For personal reasons that are out of my control, I had to consider buying a second place in Melbourne for my old folks.
One option we need to look at is to buy a close-by property and have it rented out, keeping some space for personal use.
I did some maths and it just made no sense with investment properties in Melbourne
Property: 1.4m
Size: 600m2. 4x2
Build quality: low - plastic weatherboard
Rental estimate: $700 - $800 thanks to being close to good school
Let's look through the costs
Stamp duty: $75,000
Other establishment costs: $8000
Ongoing
Councils + water: $3500 per year
Mortgage : $6500 per month at minimum (assume $1m loan) - most of that will be interest expenses
Land tax: $3500 - $4000 per year
Property manager: $1000++ per year
That hasn't accounted for maintenance and so on.
Even after negative gearing and tax back, a property like this will do $20K - $30K negative cash flow per year.
We have seen houses in the area where people bought for 1.6m as investment property.
It's just mind boggling how would anyone consider this kind of investment???
Even if one has the money to pay for this, e.g. pouring in all and everything one has to bring the mortgage down to $500K and have a zero balance cash flow. How does this make sense as an investment?
Edit: land tax per year, not per month