Forum Replies Created
Could it be “on”? I hear CBA is predicting a rate cut likely at the Feb 2025 meeting of the RBA, followed by up to 3 more through to the end of 2025.
Can’t come soon enough for mine, and, I suspect, lots of others too. So if it comes to pass, the 4.35% Cash Rate should be 3.35% by year’s end. And no, that is not a 1% drop (of course) – it is far more significant than that. It is close to a 25% cut.
Of course, your Bank won’t be reducing from 4.35 to 3.35 – theirs is more likely to drop from something like 7% to 6%. That’s about a 14% drop, so not to be sneezed at, particularly if it allows you to have a wee bit more discretionary income available to you. Of course, we don’t count chickens before they hatch, but there’s nothing to stop us dreaming, hey? :p
Benny
Hi Firefly,
Ah, not such a bad outcome then….
Re the short term rentals, I’ve been there myself, and the extra rental goes well IF certain things can be mitigated:-
1. Does your place have a “point of difference” that has people choose your place over others? Proximity to the beach could be one….
2. The cleaning and preparation between each visit – in our case, we started out by hiring cleaners, and that was OK as the rents covered that cost. But then, I retired, so we handled everything from then on. That made a big difference to the income
3. We found a “homely feel” worked well for us – others like to have a “show home” – over to you re your desires.
4. We had a set rate for a couple, then a nominal amount per night for extras – but then, we had 5 bedrooms and could sleep 10…. And of course, a higher rate for weekends.
5. We had locks on all bedrooms, and provided just enough keys to cover those staying. That meant the unused rooms didn’t need to be “made up” after each visit. Though our place was ideal for families, we also offered couples the place too (with bedrooms locked off).
6. We offered air mattresses (with linen, blankets) to accommodate any extras that exceeded our bed limit – great for a larger family and/or with kids. Many places are “couples only” – our niche was as a “family home”.
7. We discounted a 3rd night, or more, quite heavily – no extra sheets to wash, or cleaning to be done – the extra is all cream !!! That can also be a point of difference from others. The longer they stayed, the average cost per night went DOWN.
Other “plusses” we found – with no long-term tenants, we could schedule repairs through the week with tradies if needed. We could also visit and enjoy the place ourselves whenever it was not in use. We could “stay over” ourselves if there was work that might need to be done over a day or two. Less overall wear and tear as the tenants tended to respect the place instead of becoming “familiar”.
they wonder why there’s a rental shortage and they leave us almost no choice but to remove our property from the long term rental pool!!!
Amen to that !! I spoke to that in another post – here :- https://www.propertyinvesting.com/topic/5083103-how-does-an-increase-in-the-rbas-cash-rate-help/page/2/#post-5090493
The State Govt certainly didn’t want to see investors stick around eh? Of course, the rental shortage comes from other factors too, but those regulations didn’t help.
Anyway Firefly, good luck with choosing the right path for you. Keep in touch eh?
Benny
Hi Groono,
Is the ‘big picture’ link sent to my personal message box?
Sorry, I hadn’t yet PM’ed you – it’s coming…. ;) But here is the link in one of the forums anyway:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/
I know that council rates, and interest can be tax deductible. But generally, what percentage can be deducted?
That percentage would be equal to your Marginal Tax Rate. Some expenses related to an investment are claimable. What that does is REDUCE the Tax you need to pay on those costs. e.g. If you’re Marginal Tax Rate is 30% (i.e. you earn between $45k and $130k) then when those expenses are taken off your income, the Tax saved is 30% of their total. Expenses of $1500 would therefore save you a Tax amount of $450.
One would want to find an investment that doesn’t only rely on future growth. That is where buying smart helps. So does “adding value” (renovation?). Repurposing – turning a 4 bed house from a rental of $600/week into an HMO dwelling where you might get $1200/week plus. And there are a host of other options – JV’s, syndicates, options, etc. Lots to learn, and not all will suit you, but good to know of in case they might suit eh?
