Clayton vs Carlton
June 21st, 2008 | by winsonlee |Two suburb might sounds similar but the Return On Investment (ROI) for the two suburb is different.
The above property is located in 18 Dooga Street, Clayton and is selling for AU 520,000. The above property can be rented for AU 450/week or AU 23,400 / year. This is equivalent to 4.5% return.
source : http://www.raywhite.com/cgi-bin/rsearch?a=o&id=104495768&fmt=&header=&s=vic&t=res
For those who goes to Melbourne city often enough would know where is “Arrow on Swanston”. This property is located at 713/488 Swanston Street, Carlton. Fully furnished 2 bedroom apartment currently leased to Arrow on a long term lease at $1064.00 per calendar month is selling for AU 175,000. This is equivalent to 7.296% return in a year.
source : http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2006882609#
I compared two property in Carlton and Clayton. With the same amount of deposit for both the properties, it can cover up to 29.71% of the total property cost in Carlton compare to 10% for Clayton. Monthly repayment for Carlton will be $1,031.59 compare to Clayton which is $3,925.09. In Carlton with monthly rental return of $1,064 after making monthly repayment for the mortgage which is $1,031.59, there is still a positive cash flow of $32.41. In Clayton, with monthly rental of $1,950, after making monthly repayment of $3,925.09 to the bank, there is still a negative cash flow of $1,975.09. This means that you will need to fork out $2k from your own pocket for the monthly mortgage.
No doubt capital appreciation of a landed property is a lot faster compare to apartment. But why invest for capital gain instead of cash flow ? From what Robert Kiyosaki said, it seems the wiser choice is actually to go for cash flow model. If you are going to buy real estate, then make sure it can generate cash flow or income for you.
Robert Kiyosaki:
One of the reasons I was able to retire at age 47, and my wife, Kim, at 37, was simply because we had enough cash flow coming in (primarily from our real estate investments). It wasn’t much — about $10,000 a month — but we only had about $3,000 in monthly expenses. That left us with $7,000 a month to do with as we pleased.
On the other hand, capital gains are when you buy a stock for a dollar, and it goes up to $10 so you make $9 a share. Or, you buy a house for $100,000, and it appreciates to $150,000. You sell it and make $50,000.
One of the reasons people do not become financially free is because most of them are focusing on capital gains rather than cash flow. Chasing capital gains alone is gambling — not investing. Want proof? You don’t have to go back very far to find it: Between 2000 and 2003, millions of investors lost trillions of dollars in the stock market
One Response to “Clayton vs Carlton”
By kwang on Jun 23, 2008 | Reply
winson,
you are not taking into account body corp fees which will dilute the returns from the unit. It you add that and council fees, you will get a lower return than the landed property.
just my 2 cents. cheers