Forum Replies Created
Hi MM,
How is the figure of 3.2% even reached? What’s the formula there?
You found the figure, MM – where you found it, you might find a “How was this calculated?” link to click on.
As an example, re.com.au does this – the link below won’t be your area, but it is purely an example for you:-
https://www.realestate.com.au/property-house-qld-tarragindi-125753630
Scroll down past halfway on the page and you will see a section called “Suburb Profile and Market Data” – and it lists the median price as $691k and below that is the House Rental Yield of 3.3%. Both of those numbers have a “>” sign to their right – click that.
The new section that opens up is on this page:-
https://www.realestate.com.au/invest/3-bed-house-in-tarragindi,+qld+4121That page includes graphs and things that show how the numbers came about, along with some recent history. And under each of the graphs (median price, market demand, and rental yield) is a link that says “How was this calculated?” – click that to make sense of each of the numbers.
Note too, that each graph has lots of options – 1 year or 10 year timeframe, what type of dwelling (house, 1bd unit, 2bd unit, etc). Have a play and see what you can learn. You might even learn that medians can be pretty useless at times….. depends.
Benny
Hi eMark,
9 months till the next one? Are the dates locked in yet? I’m assuming it’s in Melbourne.
The concrete is hardening – I’ve heard the plans, but I’ll leave it to Steve, Jason, or Romy to confirm the actual dates/venue once they are absolutely locked in. For now, I believe it is OK to say “It is planned to be in Melbourne, near EoFY”.
Benny
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This reply was modified 7 years, 3 months ago by
Benny.
Cool – thanks for the extra info. See, straight off, my thoughts have changed – the location sounds like one that can have legs, growing even more equity over the next growth phase. Main thing is “Can you afford to keep it?”
The rental medians usually refer to a 3bdr house – and the median values usually split between 2, 3, and 4bed houses. So, be sure you are comparing apples with apples.
The median rent of 3.2% is indicative of the growth possibilities. Where one gets larger income, growth drops away – and with higher growth, income drops away – hence the 3.2% instead of 5 or 6%. But growth is good, so long as you can afford to carry it (i.e. it would likely be negative geared).
Check with a RE agent to get a better idea of likely rentals. Some locations aren’t too thrilled with granny flats, so the rental income might reflect that sentiment. Or, you might want to check out Unit rental values in that area – there are often 1 and 2 bed units showing in the median values for an area. The RE agent might even suggest advertising them as “units” rather than half a house….
Certainly, the income “should” be a bit higher with two incomes – but then, how many renters want a 2bedder, and a 1 bedder in that area? The answer to that is KEY !!
Good hunting,
Benny
BTW, the 3.2% return on $660k tells me the median rent is $405 per week – eeekkkk!!
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This reply was modified 7 years, 3 months ago by Benny.
Hi MM44,
Going by the valuations you mentioned, this PPOR is NOT in a regional area – is that right?Sounds to me like you have gained some really good ground by doing what you did – putting a Qldr cottage on a block of land and then doing a reno. Sounds like a high value for Queensland, but then some good locations are fetching rather nice prices today. Which area is this PPOR in?
last bank value a few years ago $580000 prior to further improvements (driveway, landscaping, full exterior paint and building in underneath – legal height, rumpus, 3rd bedroom, kitchenette, bathroom etc (granny flat I guess.) So maybe $620000 conservative value?
I am wondering if $620k might be too conservative. Have you noticed that Bne seems to be getting up a head of steam recently? What is the median value for the area the PPOR is in? Has it screamed upward in the last 12 months?
What kind of rent would I be looking to charge for this property?
Again, the location would have a marked effect on the rental you can charge. Have you visited a local RE agent (or three) to ask that very same question? I would think, if rented as two separate rentable units, the return could be quite good – if that area suits that kind of rental.
And is it best to have an agent? – esp if you’re not around and would RELY on the rent for the mortgage.
I wouldn’t be without one – specially with my first investment property. Later on, maybe you can give them the flick…..
And while I’m asking the big questions, how does equity work? LOL!
Is it that simple to say there’s $250000 there? …. we need to be able to service it, but ??well, yes it is that simple – unless you are borrowing against it – then it is not quite that simple. But hey, seems you have made a good start – consider that ONE of your options is to sell that place and pocket all of that Equity for yourself. Since it is your PPOR, there should be no CGT to pay on it.
