Hi

I’m still not sure whether there is no lease or a periodic lease (month by month). In any case, i think your first step is still to get a fixed term lease in place with your proposed rental amount built in (ie $20pw); but I’d get your real estate agent to ‘suggest’ in writing that the amount is appropriate after an inspection. With the landlord’s insurance, that really is a basic protection you need in place otherwise your ‘leverage’ with the tenant will not be very good (eg if they default on the rent, if they further ‘damage’ by accident, etc.)

Gary
author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
creator of “Property Millionaire – The Boardgame”
http://www.888abundance.com

Hi Guys

I’m young (at heart). I posted on this thread a couple of weeks back that unless someone takes the “lead”, this will not be anything except a good idea. Looks like we still have the same issue.

I’m an experienced property investor, author and creator of a business tool for property investment.

I occasionally visit various States.

I will be in Brisbane between 17th and the 22nd August. I’m happy to organise this and set up the Brisbane/Gold Coast “club” first while I’m there, and organise a model for the other States.

As a starting point, email me directly on [email protected] with your contact details (name, email, contact number, address) – use the message header “Young (at heart) Investors Club”. I could go thru this thread and contact each one of you, but it will be quicker if you provide me the details, and it will ensure I don’t miss anyone,

When I get the details, I’ll make some arrangements for the first meeting in Brisbane (and also how we can get this off the ground around Australia in the other States.)

For some background about my experience in property investment, I’m an author of the book listed below and you can also view some details on my website http://www.888abundance.com. If there’s sufficient commitment, I’ll throw in a property investment boardgame/business tool for the “members” as an investment for the future in the “Foundation” group in Brisbane.

Gary[exhappy]
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
[email protected]
http://www.888abundance.com

Hi

Sometimes the CG issue can be less important to an entry level investor. Let’s look at this slightly differently, and think about CG being a phenomenon of the times.

Banks reluctant to lend because of the size, saturation of units, and there is very little CG. Because of the tight lending arrangements, there is less demand. Less demand leads to less competition driving the price. This in turn leads to little CG. Little CG means banks are reluctant to lend as they view it as higher risk on their books. But what if demographics with the Y-Gen in the future make these high in demand. if you think long term, the CG question might be less relevant.

I usually approach the question from how do you get from today to your gaols of wealth for tomorrow. The more basic question is how will this improve your serviceability position with the bank. $140K might be a good entry level position if it’s all you can afford at this stage. A more expensive CG investment at $350K or $400K might only be good if you can survive a few years paying lots more into the investment until the CG kicks in.

There are lots of these types of units around (and many are guaranteed 100% occupancy/rental). You should be able to negotiate something off the asking price.

Gary[aacool]
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
http://www.888abundance.com

Hi QL

Pretty broad question and the answers are just as many based on straight mortgage, wraps, finance solutions, etc.

If we just stick to the basics:-

1. Calculate the cost of finance (eg standard mortgage loan might be around 7%).

2. Compare this with a simple rental yield calculation:

(Rent pw x No. of weeks occupancy)/Purchase Price = x%

As you can see there are three ways to increase x%. Raise the rent. Improve the occupancy up to 52 weeks. Negotiate the purchase price down (and maybe buy below market value).

3. We then need the rental yield calculation to be greater than the cost of finance.

Some people will argue that such a simple comparison fails to take into account the running costs for property (ie rates, body corporate, repairs, etc.).

4. To overcome this assumption, you could look at it a different way. The argument is only relevant in my opinion if the mortgage is 100% finance. On the other hand if you were financed at 80% IO, and assuming running costs were 5% of the property value, then you could argue the simple comparison is a valid one.

5. In summary, assuming no more than 85% finance, simply compare the mortgage/finance interest rate vs the rental yield calculation. You could add a couple of percentage points onto the mortgage/finance interest rate to account for shifts in interest rates.

Or buy “Property Millionaire-The Boardgame” first [exhappy]and get some experience by roadtesting a few strategies before you make the big dollar decisions. it might be interesting in the ‘heat of simulated competition’ to learn how you & your friends think and make decisions under financial and investment pressure and whether a JV together will be all you hope it is.

Gary [aacool]
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
http://www.888abundance

Hi Steve

Why are you going into it with 3 friends. is it the high cost of the property? looking to share the risk?

You might have good intentions at the beginning, but will you still be friends afterwards (and it would be a shame to lose a friend over money). People’s circs change. You would have to have some legal agreement agreed upfront for exit strategies – and when you have this you have to be able to separate your thinking from business and friendship.

If it’s the cost and the shared risk issue, why not consider a low entry level property of about $120K in a 2-bedroom unit in a small complex in a regional centre that you can afford yourself. Body corp arrangements will in some respects spread your risk with other investors/owners without sharing ownership of your unit.

In my business (see http://www.888abundance.com), I have a boardgame product that allows rookies and experienced investors to roadtest their strategies in the Australian residential property market. One of the ‘teams” that played together in a workshop ended up being at loggerheads as they were confronted with making decisions. They learnt that they shouldn’t be in business together (not in investment property anyway).

If you’re going into it for friendship, there are less costly activities to go into to preserve the friendship and do things together.

If it’s for investment, you need to think about it purely from that angle, and leave the friends angle out of it – ie you go as business partners (the fact that they are friends is just a coincidence, but not necessary).

Gary[aacool]
Author of “Property Millionaire: The Guidebook to Having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
http://www.888abundance.com

Looks like lots of interest for a great idea. But is that what’s it’s destined to be – just an idea that goes no where.

One of you probably needs to coordinate a “group” and start your own ‘membership’ around the country where you can stay in touch with each other, exchange info and compare notes on resources (good books, tools, etc.) and on-the-ground property info (from your different locations).

Gary[aacool]
Author of “Property Millionaire: The Guidebook to having Great Australian Dreams”
Creator of “Property Millionaire-The Boardgame”
http://www.888abundance.com

Hi Rossco

You’ve posted some pretty big open questions. Reading is a good place to start. My book (see title below or go to my website) was written for average guys starting out (i.e. entry level investors) but there are lots of good books out there.

It sounds like you’re in Sydney. For the prices you’re looking at, you should do some research of regional centres where the prices might be lower and percentage returns might be better. Also if you check the guidelines for FHOG, you might still be eligible even if you buy an investment property.

A good simple starting point in your research would be to look for returns that are at least higher than interest rates (eg 7% or better).

Try (Rent pw x 52 weeks x 100)/Purchase price
to get return yield.

Gary[aacool]
Author of “Property Millionaire, The Guidebook to having Great Australian Dreams”
Creator of “Property Millionaire – The Boardgame”
http://www.888abundance.com