Keep reading Groono – sounds like you already have – you seem to be aware of much already !! :)
Benny
Hi Groono,
Good for you for starting to consider property as a vehicle for building wealth. It certainly is, as many on here can attest. But as you seem to already know, there is a lot to learn before pulling the trigger. Regarding timing, with Interest Rates as high as they are, finance is harder to get for many. Yet Banks still want to lend (it’s their bread and butter) so loans can still be found. You seem to know that you are OK for up to $800k, so I guess you have already checked your financing capabilities, yes? If not, it is a good place to start, as you don’t want to search for $800k properties if it turns out you can’t finance them.
Like you, I have always favoured buying property with land content, so I bought no apartments, only houses, townhouses, etc. It is land that rises in value, while buildings deteriorate, so the more land, the better. Also, don’t buy new unless you are having your own builder building it on your land. Why? Simply because in areas where developers build lots of homes (e.g. at Pimpama/Coomera) they have already charged you over-the-top $ to buy the finished product. There is not likely to be capital gain for many years. Whereas, if you buy a home that needs renovation and you can make that happen, then you are adding value that is all yours to utilise once complete.
Property values run in trends and, as you would be seeing, a shortage of rental houses and a surfeit of people wanting to rent, leads to increases in both values and rental rates. But then, that changes regularly as “buying becomes cheaper than renting” and the rental market falls back a bit. Buying could become more preferable as Interest Rates decrease again (maybe this year?) but for now the rental is king. Rents are growing hugely, as are values.
Re “is it really worth it if rent doesn’t cover expenses?” – it can be, so long as the value is climbing, and/or there is another reason where changes can be made that WILL lead to increased rent in the future. e.g. a renovation perhaps, or a subdivision, or even a change of purpose like changing from a single family to an HMO style rental where you house 3 or 4 people, each paying rent. (HMO is Housing with Multiple Occupants).
Keep in mind too, that times like these make things hard for some folks. There can be multiple reasons for a sale (the three D’s – death, divorce or destitute – are common ones) and some folks “just want out” and are not looking to get the best possible price. You would be helping them out just by making an offer, and they may well sell to you for a bargain price just to be free of their situation, allowing them to “move on”. So yes, even today it can be worth making offers.
For yourself though, set limits. Use your strengths to your advantage. e.g. if you are handy, look for a place that can be renovated by you. If you can manage people, find others who will renovate for you. If you prefer to be a passive investor, perhaps a Joint Venture with someone else who is a “live wire” but has little money of their own. Or if that’s not you, then maybe investing in other areas is better – e,g, Steve’s SOGIF fund for one.
Meanwhile do keep reading – some things will speak to you and perhaps provide a catalyst for your investing. Do check out the “big picture” link that I sent you – there is a host of good info in that link. And check out the Training Centre on the Home Page.
Don’t be in a hurry to invest – chose your battles after you know just which type of fight you like to be in. :)
Regards,
Benny
Yeah, Land Tax – ouch !!! One of the negatives of Equity Growth eh? And again, that’s a 140% increase in just two years. HOW is that any kind of fair? Especially as mortgages have gone up by even more than that for you, haven’t they? (3% to 9% is a 200% increase, right?)
At times like this, I like to look at the numbers to see if “there’s another way”. Unfortunately, being in a Trust in Qld has you liable for a way higher Land Tax than if in Personal names. That can’t be undone without a lot of expense, including perhaps CGT. So let’s look elsewhere:-
1. IF a deal is likely that will allow you to increase the rent in September, one way to “hold on” is via a temporary loan. You’d need to know that the deal ahead is going to cover all you need. e.g. Is there a “cap” on the amount you can increase the rent (like, a max of 10%?? or something?) If so, would that be sufficient to cover all you need it to?
2. If a temp loan is needed, how much for, and what Interest would that cost? For small amounts, where you KNOW it will be catered for in the future, the interest can often be miniscule in the scheme of things. e.g. You said you are now negative geared – let’s say by $10k for the next 8 months (till Sept). $10k at 9% is $900 for a year, so $600 for 8 months. Would that $600 be money well spent to allow you to sleep better at nights while you wait for September to come? Just a thought – add your own numbers to see what is really what !! ($600 for 8 months is less than $20 a week for perspective – of course, the loan to be paid back, but after the rent has been increased, yeah?) And for that same $20 a week, you can take your time to repay the loan, right? Not too bad after all?
