For insurance, AMI estimated it’d cost around $3,100 a year.
That was based on a rebuild value of about $700,000 (even though the property was listed at $335,000).
That’s because insurers care about what it costs to rebuild the house, not what you paid for it.
You also need to think about your property manager, unless you live in the area. Sometimes, property managers in smaller towns charge a little bit more.
So while I had the local property manager on the phone, he told me he charged 9% +GST.
That’s slightly higher than the 8% (or so) you might see in a larger city.
Run the cashflow
So now that we’ve got the price, the rent, and the main costs, we can finally calculate the cashflow.
The easiest way to do this is in Opes+, a free app for property investors.
What happens once we add in the rent and all the costs, including:
- Rates
- Insurance
- Maintenance ($3,000 / year)
- Vacancy (you won’t have a tenant all the time)
- Property Manager
- Letting-fee (to find a tenant)
- Accounting
We can see that while the property earns a good yield (7.7%), the costs still make it cashflow negative by about $136 a week.