather than make you wealthy on their own.

Get the full details, analysis, and research…

Join the Property of the Week Club to get the full report on this property. It includes:

  • The valuation report
  • The rental appraisal
  • Cost calculations for an investor earning $50k p.a.
  • Profile of the Sunshine Coast as a growth area
  • Links to the resources we’ve used for our research