Forum Replies Created
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, 7 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
An interesting one has been discussed recently – someone asked about the benefits of buying a unit in a retirement village. Lots of thoughts were passed around over this one.
On the plus side, the returns looked mighty good – initially. Was there to be Cap Growth into the future? Would Banks even lend – this was low priced, but also in low demand – or was it? It is an interesting exchange that could well turn on a few lightbulbs here and there.
Check out the conversation here:-
https://www.propertyinvesting.com/topic/5038708-over-55s-complex-deal-or-no-deal/Benny
Hey Jaxon and Tom,
I’m appreciating the discussion here – lots of numbers and shared thoughts to inspire others. So, thanks you two. I’m about to direct others to this thread for their edification. ;)Benny
There have been posts in here earlier on Dominique Grubisa – check them out in a Search, or do a Google for more info.
I haven’t heard her – it would be interesting to hear what you think of it once you have attended, Steven. And yeah Google confirms $6k for the “rescue” course – but as happens often, by attending the seminar there may be a chance of buying at a discount – lots do this.
Benny
Hi Steven,
There is a lot of truth in what you are saying:-The result is before we realize what happened, Rowville went from an unpopular area to an area where housing price shoot over the roof. And now, those who bought in Rowville only 5-6 years ago, they are all laughing.
Sure, this happens often – you might see a lot of renovations and/or old homes being bulldozed and newer ones going up. This is often referred to as “gentrification” where 50 year-old homes are pushed over to build new.
Keep in mind that Real Estate increases in value in a “stair” pattern. Values can remain almost stationary for many years (and even drop a bit in that time), then can double very quickly. This seems to follow a similar pattern each cycle, and I fully expect Brisbane to be the beneficiary of this within the next couple of years as people get priced out of Syd and Mel. If you compare Bne median values with Syd and Mel, you’ll see a huge disparity today compared to (say) ten years ago. Maybe more investors than owner/occupiers will descend on Brisbane, as moving house interstate IS a big deal – but for an investor, not so big !! I’m expecting to see Bne’s median jump by about $300k over the next few years. Let’s see eh? ;)
Those owners that do jump ship can set themselves up pretty well – sell up in Syd or Mel and buy a property for about HALF what they were living in, and pocket the rest (or, if starting out, pay about half the amount in mortgage interest). Of course, it means maybe leaving family/friends behind, but airfares are cheap eh?
In one of the seminars I attended, the instructor used a term called “the Push Factor”. Basically it means a previously unpopular suburb that is largely off the investor’s radar, happens to experience rapidly growth due to residents “push” into that suburb. The reason behind why residents “push” into a previously unpopular suburb can vary, but the point is the push factor is able to drive good growth.
This is true and, as you say, there are many factors. Gentrification is one, neighbouring suburbs values going thru the roof, local govt adding facilities, historical “stigmas” being forgotten with time, certain ethnic or other groups flocking there (often because of price and the desire to remain “in a group”), State govt opening better arterial roads or adding bus services, new schools, new employment prospects opening nearby (shopping centres, industrial companies), etc.
A quick look at Rowville tells me it has been around since the 1980’s and grew rapidly thru to the 1990’s (schools added, etc). Now, taking your words, maybe other factors have led to a recent price growth. Rowville is near Dandenong – so, is Rowville up on a hill? Does it have great views? Has it received a lot of “money” as people build awesome mansions “high on the hill” to get the views (views can often add $100’s of thousands in value). When was it last cheap? Was it just 5 years ago that it soared? Did neighbouring suburbs also soar prior? Has Rowville become “gentrified”? If not, why is Dandenong’s median almost $200k cheaper? Is Dandenong likely to be “next”?
A local could add a heap more, Steven – maybe you even have answers to some of the hypotheticals I mentioned there. Certainly, there are always reasons WHY an area soars in value. Find out what they are, and keep an eye out for similar areas !!
Benny
Hi Simon,
looking for over market rent while they have continued guaranteed rental income?
By that, I presume you mean that your friend is bound to pay rent in lieu of the broken lease? i.e. they are “in the gun” for rent until it is leased anew to another tenant.
At first glance, and in my opinion, this wouldn’t pass the “pub test” (or the “reasonable man test”). I would have thought the agent must make every endeavour to “replace” the rent, but not to exceed it, thus perhaps making re-renting more difficult because of the higher rate.
Wait up though – if that rental uplift is minor (a few %), this could be understandable. e.g. If the lease your friend had first signed was about to expire anyway, then uplifting the rent by a small amount would make sense – otherwise they are locking in “last year’s rent rate” for a further year with a new tenant. But if the uplift is excessive, then I would think your friend might have grounds to oppose what the agent is doing.
Good question, and I too would love to hear what others think of this – maybe some have “been there, done that” and can add more,
Benny
Hi Steven,
I do somehow get the impression that you make it sound like you have a grudge against new properties or H&L packages.
I’m not sure I’d call it a grudge, but simply that some properties are better for investors than others. And, as you just saw in my response to Cherry, if you have the skills/knowledge/wherewithal to be able to build your own properties, then go for it !!
One option that you made reference to, was purchasing a townhouse closer to a CBD. Now THERE you might find me pricking up my ears and paying more attention. See, to me there is a HUGE difference between buying a solution property from a developer in one of the new “greenfield estates” or alternatively buying a new townhouse in a small block close to all amenities.
I have long been in favour of “buying in well-established suburbs” and that can be new too, if the $$ work out well. But mostly (for new investors) buying an older property in established areas gives them a better chance of finding an investment property that can return them some useful $$, either as Income, or Growth (or even both). You won’t find too many opportunities like that in North Lakes, Pimpama, Morayfield – or any other greenfield developments !! So yeah – I guess I am more against “some new properties” rather than being against “new properties”.
Thanks for the comment though – it is good to be challenged and to have to think long and hard about my own biases before replying. ;)
Benny
PS For others who may not have seen this link,
https://www.propertyinvesting.com/buying-investment-property-off-plan-dumb/
…it does warn about OTP or H&L purchasing, and what we need to be aware of if considering doing so.PPS
but to call them “bad investments” is probably not fair either.
Hmm, I didn’t see where I did that in this thread ???
Hi Cherry,
Personally, I prefer new house with big land. :)
If you are at the stage where you can afford to build them for yourself (and not be taking some solution product from a H&L developer), I agree with you, Cherry.
;)
Benny
Hi Investor,
If you read all of the words carefully, you will see I was using words like “IF”, “might”, and “could be”.That means, this was not reality I was describing, but an example of what “could be”. The underlying lesson was that some areas of Goulburn might have a majorly different vacancy rate than other areas, and that you do need to take this into account.
e.g. you have found data that says Goulburn has a 1.5% vacancy rate overall. Good for you for finding that, and yes, it is a good figure.
But now, do consider that NOT ALL of Goulburn “might” have 1.5% – some areas “might have 0.5%” while other areas “might have 3.5%”. Don’t be blinded by an overall figure, even though it appears to be quite a good figure. You “might” be looking to buy in the one area of Goulburn that “might have” a 4% vacancy rate (even though the overall is 1.5%). Get me?
The good overall rate of 1.5% is NOT the be-all and end-all, but it is a good start.
Benny
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This reply was modified 7 years, 7 months ago by
