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July 15, 2015 - 3:34 pm

Hi Justin,
I’m sure I have heard of such things happening. Of course, it will all come down to “the numbers”, and these will emerge based on the location, the Council, and the builder themselves.

Hopefully someone who has done (or is doing) deals like this can step in to give you better direction, but good one for asking anyway.

Benny

July 13, 2015 - 8:14 am

Hi Tiger,
The main thing you are seeing is how there are two major “parts” of any Finance Deal. One is LVR the other is DSR. And either one can limit you.

Richard, or other Mortgage Brokers on here, can take you chapter and verse through the complexities of all this.

Right up, I’d say you are in GOOD shape with $600k of equity. Yes, the DSR side of things might slow things down with the size of a loan, but then, the right purchase could see you able to make a second purchase right after that.

Take the time to learn all of this for your own benefit. It helps to have some understanding which will occur as you meet/talk with others like Richard. And welcome aboard – I hope your search for more info is a fruitful one,

Benny

July 10, 2015 - 5:21 pm

Hi Wadez,

Thanks for the idea…. Do you have an idea that such a decline is likely?

July 10, 2015 - 12:26 pm

Hi Wadez,

1. Click on “Forum” at top of page (between Home and News)
2 This shows a forum Index – choose which forum you want to start a thread in (click on the forum you want)
3. Now that you are in one forum, at top left a “New Topic” button appears – click that, then follow the bouncing ball,

Benny

July 4, 2015 - 9:29 pm

Hi Daniel,
Click on the “Forum” Tab at top right of most pages. Once in the Forum listings, you will see a Search box – type in “Gladstone”, click the “Magnifying Glass” button, and you will find several threads discussing Gladstone.

The first in the group (apart from your own reference in this thread) was this link :-
https://www.propertyinvesting.com/topic/5010080-selling-a-property-that-has-fallen-in-value-in-gladstone/

Maybe you and them can discuss strategies, ideas, etc and uplift each other. Hope that is a help,
Regards,
Benny

July 1, 2015 - 11:51 am

Hi Suri,
What Jacqui has suggested makes a lot of sense, and reminds me of a story Steve tells in relation to his mantra of making money. His aim when investing is to :-
make the most money
in the least time
with the lowest aggravation
and the least risk

Balancing those out on a particular deal he had, led him to do exactly what Jacqui suggested above. He had a block that could be developed, so he “ran the numbers” and found something like this (I don’t recall the actual figures but is an example):-
Developing and building one extra house was going to gain him just $20k in 9 months (erk!!)
Developing and building two extra houses was going to gain him around $120k in 10 months (not so bad)
Getting Development approval and onselling to a builder would gain him $100k in 6 months without having to actually build them himself. (He chose this path)

Though building two houses would have earned him more, he would have had to outlay far more to build two houses, so the return on investment was going to be way lower than spending just enough for a DA, and getting nearly the same return more quickly.

Way less aggravation and risk !! You may well be in that same situation – run your numbers, and see what they say.

Benny

PS By the way, I just found Steve’s actual numbers and the story (I didn’t have the facts right, as I suspected… wah!!) It is the story that opens Chapter16 of “0 – 130 Properties in 3.5 Years”. His third option actually paid him MORE money than the second option did. Oh, and there was way more to it too, so go find it if you have the book.

Oh, and the final learning from the story (as it all worked out to a $130k profit) was “How many deals like this would YOU have to do each year to replace your wage?”

• This reply was modified 9 years, 9 months ago by

June 24, 2015 - 9:19 am

Hi Dtrain,

Does it have ceiling insulation? I would think this would have a marked effect on warmth, more so than external walls. If ceiling insulation is old, a “top-up” could be all that’s needed.

I can’t see any quick/easy way around the walls – unless you wanted to use the foam to fill the cavities (means drilling holes internally to insert the nozzle – don’t drill through asbestos). This foam is what I have seen used on USA TV shows – I haven’t used it locally, but I would think it should be available !!!

