Forum Replies Created
- We believed the Agents and now we are feeling the pinch.
How many times does that come up? It’s no wonder Agents get a bad name, their interests are never properly aligned with the interests of the owners.
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We all need somewhere to live – but do we all need a CBD apartment?Commercial has a lot of benefits over residential. One main benefit is that the supply of buildings as the asset value goes up is much greater. How many 3 million dollar homes would you want as an investment property. But a 3 million dollar commercial property sounds like a great retirement fund.
There are higher risks with commercial, because they can be harder to rent if they become vacant. This may be reduced somewhat if you are running your own business, but if you grow out of the property, sell the business or the business folds you’ll need to rent the property out pronto.
The banks will mostly only lend 70% on a commercial property (i’m sure there are exceptions) and capital growth on commercial is generally not regarded as being as good as residential. It is slightly more complicated and you’ll need good advisers – but you should have these anyway, right?
However you get long leases with excellent conditions for the owner, virtually zero maintenance costs (what can go wrong with a shed compared to a 3 bedroom two bathroom house and yard) and much better rental return (although not so much at the moment)
Talk it over with your accountant and they may suggest buying the shed in a different legal entity to help with tax planning and in case you decide to sell the business and keep the shed. A lot of people make money buying vacant commercial property, starting a business in them and then selling the business as a going concern, pocketing the money for the business and locking in a tenant on favourable terms at the same time.
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We all need somewhere to live – but do we all need a CBD apartment?Well, the valuation is getting done today. Interestingly though, even though it is costing ME a couple of hundred dollars, the bank won’t tell me the valuation figure. It’s like paying to see a movie and then being told you have to stand in the foyer and listen to people coming out of the theatre to get an idea of what the movie was like.
Anyway I’m pretty sure the banker will tell me a rough ‘guide’ to the value because they have to tell you what the maximum lend will be. Doesn’t take much mathematics to work backwards from there.
I submitted the lease without any extra documentation regarding the taking up of the option, no word yet but I’ll post here on the result.
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We all need somewhere to live – but do we all need a CBD apartment?Just don’t forget that Cairns is in a cyclone zone. You won’t get flood insurance if the water comes from a storm surge. Hasn’t happened in living memory but it can happen. A relative of mine had a house completely wiped from the map in Home Hill. They couldn’t even work out where it had stood before hand. No insurance possible so total loss.
If you’re building is quite old it might not have been built to the latest standards. This particularly applies to early 1970’s and earlier buildings.
Cairns is a good place and growing well. Just don’t forget that North Queensland has a big storm bullseye on it, and this needs to be taken into account. Just ask people in New Orleans if they’d buy in a low lying area again.
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We all need somewhere to live – but do we all need a CBD apartment?Just remember the property market is not the share market and doesn’t move as fast. Just because you are sitting on a loss now doesn’t mean that in twelve months time you will be sitting on a profit.
I bought a unit in 1999 which was bought by the vendor in 1995 . He paid 20% more for it than I did 4 years later (ie, I paid 20% less!). Factor in his holding costs over that period, factor in inflation and you are looking at a 30% loss. This is a desirable unit in a good area.
Slumps caused by oversupply can last for years and years. If you have made a loss perhaps you should think about cutting it and looking to make the moeny back somewhere else. If you hang onto it, it will drain your confidence, your finances, your borrowing capacity and cloud your decision making.
If it is not costing you anything (ie positive cashflow) it’s value to you has nothing to do with the market price. The value to you is then the CCR that you get.
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We all need somewhere to live – but do we all need a CBD apartment?My Dad had a block of self storage units about 10 years ago before they were in vogue. He got a 20%+ yield out of them but the local area is saturated now, and with big money companies moving in the competition is pretty fierce.
I looked at a couple a while back but didn’t go for it. The yield wasn’t high enough, and you couldn’t do anything with them because of the strata title. Better value elsewhere in many cases, unless you can buy a whole block of them, in which case you have control over the land as well as control over the entire management of them.
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We all need somewhere to live – but do we all need a CBD apartment?Fern
As they say in the share market, bottom pickers get their fingers dirty.
If you want to sell, do your sums on realistic outcomes and not hopes and dreams. If the property is costing you money each month (mortgage payments, rates, body corps?, insurance) realistically how much more are you going to get in 12 months time? If you get $10,000 more in 12 months, is it going to cost you $12,000 in holding costs?
If it is a positive geared property, and not costing you anything, why sell?
I’m trying to decide at the moment whether to buy a place or not. Should I buy now, or should I wait for 12 months to see if prices come down further? In the end nobody can predict the future so you have to make your best judgement and go for it.
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We all need somewhere to live – but do we all need a CBD apartment?Well, I’ll go first. When I think about selling, my first thought is….don’t. A dear old friend of mine, weeks before passing away told me that one of his biggest regrets was selling his riverside apartment in Brisbane instead of keeping it. He sold it in the early ’80s before riverside apartments were even ‘the thing’. He could have kept it and built his retirement home, but he sold it preferring not to be a landlord. He had another 15 years to watch the price skyrocket.