3. Sorry, but I think you may need to take a hard look at your current tenant – here’s the thing:-
a. She didn’t notify you of the extra person, nor the dogs.
b. When found out, she reverted to bullying to try to get her way. If her integrity is in question (in both a and b), her future with you is also worth questioning, eh? What of the boyfriend’s integrity? Do you know?
c. The other tenant might be considering THEIR options if she and her boyfriend (or dogs) are a problem to them. Where would that leave you if that other tenant chose to leave?
4. Yeah the Govt. It hasn’t been pretty for some years – landlords can’t dismiss tenants so easily, tenants can bring pets without landlord approval, rent caps (no more than one increase per year), put holes in walls to put up pictures, etc. And then Land Tax – I’ve been there, also held in a Trust – an extra $100 a week that had to be covered, with penalties for late payment !!! What a way for a Govt to stuff up a market eh?
But then, there is the Capital Gain. You’d know the numbers thus far. Is it worth holding on if you can redress that rental issue?
That’s a beautiful part of the world to hold property. I hope it all works out for you in one way or another,
Regards,
Benny
Hi Firefly,
Yeah the previous Govt certainly made several brain-dead moves in this space over several years up here. I’ve talked of these very things in other topics. I’ve also heard of landlords bailing from the Qld market as many of those law changes impacted them.
The big one in your case though (obviously) would be the ballooning Cash Rate, leading to similarly ballooning mortgage rates. I go nuts over that in this topic from a couple of years back – https://www.propertyinvesting.com/topic/5083103-how-does-an-increase-in-the-rbas-cash-rate-help/ – see especially the later pages where I show just how much this “4%” increase is costing (I bet you know, Firefly – 4% is so NOT 4% eh?)
Those other changes imposed by the State Govt, though annoying, are really minor in the overall scheme of things. What I’ve viewed over the last two years here in Brisbane, I’d have thought your last increase could have likely been $50 a week to match every other rental I know of. You were very sweet to say just $5. Of course, I don’t know your case, your numbers, the area in which you own property, but Brisbane has gone boom in both values and rents. That also means that your Equity would have boomed too – I know, I know, you can’t eat capital gain, but hey it must help at some point. If nothing else, it justifies the higher rents surely?
Re “where to from here?” I would think there might be a way to lock in a suitable increase for September now that will make up for what you are losing now, AND allow for next year’s increase too. It sounds like your tenant might have checked out “other places” and figured you really are doing her a favour (hence her request to ‘put up her rent please’).
* Tenant is now in breach, and that breach is costing us a substantial amount more in our outgoings and increased wear and tear.
What you don’t say above is just HOW her breach is costing you? And of course, it is up to you whether or not to share such info on a public forum. The increased wear and tear might mean she is subletting to others (?) – or is she trashing the place?
Other “what now?” thoughts
– check out QCAT to see if there might be a way that you and the tenant can do what you both want to do. Perhaps the tribunal can pull some strings to bypass any laws where both parties are in agreement. This link may help – https://www.rta.qld.gov.au/disputes/qcat-dispute-options – (apologies if you have already been down that path).
– can you hold on till Sept to allow a possible lease and rent change to make up the shortfall?
– any chance of refinancing to perhaps limit the bleeding? There may be lenders offering great honeymoon rates just to have you switch (see a MB).
– fingers crossed for the RBA finally coming to their senses in Feb… but don’t hold your breath !! :p
– and of course we have had a change of Govt recently – which “may” lead to some law changes in areas where the conservatives deem that Labor went too far – but such changes could take time anyway….
– weigh up whether the Capital Gains you are seeing are more than covering the rental losses by enough of a margin to “hang in there” till Sept.
I hope some thoughts help a bit…. Good luck,
Benny
Are we really likely to have 6 x 0.25% drops this year? (i.e. in 2024)
Well, that didn’t happen, now did it? So here we are in Jan of 2025, with still no decrease in the Cash Rate at all. The headline inflation broke through the 3% band, but that wasn’t good enough for the RBA. So folks continue to live in tents, power prices continue to grow, Govt spending continues apace, and the hoi polloi struggle to keep bread on the table.
