hi all
just a quick story to show how crazy this market is.
About 12 months ago i was busy running around all over the country buying cheap properties. it suddenly dawned on me that in my own town of Stawell in Vic i could find some of the bestdeals around. One was a ex ministry house that was on the market for about 10 months at 42k. because no one wanted to buy it, so i picked it up at 35k, and cleaned it up and rented it for 115pw. a few weeks ago i decided to sell it but had to wait until i’d owned it for 12 months. i prepared it for sale (as it was now vacant) paid someone about $1,000 to fix it more ( a bit of tiling in the bathroom mainly and facia boards painted) and then put it on the market in sold in 2 days for $68,250 (he still got a good deal as it will rent for 120pw). i couldn’t believe it, no one wanted it 12 months ago, yet now everyone’s buying.
westanWell done Westan
They often say we all overlook whats in our back yard!
Regards Bear
westan,
Why would you sell a property with a 17% return?
Slum Lord
gday Westan,
i think i am with slum lord on this one.
was there any problems you had with the house?
i just cant think why you would give up something that good in your own town.[?] Powmow [?]
Hi Everyone,
I may sound stupid but I when you guys refer to a house earning a 17% return, how do you work that out, like could someone explain the sums for me, it would be greatly appreciated[
]Fudge111
Usually worked out as follows.
rent x 52 divided by purchase price x 100
ie
$200pw x 52 divided by $200 000 x 100 = 5.2%
Useful to compare properties when inspecting with a calculator in hand [
]Cheers,
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Mortgage Hunter, that is exactly what I thought, just confirmed it for me.
Regards Fudge111
hi all
hi slum lord how are you i haven’t seen you on the forum for a while. to answer your and powmow’s question.
Why would i sell a property returning 17%?
well i have 5 properties in my home town of Stawell. i want somecash for new investments and need to sell (yes i could of refinanced but decided to sell this time). This property was putting about $40 per week into my pocket. Once i pay off the loan and pay CG tax i will have about $30,000 which i can use to buy 3 ($45,000)properties renturning about $130pw. the profit on each will be $45 pw or a total of $135 pw.
regards westan
westan,
That makes sense. I must admit I have started to focus on diversification myself. Once you acquire enough properties you begin to realise that vacancy rate is probably your number one risk.
I am getting to the stage where I am paying down debt and protecting myself against interest rate hikes but even then the one thing that could force me back to “9-5 work” in the next few years would be vacancy. Having a large percentage of your property in one area increases this exposure.
I haven’t posted in a while cuz I’ve been in the USA. Rental returns an average are twice what they are in AUS. The premium areas you can get 10% pretty easy, and the less premium areas you can get 20%. Once I stabilize my portfolio over here I will probably buy some in the US.
Slum Lord
SL, are there foriegn nationals/non-resident rules regarding purchase in the USA? I’ve spoken to a few pals over there who are into property, but as they’re USA residents, they don’t know.
Cheers,
Jon.You know, Americans are exempt from the requirements of the Foreign Investment Review Board when they want to buy in Australia so it would indeed be interesting to see whether these rights are reciprical.
One possible problem I can foresee is that it may not be easy for a foreigner to borrow home or investment loans in the USA unless one is employed there.
Pisces133
There are State as well as Federal laws on this but I know of one Aussie who bought in Colorado with no fuss at all, all done by phone and letter.
Also, they have some innovative financing, eg, you can buy property like we gear shares, where the lender holds title but you have beneficial ownership, which means you get all the rent and capital gain but not the full freehold until loans are paid. Under this scheme, ability to pay is assessed very basically and if you default, out you go and in steps someone else, real easy.
They also allow interest fixing for terms of up to 30 years.
hey western
l bet someone from this forum bought your property as stawell has been getting a good mention in the last 2 months. good onya
cheers lynnemGood job Westan.
You know what you are doing and have proven this stuff to yourself. Using your head and your gut instinct is always a smart choice.
I too would be interested to know if Aussie can buy property in the USA.
Hope everyone is well and good.
Invest wisely, do your research and don’t act on an uninformed whim.
Pleanty more opportunities round the corner.Hi everyone
i did the numbers on westan’s property after seeing someone say ‘why would you sell a property with a 17 percent yield ?” ….and i only got a 9.1 percent yield.
120 per week X 52 weeks is 6240.
Divided by 68250 = 0.914….9.1 percent return
how did you get 17 percent?
Hi mini,
I think the 17% was on the $120pw on westan’s original purchase price of $35K.
You are quite correct, the new purchaser is only getting 9.1%.
Rod.
I agree with enduser; it is possible to buy property in the US but you need to be aware of the State laws. Unlike Oz the laws vary greatly from state to state.
Slum Lord has exactly the right approach for any purchase – you need to have your feet on the ground. If you want to purchase property in the US then do your research and then go there.
If your interested in purchasing property overseas the best case would be to investigate areas where you have close contacts or family. I know of people with property in areas such as Crete, Italy, Chile, UK, France. In most cases they have extend family there so it makes management a lot easier.
Also don’t forget that CGT and income tax still apply to overseas assets. Best idea is to get an accountant who really knows this stuff (not a backyard accountant).
If you are investing under a company or trust structure you would also fall under FIF legislation; which basically means that each year you would pay tax on your unrealised gains (not a great situation to be in).
“I think the 17% was on the $120pw on westan’s original purchase price of $35K. “
oh yeah DUH!!!
Scuse me for having that little blonde moment.
I think perhaps I stayed in Byron Bay one day too long…hehe
no seriously, there is no such thing as spending too much time in Byron Bay. And yes, i looked at real estate in the window as you do while I was there – a property is like 10 times the price of what i’ve been buying. similar yields to Sydney. 5 percent if you’re lucky. That was just glancing at the surface though. Of course there are deals to be had there too.one day though! Just gotta get my serviceability up a bit more first with a few more CF+ props.
cheers-
Minicheers-
Mini
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