Of course, you can choose to keep it too – borrow against it to purchase something else. Your finance dude should be able to handle that side – just don’t run yourself short. Re “purchasing in regional areas”, check out a recent offering from Steve McKnight :-
https://www.propertyinvesting.com/whats-best-city-regional-rural-property/
Hope that helps,
Benny
Hi FXD,
I did a quick search and found this link that provides some guidance, including the section on “Enforcing Real Estate pricing”. It is for Vic – it may be different for other states.
https://www.consumer.vic.gov.au/housing/buying-and-selling-property/buying-property/understanding-property-pricesThere were several other finds – to get them, I used these words as a Search key “RE agent underquoting legal?” and up they came. THe one above was first on the list, but there were several more for you to check.
One thing I noted in there is that it is illegal to state a lower price than a seller’s reserve price IF it was made known to the agent ahead of auction day!!! I hope it gives you a direction in which to head,
Regards,
BennyHi Amaka,
Welcome to Property Investing. There is lots to learn, and we can help you with that – but first, let’s address your initial question.
I don’t know the company you mentioned – except to say that, if any investment company calls you, then do keep your guard up until you can work out if they are kosher or not. Also, did they mention to you just what they had going in Mudgee? Like, do they have new houses there? Or are they selling OTP (Off-The-Plan – i.e. not even built yet)? Or is there something else they are doing?
Do have a read of the link below – I call it the “Big Picture” topic where we endeavour to get a whole bunch of useful information to you in one link:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/If you go to the third page, you will see one of the posts (dated 4th Aug 17) talks of how to work out if a company might be good or bad when they call you to invest with them. Have a good read of that, follow the link in that post, and see if it makes sense to you. Certainly, there are “giveaway signs” if a company is one who you want to steer clear of. Once you know those signs, you can stay safe into the future.
Benny
Hi SAF,
I was told by my mortgage broker that we have maxed out our borrowing capacity.
Have you perchance sought a second opinion? The only reason I say that, is because I have heard the MB’s on here talk of “maxxing out” one lender, but they have another lined up to continue lending. And all of that follows from having a specialist MB chart your path from day dot onward. It might be that you have maxxed out one lender – could there be another waiting in the wings?
Could it be that your MB is a “GP” and not really a specialist? Not inferring anything except that “there are mb’s and then there are MB’s”. Some mortgage brokers buy themselves a job via a franchise – e.g. they might have been a carpenter in their past life. Of course, even an ex-carpenter can become good at a new role if they stay in it for the long haul. But has yours been in it a while? And/or is he/she “locked in” to their franchisor’s modus operandi – perhaps restricting their moves for you?
Of course, it also could be that your mb is correct, and you really are totally “maxxed out” – only one way to confirm that is by “second opinion”. Why not ask here? One of our member MB’s might be happy to share a bit more if you share a bit more first. Or, you might prefer to make contact with one of them offline, rather than tell your details to “the world”. Over to you, SAF, and good luck,
Benny
Hi Zen,
I figure you might have already Googled the fund itself to read reviews etc. If not, that would be worth doing.Theres a monthly ROI which we can reinvest.
Just what is that ROI%? And is it a monthly return % or a yearly % but paid monthly?
I have heard some funds paying 5% returns monthly – but they are typically Ponzi schemes that one would be well advised to steer clear of.
So what about your one? Does its return “sound too good to be true?” or is it in the realms of reality?
Benny
Hi Matt,
Certainly this is NOT one of the areas in which I feel I am competent to comment – but hey, maybe some of my thoughts might be of use – to you, or to others who find this topic in years to come.The one and only link that I figure could be of use to you is this one:-
https://www.propertyinvesting.com/the-12-most-common-pitfalls-when-insuring-your-rental-property/The post was from an Insurance “master” and in it, he warns of several things that we should all be wary of. Now, I don’t know Brett, except that he was knowledgeable enough to produce what you just read. And, as he is an Insurance Broker, and you are looking for an answer to an Insurance problem, perhaps Brett can be part of the answer? His contact details are at the end of the article.
The only other thought that I wanted to share was this – there are some events we simply MUST be insured for, while other events may be simply a “maybe”. Depending on the likelihood of any damage, and the severity of same, versus the cost of covering it, it could be that some events can be “self-insured”.
One of those COULD be the tenant’s dogs. If you already know the tenant and their past tenure, could it be that the tenant and dogs have lived there for some years with little damage to the property over that time? Indeed, many tenants with dogs are so happy to find a landlord who will accept them, that they bend over backward to be a model tenant. I was fortunate to have such a tenant for over 12 years, complete with a pair of dogs who were NO trouble over that time. Neither was the tenant – ever !!
