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Investment Property

Using the following steps calculate the return on a typical investment home in the suburb in which you live. Most of your information can be sourced from the web site of The Real Estate Institute of Western Australia (www.reiwa.com.au). Please note that under no circumstances are you to call REIWA for information. All the data you require is on their web site.

  1. What was the median price of a typical 4 bedroom house in the suburb in which you live in 2009? This data can be found from the Median House Price Chart.
  2. Using the stamp duty calculator on the REIWA web site how much would you have to pay in stamp and other fees? (Note that you will be using the calculator as it applies today and not 4 years ago). You should consider this purchase an investment property (You should ignore the First Home Owners Scheme).
  3. What is the latest median price of the house in the same suburb?
  4. What was the median monthly rent for a typical 4 bedroom house in the suburb in which you live in the Jan to Mar quarter for each of the years 2009 to 2012? Note that this information is also available from the REIWA website.
  5. To evaluate this investment you now need to find the effective annual rate of return based on the following cash flows:
    • Initial outlay (cost of the house plus stamp duty):
    • Monthly rent for each year (note that your cash flow should take into consideration the rent values you have stated above).
    • Annual expenses incurred such as rates and taxes (2% of the purchase price of the property – this is paid annually), maintenance and other outgoings (20% of the rental income paid monthly):
    • Final valuation of the property.

Question Set #39

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