Forum Replies Created
Hi Charlie,
Check out the “Training Centre” on the Home Page. There are hundreds of articles about all aspects of property investing. They are broken down into categories (e.g. Buying, Selling, Renovating, etc) so you might be interested in those to do with Buying.
Other than that, in a nutshell there are plenty of variables to consider. Common ones are :-
Is mining the ONLY employer in town? If so, what happens when it suffers a downturn? Where do the workers go? Do they leave town?
What is the ratio of rentals to owner-occupied? If heavy on rentals (>30%), then these are all your competition. (Especially in bad times !)
Is the mine thinking of providing their own accommodation for FIFO workers? It has happened before! What happens to your IP then?
Can you get finance? Some lenders won’t look at some regional towns.
How difficult is it to manage a remote property? To get tradies to fix things? Is the town big enough to have a few RE agents? If only one or two, you are CAPTIVE to them – what if they are both no good?
Whenever you buy, you should always have an Exit plan worked out. e.g. If times went bad for the mine and its workers, how would you exit this property? Who would you sell to if times were tough? Can you hold on until better times come around again?
Just a few thoughts out of left field Charlie. Keep on searching – the answers will come,
Benny
Hi Charlie,
So the question I am asking is, can the revenue of a business be recycled using trusts?
I thought Chapter 9 covered that bit quite well…. Or was your question a bit more broader than the book covered? Maybe change the question if it needs to be more definite in its focus.
And also will the banks lend money based on the revenue of the business or only the free cashflow?
Are you asking whether the Bank looks at Gross or Net Revenue? That’s what it seems like to me. In answer, I’m sure they’d want to look at both. And probably it needs a bit of time too – i.e. they like to see a business has been in operation for some time (not just a startup).
Benny
I heard on the radio this morning that Chris Bowen commented something like this – “With power prices having lifted 36% we must assist families who are doing it tough”.
Hmm – how about the families with a 120% lift in Mortgage Interest costs, Chris? What does Labor have for them? I haven’t heard of that “RBA Review” happening either – isn’t it time? C’mon Jim Chalmers, time to take them to task methinks !!
OK, here we are at year’s end, with no more RBA intervention until early Feb 2023. In the last 3 months of 2022 they “went easy”on us, with just 0.25% each month. The total uplift from April 2022 (when the Cash Rate was 0.1%) has been a further 3%.
Sounds innocuous, doesn’t it? A bit like the Interest Rate you “might” be able to get on your Savings in a bank. But is it really just 3%?
No bloody way. This 3% has been an enormous blow to many. Let’s take an example – back in July, it looked like an extra 2.5% increase could happen (after already lifting by 1.25%, giving a year end likely total of 3.75%) :-
But let’s take a look at the mortgagor – the poor old Mum and Dad who were on a 2.5% Interest Rate for their mortgage.
That 1.25% lift is a FIFTY percent increase in the Interest cost of their mortgage, with (it seems) more yet to come? Who can handle a 50% increase? If true, this prospective 2.5% lift by year end will totally cruel the Mums and Dads. Forget a 50% rise in the Interest costs of a mortgage – try 150% !!
With hindsight, we now know the total change was 3%, not the 3.75% that was projected in July – whew !!! But it still has a huge effect. That couple who were on 2.5% Interest with their mortgage at the beginning of 2022 will now be facing a 5.5% Interest Rate. And the increase since April was not 150% after all, but it still made 120%. 5.5 / 2.5 * 100 = 220% – i.e. a 120% increase on “what was before”.
120% sounds a helluva lot more than 3%, don’t you think? And the effect on a mortgage is seriously serious.
The Interest component has more than doubled in just 8 months. How does a landlord go with attempting to lift rents by 120%? How do families facing petrol, power, food, insurance and mortgage increases cope? How many have dropped into “mortgage stress”? Would have to be a bunch, wouldn’t there?
All I can do is hope (as someone else had commented) that the RBA realise in the New Year that “they went too far”and decide to drop things back somewhat. I know, I know – the Interest Rate was on an emergency setting – it HAD to lift. But then prices had ballooned upward, and a 100% lift in Interest on a $1m nortgage is a lot more hurtful than a 100% lift in Interest on a $250k mortgage.
Did the Rate need to lift THAT far, THAT FAST???? I still say No – let’s hope the RBA enjoys their vacation time and relaxes a lot more into the New Year and have the IR’s relax a bit too.
