20 Marriott St — Feasibility Dashboard

RECOMMENDATION: PURSUE ACQUISITION — NEGOTIATE AGGRESSIVELY TOWARD $4.5M

Annual Net Cash Flow

After interest & all opex

Gross Yield

Gross rent / purchase price

Net Yield (NOI)

After opex, before debt

Cash-on-Cash Return

Break-Even Price

At current interest rate

Buffer to Break-Even

Upfront Investment Required

Deposit ( equity)
Stamp Duty (VIC Investment)
Legal & Conveyancing	$20,000
Total Cash Required
Loan Amount ( LVR)
Annual Interest Cost

Annual P&L — Ownership Model

Gross Rent (12 units × /wk)
Vacancy Allowance ()
Effective Gross Income
Total Operating Costs
Net Operating Income (NOI)
Interest on Loan
Net Cash Flow
Capital Growth Est. (5% p.a.)
Total Estimated Return

Property Overview — 1–12 / 20 Marriott St, St Kilda VIC 3182

Property Details

Type: 12-unit residential block
Location: St Kilda VIC 3182
Agency: Buxton Real Estate
Asking Range: $4.5M – $5.0M
Currently Managed: 8 of 12 units (Hybrid ARB)
Zoning: General Residential (R1Z)

Current Arbitrage Income (8 units)

Owner rent paid: $3,880/wk
Tenant rent collected: $5,070/wk
Weekly margin: $1,190/wk
Gross profit p.a.: $61,855
Vacancy cost p.a.: ($6,481)
Net arbitrage profit: $55,374

St Kilda Market Context

Median house price: ~$1.8M
Avg 2BR rent (mkt): $650–$750/wk
Vacancy rate (suburb): ~2.1%
10yr price growth: ~5.5% p.a.
Demand drivers: Proximity CBD, beach, lifestyle
Supply constraint: Very high — heritage overlays

Acquisition Assumptions

Purchase Price

Asking range: $4.5M – $5.0M

LVR (Loan-to-Value Ratio)

Some lenders cap 12-unit blocks at 70%

Interest Rate (p.a.)

Variable from 5.35%, avg investment 6.72%

Capital Growth Estimate (p.a.)

St Kilda historic: 5.5% p.a. (10yr avg)

Income Assumptions

Avg Rent / Unit / Week

$ /wk

Current avg: $633/wk. Market: $650–$750/wk

Number of Units

units

Currently 8 in ARB portfolio (4 additional on purchase)

Vacancy Rate

Current actual: 3.2%. St Kilda suburb: 2.1%

Operating Cost Assumptions (Annual)

Land Tax (SRO Victoria)

~$14,000 est. (site value ~$1.9M)

Council Rates

~$1,000/unit/year

Water Rates

~$1,000/unit/year

Insurance

Building + landlord liability

OC / Body Corporate Admin

As sole owner, admin costs reduced

Maintenance & Repairs

$2,000/unit/year routine maintenance

Contingency

Unexpected costs buffer

Live Model Output

NET CASH FLOW

GROSS YIELD

NOI

TOTAL CASH REQ.

📦 Scenario A — Full Ownership

Gross Rent (12 units)

Vacancy Allowance

Effective Gross Income

Operating Costs

Net Operating Income

Interest on Loan

Net Cash Flow

Capital Growth (5% est.)

Total Annual Return

🔄 Scenario B — Continue Arbitrage

Gross profit (8 units)$61,855

Vacancy cost($6,481)

Net Arbitrage Profit$55,374

Capital invested$0

Return on capital∞ (no equity)

⚠️ Income at risk (sale)($55,374)

Capital growth benefit$0

Total Annual Return$55,374

Ownership Advantage over Arbitrage: /year

Total Annual Return Comparison

Income Composition — Ownership

Key Decision Factors

Factor	Scenario A — Ownership	Scenario B — Arbitrage	Winner
Income security	Fully secured — owner controls asset	100% exposed — ONE owner can end all 8 leases	🏆 A
Units in portfolio	12 units	8 units (4 not accessed)	🏆 A
Capital growth	Full benefit	None	🏆 A
Cash required		$0	🏆 B
Renovation control	Full discretion to upgrade	Owner's approval required	🏆 A
Rent control	Set market rents directly	Constrained by owner lease terms	🏆 A
Exit strategy	Can sell entire block or individual lots	No asset — exit means income loss	🏆 A

💰

Total Weekly Margin (8 units)

$1,190/wk

Weighted avg margin of $148.75/wk per unit. Highest: 12/20 at $230/wk. Lowest: 1/20 and 11/20 at $115/wk.

