How I decide on a purchase price - Episode 21

Christchurch Real Estate Podcast

How do you decide on a purchase price??
You start at the end and work you way backwards.
The 2 different types of examples I talked about are:
Buy and Hold deals.
1 - Possible rent achievable after reno eg $750/week or $39,000 pa
2 - Less desired profit of $5200 = $33,800
3 - Less R & I of $6000 = $27,800
4 - Divided by interest rate of 6.5% =$427,600
5- Remaining equals purchase price of $427,600
6 - this equals a 9.1% gross yield on purchase price (seems good - but isn't)
Quick flip deals.
1 - After reno Sale Price $495,000
2 - Less Agents fee $ 16,000 (3.5%)
3 - Less Profit $80,000 -you will loose 50% to tax, gst, closing costs(so $40,000 in the hand)
4 - Less Reno cost $50,000
5 - Less Holding Costs 8% for 3 months = $7000
6- Possible purchase price = $342,000

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