Benny
Hi Charlie,
That’s good to hear. Oh, and check out my answer to you in the other thread you started. I think you will appreciate what you find there. ;)
Benny
Hi Charlie,
I hear you asking more and more about Trusts. I can’t help you directly, but I can refer you to Steve’s earlier book – “From 0 – 130 properties in 3.5 years”. Get the updated version from 2010, then seek out Chapter 9 and DEVOUR it. I found it fascinating reading on the subject of Trusts and how Steve uses them, and I am sure it will answer a heap of your questions.
Of course, though the book is educational, it cannot replace the worth of a professional (your Lawyer and/or Accountant) well versed in these structures who will be advising you re YOUR OWN situation.
Benny
Hi Charlie,
Can anyone confirm this or provide an alternative view as it is becoming increasingly frustrating when the advice from accountants and lawyers do not match up?
That should “an accountant and a lawyer” shouldn’t it? Sounds to me like a second opinion from both professions might be a good move.
I am unsure of what the lawyer’s view of trusts is, but I am going to take it that it is wrong…..
Gee, Charlie, alarm bells are going off in my head as I read those last words. To me, it would be more likely for a lawyer to know the laws than an accountant, but then there are some really knowledgeable accountants, and I guess there could also be lawyers who may be still learning…. Has to be second and third opinions surely?? Oh, and a wee reminder – when an accountant does your books at year end, they have you sign that YOU are responsible for THEIR calculations don’t they? Couldn’t that also apply to any advice they have given you?
Tread carefully my friend – those questions you’ve asked are very good ones, so don’t resort to guesses as to the correct answers.
Benny
Hi Jeeakz,
Steve no longer does training courses. He does however run webinars from time to time, and these are always worthwhile as he comments on current situations. Also, I think his STEPS offering is a VERY good product. It is designed to walk you through the total Due Diligence needed when purchasing a property. The detail is phenomenal and if you followed the steps to a T, you would minimise (or even eliminate) the risks involved when purchasing.
Other than that, some members post of educational meetings on here (either in person or online). Look for them every month or two.
Good to hear you are looking to spend money to educate yourself – a favourite quote of mine is “Ïf you think education is expensive, try ignorance!”
Benny
Further to that last comment, the presenter (Bjorn Lomborg) goes on to say (and I paraphrase Bjorn, but you can click the link and hear him yourself) “Instead of pouring Billions into subsidising infant technologies that are not cheap, we would be better advised to turn those dollars into researching better ways to produce CHEAP energy. Once that path is found, China and India (along with everyone else) would RUSH to utilise this new cheaper, more reliable power source. So long as the current ‘green’ energies require massive subsidies to make them appear cheap, that will not happen.”
In short, he is inferring that we need to do a U-turn, and stop doing what is not working too well (and at a very high cost – i.e. those renewables), and instead turn to the other options (Nuclear, Thorium, etc) that seem to show much promise around the subject of providing cheap energy for all.
Why not? Seems to me to make far more sense than what is happening currently…. Do you agree? Or is there an even better way? Let’s hear it….
Benny
Hi Curious
Just noticed – this looks like an honest mistake rather than an attempt to deceive. When someone typed the brochure, their right hand slipped one position too far left, thus the 09 became 98. It happens often – but proofreading would (should) have picked it up. Or a title search during conveyancing….
FWIW
Benny
Ah, right…. That makes more sense now. Septics can take up a lot of space when using transferation trenches. Aren’t there now newer ways to handle this? Have you researched these later septic options, and do they help (i.e. do they take up less space)? It’s been a long time since I had such a property, so my knowledge today is not great.
Benny
Hi Dominique,
It appears to me that things don’t quite compute….. A quarter acre should be PLENTY big enough to fit a house and a Granny flat, with room to spare. Some folks do this on half that size block. Was there something else that was unsaid – e.g. are there easements on the block that can’t be built upon? Is the house a very LARGE 3 bedder?
Or is there something else I’m missing?
Benny
November, and the RBA, with yet another 0.25% lift, does the “same old, same old” – well not really !!
The “same old” used to be “Lift rates a couple of months in a row, then sit back and contemplate their navels to see the effect of their actions”. But not these days. Now it is squeeze the life out of everything by increasing Interest Rates (a major non-discretionary item in many folks’ budgets) while other non-discretionary items have already jumped hugely.
Power increases and petrol/diesel costs have already had a major effect on stores and their products – e.g. food (a pretty useful non-discretionary item, that one), not to mention basic household costs too. So let’s add to the pain by continuing to bump the Cash Rate !!
Who is really controlling the ship, and why are they steering it onto the rocks?
