A lot of media attention over the past few weeks has focused on Federal Health Minister Sussan Ley after it was alleged she used taxpayer funded flights to the Gold Coast to purchase an investment property. Ley has since resigned from her position.
What hasn’t received much attention are the details of the property she purchased. Ley paid $795,000 for a two-bedroom unit in a high-rise apartment block in Main Beach (just north of Surfers Paradise).
If Mrs Ley has purchased the unit to live in or to use as a private holiday house, then the decision to purchase comes down to personal circumstances and preferences. Emotions play a large part in such decisions.
However, if the unit was purchased as an investment property, that is a different story. Facts and figures are the priority and emotions only serve to cloud decision making. At We Find Houses we help investors looking to take control of their financial circumstances to take the emotion of out of purchasing an investment property and to focus on what really matters.
Let’s take a closer look at the unit Mrs Ley purchased.
It would attract a rent of around $700 per week. Body corporate (strata) fees, rates, water and insurance would cost around $200 per week, leaving a net return of approximately $500 per week.
This equates to a net yield of just 3.27%. This figure will reduce further once vacancy rates and property management fees are taken into consideration.
With this type of return, strong capital gains are required to make this type of investment feasible. However, historically, high-rise units on the Gold Coast have provided poor capital growth in the long term. This looks set to continue as dozens of high-rise blocks in the 10km strip between Southport and Broadbeach are currently under construction or in the planning stages.
At the time Mrs Ley was winging her way up and down Australia’s east coast at our expense (allegedly), We Find Houses also had clients who were keen to invest in property on the Gold Coast. Our clients didn’t have the same budget as our former Health Minister, but they will still finish way in front. The reason being is we sought and secured properties based on our clients’ individual needs that would provide the best long-term results.
As an example, in the same month that Mrs Ley purchased her Main Beach unit, we secured a three-bedroom duplex half at Palm Beach (on the southern end of the Coast) for one of our clients. The purchase price was $481,000 with a rental return of $500 per week. After taking into consideration all the outgoings, this investment came out to be neutrally geared. Due to high demand and extremely tight vacancy rates, the rental return on the duplex has increased since the purchase, so now the property provides a slight positive cash flow for the owner.
Despite this, the major benefit to our client has been achieved through capital growth. Current estimates value our client’s Palm Beach duplex half at around $590,000 with further growth projected throughout this year.
Had Sussan Ley spoken to Paul Wilson and the team at We Find Houses before purchasing, she could have paid for her own first class flights to the Gold Coast, stayed at one of the premium hotels, had an extra $300K to put into another investment and still been more than $100,000 in front!
To find out how we can help you to avoid the unnecessary pitfalls of investing in property call We Find Houses on 1800 600 890.