📅

Gross Profit (before vacancy)

$61,855/yr

Across 8 active units before deducting vacancy costs. Equates to $5,155/month gross arbitrage income.

🏖️

Net Arbitrage (after vacancy)

$55,374/yr

Total vacancy cost of $6,481/year across all 8 units. Unit 12/20 has highest vacancy cost at $1,303 (19 days).

⚠️

Concentration Risk

100% in 1 building

ALL $55,374 comes from a single property and a single owner relationship. A sale ends ALL 8 leases simultaneously.

Actual Unit Performance Data (8 Active Units in ARB Portfolio)

Unit	Owner Rent/wk	Tenant Rent/wk	Margin/wk	Gross Profit p.a.	Vacancy Days	Vacancy Cost	Net Profit p.a.	Net Yield %
TOTAL (8 units)	$3,880	$5,070	$1,190	$61,855	94	($6,481)	$55,374	—

Net Profit Per Unit (p.a.)

Weekly Margin Per Unit

4 Additional Units (On Purchase — Not in Current ARB Portfolio)

Units 5/20, 8/20, 9/20, 10/20 are currently managed outside the ARB portfolio. On acquisition, Hybrid controls all 12. Estimated additional income:

Metric	Estimate	Basis
Est. market rent per unit	$633/wk (avg)	Based on current 8-unit weighted avg
Additional gross rent (4 units)		4 × $633 × 52
Vacancy allowance (3.5%)		At model vacancy rate
Additional EGI		Net of vacancy
Total 12-unit EGI		Model base case

📖

How to Read This Table

Each cell shows the Annual Net Cash Flow at that purchase price × interest rate combination. Green = cash flow positive. Red = cash flow negative. Current base case is highlighted.

🎯

Break-Even Price (Current Rate)

📈

Rate Sensitivity

~$4,750/yr per 0.25%

Every 0.25% increase in interest rate reduces annual cash flow by ~$4,750 (at 80% LVR, $4.75M). At 7.0%, break-even drops to ~$5.1M.

💵

Price Sensitivity

~$5,000/yr per $100k

Every $100,000 reduction in purchase price improves annual NCF by ~$5,000 (at 6.25% rate, 80% LVR). Negotiating from $5.0M to $4.5M saves ~$25,000/yr.

Net Cash Flow Sensitivity — Purchase Price × Interest Rate

NOI used: | LVR: | ■ green >$20k ■ lime $0–$20k ■ yellow ($20k)–$0 ■ orange ($40k)–($20k) ■ red <($40k)

Break-Even Price by Interest Rate

Interest Rate	Break-Even Price	NCF at $4.5M	NCF at $4.75M	NCF at $5.0M	Position

🔨

Light Reno ($15k/unit)

+$75/wk per unit

Fresh paint, updated fixtures, new flooring. Payback: ~4 years. Targets $700+/wk market rent.

🏗️

Mid Reno ($25k/unit)

+$100/wk per unit

Kitchen and bathroom refresh, new appliances. Payback: ~5 years. Targets $730+/wk market rent.

✨

Full Reno ($40k/unit)

+$150/wk per unit

Full kitchen/bath renovation, air-con, new fittings throughout. Payback: ~5.3 years. Targets $780+/wk.

💡

Market Validation

$650–$780/wk

Current St Kilda 2BR: $650–$780/wk. Current avg is $633/wk without renovation — upside is well-supported by market data.

