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    Hi Ajay,
    That sounded like a pretty good gross return, until the body corp costs hit. Rates shouldn’t be much more than $2k, so the body corp costs must be $4k? What do you get for that? Is there a security guard, or just electronic gates? Seems way high….

    Re Eagleby, I have always thought of it as a “cul-de-sac area”. That has both plusses and minuses. See, no-one drives through Eagleby to get anywhere else – mostly, you just drive past the entrance as you hammer down the M1. I often drive through Beenleigh for one reason or another, so am more up-to-date with “what’s going on” there – not so Eagleby. Then again, cul-de-sac areas are less troubled by traffic, so that is a plus. And it was originally a low-cost area, so anyone can afford to rent or buy there. Over time, “bad news” fades into oblivion as more people end up buying their homes and tarting them up. Eagleby too is getting better – but it still lacks the infrastructure that Beenleigh has. Also lacks a “drawcard” to bring people in.

    With yields growing, it is in that part of the cycle which leads on to capital growth (at which point yields will plummet – not in $$ terms, but in % terms). How far away is that? Well, first, let’s see where/when Brisbane peaks – hasn’t yet – and then add up to two years. I live in Logan – also a low-cost area – and have seen my place grow 600% in 22 years. Settled back a bit since GFC, but a lot of interest and development starting up now – more good times to come?

    Benny

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    Hi Kurtuk,
    As the others have already said, the “numbers” will tell you.

    My initial thoughts were buying two places at $350k so that I can diversify etc, but this also means I will pay double stamp duty,

    The Stamp Duty subject brings up an important point – first, each State sets its own Stamp Duties. I used Qld figures to get this :-
    Purchasing one IP at $700k – Stamp Duty is $24.5k according to OSR’s calculator.
    Purchasing one IP at $350k – Stamp Duty is $10.7k according to OSR’s calculator.

    So, TWO $350k properties will cost you LESS than one $700k property for Stamp Duty in Qld. Worth knowing, eh? What do these Duties look like in the State you are considering buying?

    And, re “paying double Rates and bills,” you have two Rental Incomes to cover them, and USUALLY at a higher yield than one higher priced property might offer.

    Doing the numbers will have you more confident about your choices. And might contain more pleasant surprises…. :p

    Benny

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    Good thoughts already !! Kudos.

    Though your Title refers to apartments, I’m replying below as though this is shared accommodation in a house – most of these could apply to an apartment too….

    Add to that the numbers may look really good with (say) 4 students paying $160 a week – beauty $640 a week instead of $450 to a family group. But wait – factor in
    a. not all weeks of the year have students staying (subtract the weeks they WON’T be there, or find a stop-gap for those weeks – or lose the rental!!)
    b. extra management with 4 different groups ending tenancies at once (better find four new ones!!) – four bonds, four personalities, four times the chance of people “falling out” (i.e. loss of rental until replaced, but most other students locked in for their year already – so a very limited market).
    c. need to provide furnishings, then repair/replace as required.
    d. any extra compliance issues (check the new housing plan if Brisbane – some changes there).

    So yeah, some opportunity, but certainly some headaches too. Work it through carefully,

    Benny

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    Hi Josh,

    there is a rental guarantee of 470 for the first year,

    That is one amount that you will have paid for in the price, for sure.

    But right now, the BEST thing you can do is to check comparative units in the same area (not in that development) and see whether $470 a week is “about right”.

    If it is way over the mark, that sends you a very loud warning. Just think ahead to “what happens after 12 months?” And, how positively geared would it be if the rental used were the TRUE amount? Hmmmm…..

    Benny

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    Hi tjamuna,

    i am looking to borrow as much as i can without realizing equity ! !

    Does that mean you are looking to take out a Personal Loan then? Or use a credit card? Is there a particular reason you DON’T want to draw on equity?

    Benny

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    Hi Chief,
    Have you got something to share with us? Did you end up investing there yourself? How has it gone? Does Danang still “look” like it did 8 years ago? Do tell,

    Benny

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    Hi Hiiph,
    Welcome to this place. Has your brother also registered with us? There have already been some great answers posted – kudos to the posters *applause*

    I figured your brother might also get some benefit from this link :-

    https://www.propertyinvesting.com/forums/general-property/4349450

    It endeavours to group together a lot of “early learnings” for newer investors (saves a lot of searching). I hope it is of benefit to him,

    Benny

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    Hi PW,
    That link to the Sage property was a good one. I was impressed by a couple of things – the low vacancy rate, and the “look” of the apartment (IF the photo is of an apartment selling for $345k, that is). It appears to be genuine good value.

