Benny – is this an argument, or a discussion, we’re having? I’m confused!

Yes!!

*roflmao*

Hi Rillanon,

The plan of course is to get a discounted price though o hopefully we can get it discounted enough to cover all those costs.

You may be able to do that, but it will remain locked in “future Equity” until your next valuation – at which time, you might be wanting to take some as a Deposit on another IP… ;)

They say “You make your Profit when you buy” – but you don’t always get to see it at time of purchase (for the reason stated above – “the Bank will only lend to the lower amount of Contract Price or Valuation”). If you have bought well, you have salted away any discounted amount as stored Equity. e.g. Buy a house for $350k where other similar properties sell for $400k and you have an extra $50k in Equity from day one.

On your next valuation, that Equity is (partially) available as Deposit and Costs for another IP. Why partially? Simply because you might be able to borrow at 90% of valuation – thus, your new valuation of $400k allows borrowing to $360k. Your earlier mortgage (90% of $350k) is $315k. So, new mortgage of $360k minus old mortgage of $315k = $45k (not $50k).

And, after that new valuation, you still have $40k Equity – but you CAN’T borrow against it at 90%. You would have to find a lender that would go to 95% to get at that extra Equity. Despite all of that, the Equity you created on Purchase is YOURS to utilise – but not from Day one !! ;)

Benny

Hi SydneyGuy,
Corey said it so well :-

It’s very common for those buying in these large estate areas to see limited growth indefinitely and stagnant rents – be careful.

By replicating what the developers are doing (but without their cost-savings by building in bulk), you will be limiting yourself severely. In short, you can do a lot better than that. Have a bit more of a “read around”, starting with this article – it is a classic :-

https://www.propertyinvesting.com/how-to-invest-in-real-estate/

Benny

Hi Ticker,
From what I recall, the States (or is it Councils?) each have a differing view of Granny flats. To be able to help, we would need to know which State (or Council?) your granny flat is in.

I have seen that “granny flat” information mentioned in some posts recently, but couldn’t find them just now – if others can, please add the links,

Benny

Hi Pepper,
Welcome to PropertyInvesting.com – I hope you find lots of worthwhile information to guide your steps.

Re your question (ocean views vs flat lot) I would first mention that I don’t know Perth (I’ve never been there). But some thoughts re Real Estate are universal, so my thoughts will be ignoring the city and just comparing the two options.

First, I would suggest checking comparables for both properties. What values do “ocean view” properties of a similar style (once done up) fetch? Are you able to buy it cheaply enough to cover the cost of renovating, and gaining some Equity?

I don’t know the R20/R40 zonings – I would guess the R40 might allow extra density into the future – is that right? If so, then that has a value favouring the “flat land” property. Also, from your words, the “Flat land” one is ready to rent (no reno required?). What about rents? Do the rents favour one over the other?

With comparable land sizes, the differences are “views” vs “development gains”. Let’s assume that the reno is complete on the “views” house – what is its value then? From that point on, the views cost you nothing – whereas to take advantage of the “development” house, a lot of time/cost needs to be applied.

My thoughts would be that IF the views house doesn’t require too much major work (cost) and its value then jumps way more than the cost of the reno, then I would be favouring that one. The idea of being built on a sand dune is a bit worrying though !! Eeekkk…. Sorry – no definitive answers, but hopefully a bit of food for thought,

Benny

Hi Fred,
No problems in starting out not knowing too much – we all start out that way. This is where there is an opportunity cost in following the Nike brand (“just do it”) as that way can bring you unstuck.

The first thing that came to my mind is positive geared properties, a few renos here and there to up the equity buy another one etc.

Nothing wrong with that way of thinking either. A large part of “what to invest in” will come down to “what suits you?” So getting your own head together is a very important part of the whole scenario. And how does one “get one’s head together?” You fill it with useful information – like being on here, reading books, doing seminars, meeting with investors, advisers, etc.

Your opportunities will come in different ways – your job is to be able to recognise the opportunity that is for you !! Following Terry’s line of thought, even if this first property were bringing in $50 a week for you, that is $2600 a year. How long would THAT take to build up the funds for your next deposit? $2600 is good, but can you do better?

It is by nutting out these kinds of things that lights start to turn on. True?

Now, I don’t know if $50 a week is even the right number – did you come up with a likely weekly income after mortgage, rates, insurance, etc? You mentioned being excited…..

And I was so excited until a couple of minutes ago, when I read about all the fees and taxes that will add up at the end.

…and I thought maybe you were referring to the “setup costs” of purchase – that is why I took a punt at some of them. And there is where my lack of knowledge of Regional purchases and borrowing lower amounts showed up. See, if it costs $400 for an Application fee, won’t that be the same for a $100k loan or a $500k loan? What about Solicitors Fees? Won’t they do just as much work to transfer a $130k property than a $600k property – thus their fees would be similar?

It is that “unknown area” that needs more work in my opinion. Some things will be relative to cost (e.g stamp duty – and that varies by State, so check it with your State Govt). OK, there are financial things to nut out – but even before that, it is useful to have a clearer picture of where you are wanting to be….. so,

Jason Staggers has just written a brilliant article on Investing – you might have even skimmed it, as it is on the front page right now. I’d suggest you go and action it (don’t just read it) so that you get the true benefit of its offering. It is here:-
https://www.propertyinvesting.com/how-to-invest-in-real-estate/

After devouring that one, take a look at another string of subjects that I believe are useful to “new players” – here:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

After getting through both of those, you may well find a lot of your questions have already been answered, and that you will be much closer to deciding “What can work best for you?” Do let us know how these work out – and do come back if confused (we know what that is like, so we try to help out where we can),

Benny

Hi Amelia,
Start with searching for “house cleaning Melbourne” and see what pops up. Most will be domestic cleaners, but most also offer a “spring clean” service. And if your words have them saying “Oh no – we don’t do THAT kind of cleaning, just ask them if they know of a company who DOES!”

If there is a whole lot of junk still in the house, maybe search for “junk removals Melbourne” – ‘cos there are people who do that too. Get the junk out first so the cleaners can have a good go at it. Re the concrete floor in the basement, there are groups that clean concrete floors for garages – call one or two of them.

Certainly with the savings in purchase price you have made, it will be totally good to turn this bad boy right around and have it re-valued in 6 months time for a HEAP more Equity. Go hard,

Benny

Hi Terry,
In respect of this answer:-

2. depends. You will only be able to claim one of the houses as the main residence and get the exemption. So you would generally reassess things in a few years and see which one has grown the most.

I had previously heard that this “nomination of PPOR” can take place like you said – years after the fact, and you may choose which one to go for.

But then, in my own situation, I had the State Govt requesting I nominate my PPOR so that they knew which house to exempt for Land Tax. So where does that leave us in the above situation (where we want to “hold off nominating a PPOR”? Is there a way where we can satisfy both State and Fed while still holding off on the PPOR nomination?

Interested to hear the answer, and thanks in advance,

Benny

Hi Barlow,
The BIG savings were made where people would make half a monthly payment every fortnight. This effectively makes 26 payments per year instead of 24 (2 per month). Depending on each lenders calculator, the story might change.

Like, if you were to make weekly payments, would you pay 1/4 of a monthly payment each week? Or would the Bank give you a lesser amount that would satisfy their requirement (52 payments yearly being just the right amount to equal 12 monthly payments). The first way, you would make 52 payments where 48 were enough – the difference is what then comes off the principal amount owing.

Setup an Offset account instead, and don’t worry about all of that other stuff. ;)

Benny