Forum Replies Created
Hi Smally,
Welcome aboard – I hope you find your visits here useful in every way.
I have been looking around for my first investment property.
This is all very daunting and I don’t know which way to turn when looking on line.Given that second line, I wanted to attempt to “bring you down to earth”. That is to say, WHAT are you looking to buy? Are you wanting to generate cashflow, or grow equity? Do you want to pay a high price to buy a manufactured item, or are you looking to renovate (or develop) an older property and pocket the equity yourself instead of paying it to a marketing company?
I don’t know Canterbury Property Services, so really cannot comment – except to say, are they offering what you are wanting to buy? And, having bought it, what timeline is then required before it creates a profit for you? In short, have you “run the numbers” to see if such a purchase will be a good investment for you?
Sorry, mate – no answers, just questions (but perhaps some that you really need to answer before moving into any investment..)
Benny
Hi Chat,
Awesome to see you working it through. Your diligence is going to pay you handsome dividends, so do keep it up.To your concerns :-
1. My fear is that once this interest only period ends – the bottom has fallen out.
Good thought – now check things out to see if “the end of an IO period” is actually THE END – hint, there are ways around this.
2.Now the first issue I have with this is that if each of these properties hasn’t risen in value or provided cashflow that totals more than associated costs of purchasing the property – stamp duty for example – then it really wasn’t a good investment
Keep in mind the deductions that exist (benefitting investors who provide housing) that will take a lot of sting out of these costs. e.g. Did you know that it is possible to have a negative geared property that has a positive cashflow? One to think on, or read up about !!
3. The second issue is that if I am using the positive cashflow to support other negatively geared properties and that cashflow disappears then again I’d find myself in a detrimental position.
Good point – CASHFLOW is Numero Uno, and the lifeblood of investing. Cashflow can come in many forms – have a think about the many ways this can happen. Some may be in weekly dri bbles, while others can be in chunks !! And yes, you are right that losing one positive geared IP can have a snowballing effect on other IPs held.
4. Looking back on my paragraph – the only way in which my strategy will work and continue to work will depend on my ability to a) source positive cashflow properties (with every interest rate point rising, this will become more difficult) and b) ensuring that each property I buy stands every chance of rising in value above the associated costs of purchasing it before the interest only period ends, and of course successfully selling each property in a timely fashion (just before payments are due to switch from IO to P&I) which in a fairly illiquid market could be easier said than done.
Chat, to that I will simply say “Your options are nowhere near as limited as that!” Find the answer to 1. and you immediately start to undo these limitations. And way before selling would come “adding value” I would think – that adds Income and Equity if done well. Get those two working for you and Cashflow gets enhanced. With enhanced cashflow, you become unstoppable (within reason).
Keep on thinking and reading, grasshopper – to learn, much there is !! (in my best Yoda voice)
Benny
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Hi Barlow,
Terry’s idea is (I think) a good one – call your lender and ask for the “Break Cost” of your Fixed Loan (but be sitting down when they tell you – ;)The Break Cost increases as the difference between Fixed and Variable increases (and there has been a 0.5% drop in the Cash Rate in the last 12 months – which may or may not have become a drop in Variable Rate depending on the lender). In essence, if you Break out of a Fixed Loan, and the lender can then re-loan your funds to someone else for a HIGHER amount, then the Break Cost will be minimal.
Once the Cash Rate starts going UP again, is when the Break Cost will drop appreciably. The Break Cost also has TIME as a factor though – so the shorter the time before the Fixed Rate finishes, the cheaper the Break Cost. If you do determine your Break Cost, why not post it here – and in 6 months time too – we can then all see the pattern forming.
I broke a Fixed Loan – just once !! I spend a lot more time now ensuring I won’t NEED to break a loan. e.g. if you are planning to sell a place, DON’T take a Fixed Loan on it !!!
Benny
Hi Coogee,
As Jamie said, asbestos is still quite common. The places where yours was found are in quite inaccessible areas – i.e. inaccessible to most people.Where asbestos is so dangerous is where a youngster might “play” – digging at walls with sharp objects, etc before they are old enough to know “Don’t do that!” In your case, the asbestos that has been found is where it can’t be “attacked” easily, thus it is a pretty much a non-problem. I would not be “pulling the pin” over that finding.
