Posted to The Age (15/2/2012) on 15/2/2012 at 1:48 PM
Commenting on "Rents rise by 13% in sought-after suburbs"
http://theage.domain.com.au/real-estate-news/rents-rise-by-13-in-soughtafter-suburbs-20120213-1t0e7.html
Most people, whether they are renters, owners and investors have not much or no idea at all about the costs of owning and keeping a property. With rising utility charges, rates, land tax, on top of bank interest charges, property owners are in no way laughing to the bank. In fact, the contrary is true.
When one wants to start a business, he/she has to prepare a business plan and many potential wise operators will even attend courses on how to manage business and basic accounting.
A few hundred thousand dollars investment in property is worth more than some small businesses, and yet I have not come across anyone to take the effort to learn about income, expenses, breakeven, small business operation/management, negotiation skill, demography, real estate market trend, etc. Some of the course items mentioned are not rocket science, but only very few real dummies will find these difficult to understand.
If the initial rent charged was low, there is a lot to catch up in rent increase. Investors are not saints, and they need to make a profit to justify their investment. Many properties purchased during the last few years were at highly inflated prices, and the rental return for property investors has been in the red. Unless they are other form of income to cover their shortfall, many will have to sell their investment properties to cut their losses. The cumulative loss is far more than the capital gain in the past few years.
Unfortunately, many investors cannot curb their losses even in the next seven years, unless annual rental increase over this period is at least double that of the inflation rate. By my calculation, some may even have to increase rent by 40% to achieve breakeven.
Commenting on "Rents rise by 13% in sought-after suburbs"
http://theage.domain.com.au/real-estate-news/rents-rise-by-13-in-soughtafter-suburbs-20120213-1t0e7.html
Most people, whether they are renters, owners and investors have not much or no idea at all about the costs of owning and keeping a property. With rising utility charges, rates, land tax, on top of bank interest charges, property owners are in no way laughing to the bank. In fact, the contrary is true.
When one wants to start a business, he/she has to prepare a business plan and many potential wise operators will even attend courses on how to manage business and basic accounting.
A few hundred thousand dollars investment in property is worth more than some small businesses, and yet I have not come across anyone to take the effort to learn about income, expenses, breakeven, small business operation/management, negotiation skill, demography, real estate market trend, etc. Some of the course items mentioned are not rocket science, but only very few real dummies will find these difficult to understand.
If the initial rent charged was low, there is a lot to catch up in rent increase. Investors are not saints, and they need to make a profit to justify their investment. Many properties purchased during the last few years were at highly inflated prices, and the rental return for property investors has been in the red. Unless they are other form of income to cover their shortfall, many will have to sell their investment properties to cut their losses. The cumulative loss is far more than the capital gain in the past few years.
Unfortunately, many investors cannot curb their losses even in the next seven years, unless annual rental increase over this period is at least double that of the inflation rate. By my calculation, some may even have to increase rent by 40% to achieve breakeven.
