Project Overview
Property Type: Dual Key, Single Storey
Total Floor Area: 208.56 m²
Lot Size: 811.0 m²
Contract Type: 2-Part Contract
Pricing Structure: Fixed Price - Full Turnkey
Total Purchase Price: $774,739
Land Price: $240,000
Construction Cost: $534,739
Estimated Weekly Rent: $950 - $1,000
Estimated Gross Yield: 6.71%
Funding and Interest Assumptions
This project will be financed with 100% debt at an interest-only rate of 6%.
Land Loan: $240,000 (100% financed)
Construction Loan: $534,739 (100% financed with progressive drawdowns)
Total Debt: $774,739
Land Holding Period: 3 months before construction starts
Construction Period: 9 months (5 drawdowns)
Interest Cost Calculations
1. Interest on Land Loan (Before Construction Begins)
Loan Amount: $240,000
Monthly Interest: $240,000 × (6% ÷ 12) = $1,200
Total Interest for 3 months: $3,600
2. Interest During Construction (9 Months, 5 Drawdowns)
Month | Loan Amount Drawn | Monthly Interest (@6%) | Total Interest Over Period |
1-2 | $106,947 (20%) | $534 | $1,068 |
3-4 | $213,895 (40%) | $1,068 | $2,136 |
5-6 | $320,843 (60%) | $1,604 | $3,208 |
7-8 | $427,790 (80%) | $2,139 | $4,278 |
9 | $534,739 (100%) | $2,674 | $2,674 |
Total | - | - | $13,364 |
3. Total Interest Cost (Before Completion)
Land Holding Interest: $3,600
Construction Interest: $13,364
Total Interest Paid Before Completion: $16,964
Gross Rental Yield Calculation
Annual Rental Income (High Estimate): $52,000 ($1,000 x 52 weeks)
Gross Yield Calculation: ($52,000 / $774,739) × 100 = 6.71%
Projected Capital Growth at 7% Per Year
To assess long-term investment potential, below is the projected property value over 5, 10, 20, and 30 years assuming an annual growth rate of 7%.
Years | Projected Property Value |
5 | $1,086,751 |
10 | $1,527,647 |
20 | $3,007,139 |
30 | $5,920,551 |
Conclusion
This feasibility study highlights the viability of financing the Sovereign Downs project with 100% debt.
The property generates a gross yield of 6.71%, ensuring strong rental returns.
The total interest paid before rental income begins is $16,964, which is reasonable given full debt funding.
Over the long term, at a 7% annual capital growth rate, the property's value is projected to reach $1.08M in 5 years and $5.92M in 30 years.
With both strong rental yields and capital growth potential, this project presents a compelling case for investors seeking a fully leveraged investment with long-term appreciation potential.