    Add Mike Matusik’s words, and overall it looks pretty good – almost unbelievable. But then Merrimac is not beach-front, and I don’t know of any “drawcard shopping” or anything else there. It is away from the crazy land prices of Main Beach or similar, so the land can be purchased at a better price, and, when building in blocks of 24, the small land content at a low cost means you are only paying for the construction – almost. What is the land component of a unit? Can’t be much. Could be worth a closer look…

    Benny

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    Hi SAH,

    My main question was about the new unit market? Any thoughts,

    Although Units often have a Gross Rental Yield higher than houses, their Nett Yield is not often positive unless you buy very well. And purchasing OTP is not usually the way that one finds positive yields. I’d be interested to see if these ones are any different – can you share some basic numbers? (price, rent, Body Corp costs, number of units in block)

    CBD’s have a habit of offering many units in bulk, often leading to oversupply and a pullback in rents. Consider too, that many NEW apartments are sold to the overseas market. If for any reason they then need to sell, other overseas investors CAN’T buy them (as they are no longer new, so second-hand sales are into a smaller market.

    I choose to stay away from that area – but if buying at a greatly distressed price it might work out. Give me houses first any day, or units in small boutique blocks if/when price is favourable.

    Benny

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    Hi Hot Stuff,
    As a landlord who was (once) quite unfamiliar with gas hot water, I wasn’t aware of a Pilot light, and would have been the same if I was renting a place for myself. So, I think don’t blame the tenant right off – here’s who I would be asking some hard questions of right now :-

    Property manager calls me and says that the unit will need to be purged by a plumber, that I can’t do it, a plumber needs to.

    Now THERE is one who you would think would be savvy enough about the different ways water can be heated.

    It strikes me he didn’t even ask the tenant the right questions e.g. Mr. Tenant, is any water actually coming out of the Hot tap when you turn it on? If water is flowing, what the hell needs “purging”?

    If the water flowing is not HOT, then it is not being heated – SIMPLE. If electric, check the circuit breaker first, if gas, check the Pilot light !!!! Do you have other Property Management options in your area? I hope so…..

    Benny

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    Hi Wiwin,

    I don’t really understand how people can buy 14 ip in a year’s time.

    Well, not quite 14 in a years time, but Darryl did a pretty impressive job none-the-less. Take a look :-

    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697977

    While you are in that thread too, there are a number of other useful posts and links answering or discussing many of the early questions asked by new investors. Maybe you will learn about things you aren’t even aware of yet. Happy hunting,

    Benny

    • This reply was modified 10 years, 1 month ago by Profile photo of Benny Benny.
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    Hi Derek,

    Is there a way she could keep both properties and take out a new mortgage with any existing equity even though she is no longer working or would the best idea be to sell them both or keep one and sell the other?

    MIL has some good choices there. You don’t say, but is it likely that she owns these two outright? Since she is unable to work, she maybe should look to freeing up cash, either to invest in areas of good return, or to set herself up in a less expensive place, thus leaving some cash available for “whatever is next”.

    I’m not sure she could keep both – that would depend on a whole bunch of other financial things that I don’t know, and couldn’t offer advice on anyway. So let me just throw out an idea or two :-

    1. By selling her PPOR, she can walk away with no CGT to pay, and making (presumably) a whole bunch of cash that could do many things.

    2. If either of her properties were negative geared, she would get no Tax benefit from it as she would not now be drawing a wage and paying Tax.

    3. A quick look at Griffith tells me it could be an interesting proposition. As an example, take a look here :-
    http://www.realestate.com.au/property-house-nsw-griffith-118243251

    Its price seems to be way below Median ( = opportunity? Or caution?) About halfway down the page, you can see that Median Price for a 4bdr in Griffith is $305k. And, Median Rental Yield is 6.1%. Note, these are only “the numbers”, so things like demographics, vacancy rates, infrastructure, population growth/decline are NOT considered. But the numbers say the median 4Bdr brings in $370 a week and costs $305k to buy.

    BUT, that one in the link only costs $175k (seems to be older – could it do with a reno to create equity and a higher rental?) and returns $220 a week which is a 6.3% return. Could it be bought even better, have $$ spent, and be returning 8% perhaps? What if you could spend $10k on it and have a rental uplift of $60 a week (still below median rent even at $280 a week)?

    Back to MIL – how does HER property in Griffith compare with the Median prices shown? Note the Rental Yield differs between 3 Bdr and 4Bdr homes. Check out re.com.au or similar for the other homes that match her place. Is it worth keeping? i.e. Is it below Median, and is it in a desirable area that could command a higher rent? Would a reno benefit it? By investing a few $$ in it, perhaps she could make it hugely positive geared. Perhaps it could even be a candidate for a Wrap !!!

