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September 23, 2014 - 9:43 pm

Hi Raist,
Good on you for adding your thoughts re Penalty Rates. I can certainly see your point of view there, and agree that this could/would have an effect on many workers. And yes, any change there would directly affect their discretionary income.

On the other side of the coin though, in this 24/7 world we live in, the payment of double and “two and a half times” rates are a WHOPPING uplift that employers must pay, or they just cannot open on some days.

IF these rates were lessened, the employer might well be able to open, and even be able to employ more people. Any lessening of the “average” income (through lessening of those huge penalty rates – e.g. maybe make time-and-a-half the max allowable) would work its way through the system, likely leading to lower costs for many things too (including housing….). More people earning a less amount would help the economy by providing more people with a bit of discretionary income, while lessening the “Centrelink” burden on the Govt. It may also allow small companies to open on days when they currently cant, thus providing more paid days for those who can work them.

The supply/demand curve would be altered – but with more workers, that could lead to an overall better outcome, couldn’t it? It is a huge subject – and there are likely many angles to this debate. Let’s hear some more…..

JMO, (just my opinion), and thanks for putting yours out there too, Raist,

Benny

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September 21, 2014 - 10:41 pm

Hi Snowlionz,

Also, how is land tax calculated? Is it market value of the home minus the cost of replacement of the home or is it calculated differently?

I can only answer for Qld (NSW might be different) – up here, the Land Tax is paid as a percentage of the UCV applied to the land (that is the Unimproved Capital Value – the supposed value of the land if nothing was built on it – found on our Rates Notices).

The more you own, the higher the rate of Land Tax. Also, in Qld, the Land Tax rate is higher for a Company or Trustee than for an individual – $2million of land would cost $21k a year for an individual, but $29.5k for a Trustee.

Check out the NSW Office of State Revenue site for what applies to you,

Benny

September 21, 2014 - 10:16 pm

Hi PS,
As Jamie pointed out in another thread, we are an Australian based forum, and some of the answers given are specifically Australian-centric. However, the comments may hold some clues for you.

Based on the questions, you are obviously quite new to the role. I’d be suggesting you find someone else in your area who is alrady doing it successfully, and learn from them. You might need to cut them in on some commissions as a sweetener, but they may already have all of the answers, and their help will likely speed you on your way and prevent you “doing your dough” on some deals through inexperience.

Good on you for having a go though – I wish you all the best,

Benny.

September 21, 2014 - 7:54 pm

Hi Chris,
THank you for providing that ‘blow by blow” solution to your posted question. JUst tried it for myself, and yep, works beautifully. Well done,

Benny

September 21, 2014 - 7:24 pm

Hi Yuley,
There have been changes made recently that make things better than before. Previously, we could go back or forward just one page at a time, or to first or last page.

The recent change now allows us to move forward or backward up to 4 pages at a time, as well as going to first or last page. So, a big improvement over “what was!”

Benny

September 17, 2014 - 2:45 pm

Hi Ronnie,

So using the same example if I was to put a 20% deposit on a $600,000 property ($120,000) does that mean I have instantly a equity of $120,000 and be able to use it to invest in another property?

You are sort of correct – but wait, there’s more….. :p

To be able to use ALL of that Equity, you would need 100% loan AND extra cash/savings/Equity to cover purchase “costs” of another place.

Consider this – if you source finance on this place that has $120k Equity, and the financier allows a 90% LVR, then they would lend up to $540k (90% of $600k) – but you already owe $480k, so only $60k is USABLE Equity ($540k – $480k = $60k). But if you can get 100% Loan, then yes, $120k is available.

In the “usual world” (Mums and Dads) Equity growth happens over decades. e.g. they bought a place in the 80’s, paid $100k for it at the time. They would have been paying down a loan of $80k, and it would’ve hurt back then. By the 90’s it would likely have doubled (so, $200k) and doubled again by the “naughties”, to $400k. Maybe today it is worth $600k. Thirty years later, they have $520k Equity, plus whatever they have paid off the mortgage (probably the full $80k by that time).

Maybe they chose to utilise some spare equity in the 90’s to buy one investment property? With their $100k house then worth $200k, and needing just a $50k deposit to buy a $250k house, the Equity would be there (after just 10 years). They could have done it again in the 00’s too – as long as they could handle the DSR (Debt Servicibility Ratio) side of things. No problem with LVR (Equity) though.

As an investor though, we endeavour to “manufacture” Equity so that it grows more quickly – a reno, development, distressed buy, change of use, creative investing, etc. If we simply bought and waited, a positive outcome is virtually assured. Endeavouring to increase Equity brings its own reward, but also its own extra risk.

The above is also a good clue for those who “wonder why an Interest Only Loan can ever be a good way to go”. Using the above example, I would be thrilled to owe just $80k on a property worth $600k (I had owned it for 30 years, and had always just paid IO). Money saved by not paying down principal might’ve been buying another one (or two, or twenty) over that 30 year period.