Benny

June 24, 2015 - 8:36 am

Hi Audsco,
Also because others haven’t yet responded, I wanted to pass on what I believe could be useful. I don’t know, as I don’t spend much time at auctions, nor have I purchased a place that way……

I recall a story written by an investing “player” who wanted to snap up a property – he formed his view of value with a walk-thru on the day of the auction. He determined the amount that would be his “highest bid”. During the auction, he had the distinct impression that it was “just him and one more (maybe a “plant” working for the vendor?)

But HERE is the key – the reserve was not reached, and our friend had outbid the “other bidder”. This made him the first one the RE agent came to talk to once the place was passed in”. He ended up buying the place at his final offer price.

And he was offered $40k more before the day was out from someone else wanting to buy it from him.

I thought that might be worth knowing….

Benny

June 23, 2015 - 9:28 am

Hi Vik,
Interesting questions :-

Why is it that Agents in QLD ask 8.5% management fees whereas in NSW they are asking 6.5%.

I long thought it had more to do with the fact that MOST SYd properties rent for much more than Bris properties. And, since the same amount of work needs to be done by an agent, whether Syd or Bris, that 8.5% of average rent in Bris may STILL be less than 6.5% of Syd average rents. Since it didn’t apply to me (I was only investing in Bris) I didn’t spend too much time researching it further…..

What is so hard about managing QLD property?

Nothing (???) – see above.

That said, what are people actually paying?

Now you’re talking !! I have heard that Sydney continues to be quite expensive to rent. But I also recall a time – circa 2000 – when landlords in Sydney had to DROP their rents by $100 a week to get tenants, so it is swings and roundabouts. How are median Brisbane rents in comparison?

Do you find agents are prepared to negotiate on the rate?

I found this would happen when it made sense to the agent – e.g. you had a long standing with them, and a trouble-free rental property, and/or multiple properties with them. No-one likes to work for less pay, unless a benefit arrives (e.g. you get to KEEP your business rather than losing a landlord with an “easy rental property”.

And welcome aboard Vik :) I hope you find things to your liking and get to keep on sharing good value ideas with us,
Regards,
Benny

June 14, 2015 - 1:21 pm

Hi 5102,
Sorry to hear what has happened – but then, as you said, this is not as bad as it might have been, so hold tight to that thought.

Original plan was to revalue to purchase 2nd property but I’m just not interested because it just feels too risky and I don’t trust myself to understand the process.

ANYTHING is risky if you haven’t educated yourself ahead of time. Consider getting behind the wheel of a car without learning first HOW to drive….. even if a friend says “You’ll be OK”.

Spend some time here – just read up on a number of threads on a number of different subjects – you will be amazed just how easily you can learn of “good ways and bad” to invest in Real Estate. Steve cites a valuable lesson when he says “Buy a problem, sell a solution”. i.e. Don’t buy new, but instead, buy the “Possibility of extra growth” (the problem). It could be – an old house on a large block that needs to be developed, or it could be rundown, so selling cheaply – it could be MANY differing things. But if YOU can fix whatever needs fixing, then YOU can command the fee for fixing it.

That might sound like “Oh, I couldn’t possibly do THAT” – but look for what you CAN (or COULD) do with Real Estate, and search for a way to claim $$ from it. For some, it may be “Buy and Hold” (knowing that more infrastructure is to be built, and/or more development is to be allowed per block). Or you may know that “Shared homes” are in big demand in an area but no-one is supplying it (and you could!!) Or you might read up on, and meet up with those doing, development of land.

Admittedly I feel pretty silly and foolish listening to very slick guys talking wealth creation lingo. I thought I did my due diligence but I’m probably more risk adverse than I thought. Perhaps the situation is more in my head than reality. But we’re in our 50’s, have teenagers and not a lot of super so this was to be the beginning and I feel like I’m already at the end.

You are only at the end if you choose to be. Your situation could do with some specialised help – an accredited adviser in money matters. e.g. There MAY be good reasons to “cut your losses” with this property in Gladstone – but then, there may be other good reasons to “stick with it”. Someone who is fully aware of your total financial situation (and has nothing to “sell” you except their expertise) would be a useful ally right now.

