Hi Daz,

A bit of clarification needed – your title suggests you might be wanting a book about “Developing”…. But your words in the first post seem to say you are looking for a book of fundamentals re property investing. Please identify just which kind of book you require.

Depending on what it is you are seeking, I would hope someone would be able to step in and offer their thoughts.

Benny

Hi Leewizza,

That is a huge point right there !!

I truly believe that with the stuff we will be doing this year and beyond that the loss of $ will be a small number in comparison but wouldn’t get the chance if I used up that capital in paying off the loss.

It is easy to get caught up in the drama of a poor decision, and we might take the path of “amputate the offending item to ease the pain”.

But, I believe it is a perfectly valid (and sensible) path to continue to make payments on a “dog” to prevent a calling in of the loan if your situation can cover the negative payments, rather than stifling your progress by paying down the loss and starting again. e.g. A negative $100 a week (even if no Tax deductions) only costs $5000 a year. How does THAT compare with monetising a loss of $150k?

As always though – the detail is in the numbers. The numbers work, or they don’t. If, in your case they do, then I’m with you,

Benny

Hi Kylie,
Here are a couple of links that may be useful to you. This first one is of a young bloke who concentrated on positive geared IPs from the get-go (started just 4 years ago) :-
https://www.propertyinvesting.com/topic/4410441-thankyou-steve-mcknight/

The next one is a generic thread with a roll-up of useful information re finding positive geared IPs :-
https://www.propertyinvesting.com/topic/4384472-answers-to-where-to-find-cf-deals/

Note the older dates on the latter link – not to scare you, but just so you can see these ideas still work today.

Benny

Hi Sam,
Thanks for adding more data – here’s what I got from your words – summarised:-

You are looking at a second-hand house with potential for a reno in a regional area. Asking $390k, median is $460k. Rentals are in big demand (ttherefore vacancy rate “sounds” low), so that is good. That target property sounds quite good – only the numbers (I think) need a bit more of a look……

My thoughts straight off are these – with a 6.4% return, it might go close to positive geared right off. Of course, with capital and depreciation, that will be assured. This sounds (to me) like a rather high-cost regional house – I hope you are not looking at an area that might be artificially high right now, but might drop in the future (e.g. a mining area). Who are your tenants to be? A family unit with kids? Students at a nearby Uni? DINKS? Mine workers (gasp)?

Some Regional areas might indeed have quite high prices today (e.g. large regional cities – e.g. Ballarat, Dubbo, Townsville – but then, are these really “Regional”?) Can you share the approx. population of the area you are looking at?

Re an accountant – depending on just where you are, you might want an accountant in your area. Share where you live and someone might know of a good one in your city/area.

How did you go with your finance?

Benny

Hi Bianca,
And a big welcome to you – you have come to a good place !! The subject of property investing is huge – as such, reading or learning enough so that you can at least decide which path is for you would be a good start.

Your current skills might allow you to buy/reno/sell or buy/reno/hold – but do you want to do renovations at all? Maybe your finances won’t allow it, even if you do have the skills. That is one small example – finding out what options you have, and then choosing which option suits you, is probably one of the earliest things.

Finance is an early one too – no use making plans to do much at all if your finances don’t allow you to, so spend some time reading and meeting others to get an idea of what can work for you. Get to know a Mortgage Broker that seems to “click” with you – they might become a founding member of your “team” into the future. Meanwhile, their words will be guiding you.

Re reading materials, books are good – but also on this site, on the Home Page, is the Training Centre. Check in there for a wealth of knowledge broken into areas – e.g. Finance, Analysing Deals, Buying, Selling etc. Then on the forums, do check out the “Stickies” in each forum. When you read of “meetups” in your area, go to them to meet others who are doing what you want to do.

I hope you find a wealth of information right here that will help you get up and running,

Benny

Hi CoolKid,

What do you mean as in rubbish stock? I have been looking around Nerang.

I won’t guess what “BuyersAgent” meant, and he will likely reply soon anyway. For mine though, the Gold Coast has LONG been a haven for some unscrupulous figures and/or companies. Their modus operandi is to FLY buyers in from cities lke Sydney and Melbourne (for FREE – yer, right!!!) and SELL them poorly built new houses/apartments at over-the-top prices.

Usually these would all be new and often OTP (off the plan – i.e. doesn’t exist yet), in greenfield estates commonly. Now, I don’t know if Nerang was ever a place where this went on – others might be able to help. If it was, it could go back 30 years or more. Ones I can mention currently are Coomera and now Pimpama. They are often characterised by being minimal land sizes, often in areas that still have little infrastructure, and their initial sale will be showing a “higher-than-usual price”.

I would think your best defence when buying any older property is simply due diligence – check a house’s price against other similar properties thru several RE agencies.

Be sure to have a proper Building Inspection as part of your contract conditions, then PORE OVER the report the Inspector will provide you. Talk to neighbours and shop owners in the area where you are looking to buy, questioning them about their place (e.g. did they buy their house new, who from, good deal or not, was their house good value from day one, etc). Do they know any stories of marketeers who might have “come unstuck” in that area…. etc.

Some areas are old enough now to have become good value (infrastructure is now in place, early owners have worn the cost of the “too expensive OTP house”, and any structural problems have been fixed by them or subsequent owners). So, don’t let the history of an area throw you completely – a house will be good value, or not – and usual DD will identify this.

