Purchasing a property with a full loan in Australia
9/30/2022
I have been staying in Australia since August 3rd. During my stay in the country, there were important tasks such as "property purchase" and "loan screening", but I managed to finish them.
Oh my God, I can buy a new property with a full loan!
Here is an overview of the property we are purchasing.
Location: Brisbane suburbs. A 5-minute walk from the planned site of the new station.
Land: 270㎡
Building: 2 detached houses <3LDK x 1 for families, 1LDK x 1 for singles>
Price: A$399,990
Completion period: February to March 2016
Estimated rent: A$550/week (family property: $330, single property: $220)
Gross Yield: 7.2%
* 1 Australian dollar = 91.4 yen (as of August 17, 2015)
This property is a type called Dual Key, and on a land of about 270㎡, a detached house with 3 rooms for families and a detached house with 1 room for singles are built. It is a profitable property that gives a yield that exceeds that of a normal detached house rental. The image is similar to Japan's "Nikoichi", but instead of a series of dwelling units separated by shared walls, independent detached houses are built as shown in the figure below.
I was able to buy this property with "zero own funds" this time. The cash I need to prepare is only for the purchase costs (stamp tax, registration fee, etc. approx. 16,000 AUD).
In the case of Australia, a down payment of at least 20% is required for the first acquisition. 30% is required for non-resident foreigners. The reason why I was able to buy this property with zero own funds this time is that the property in Sydney that I acquired 13 years ago doubled in price, and the increased collateral value was included in my own funds .
To be more precise, the Brisbane property purchased this time must prepare $44,000 of own funds (11% of the property price), but borrow $44,000 more for the Sydney property loan. In effect, it was the same as buying with a full loan.
The property in Sydney was purchased for my home in 2002, and the price at the time of acquisition was $394,000. However, the value has steadily increased to $531,000 (2009) and $665,000 (2013), and the current collateral value has doubled to $800,000. Without much effort, I found vacant collateral, so I used it to purchase the second house.
The terms of the loan are an annual interest rate of 4.63%. It is a monthly variable interest rate, and it is a pattern that only interest should be returned (Interest Only). The cash flow after the purchase will also be calculated as it is.
Rent income (assuming full occupancy): A$28,600 ($550 x 52 weeks)
- Loan redemption: A$16,480 (356,000 x 4.63%)
―Other expenses: AUD 4,120 (city tax 1,500 + water 600 + rental management 2,020)
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Cash flow: A$8,000/year A$666/month
Cash flow of about 60,000 yen every month, including a full loan... It doesn't sound like much, but in Australia, the national average vacancy rate is less than 2%, and the rent and real estate value are common every year. I think it's not a bad story considering that it will go up to.
The site is a new residential area that will be developed systematically. If the new station and commercial facilities are completed in a few years as planned, convenience and real estate value will increase. In addition, there is also a phenomenon in which investment money flows from Sydney, where real estate prices are soaring, to Brisbane, which is still affordable. It is a property that looks forward to the future in terms of capital gains.