Get some “second opinions” on what is the best thing to do right now. From the little I know of your circs, you are in a position where you CAN still recover, and quite well. We do hear some really awful stories, where the prognoses are VERY gloomy. I am not so gloomy re you, 5102. Take a deep breath, read a bit more, and start talking to those who can help.

And do consider putting some $$ toward properly educating yourself in whatever money-making scheme you want to try. I well recall an axiom that reads “If you think education is expensive, try ignorance !!”

Thanks in advance… just needed someplace to put it out there to hopefully learn from my mistakes and try to make the best of a difficult situation that isn’t the worst that it could be.

Welcome here, 5102 – I hope the various replies can offer some meaningful and useful thoughts for you.

Check out some of the thoughts in the link below – they might help to steer you to some useful early learnings:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

Regards,
Benny

June 10, 2015 - 1:06 pm

Hi Loukediva,
Well, I finally FOUND the quote in the updated book and had a good look at it. For anyone else looking, this quote is from the later “0-130” book, not the earlier 2003-04 version. It is in Chapter 5 “The Truth about creating Wealth”.

Steve says that –
10% of pre tax earnings go to charity
10% of pre tax earnings go to reducing debt
10% of pre tax earnings go to investing
70% of pre tax earnings for ‘guilt free’ living

When I tried to calculate this all I could see was that there was a -$42,000 difference between our current annual expenses and how much we would have available for ‘guilt free’ living.

Is there someone out there that can explain this to me???? – Loukediva

It appears to me that Steve may have been referring to using pre-tax amounts quite deliberately. Of course, the final “70%” left over would have had all Super, tax, etc taken from it, so the amount available to “live” would certanly not have been 70% of pre-Tax – perhaps only half of that?.

The pages following that quote often refer to “pre-tax” figures in an effort to SHOW just how people can be confused and/or misled by considering their pre-Tax salary as though it were post-Tax income.

On the other hand, one workmate of mine would, on a hot day, turn down an icecream by saying “The price shows $4, but it would be $6 from my pre-tax Income – that is too expensive!” Like Steve, he was looking at the REALITY of his spending in a very different way to many of us.

On page79, Steve says :-
“Do you know the difference between your gross salary (i.e. pre-Tax) and what you receive as cash in your pocket (after-Tax)?
A simple test to determine whether or not you’re on the right side of the lifestyle line is to calculate how much money you’re saving (or using to repay old debts) and then dividing it by your base salary. A great rule of thumb is to put away 10 per cent of your pre-tax pay to draw upon when you’re ready to begin investing.”

Sounds to me like Steve really was meaning “Pre-Tax” back on page 75.

And he got us thinking too, so – “Mission Accomplished?” ;)

Benny

May 31, 2015 - 9:26 am

Hi Cathy,
If the two questions are combined (i.e. was Taree mentioned by MA?) then tread carefully.

I don’t know Taree, but a country town (or a smaller city) can often be WAY cheaper than any of the Capital cities prices, thus they SOUND like a great deal.

To find out (especially if a marketing company is promoting property in the country town) simply check out the local prices via the web, or call a local RE agent. Compare property prices with a similar style to the one quoted by the marketer (e.g. 4bd2ba house, 2br unit, etc.) – there can often be a large discrepancy in pricing (their profit!!).

Do a Search on here for MA in the “Help Needed” forum and I’m sure you will quickly find many posts by others,

Regards,
Benny

May 22, 2015 - 7:59 pm

Hi JSmith,

I see you are a new poster – so a big welcome to you !! And good on you for taking a look at Real Estate to make good use of your windfall. There is a lot to learn, but, as Terryw pointed out, some things you may have heard decades ago :-

Go back and look at a house your parents bought 30 years ago. If they paid $50k for it then it may be worth about $1mil now.