Renovation Scenario Analysis (Base: /yr NCF)

Scenario	Capex / Unit	Total Capex	Rent Uplift/wk	Extra Income p.a.	New NCF p.a.	Payback Period	Risk

NCF Uplift by Renovation Tier

Gross Yield by Renovation Tier

Incremental Cash Flow Analysis — Mid Renovation ($25k/unit × 12)

Year	Capex Outlay	Extra Income p.a.	Cumulative Net	Position

🔑 Key Financial Insights

💹

Ownership is Cash Flow Positive Across the Entire Asking Range

At every price in the $4.5M–$5.0M asking range, the model generates positive net cash flow after full debt service at 6.25%. This is not marginal — even at the top of the range ($5.0M) the model is comfortably positive.

🛡️

$720k+ Buffer to Break-Even

The break-even price is nearly $1M above the top of the asking range. Significant price rises or rate increases would be needed before the model goes cash flow negative.

📊

Gross Yield Well Above Investment Threshold

A gross yield above 8% is strong for inner-Melbourne residential. The current average rent of $633/wk is below market ($650–$750/wk), meaning organic yield improvement is likely without renovation.

🏦

NOI Covers Interest by a Comfortable Margin

Interest Coverage Ratio >1.0x means the property income alone services the debt. At 1.2x+, there is meaningful headroom before any debt serviceability issue arises — even if rates rise further.

📈

Capital Growth Makes This a Compelling Long-Term Hold

St Kilda has delivered ~5.5% p.a. capital growth over 10 years. On a $4.75M purchase, 5% growth adds ~$237,500/year in equity. Combined with cash flow, total return is exceptional.

💡

Actual Unit Performance Exceeds the Brief

$148.75/wk avg margin

The original brief described 6 units at $150/wk. Actual data shows 8 units with margins $115–$230/wk, weighted avg $148.75/wk. The highest-margin unit (12/20 at $230/wk) alone nets $10,664/yr.

⚡ Strategic Insights

⚠️

The Status Quo is High Risk — Not the Safe Option

$55,374 at risk

Choosing NOT to buy is not a "safe" choice. If the block sells to a third party, ALL 8 lease agreements are immediately at risk. All $55,374/yr of ARB income could disappear overnight. The real risk is inaction.

🎲

Income Concentration is the #1 Existing Risk

1 building, 1 owner

100% of Hybrid's $55,374 ARB income from this property flows through a single owner relationship. Diversification is impossible without purchase. This risk is eliminated completely by acquisition.

🤝

Elliot's Existing Tenancy is a Major Negotiation Lever

Use it actively

As the existing operator managing 8/12 units, Elliot can offer the vendor: zero vacancy transition, no re-letting costs, immediate settlement certainty, and no marketing period. This is worth $30,000–$50,000 in value to the vendor and justifies a price reduction.

🔑

Sole Ownership Unlocks Renovation Control

+$60k–$93k/yr potential

As sole owner, Elliot can execute a staged renovation program on vacant units without seeking owner approval. A mid-reno ($25k/unit) adds ~$62,400/yr incremental income on top of the base case cash flow.

🌊

St Kilda Supply is Structurally Constrained

Heritage overlay protection

Heritage overlays prevent new high-density development in most of St Kilda. This means rental demand consistently exceeds supply, supporting both rent growth and capital appreciation. The structural supply constraint is a long-term tailwind.

📌

Target $4.5M — Every $100k Saved = $5,000/yr Extra Cash Flow

The deal is compelling at any price in the range, but aggressive price negotiation compounds over time. $500k negotiated off asking = $25,000/yr permanent improvement in cash flow + lower stamp duty + smaller loan.