One bright spot (imho) is the imminent return of Trump to the White House. Lord knows a healthy dash of conservatism is what is needed all round the place (the world even). Even yours truly the cynic is beginning to feel a ray of hope that some kind of fiscal sanity might return soon. It can’t be soon enough, but I’ll take it whenever…..
Benny
Hi PropDir,
The forum in which meetings are aired is the “Heads Up” forum. SEQ is well served by one Matt Jones who runs such meetings usually monthly in Brisbane, with other (less often) meetings for the Gold Coast and Sunshine Coast.
Over time, I have seen occasional meetings held in Sydney and Melbourne too, though nowhere near as regular as Matt’s meetings. Here’s a link to the Heads Up forum where you can search the past history of other meetings – https://www.propertyinvesting.com/forums/community/heads-up/
Benny
Wow – it’s been a whole year !! One major sticking point that has shown up over the last 12 months is the subject of transmission lines. Think this through now:-
For a grid to work, it must be interconnected. To interconnect a plethora of independent inputs requires a spiders web of interconnections. And copper wire is not cheap. Neither are transmission towers. So, we are accumulating a bunch of separate power inputs (think each and every wind tower, plus each bank of solar panels. In fact, even each bank is made up of separate inputs, so a whole mess of interconnections in one bank. Then again, the solar “farms” appear to be acres of these things, all needing to be interconnected, and then their combined output needs to reach the “grid”. This could conceivably be many kilometres away. And each wind tower and/or solar farm needs a similar interconnection to the “grid”. Thousands of kilometres of copper wire, and even hundreds of kilometres of transmission lines including their towers need to be built. Expensive, much !!
Alternatively, upgrading coal fired stations (where transmission lines already exist) to HELE coal (High Efficiency, Low Emission) sees no need for extra connectivity. And/or, put a nuclear station on the same plot of land as a decommissioning coal power station, and the need for uber expensive connectivity becomes way lower – just hook ’em up to where the coal power station did. A few feet of copper wire, sure, but no way as expensive as the alternative.
Earlier points made (transient supplies can’t supply “base load power”) that show the weakness of wind farms or solar farms also remain valid. Now add BOTH of those major imposts together, and I fail to understand HOW any sane Govt signed up for such a plan in the first place. But then, they doubled down by signing up to time limits on getting rid of coal, AND pushed the usage of electric cars – which will be powered by what overnight????? No solar, for sure. So, we end up with more demand for a transient power source at times when these sources CANNOT work.
What’s next? Have everyone who drives an electric car mount a generator under their desk so they can pedal a few Kw as they sit watching TV or using the computer at night? Or wait – maybe the Govt will have a brainwave and go nuclear after all?
Forgive me if I fail to be convinced Labor will head the way of common sense. They haven’t shown too much of that for mine.
Hi David,
Thanks for such an insightful yet succinct post. I have just the place for such good comment, and have added a link to here in the “Big Picture” topic for those who follow. Well done, and I like your style.
Benny
Does positive cashflow investing work today, in these times of high prices and interest rates?
Someone recently asked the question “Can positive cashflow investing like Steve did in Ballarat work today?” (from the book “0 – 130 properties in 3.5 years”).
In reply, one of our experienced members provided the poster with a brilliant breakdown of how he is investing today, and how a current investment should work to produce a great outcome for himself and others. Here is his post:-
Thank you, David, for the very complete yet succinct breakdown of an investment you are planning. I hope it goes well for you.
Benny
Hi Lin,
That’s a good question. I lived through those years, and have seen a few booms in my time. I recall Steve saying that his “way” was what worked at that time, in that market. Markets change, and Steve changed with them. After Ballarat, Steve moved to another area (was it Latrobe Valley?) then on to New Zealand, then USA, and later on to Commercial properties. I recall other investors too “riding a wave” of cheaper properties from Brisbane on up the Queensland coast back in the early 2000’s.
What works this way today? I have no idea. With house values so high right around Australia, perhaps another country is where this method might work today. Or wait 5 to 10 years, and these times might come again.
I’ve found house values seem to rise like a staircase – a long flat period, then boom and a huge rise in a very short time. Then a flattening out (and even a drop?) and a long period of little movement until the next boom.