Though I am not sure of any house going up 20 times in value in 30 years, the important point was “Even if no extra principal amount was paid off, the amount actually owing is as tiny as the original amount borrowed”. Thus, is there a need to pay Principal and Interest? What do you think now? Do you agree with Terry?

One thread I would like you to check out actually ties together a number of “new investor” questions, ideas, finance thoughts, etc. Do check it out, along with each link. The Offset account is a real friend when thinking of “paying off” any mortgage.

Here is that link :-
https://www.propertyinvesting.com/forums/general-property/4349450

Benny

May 22, 2015 - 11:39 am

Hi there,

Question> What is the time, Anthony?

Answer> TIME FOR ANOTHER BROKER/ADVISER !!

Good luck with your hunt. Hopefully, some of our MB’s will direct your steps in reply…. Many of them know each other, and would also know “who is in Melbourne”.

Benny

May 22, 2015 - 11:13 am

Hi again, Anthony,

For ongoing costs, they come under 5 main categories :-
Mortgage Interest
Rates, water
Maintenance
Insurance
Administrative – RE costs (if not self-managing) and accountancy.

Purchasing costs are a whole ‘nother ballgame. Costs come out of the woodwork during that time (Stamp Duties, Borrowing Costs, Solicitor fees, Registering title, etc, etc.

Most allow 3% of purchase price to cover most of these. Some of these can be added to the mortgage and paid as extra on your Interest (e.g. LMI) and some can’t. This area is complex, and a chat with a knowledgeable Broker and/or Financial Planner is well worth doing, if you are new to this.

Most MB’s (Brokers) on here would be well equipped to guide your early steps thru the lending, and to explain much of the stuff you need to know re $$ and financing. Most also have their own portfolio of IPs so are very knowledgeable in “all things IP-centric.”

Re them being in Melbourne, I suspect there are some MB’s on here that would be – but, as is mentioned many times, a MB can conduct business across States with the technology available today.

Of course, YOU may want to sit down eyeball to eyeball with a Broker – and that’s fair enough too. Look around at some of the signatures and you will soon notice all of the Brokers, their locations, and their knowledge will be on display too….

Benny

May 22, 2015 - 9:07 am

Hi Inusure,
Welcome to our useful little community. I am glad you made that post, as this is a great example of how many people can get themselves into trouble. You though have been smart and have asked “Is this right?”

i was approached by some “Professional Financial Advisers” who suggested me that I should only buy New Home and Land Package( the one that is building/soon to be finished), and they told me that i can only get positive cash flow by purchasing this type of property.

They are obviously trying to sell you something, and it will likely be over-priced. To my mind, any business who will bend the truth to get you to buy from them is not to be trusted. The comment about “can only get positive cashflow by purchasing this type” is hugely incorrect!

Their explanation is that i can only claim depreciation of buildings and fittings and loan costs through this type of property?

Incorrect !! But a new build WOULD have MORE depreciation available to the investor than an older home (of similar style) would.

I am a bit confused, as i thought that we can claim tax depreciation on any types of properties?

You are CORRECT.

Then they explained that with old/already existed or built properties, we can claim tax depreciation for 5 years max( or 3 years? I cant remember exactly what did they tell me).
I would call that “selective correctness” !! They are speaking the truth – sort of !! They are not completely incorrect, nor completely correct. Capital costs can be claimed for many more years, depending on the build date. Borrowing costs can all be claimed within 5 years. With Depreciation, your choice of Prime Cost or Diminishing Value WILL affect how soon you will stop claiming depreciation. There is SO much to it all – they are sometimes right, and sometimes misleading. Be careful.

What they DON’T tell you is that a second-hand property may well be able to be bought in that area for a lot lower cost, thus making it cashflow positive (or near to it) WITHOUT any Depreciation needed (but still available to you anyway, and can further increase the positive cashflow).

Where you REALLY need to check though, is whether any OTHER NEW property in that area is able to be purchased for a lot less. If that IS the case, RUN A MILE.