And no – I never did endeavour to find Insurance to cover pet damage.
Benny
And just a word to the wise, how do those suburbs look when considering THIS demographic?
https://www.propertyinvesting.com/watch-out-for-this-simple-stat/Corey, you don’t sound too concerned, so you are likely already on top of this one….
Benny
(Posted as a public service to those newer to property investing… :p )-
This reply was modified 7 years, 3 months ago by Benny.
Hi Corey,
Thanks for the extra words around all this.
My mind ran away with this comment of yours:-
besides the fact it would be an immense adminstrative burden to keep trying to get the right ownership type up to date for millions upon millions of loans
Hehe – yeah, forget “Too Hard Basket” – their “basket” would have to be the size of an Olympic Swimming Pool !!
;)
Benny
If the loan is structured as a owner occupied loan and that’s not your current and legal address they have something to argue in court.
Hmm – that is an interesting thought !! And things in contracts – would have to be quite new wouldn’t they, as it was only APRA swinging its bat that had the Banks charging more for IP loans. All something to do with getting total IP loans below some percentage of all loans (was it 30%?).
So now, if I am a Bank, and you buy a property to live in, then you are charged at Home Loan (lower) rate. Cool – but then you change your mind and make it an IP. I doubt the Bank would worry as your loan is “making up numbers” on the Homeowner side. That means the Bank may be able to make another IP loan to someone else without flopping over that 30% mark perhaps. Your loan is therefore in the “goodness” pile. You are helping the Bank !! :)
I’m also picking they wouldn’t be chasing you. But then, I havent seen any new contracts written since that change earlier this year – are there any clauses in there re this? Ones that could bite?
I dunno…..
Benny
Hi David,
so I am sure I will flood the forums with questions that will continue to put a smile on your face.
It is important that you do get to know the basics, so ask away. Steve’s latest “Steveism” that came out a couple of days ago talks of having the “foundations solid” if wanting to add an extension to a house.
That applies to your investment knowledge too. Keep that in mind if you ever think “I won’t ask that question, as it is probably a dumb one to ask”. See, if you don’t get to really KNOW the basics, then that puts at risk any later decisions you might make. So do take the time to really ground yourself, and to gain confidence in your knowledge before you go running off and buying a property. It’ll happen – but it won’t happen overnight !!
;)
Benny
Hi David,
Congratulations !! Purchasing your first home is an exciting time. I’m glad you found us too, as we can guide your steps toward property investing. There is a wealth of information to be found in here – feel free to wander around and read. Check out the Training Centre and the different forums.I had a wee smile when I read this:-
From here on is it now just a matter of building equity to use as security/deposit in order to get the next property or is there a bit more to it then just that?
It reminded me of someone else who had asked a Doctor – “My blood pressure shows the right numbers, so am I healthy?” The answer was “That’s a good start, but there is a whole lot more to it.”
So ditto, David – there is a lot more to it. ;) You won’t learn it all at once, but some large clues are dotted around the place that you can pick up on. Also, depending on where you live, you might be able to meet up with others who meet to discuss investing with those who are on the same path. Keep your eyes open for those meetings.
Here’s one big “clue” to whet your appetite :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/I hope it provides a glimmer of understanding of this vast subject. And, welcome aboard, David,
Benny
So it seems you have had an Equity jump. Does the median value for the Units agree with HTW’s current valuation? And, if using re.com to get the median, they also provide a median rental %age. Here’s an example:-
https://www.realestate.com.au/property-apartment-vic-burwood-125813538
After clicking on that, wait about 15 seconds as it takes that amount of time before the “median data” makes it onto the page. The median data appears just before the “Recent Sales” info. You will see that the units in Burwood have a median value of $600k. You will also see that the median rental yield is a paltry 3.6% which translates to a rental of $415 a week.
Now, to the right of each of the median value and the rental %age is a > symbol – click on both of those to learn a heap more.
Of course, you will want to do similar for YOUR area – I just happened to choose a suburb in Melbourne that has a unit price approx what yours is. Have a good read,
Benny
Hi Steven,
HTW gets a lot of work from a lot of lenders, so they could well be doing the vals for both your old bank and the lender the broker is suggesting. OK, let’s take a look at the facts (as I now understand them to be):-1. Your place was purchased for $550k, and there was a lift of $50k this time, so now $600k. Nice !!