    I know this way of attempting to ascertain the value is way off being accurate – but as an idea, she may find it IS worth keeping the Griffith one, and even buy more (???)

    In her situation though, she should take the time to check out her position with an advisor with whom she can share ALL of her personal information, and who can discuss each possibility with her re “the best way forward financially”.

    Happy number crunching !!

    Benny

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    Hi all,

    First off, let me recommend that you go to the Home page, look on the right side (under Private Messages) and look for the “Strategies Explained” area. The first strategies are “Positive Gearing” and “Negative Gearing”. Have a read of both of those.

    Just today, the forum underwent another transformation – what used to say “Strategies” is now titled “Training Centre”. Open that up, look under “Buying”, and the Negative Gearing articles are right there.

    In case you have trouble though, here is the direct link :-
    https://www.propertyinvesting.com/negative-gearing/

    And, in case it is of interest, here’s the other side of the coin :-
    https://www.propertyinvesting.com/positivecashflow/

    I really like the “new look” and it appears to me that the articles are a bit easier to find. In the Training Centre, some articles appear under several headings (e.g. the Negative Gearing article can be found under “Buying” and/or “Analysing” – a nice touch).

    Benny

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    Jeff,

    do you have any one who you think can assist me on this?

    I know a few RE agents, but none that I know frequent this place. I may mention your question to them next time we meet up – if any of them show interest, I will direct them to this place, and your thread.

    Maybe other members might be able to help,
    Benny

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    Hi JZ,

    I stumbled on this piece about negative gearing, highlighting the pitfalls and misconceptions and will approach this with much more caution.

    It contains really worthwhile information. The main slant though (I believe) was to warn against “those that will try to sell you their new offering by using it to show how little it will cost you after Tax benefits, etc”. As Steve says, negative gearing is incurring a certain loss in hope of a greater capital gain.

    Now, in your situation, with a large income, it CAN work for you. The more important things to consider are the deal itself. If you buy in a low vacancy area (lots of demand), and the property has features that make it a good deal (reno opportunity, possible sub-division, steady growth, infrastructure in place or imminent, advantageous price, etc.

    I watched as Rents in Sydney soared, with renters lining up to “bid up” what they would pay each week – just to get a place. I think that was in the late 90’s. Then only a couple of years later, landlords were having to DROP rents by up to $100 a week just to get someone in. i.e. its a cycle. If you do your research and shop for IPs in the right areas, AND have enough of an Income to ride out the rough times, you will do OK.

    I’ve heard Steve (and others) say buy below Median value – this puts you in a price range that is affordable to most, and perhaps buys a place that can be brought up to a Median value with some work (cosmetic reno?) thus adding Equity.

    Re Units, these are something I would buy only if I bought a whole block. Though they appear to have a higher Gross Return, the Nett gets chewed up with Body Corp fees as well as the other “usual costs”. Also, as you said, what you can do is quite limited without getting the Body Corp involved. But then, I’m sure that others will have a different slant (perhaps a way that does work for them in buying Units)….

    Benny

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    Hi JeffC,
    Welcome as a new member to our site. I hope you are enjoying the information available herein.

    Re your post above, it shows a lot of thought going into the process. A pity you have had no replies, but then I don’t know just how many on here are RE agents (the numbers might be quite small).

    Further to your questions though, I wondered of your reason for asking them…. Is it simply “a need to know” as a new investor? Or are you considering creating something (an App perhaps) that will actually assist a RE agent with some of the “drudge work”, or time-consuming activities. It’s an intriguing list of questions,

    Benny

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    HI again JZ,
    I’ll put my opinions re some of these – hopefully others might put counter-points, leading to a more rounded look at this complex area for you. See what you make of these thoughts :-

    1) From an investing point of view, would you forfeit FHOG for a good opportunity?

    Hmm, define “forfeit” !! If you mean would I NOT use FHOG to buy an IP if it was a good opportunity, I’d say a definite YES. In doing so, I believe (I could be wrong) that the FHOG might still be available to you when wanting to purchase your PPOR later on. Of course, State Govts decide when/if to offer or cancel FHOG – when wanting to buy your PPOR, the current FHOG may not be available – in that case, “forfeit” would apply I guess.

    2) I’m trying to manage a safe-moderate risk profile and looking long term instead of short term and wondering if I should favour yield over growth (hopefully both). Which would allow me to grow my portfolio at a steady rate.