Will this work into our futures with values being as high as they are? Again, I don’t know. Major world changes could have an effect. e.g. what if immigrants stopped coming to Australia? Another COVID-type issue may shut down world travel again. What if it lasted years? Would prices fall? I suspect so, but how far?
Meanwhile, perhaps other ways can help. With housing so dear today, some renters have turned to sharing accommodation, and investors have added granny flats (cheap as they don’t need to buy the land again – they already own it). Some investors create houses that cater for multiple renters (a 3bdrm house also has 3 bathrooms, but they share cooking areas, etc). That brings in multiple rents from one property.
i.e. Are there now other ways to invest? Back in Ballarat, Steve did the wraps that helped people end up buying their own homes without paying much more than rental rates. Worked beautifully for a lot of folks. But today, what works now? Investors will find a way I’m sure – keep your ear to the ground and see what can work for you. Good luck,
Benny
Hi John,
You might’ve seen the PM from me, wherein I point you to two places. I am adding it here in case others could do with finding the same info. First place to look (for general info re investing in property) is the Articles in the Training Centre. You’ll find it on the Home page. The articles are broken down into subjects like “Buying” and “Selling” and “Analysing a deal” etc. Have a look, and have a good read in there.
The second place is in my “Big Picture” topic. In there I highlight posts and subjects that helped me, and they cover a very broad range of topics, ranging from Finance and Legal through to Buying, Selling, NOT Buying, and even at times the mindset behind decisions. The Big Picture is a sticky in the General Forum – here:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/
The first post in the link includes an Index of the various posts within, to enable you to seek out the subjects you most want to learn about. I hope it is some help to you and other readers. It runs for 3 pages, so if you finish the first page, keep on……
Benny
Hi Tazzzman,
I’m not sure if you stumbled over an article written by one of Steve’s former right-hand men (Jason Staggers), but it appears to be a useful guide to WA zoning, including a link to the Govt website where you can read more. Here’s the article by Jason – hope it helps:-
https://www.propertyinvesting.com/r-zoning-codes-for-western-australia/
Benny
Hi ILF,
I must say I can only agree with the thought expressed here:-
Considering housing crisis, government can NOT provide more house, Aussies have to live in cars and tents, but council still says people can NOT live in rumpus room…
I guess “back in the day” there may be really good reasons for making 8foot (or 2.4metres) the minimum height of a livable room (e.g. bedroom, living, etc.) Could it be to prevent folks from skinning their knuckles on the ceiling when changing their jumper? I don’t know, but in times when folks are having to live in tents, surely a 2.1 metre high room that is warm and safe is a far better option than a tent or a car……
Why not? I think it passes the pub test. What of others though? Are there other reasons WHY this is NOT a good idea? I’m all ears….
Benny
Well, THIS email I received struck a chord with me. It’s title read thus:-
Save money and get healthy by avoiding the cashless effect
The email referenced a petition to the Govt that attempts to prevent the abolition of cash in our society, and it makes comments that ring true to me. It was all about “the pain of parting with cash keeps you safer and healthier than using a card”.
Makes sense doesn’t it? Here are a couple of extracts from the email:-
When cash is compared to any other payment method, the research data shows consumers spend more when they don’t have to hand over physical notes and coins. The cashless effect works to increase our spending by removing the ‘pain of paying’ – the emotional impact we feel when having to hand over physical money. And paying with cash – with its associated pain – means we are more likely to make better spending choices – and this has direct impact on our physical health.
“Consumers are more likely to buy unhealthy food products when they pay by credit card than when they pay in cash,”
In between, they referred to studies done that show that people spending via a card or “tapless” end up spending far more. Another plus for retaining cash, eh?
paying with cash:
1) Makes budgeting easier – you can only spend what you have in your purse. If you want to spend more you need to go and get more cash. You can set your daily budget in the morning and stick to it.
2) Retains the pain of paying – the emotional feeling you have about losing a tangible and valuable physical banknote – so you’re likely to spend less.
3) Improves your healthy choices – paying with cash means your less likely to make impulsive unhealthy spending choices.
On top of all this, cash helps us retain our privacy, avoid payment surcharges and doesn’t suffer from ‘system outages.’