I branched away from your initial question – hope the extra thoughts helped,

Benny

September 17, 2014 - 12:06 am

Hi Deza,
It can drive you nuts – but don’t let it. First off, I’d say to check what you can of their words (e.g. call, or have a friend call, asking questions about “availability of houses for rent” – get as much data as possible, even invite them to post you stuff). What I am thinking is to determine the rental vacancy rate – how many homes available vs their total rental role.

Chcek for values, rents, in that town using Online sources. See how much you can glean from that data. Check out the value of the property (to see if the first agent is having you on re its value). etc, etc Maybe even call the other agents to glean what you can. Ask if they have properties (like yours) available for rent, and how much?

Turn your aggro into action and see where it leads you…. Good luck,

Benny

September 11, 2014 - 7:29 pm

Hi postup,

I’d like to ask what your due diligence involves actually – is that history on the property, depreciation schedule, flood reports, pest inspections, what else?

Those items you list are a good start. Due diligence is all about finding out as much as possible (especially the stuff NOT covered on paper in a contract). So due diligence should be done on finance (all aspects of it), your advisers (if you don’t yet have a trusted team), council planning (in case they propose to resume part of the land you are about to buy – eeek!!), etc, etc.

Write down everything that crosses your mind about this place you are planning to purchase, then consider all aspects of it – think of “all you need to know about it as an owner”. Think of how you could do “due diligence” on each aspect. e.g. is it the right fit for your target market? Is your target market likely to “move” into the future? Will this place still be viable if that were the case?

I think Steve has some kinds of checklists that he created some time back. As I don’t recall them, I don’t know just how detailed these might be, but they are bound to be useful. Or there may be lists already on forum somewhere. They could even be in books…..

Maybe someone in the know can point you to these? I’m struggling….. sorry.

Benny

September 11, 2014 - 7:51 am

Hi bla,
Sounds like a great start – and, in addition to the other worthy replies, have you had a trawl through this thread?

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

It may be one you have seen earlier. I like it because it is not that old – it shows how a young bloke had worked his way up from a small wage to a property millionaire. Enjoy. The pages shown are hard to read, but maybe you can buy a back-issue of the mag to get all of the good oil. Or make of it as much as you can – the numbers particularly are worth investigating,

Benny

September 9, 2014 - 9:56 pm

Hi Glen,
If chasing +ve cashflow, this one isn’t it, surely?

Currently renting for $455
Body Corp is $1500 per quarter
Rates $250 per quarter
Water $200 per quarter

Even without Insurance, Maintenance and any RE fees, the fees shown above are costing $150 a week !! *Eeeekkk!!* That’s one helluva impost right there. Not looking like being +ve geared unless Purchase Price is WAY SOuth of $410k

Benny

September 9, 2014 - 9:42 pm

This has been the loose advice from a few accounting type friends, who believe if you primarily operate as a developer, then you do not pay CGT. I will pay, however, income tax, of which a Company is capped at 30%.

Hi JimBo,
That is how I believe it works too – but then, I am NOT an adviser of any sort, so this is truly just an opinion.

Benny

September 9, 2014 - 9:39 pm

Hi Richard,
Would you expand a little on this please :-

Wouldn’t be buying in Morayfield in a month of Sundays.

Care to share?

Benny

September 9, 2014 - 9:29 pm

Hi Jamie,
Personally – I prefer land. You can do more with it and don’t have to deal/pay for pest body corp fees.

WHen I first read that, I thought “Why you were ONLY buying land?” But I think in hindsight you were referring to buying a house (on its own land) over a unit, yes? (My choice too, BTW).

Benny

September 9, 2014 - 9:21 pm

Hi Phil, and Ches too,

I’m just wondering what are the best resources for finding information about how certain suburbs are trending and changes in the market?
I have heard of Residex, RP Data, SQM, info on realestate.com.au
Or is it best getting in and amongst the areas I am interested talking to agents and going to open houses and so on?

Much will depend on how you decide to proceed – like, if you choose to buy in an area remote from where you are, then Open Houses might naturally be forced OFF the list. I like the idea of becoming an RE agent’s “newest best friend” in your chosen area. Even if remote, much can be done by phone/email (though it would likely be smart to meet up with them when you are “sounding out” your chosen area/suburbs initially to form a relationship).

With the others you mention (Residex etc), I’ve read that some are more up-to-date than others – and some can tell downright untruths (I have noticed median values posted that seem to indicate massive spikes on a Monthly basis – as useful as an ashtray on a motorbike). A median should be a “rolling window” figure over several months so that spikes are minimised, and overall growth becomes more easily noticed, not the spikes.

In the end, IMHO, nothing beats being in touch with an RE Agent who is “living the market”. They will tell you almost instantly of changes as noted by them.

Benny

PS Glad you enjoyed the “big picture” thread !!! :)

September 6, 2014 - 11:37 pm

Hi Jas,
Ah, a depreciation schedule – yes it all makes sense now.

Re growth in Morayfield, I don’t know the area well, but I note there is stacks of land around, and there seems to have been quite a “push” in that area over the last number of years. That could have affected the supply/demand curve of course. Is it still growing? Are new homes selling for more than those from 2 years back? Are there any signs of infrastructure spending that will add value to the place? Any new employers that will need more workers?