    If a safe path were required, maybe purchasing a PPOR is better for you (as suggested by “theNewGuy” above). Certainly, you appear to have the kind of Income that would allow you to quickly pay down such a purchase, gaining Equity that could then be borrowed against for investing in IPs (and therefore Tax deductible). It also means that a later sale would NOT incur Capital Gains Tax (which, on your Income, would likely be at top marginal rate). So a safe path might be to buy a PPOR, perhaps one that could gain equity from a renovation, then sell when buying another PPOR (also with an Equity gain – another reno?). Some build their wealth in that way, and is (I believe) a very safe, if slower, way to go. The saving of CGT makes a serious difference to your final outcome.

    A moderate way would be to go for positive cashflow IPs, which would earn an extra Income from day one. These are usually found in lower-priced areas (with higher yields). Growth is not usually as high, but can still happen, especially if you “manufacture it” via renos, sub-division, etc. In buying at the lower end, EVERYBODY can afford to buy/rent your place. Other demographics apply though, so don’t just buy anything in that sphere.

    3) Considering I’m trying to keep it safe for now, what are your thoughts on either buying 1 place in the $500K-$600K range in a better area (e.g, inner west Syd)? Or should get 1 or 2 places in the $300K-$350K in a more remote area (e.g, west/south-west Syd)?

    My answer to 2. probably covered that when I mentioned the more moderate path.

    4) What are the cons of getting a 95% loan considering that I will be able to make repayments easily. i.e, Put down 5% cash even though I have enough for 10%-20%. Is it silly to do this?

    Your high Income probably trumps any “cons” of a 95% loan. One major con is the extra burden when Interest Rates rise. With a larger loan, the Rate increase hurts you more than most. But these things can be mitigated – get advice before committing though – by using Fixed Rates and/or Variable, and Offset Accounts.

    On the other hand, the “pros” include the capability of keeping more cash as deposits on more IPs. You could conceivably buy 2 or 3 lower-priced IPs quite quickly. If holding 3 IPs worth $300k each, you have some advantages over one higher-priced IP.

    1. If you lose a tenant for 4 weeks, you lose 33% of your income for that time. With a single IP, you lose 100% of your Income.
    2. Buying 1 higher priced IP might stop you in your tracks while you wait to build more deposits. With lower priced IPs, your funds can buy 2 to start, and perhaps a 3rd very soon after.
    3. Should things turn sour, and you need to liquidate quickly, you can choose to sell just “the worst performing one” – leaving you in better shape afterward. With one IP, you have just one choice, and you might be selling a top-performer.

    There is SO much more to it…. I hope those few thoughts are useful to you for now. Let’s see what others have to say too,

    Benny

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    Hi JZ,
    Welcome to you too – it is good that you have found us, as it sounds like you are well-prepared financially to make a go of IP’s. But first, do have a think about where you want to be, and whether you will need cashflow or Growth to achieve it.

    The “Do I buy a PPOR or an IP?” is one of those early questions, and it would be good to arrive at your own conclusion re this. To get an idea, try Steves Articles, or check out this link :-
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697967

    There are many things to consider and plan, so please don’t set off running – take the time to learn to walk first !! :p

    That link takes you into a thread especially for those starting out, so do check out some of the other posts in it too – much you will learn grasshopper….

    Benny

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    Hi Dean,
    And a big welcome to you into our community. I hope joining up proves to be a life-changing event for you. :)

    I can’t comment on Yale specifically as I don’t know them. But this comment of yours had me smile – it reminded me of me about 25 years ago:-

    To be honest, I had not thought much about IP’s before tonight as I always viewed them as too expensive and too big a risk should it stay vacant for extended periods. What are realistic costs associated with buying an IP? To me, if $60 a week is all it took to buy a $350k IP, everyone would be doing it.

    You will very quickly learn here that there are ways to have IP’s put money IN your pocket each week. And yes, $60 a week is not much to be controlling a $350k property, for sure.

    First off, let me recommend that you go to the Home page, look on the right side (under Private Messages) and look for the “Strategies Explained” area. The first strategies are “Positive Gearing” and “Negative Gearing“. Have a read of both of those.

    The way Yale and many others promote is Negative Gearing. It is a viable and valid choice, especially in Australia, but watch out, as not all companies have your interests at heart when promoting their product.

    Then compare the Positive Gearing option. And then, to help you get up to speed on some “early learnings”, check out this thread:-
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

    That is all for today – we will have a test tomorrow morning….. :p Just kidding – but this can be like a good book – hard to put down…. Enjoy,

    Benny

    • This reply was modified 10 years, 2 months ago by Profile photo of Benny Benny.
    Profile photo of BennyBenny
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    I have used Qld Law Group several times – based in Springwood. Very happy with them.
    http://www.qldlawgroup.com.au/reception.html

    Kirsty is very knowledgeable and decisive – did one for me just a month or so back. Conveyancing charge is $550 which seems to be pretty normal.

    Benny

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