2. You said “I also didn’t think a valuation with HTW would happen as part of refinance…” and you are right, Steven, in some situations.
If refinancing with the same bank, they might order a “drive-by valuation” where an internal Bank staffer will take a look at the house, check out comps, and give it a tick for the increase. But for a new lender, using a valuer like HTW is the smart (and usual) way to go.
3. You said “…the valuation figure is usually pretty close to the property’s selling value, if not the same…” – and yes, that is common. However, this means the value is pretty much guaranteed to be at least whatever that purchase price is – but, you might have bought it at a great discount (for whatever reason) and it is only at re-finance time that you get to learn of its true value. Like now perhaps? Did you buy it at what you believed was a discounted price?
4. Or, as mentioned earlier, maybe that area is in an upswing. Now $50k lift on a $550k property is a 9% lift if over a year, but in just 8 months, that is more like 13% – which is huge. Could it be so?
Well, yes it could. Each suburb of each city/town has its own “market” and they are influenced by other things – like wage growth (whether localised or national), tax changes, health of economy, etc. There are so many variables.
But 13% in a year – yep, it sure can happen. Have a read of this post from a year or two back where a member could not believe just how the values were scooting skyward. So much so that the median values were LAGGING behind hugely. Just look how much they went up in value over 12 months.
https://www.propertyinvesting.com/topic/5029447-australia-undervalued-suburbs-opportunity/
By the way, do read all through that topic – there is some VERY interesting information about the way median prices are calculated that you should be aware of. In that case, the median values quoted were close to useless as the suburb was surging in value and the median is calculated as a lagging indicator. As it turned out, way too far behind to be useful. That is when comparables make more sense than medians.
Benny
Hi Steven,
In my experience, most valuers tend to be conservative (as their neck is on the line if they over–value). HTW is certainly one of the more well-known.Also in my experience, a valuer will RARELY value a property at higher than the contract price – so if a deal “stacks up” when purchasing, it may well be that the property is worth MORE than they first quoted, and likely won’t be worth less.
This follow-up valuation you mentioned might be “a little out of the ordinary” – e.g. was it a valuation commissioned by a Bank, or was it at your behest? If the latter, then a lift in value is not too unusual as there is no Bank depending on their val so they can be freer with it. If it is to allow further loans against the property, then a Bank is depending on them for a “fair val” – thus the lift in value is a good sign.
Maybe check out what the median values have been doing – if they are showing a lift too, then this can indicate a generic shift in values.
Benny
Hi Tom,
– The young couple with 1.2 million in debt (plus two builds to be added to this) with a net worth of $300K (They stated the portfolio is worth 1.5 million), which is a Debt/Equity ratio of 4 (that’s 400%.
Sounds like an 80% lend to me !!
Many start out that way (even you, but likely not on $1.5m eh?) In my case, my first was 86% – but also NOT on $1.5m. I agree with you, insomuch as I wouldn’t want to have an 80% loan on $1.5m for any great length of time. Maybe would for a short-term, well researched, profit-producing play with a large benefit at the end though.
Benny
Hi Tom,
You’ve uncovered a heap of good stats there. Good luck with the broker.Along the way, you asked this:-
Over the past 5 years rental growth has been 1.6% per annual, for an 8% growth between 2011 to 2016/2017.
This seems like reasonable rental growth. What type of growth do you (forum members/investors) factor in for residential houses?I would’ve said “CPI level” – which would usually be around 2 – 3% pa. Of course, that has not been the case for the last few years – more like 1 to 2%. So, yeah, 1.6% is probably “to be expected”. And of course, with pensioners, there is that one limitation that really puts the cap on their rents. Your research told you that pensions are locked to around 42% of Average Earnings. Thus go their rents perhaps?
Where a family might pay $500 a week in rent, doesn’t this suggest a “soft limit” of 42% or $210 per week as being what a pensioner can pay based on THEIR earnings?
Anyway, good work Tom. I’m interested to hear how it goes with the MB,
Benny
Hi PT18,
You might get a good idea or two from this discussion :-
https://www.propertyinvesting.com/a-budget-with-a-few-nasty-jabs/Note that the situation evolved over time, and, by May 10th, Steve was pretty much defining what he thought might be workable. One early response has a link that goes to a Quantity Surveyor’s office, and, if you click on it, someone invites you to “chat” with them. So maybe take them up on it, to see if they have found “ways around this”.
Benny
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This reply was modified 7 years, 3 months ago by