🚀 Recommended Next Steps

#	Action	Detail	Priority
1	Contact Buxton Real Estate	Request full information memorandum, vendor income schedule, OC records, and strata plan. Confirm units 5/8/9/10 status.	Urgent
2	Engage investment mortgage broker	Verify 80% LVR availability for a 12-unit residential block. Some lenders classify as commercial (cap 65–70%). Broker comparison essential before offer.	Urgent
3	Leverage position in negotiation	Frame as seamless transition — no vacancy, no re-letting, immediate income continuity. Justify $4.5M offer with zero transition risk to vendor.	High
4	Commission building inspection	All 12 units, common areas, roof, plumbing, electrical. Budget $1,500–$2,500. Informs $50k–$100k first-year capex contingency.	High
5	Confirm land tax with SRO Victoria	Use sro.vic.gov.au Land Tax Calculator. Request last Land Valuation Notice from vendor. Model uses $14,000 — verify site value assessment.	Medium
6	Review all 8 lease agreements	Confirm expiry dates, rent review clauses, break provisions. Determines renovation scheduling and rent uplift timing.	Medium
7	Instruct property solicitor	Multi-lot strata/block acquisitions have specific OC obligations. Confirm stamp duty calculation. Check for any existing easements or caveats.	Medium
8	Update Excel model with agreed price	Once final price is agreed, update cell E5 in the Excel model. The sensitivity sheet confirms position at any price in the range.	Ongoing

🟢

Low Risk Items

4 of 8

Vacancy, land tax, maintenance, and renovation feasibility are all well within manageable bounds given existing operations and market data.

🟡

Medium Risk Items

3 of 8

Interest rate risk, LVR classification risk, and interest rate increases are manageable with proper structuring — fix rates, use specialist broker, maintain contingency.

🔴

High Risk (if NOT buying)

1 of 8

Income concentration risk is HIGH and exists RIGHT NOW regardless of the purchase decision. Purchasing eliminates this risk completely.

Full Risk Register

Risk Category	Description	Mitigation	Severity

⚡ The counterintuitive truth about your cash income

Buying this block does not add to your current income — it replaces the structure that generates it. Your $55,374/yr ARB profit disappears as a separate line item because you become the owner. What you get instead is /yr as a landlord — meaning your annual cash income . The real case for buying is capital accumulation and income protection, not higher cash flow.

Your Opportunity Cost Assumption

Alternative return on $1.26M (if NOT buying)

% p.a.

Australian shares (ASX): ~9% long-term | Term deposit: ~4.5% | Balanced super: ~7%

Annual Opportunity Cost

What $ earns elsewhere

Cash Income Change

Per year vs status quo

Personal Capital Required

Cash out of pocket today

Opportunity Cost p.a.

Capital Growth Est. p.a.

Equity gain (unrealised)

Net Benefit over Opp. Cost

Growth − opp. cost + cash Δ

Return on Capital Deployed

Total return / cash invested

Personal Loan Guarantee

Personal liability on balance sheet

Capital Recoup (Equity)

Yrs for growth to repay outlay

Net Change in Personal Financial Position

Item	Before (Status Quo)	After (Purchase)	Change
Annual cash income from this property	$55,374
Capital growth benefit	$0
Personal capital deployed	$0
Personal loan liability	$0
Asset on balance sheet	$0
Annual opportunity cost foregone	$0
Net annual benefit (growth − opp. cost + cash Δ)	$0

Annual Income & Return — Side by Side

10-Year Wealth Projection — Buy vs Don't Buy (Equity + Cash)

Assumes: capital growth compounds annually at your model rate, cash income difference compounds at alt return rate, opportunity cost of capital grows at alt return rate. All figures are cumulative from Year 0.

Concentration Risk Warning

If you buy, your personal wealth and your business income are both 100% concentrated in a single building on a single street in St Kilda.

Exposure	Currently	After Purchase
Business income tied to this address	100%	Eliminated
Personal capital tied to this address	0%	100%
Personal loan secured against this address	$0
Ability to diversify capital elsewhere	Full	Reduced by

This isn't a reason not to buy — it's a reason to make sure this is genuinely a core long-term hold, not a forced position.

Personal Decision Checklist

✅ Do you have the capital in liquid assets? The $ shouldn't require selling other investments or straining personal cash flow.

✅ Can you comfortably carry a $ personal guarantee? This appears on your personal balance sheet. Affects future borrowing capacity.

✅ Is this a 7–10 year hold? Capital growth is the primary return driver. Short-term hold undermines the thesis — transaction costs alone (~3%) eat 2–3 years of cash flow.

⚠️ Do you have other investments? If this is your only major asset outside the business, concentration risk is significant. Ideally have other assets first.

⚠️ What's your income outside this property? If business income drops (economic slowdown, vacancies), can you still service $/yr in interest without the property income?