Benny
Hi Chat,
In my understanding, any cash withdrawals from a credit card are an IMMEDIATE instigator of Interest, and often at a higher rate than other purchases. e.g. a credit card might have a 17.9% rate for purchases, but a 27.9% rate for cash !!! It bites, so I am glad you asked first – but don’t just take my word for it – check that I am right with a bank. ;)Re loans with an interest free period? Hmm, pass !! Good to see you still thinking around the situation – good for you.
BennyHi JJ,
Stegbar installed the glass windows and doors to my property but they were not been paid by the original builder
I don’t KNOW, but I would think QBCC should be able to do something here – aren’t they “taking over” to basically make good what the first builder did/didn’t do? I would think that would include making payments to those suppliers who hadn’t yet been paid(??)
That would be where I would go first up. Hopefully others who KNOW might pop up to offer alternatives,
Benny
Hi Corey,
It’s related to building work over a certain threshold ($12,000 if I remember correctly), as per norm.
Ah, thanks mate !! Yes, that does sound like “as per normal”. I have turned off the pacemaker now….. ;)
Benny
Thanks for all of you who have added your thoughts above. What a huge selection of positive comments after what sounded like a huge effort on everyone’s part, whether a presenter or an attendee.
Just reading this thread has fired me up – but “being there” would mean so much more. I must make the effort to get to Melbourne if this were offered again.
But now, this thread has dropped off the front page, and I was wanting to read more…. so here is a “bump” to bring it back into the spotlight. Please add YOUR thoughts, if you haven’t already….
Benny
PS And down the track, I would love to read of the actions that followed this Bootcamp, and the progress made by its attendees.
Hi Xenia,
Wow !! After a bit of a look, it seems to indicate that if I was a landlord in SA, I cannot paint my own IP, nor replace a broken paling in a fence, and I think it also mentions Paving, so I can’t fix a broken paver….I sincerely hope that no other State Govts are thinking of following their lead!! The quote “Bureaucracy gone mad” comes to mind. Or is “revenue raising” a more apt quote? Sheesh.
Thanks for bringing it to our attention, Xenia. Are SA landlords looking to riot in the streets any time soon?
Benny
Hi SM,
It’s in a large block of 200+ high rise and It’s not due to be completed for about 2.5 years
This sounds like the kind of property that they sell to overseas buyers. Could that be a market for you? Maybe approach Ironfish to see if :-
a) This can be onsold by them to an overseas buyer, or
b) Can you onsell it to someone else, and if so, thru whom?Keep in mind that if you settle on it, it is then “second-hand” thus it is no longer one that can be sold to an overseas investor – so your potential marketplace is cut in half (Aussie buyers only). I would think making every effort to find a way out now woud be time well spent…..
If it is 2.5 years before it is even built, what WILL be its value on completion?
Could it be worth $420k by then? Or $350k? If the latter, HOW do you settle, even if you wanted to? If you don’t settle, how much does that cost you? Sorry, SM – I don’t have a lot of answers, but those are a few questions that I would be asking if it were me. You may have broken an egg – the trick now is to endeavour to make it into an omelette !! ;)
Hopefully others who might have faced this very thing themselves might pop in with a few more thoughts.
so also thinking of opportunity cost and what that $40k could be used for in the meantime.
Good to hear that you are already looking at the whole situation. That could even include bailing at a loss (if so, how much loss?). And what if it would cost too much to NOT settle? What then?
Good on you for considering your position – look from all angles. A poor decision early on is recoverable, even if painful – and you will LEARN SO MUCH from it. So look on this as a learning curve – how to make the best of a mediocre/poor situation.
Benny
Hi Dean,
Hopefully, this will be a temporary halt. Here’s the thread that had us looking at the current “5 star system”.
https://www.propertyinvesting.com/topic/5016527-renovation-advice-companies/#post-5017000My post finishes the story, but read back a bit to see what went on,
BennyHi VeeR,
Your descriptions sounded like a thread we had on here a few months ago, so I went looking :-
https://www.propertyinvesting.com/topic/4399106-uretek-anyone-used-it/If you go to the Forum pages, use “underpin” as the keyword and press Search, you will have a number of threads pop up. The one above is the one I remembered, but there are a number of others.