Always ask yourself – is this person who is offering me advice going to gain as they direct me to purchasing a specific property?
The more they “turn you away from other options” the more your feet should be itching to RUN !!! Good on you for asking,

Benny

May 19, 2015 - 9:20 pm

Hi all,

and if you have to break a 5 year fixed loan it could be quite expensive.

Just one thing I would suggest is that EVERYBODY who is looking to take on a Fixed Loan (especially 5 years) should KNOW the magnitude of any Break Costs. With IR’s as low as they are, it does appear that a lift in 5 years COULD be on the cards.

So, have a talk with your lender or Broker about “What if I had to Break after 4 years and a. the Variable Rates were still 1% below my Fixed Rate and b. If the Variable Rates had climbed to 1% ABOVE my Fixed Rates.

As a hint – if you BREAK a Fixed Loan and the reigning VARIABLE Rate is LOWER, be prepared to take out a mortgage to pay the Break Cost. How big a Mortgage will depend on the amount you have on the Fixed Loan, and the delta between the Variable and the Fixed Rate

If nothing else, simple BE AWARE just how crippling it could be if things went sour with a Fixed Loan.

DON’T contemplate putting any property on Fixed if you are planning to SELL it – unless you like giving your cash to the Bank….

Caveat Emptor with Fixed Rates !!

Benny

May 16, 2015 - 12:57 pm

Hi Christine,
Just in case it is a help, do take a peek here:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

There is a specific post in that link that tackles the question “Why use IO loans and not P&I loans?”
It may expand on the WHY you should use IO area. Of course, though IO can be beneficial to many, it doesn’t suit ALL.

Enjoy – and I hope it helps to direct your steps,

Benny

May 12, 2015 - 10:41 am

Hi all,
While composing a reply to the age-old question “Is NOW a good time to be buying property?”, a thought struck me, and I went looking for an Article that held the info I was wanting to share. It was about the property “cycle” and the best/worst parts of the cycle to buy or sell.

Instead, I found this one……
https://www.propertyinvesting.com/buy-properties-in-australia/
….. and I liked its completeness around the subject of “a new person wanting to know when they should buy a property” that I decided to add it to this thread.

It is not the one I was originally looking for, but I will add that one’s link below once I do find it.

Much later…. I still haven’t found that graph – the one I was wanting to add shows how the Yield and Price curves are the Inverse of each other. e.g. Yield drops as Price increases, and yields will increase if the price drops or rents increase. Yield as a percentage will go lower, even though rents remain the same, if the Price goes up.

At its most basic, Yield% = Rent per annum X 100 divided by Price (e.g. $15,000 x 100 / $300,000 = 5% )

Now think of it like this – as buyers see that rents have gone up while Prices have not (they may have even dropped), they become drawn toward owning property instead of paying a higher rent. In the reverse situation (rents become relatively cheaper than owning) they don’t buy, thus impacting on prices even more. As time passes, rents rise, and so do yields thus making owning a property more attractive than renting – so prices rise, yields drop, and the cycle continues.

Look to buy when yields are (relatively) high and prices are still (relatively) low. The “Property Clock” offers a much more detailed look at this – buying at the right time in the cycle leads to better gains for you.

Benny

• This reply was modified 9 years, 7 months ago by

May 10, 2015 - 3:53 pm

Hi Minimogul,
I was happy to Log in and see that you still frequent this place (though maybe not so frequently as before??) Anyway, I was very happy to see you here again, and it reminded me of the Introductory Post to my “Big Picture” thread for newer investors.
This quote of yours says it all really !!

I don’t need to move markets, because I am no longer relying on the market to do anything.

If it goes up, great, if it’s flat, doesn’t matter, the profit is in the adding value. if it goes down 10 percent, my profits are affected of course but not so much that it’s not worth doing.

So by doing that you become the master of your own investing destiny and not so much a cork bobbing on the ocean of ‘market movement’ that you can’t control.

Minimogul, I salute you, and thank you for that post. I hope we get to converse more on this board into the future.

Regards,
Benny