It’s got me bluffed !!
Benny
Hi jeeakz,
One thing you might not have considered when purchasing a Town House would be any Body Corporate fees and/or restrictions. Though you might own some land, there will also (likely) be some areas that are controlled by others making up the property (other owners of the remaining townhouses). A Body Corporate usually means extra expense, so I hope you have taken that into account. Same for units.
As you said, the capital growth will be less, mainly because you own less land. i.e. your block is not able to be further subdivided to increase its value. And, I believe there may be many others like me who DON’T want any Body Corporate determining my decisions about anything. So for me, it was always houses and their land, thank you very much.
If you want a 5% yield, there are areas where you can get that in houses. Just be prepared to shop around and look further to find them. Could be other centres or regional areas, but 5% is still an option for some houses.
Did you ever get to check out “Westnblue” and his actions about years back? Here’s his story – let me know in reply if what he did is something that you could (or would) also consider doing. It seemed to do him pretty well at the time :-
It’s a good story eh?
BennyWell, well, well – the RBA only lifted by 0.25% this month. Are they learning? Or (as I’ve heard one commentator mention) will they continue to lift, only to bring rates back down next year when results prove “They went too far, too fast!” No news to me with that last comment (check the earlier posts above).
But OK, with a 0.25% lift in October, that allows this update :-
After today, the RBA cash rate is 2.60% and the average mortgage Interest Rate will soon be 100% higher than it was just 6 months ago.
How are folks travelling in your area? As mentioned earlier, it is not just mortgage interest that has lifted astronomically in the last months. One example is a box of tissues. The cheapest 6 months ago were $1 at both Woolies and Coles. Just two or three months ago, these lifted to $1.30 – and recently they leapt again to $1.70. A 70% increase in half a year? Lucky it’s just tissues…..
Oh, it’s not? Hmm, what else? Petrol, power, interest rates are the obvious ones – but also (smaller?) lifts in some foods, postage….. And what of other non-discretionary items? Insurances? Have to be going up as floods hit don’t they? What about Rates? I haven’t seen these lift – yet – but the lift in Council costs must lead to a similar lift in Rates over time – but wait, I did get a new valuation on our home, and noted a 30% lift in its value. That will become a Rate increase of 30% over time.
Have I missed anything? Probably…… let me know…..
Benny
Hi jeeakz,
Hmm, is this the same jeeakz that posted THIS topic a few months back? If so, I’d added some thoughts in reply, but didn’t hear back from you to help further.
The name is right, but the scenario outlined in each post seems WAY different. Anyway, lets concentrate on today’s question :-
Off the plan or existing house. Which one do you think is a better option in today’s market?
For me, the answer is always “existing” for several reasons. You mention one, which is that the return (or yield) is likely to be way better. But there are many others – see the link below for some ideas re why NOT to buy OTP.
https://www.propertyinvesting.com/buying-investment-property-off-plan-dumb/
And, should you choose to buy OTP anyway, read THIS link before signing on the bottom line:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/page/3/#post-5038486
While in this last link, do have a look around – especially hte very first post on page 1 as it outlines all the subjects referred to in the topic, and some of them may well answer a heap of questions for you.
Any questions, reply here and let’s see what we can do….
Benny
Hi Troy,
I have a few thoughts, but I’ll step aside right now to see if others with the right credentials might stop by first. (I don’t have any credentials – just opinions…) Suffice to say, you sound like you are in a really good place. :)
Benny
PS While I think of it, there is one link I can provide that MAY hold some ideas around this subject. It may not fit directly your situation, but it should at least give you some extra angles to explore….
That’s great news, Intelligent Trader. :) That sounds like a really nice retirement place too. A hobby farm? Orchards? Animals? Or not bought yet, so don’t really know what’s there? Anyway, a terrific tale, and we look forward to hearing more from you.
Benny
Hi Tom,
as an investor it is time to move on
Right on – that’s all that is left now. Such a shame – I hope you find a buyer soon to allow you to exit these once-upon-a-time good investments. I hope the same manager doesn’t screw up the tenants who had earlier put their faith in the place and you as the landlord.
And good luck to you Tom – I’d love to hear what you find “Next!” ;)
Benny
Hi Freedom,
I really can’t help you. I watched as Perth sank while the East were going up several years back. I always heard that “Perth did its own thing”. Just recently I saw signs of life in Perth, but I don’t have a handle on just what is happening there. What are you seeing?
There are some Perth members who pop in from time to time – maybe they will see your post and add their thoughts….
Benny (Brisbane)