Let’s see what “BuyersAgent” may have been thinking….

Benny

Cool, Jamie – thanks for the tip.

For others, here is a link to HTW’s Download site :-
http://www.htw.com.au/downloads.aspx

Feb 2016 shows Brisbane and Gold Coast at 9 o’clock = Rising Market.

Others are :-
Tasmania is at 7:30 = Start of Recovery.
Also at 9 o’clock (Rising Market) are Mid and Far North Coast of NSW, Adelaide, and SEQ as mentioned
Melbourne is at noon = Peak of Market
Sydney and Canberra are at 1:30 o’clock = starting to decline

There are plenty more, so do check out the file.

Of interest to me was that for UNITS, Brisbane is showing as “Peak of Market” but Gold Coast is still “Rising Market”. This has to reflect the immense “over-building” of apartments in Brisbane in the last year or two. Melbourne and Sydney too? I didn’t check…

Benny

Hi Jo,

All the hours and hard work I put in to gain the highest certification possible in my employment has also paid off and I now regularly bring in 100 per hour at the weekends to stash in that account ready for my first successful investment property to be.

I’m enjoying reading your updates Jo, and smiling as I read of the changes in you and your stuation in just a few short months. Awesome !!

Regards,
Benny

Hi Jojo,

Vacant possession means the seller should arrange for all of the tenants to leave so that the place is empty at settlement. I would think just mentioning those words to the Agent might have them realising that this could be a requirement if you are the eventual Buyer. They will likely want to talk you into accepting that some tenants remain. At that point, you both start talking of that, and what concessions you might make and what you won’t accept. e.g. You might say that you won’t accept any tenant that is paying less than $190 a week. This puts the ball in their court – and they might discuss this all with each tenant to gauge just who will/won’t accept the new rent. In agreeing to this, you are not enforcing vacant possession, but you are doing the next best thing – getting your desires in front of the Selling Agent.

If you were to enforce “Vacant Possession”, this does create a problem for the Seller – it may even be enough to have him reject your offer and look for a more amicable Buyer. So don’t play that card without thought.

But, if played, the place is then sold to you EMPTY, and it is up to you to fill it – perhaps with ALL new tenants at $220 a week (I don’t know if that price is viable, but talk with the Agent re this possibility too).

Re property price, the more you “fit in” with their conditions, the more pliable they might be with the price. Price and conditions are often at opposite ends – so, if you want a heap of conditions, be prepared to offer a higher price.

If few conditions, the price can often be a lot lower. Maybe think in terms of “What price would you pay to accept it EMPTY?” Then shave a chunk off (see below) when accepting one or two tenants….. ALL of this is negotiation, so be free in your thoughts with this. Start low – they start high – you meet in the middle somewhere – or not.

When considering price, be realistic – e.g. if existing tenants are paying a total of $50 short per week, this is just $2600 a year you are missing out on. If all tenants pay $200 a week, you get $2600 more – wheee !!! The Seller might be happy to take $5k (maybe even $10k) less just to NOT have to get all tenants out. Remember, even at $10k less, that is only $2.5k per unit – hardly a steal, but better off in your pocket.

Or, you might choose to throw a harder ball if Sales are tight in that area, !! If it has been on the Market a while, the Seller may just want it GONE !! Get the Agent talking, then just listen (and take notes!!) and then re-do your numbers. What do the numbers show as it stands? If tenants pay what they are now (less the $130/wk tenant) how is cashflow for the block? Any reno’s required or planned?

Benny

Hi Jojo,
Have you talked with the Agent re taking “vacant possession”? This usually leads to a scenario where the Agent then discusses the “change of landord” with each tenant, and introduces to them the likelihood of a rent rise.

Depending on each one’s circumstances, they might choose to stay and pay a bit more, or they might choose to leave. Of course, this means you may need to find FOUR new tenants – but discuss that likelihood with the agent too. You would need to know how much competition is out there from other units to rent, etc. Playing the “vacant possession” card allows you to flick-pass the problem to the seller. Of course, any existing leases might need special consideration (see your lawyer re this though).

Or, flip side, if the top 3 are good people, and you want to keep them around, maybe take them on as is, but introduce discussion re “What else would you like to have in your unit?” They might be wanting to have air conditioning, or a new oven, or a fresh coat of paint. Whatever it is, look at HOW you might be able to make that work, in return for an uplift in rent. e.g. one might tell you “WE nearly left to go to another place because it has a new kitchen. We would be happy to pay an extra $20 a week to have a new kitchen.” Now, you could borrow the money needed to renovate the kitchen – like this :-

1. Expected cost to renovate = $10000
2. This can be a likely Tax deduction (but check the circumstances with your adviser – not all items may be deductions).
3. This may add an extra $20k in Equity for you (market value lift because of the reno).
4. If borrowed on a home loan at 5%, this costs you an extra $10 a week in Interest (close enough).
5. The tenant is happy to pay an extra $20/week (sounds like a 100% profit to me, even without Tax deductions)
6. Any old items replaced are written off in this FY, adding to your deductions, and the new items fitted allow MORE of a deduction in years to come.

By the way, I have heard of some who can do a kitchen reno for way less than that, so my $10k is “a shot in the dark” just as an example.

Can something like this work for you?

Benny