And yes, I’m with Patrick – isn’t a new home warranty valid up to 6 years?
Benny
Hi Barlow,
The answer would change too, depending on just WHERE you are looking to buy. If wanting to “Time” the market, then a look at the Property Cycle for the area you are purchasing would give a broad-brush indication of “Buy or Don’t Buy”.Re your comment “possible lowering of asset prices as supply is starting to overwhelm demand” – the main area I see THAT happening is in apartment towers of major cities. These have been cranking up for the last few years and large numbers sold to overseas investors. Watch out if/when those overseas investors bail – because their apartments can ONLY be onsold to residents (other overseas investors are not allowed to buy second-hand – refer FIRB).
Now THAT will cause shrinking values and supply/demand imbalances over and above the current “too many apartments being built” scenario.
Other than that, we still have one of the most stable countries in the world, and the drive for immigration won’t be lessening any time soon. I am not seeing any major property value falls in my crystal ball (save for inner-city apartments as above).
Disclaimer: All just my opinion – I am not any kind of accredited adviser, and my thoughts won’t necessarily apply to YOU !!
Benny
Hi Liam,
What if i just buy 15 properties, all cheapies, all in high yield areas.
Maybe something like this bloke did?
https://www.propertyinvesting.com/topic/4410441-thankyou-steve-mcknight/His were all cheapies in high yield areas – and then he forced some equity by renovating in some instances. Could it be done today? Hmm, I would think so – though the timing right now is not as ideal as it would have been even a year ago.
I would think doing similar types of deals should still be possible though.
BennyHi @knightm,
I don’t know if the like system can be challenged or removed when used inappropriately?
Well, as promised, I went looking and asking. Initial enquiries were not looking good, so Admin went digging further. This then led to some issue with the current supplier, so Admin is now on the lookout for a resolution.
The old system is “on hold” for now,
BennyHi Don,
Thanks for letting us know of that failure. I passed the info on to Admin, and he tells me he has now fixed that link.Benny
Hi all,
Wouldn’t the rate charged by the agent be somewhat different depending on the rental rate charged in a given area?e.g. If 8% were “the going rate” then an agent managing a property in Point Piper for $3000 a week would make $240 a week (for what)?
Whereas the agent managing a property in Mt Druitt renting for $300 a week makes $24 a week. Is there 10 times more work for the agent in managing the Point Piper property?Now, the examples above show two extremes – surely “in the middle of those extremes” agents in differing areas can do quite OK on 5% or 10%, depending?
Benny
Hi Dboyle,
I am sure there would be many on here who could learn things from you – for one thing, how to succeed on a wage of $45k maximum.Like many who come here to share their experiences, why not jump in to answer questions of less experienced folk when their question is one you have particular knowledge of. Your answers can provide help, and you can derive the pleasure of knowing that you were able to lift someone else up to a higher level today.
Who knows just where such a hobby might lead,
Benny
Hi goosehead,
If I am reading your post right, the crux of the question is whether to borrow to make repairs, or whether to utilise existing funds instead of borrowing…..Though I am NOT an accredited adviser (so do your dd on my answer, eh?) I believe that the repair to the roof may well turn out to be a Capital Cost. As such, it can only be returned to you on sale of the property. However, if you BORROW to fund that Capital Cost, then the cost of those borrowings would be deductible.
So, if I am right, your choice #1 would not be ideal, as you would NOT be getting your funds back at tax time.
This would leave choice #2 as “the way to go”. Consider though whether you really would want to “pay it off over the year”. With rates as low as they are, maybe utilise your spare funds for other things and simply pay the 5% year on year (with Tax benefits each year).
But hey – those who ADVISE on this kind of stuff will have a much more complete answer, and probably also have good reasons why my suggestions WON’T work (eek!!) Let’s see who else is around,
Benny