Here’s the petition, should you wish to add your signature:-
https://www.change.org/p/an-australian-cash-and-banking-guarantee?source_location=tag_
To read the research data mentioned, go here:-
Both are worthy of some minutes of your time. Please do check them out,
Benny
Hi Tempo,
I have no direct answer for you, except to say, try an Insurance Broker in your area. It is their job to know all the “ins and outs” of Insurance, so they should be able to guide your steps in this unfamiliar area.
Benny
Hi BB,
The “numbers” will likely confirm the way to go. Without knowing what you bought these for, my example below may be inaccurate, but use it to add YOUR numbers to see what works best.
Assuming your mortgages are IO, it sounds like a 3.35% increase, but the Interest paid would’ve DOUBLED, so a 100% cost increase. If P&I, it is the Interest portion that doubled, but Principal repayment would be unchanged, so not double, but a significant rise nonetheless. Good to hear that you two can handle the increase anyway, but now to your questions:-
Assumptions:
1. That if selling one property, #1 would likely be the one (largest equity available). Assuming you purchased for $600k(?) based on $500k mortgage at ~80%. Purchase and selling costs (I believe) come off the gain, but a balancing charge may well put some $$ back on too, so let’s say it is a Capital Gain (900 – 600) of $300k. Since you had a Fixed Loan, I assume you have held it over 12 months, so half the gain is added on as Income and CGT paid at your marginal rate (the highest as you are a top earner). So let’s say you’ll pay around $75k in CGT. This leaves $225k to be paid off your PPOR. You could choose to use it to pay down the IP’s mortgages to make them +ve again, but then you lose any Tax benefit that negative gearing gives, AND you continue to pay your PPOR with fully taxed dollars, so little Nett benefit (in my eyes) for paying down an IP mortgage at this time. And even little change to your PPOR payments either – but you will stop paying it some years earlier.
2. You mentioned Qld – I am in Brisbane, and I note that Bne homes median values increased by over 25% in the last year. In that case, a negative income from Interest around 6% is hardly an issue. Of course, that depends on what happens ongoing. Right now, I can’t see much light at the end of the tunnel regarding the current LACK of rentals, thus values and rents will likely continue to climb for some time (years?) to come.
Right off though using IP #1 as a test case – 3.35% extra on Interest is an extra $17k per year (near enough) while the value goes up by $90k if just a 10% increase in value per year. Worth holding on that basis? It is to me.
3. You COULD sell one to buy another more positive geared, but then you do give up the (likely ongoing) rises in value of the current one(s) – “all great properties that go up in value decently each year and rent out very easily”. And, as Terryw mentioned, you then incur more agent fees and Stamp Duties. You also then forgo the Tax benefit of the negative gearing losses (which you can easily afford anyway).
4. Or you could buy another without selling any – if your lender hasn’t already tagged you as “too rent reliant”. And if they have, a good MB can help with that anyway.
So, a few different angles there to consider, BB. For mine, I don’t see a problem holding for now. But then, as Steve often reminds us “You don’t go broke taking a profit” and if that profit can assist your situation in some better way, then why not?
Anyway, over to you – use YOUR numbers to see what they tell you.
Benny
Hi Highview,
I had a chat with Steve this morning – he came up with this link that may be of some use to you re Hebel problems:-
https://hebel.com.au/warranty/#:~:text=Hebel%2020%20year%20product%20warranty
Benny
Hi John,
Train lines can be a drawback for some, but there are ways to ameliorate that issue. e.g. double glazing of windows facing the train line can help – a bit more expense of course. Also, high fences can help to deaden the noise. If these exist (and are wooden, concrete, or composite – not metal) then that could reduce the decibels and some buyer reluctance along with it.
Then again, trains can be useful for some – if commuting daily on a train, the proximity to a train line could be considered a benefit. I’d be checking values of other neighbouring properties to see if the train line affects their vals markedly. Check too how often a train goes by – some lines are actually not in use. Are these short trains (i.e. do they go by in a few seconds, or are they goods trains clacking away for 2 or 3 minutes or more?)
Some might offer a place with a nice loud stereo system or HD TV with a quality sound bar that they can have playing when showing the place – all about disguising the sound of any passing trains.
There are a few ideas – what more can be done? Help me out folks !!
Benny