We have been through quite a long downturn (GFC would have played some part there) – any upturn rests with that supply/demand curve. And that will differ with each market. If you were to sell in Morayfield, would it realise an amount that would allow you to make your next move? Do you have another market in mind? With Brisbane showing signs of an uplift, Morayfield could be another year or two down the track for any increase – unless there are other drivers for its growth.

It’s crystal ball stuff in many ways, but after a 6 year downturn things may be turning the corner. Let’s see what others have to say about Morayfield,

Benny

September 6, 2014 - 8:07 pm

Hi Phil,

Is the growth potential related to new things coming to the area ie. Schools, shopping, transport?

Anything that increases demand for a property in an area will lead to a lift in price growth. With more demand, supply can’t keep up, so buyers have to pay more to “get in”. So schools, transport etc can certainly have an effect. So too can adding value to YOUR place. e.g. buy a large 2 bedder that can easily be made into a 3 bedder. This will usually lead to an increase in both rental income and growth. Maybe install an air conditioner, or a garage or carport – can have the same result. BUT, all of these depend on the area in which you purchase and the demographic that you are targetting. Or buy a house with a block large enough to be subdivided into the future to add your own growth – or reno the place, or change its purpose, or ……..

With a 95% lend is it still possible to find CF+ properties in the 250-300k range? Or would it have to be negatively geared?

Again, that will depend on the area. In a country town, $300k might be paying too much – these areas are USUALLY positive geared, but can be dependent on just one industry, so be careful…. Outer suburbs of major cities are usually the areas that you can still buy for these prices, and are usually positive geared. Take a look at this link below – it shows what a young bloke did in two years – all positive geared and returning him both positive income and growth (he manufactures some growth with renos too) :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697977

While at the link above, do take a look at other posts in that thread – it was created to cover many of the “early questions”, so read ’em all – either to learn more, or for a refresher !!

I’m am just worried about not being able to find a tenant and then have this massive debt?

Good for you, Phil !! It is sensible to be considering the “What ifs” and addressing as many as possible before buying. Ask RE agents in your “area of interest” how many rentals are on their books, then how many are available today for rent. From that, determine what percentage of their rentals are vacant. 3% is considered “normal” – anything less than 3% is said to be tightening, or tight (around 1.5%). Above 3%, landlords might have to cut rents to get a tenant !!!

Benny

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September 6, 2014 - 7:39 pm

Hi Goosehead,
So much depends on answers to a few more questions :-

If your property is in Melbourne or Sydney and it HASN’T grown, I’d be asking serious questions re “Why not?” This could indicate it is time to part company. But if your property is elsewhere, then “It depends…..”

I am seeing early signs of price rises in Brisbane, and other areas may be yet to move. So where is your place? And just what do you mean by “The property schedule is slowly shrinking…” as I am struggling to understand this.

Add a bit more pertinent info re your property, and let’s see if more answers can come your way,

Benny

September 2, 2014 - 9:51 pm

Hi Frangypani,
Wow – the options don’t look too bright right off the bat…. But the “holiday rental” might be a path worth researching….

Your story could be my own – but my property is in the Gold Coast Hinterland (in the mountains). We were losing steadily until we bit the bullet and made it into Holiday Letting. Now, we are NOT on a beach, but there is a call for pristine environments and fresh mountain air – and COLD weather. Our major letting season is Winter !! Go figure….

Anyway, in a nutshell, our GROSS rental income has virtually doubled from the usual family rental. Of course, there are costs, but they may come nowhere near the $8k you are losing anyway.

Do some research on things like – expected holiday letting income for YOUR area, extra costs (laundry, cleaning), and see whether your Nett Income would increase and by how much. It “might” be worth going that route. To furnish, we used “No Deposit, No Interest for x years” deals to make it habitable quickly, and without digging into our pockets.

What do the numbers say? Share them here – we may be able to assist in that way. And welcome aboard :)

Benny

September 2, 2014 - 6:36 pm

And Stamp Duty on mortgage is a “Borrowing Cost”, so can be reclaimed via Tax relief over (I think) 5 years – along with myriad other borrowing costs.

Anything to do with having the loan happen is a borrowing cost – e.g. application fees, Stamp Duty on many bits and pieces, LMI, mortgagee’s Solicitors fees, searches, etc.

Benny

September 1, 2014 - 10:03 pm

Hi Razoo,
Welcome aboard !! I gather from your wording that you are wanting a highish yield, perhaps in preference to Capital Growth? Or do you hope to have both – maybe forcing Growth via reno, development, etc. There would be many questions that should arise before launching into this – like, what are your goals?

Have you talked with anyone re what would be a good approach, based on your current situation and where you are wanting to head? In the case of your suggested purchase, what would be the demographic you would be chasing (sounds like family, so wanting to be near schools perhaps….) or is there another idea there (e.g. student accom for a higher rental take, but with more management required, etc, etc).

Knowing where you want to head, and why, are an important start to your IP career. DO let us know what you have in mind so we can maybe add some more meaningful answers.

Benny

• This reply was modified 10 years, 7 months ago by