Years later, when thinking about selling my first property, I stupidly talked to a real estate agent about it, who (surprise surprise) recommended selling it. The offer came in on the first day it was listed and with dollar signs in front of my eyes I grabbed it. I’ve had 4 years to watch that property more than double in price. Yeah that was through the boom, but booms come along every ten years or so. I had the property for 6 years. I remembered my old friend’s advice but ignored it as ‘old timer thinking’.
If it is a decent property (that’s why you bought it right?) and you can afford to keep it, do so. You’ve only got to go and find another property anyway, plus pay tax, listing fees, potentially lose tenants (who don’t like staying when a place changes owners).
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We all need somewhere to live – but do we all need a CBD apartment?I have an older book by Austin Donnelly called ‘Realistic Real Estate Investing’. It was written in the mid-to-late ’90s I believe.
In it he gives one piece of strong advice :
“Never invest in an unlisted property trust”.
Now I think blanket statements like that are always bad as they fail to take into account individual circumstances, such as the difference between a seasoned professional and a new investor. However, given the target market of the book (people with little real estate investing expertise), I would guess he meant ‘new investors should not invest in unlisted property trusts’.
I believe the reasons were a major collapse of UPT’s in the mid 90’s which most people have forgotten by now. I think this was because of the valuations given on properties underlying the trust were based on very high figures in boom times, and when the values came down the trusts were basically insolvent and most investors (having bought in at the top) lost almost everything.
I’m not trying to give advice on whether to buy or not, but you could flick through the book to get a dose of devil’s advocate. Not sure if it is still on sale though.
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We all need somewhere to live – but do we all need a CBD apartment?Robo
You’re probably right about having to pay commission if you show the property while listed with a particular agent. It would depend on the agreement you had with that agent.
As for listing the house price too low – I fell for that one on my first sale. Initially I was happy to have it sold so quickly. I realised later that if people snapped it up so quickly it was underpriced. One of the most expensive lessons I have ever had.
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We all need somewhere to live – but do we all need a CBD apartment?Steve
All I can say is that you were a glutton for punishment. After owning a similar Queenslander as my first property, with great dreams of ‘reno and profit’, I feel safe to say that older timber houses look lovely, but their owners bank balances do not.
A good job though – it looks very saleable.
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We all need somewhere to live – but do we all need a CBD apartment?“during the week the owner of my PM Agency rang me and said his inlaws are wanting to have a look and are keen, they really like the area and missed out on one over the road and have now sold, but he won’t look at it untill other agents agreement runs out on monday”
> If it were me, I would get the PM to take a look while they are in town. Why can’t he look at it until the other agent’s agreement expires. Can’t you take him to look at it yourself? He doesn’t have to put an offer in until the agreement expires, but surely there is nothing in your listing agreement that says you can’t show people yourself. Your existing agent doesn’t need to know. I may be missing something, but the PM agent will know if it suits at all straight away (even though he is not buying it). You’ll get something to work with before he goes to NZ, and whether or not there is going to be much more mileage in it.
Of course if you live away from the property none of that will work very well.
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We all need somewhere to live – but do we all need a CBD apartment?My Father bought 2 properties in a serviced apartment complex in Brisbane. At first these worked quite well and rented solidly, achieving their projections. But… then the developer sold off the managment rights to a private individual. (look in the weekend papers – there are always management rights for sale). This guy couldn’t manage his way out of a wet paper bag, and he allocated booking to those landlords who ‘treated him the best’. He also was charging high cleaning / laundry fees, but on a surprise inspection was found to be simply washing the sheets in the washing machine in the apartments.
Both units were sold for a small profit, but the lesson is : management will make or break these types of investments, and you as an owner will have no control over who buys the management rights. This lack of control makes the risk factor higher.
(ps my signature is not sour grapes against this as I was personally not involved)
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We all need somewhere to live – but do we all need a CBD apartment?Personally I feel sorry for the sad individual that wrote the piece – how he sees everyone else in the world as ‘greedy’, ‘out for profit’ and nasty landlords ‘holding places empty to drive up rents’. It is indicative of a poor education and no grasp of the world they live in. If they just applied their ‘fixing skills’ to a cheap reno they’d have their own place to live.
I know in the UK they have companies which provide low cost housing to ‘guardians’ – people who legally live in the property but are not ‘tenants’ under the law. This covers everything from houses to warehouses to CBD buildings awaiting demolition. The guardians get basic services, guaranteed time of occupancy and dirt cheap rent. All this to stop squatters getting in because once a squatter is in your house it is as difficult if not more difficult to get them out. I even read of a family living in a squatters home in Islington (same suburb as Tony Blair) for 10 years, establishing legal ownership rights just by squatting for a long time, then selling for £500,000 or so. That’s over a million Aussie dollars.
I haven’t heard of the same things happening in Australia, probably because of less poverty and higher supply of housing.
Back on the topic to getting squatters out – just wait for the latest protest to hit the streets of your capital city. Be it globalisation, G8 meetings, whatever. Drop around to your house and change the locks then – the squatters are almost guaranteed to be protesting at the time!
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We all need somewhere to live – but do we all need a CBD apartment?Just to add my 2 cents…
The ‘GC Corridor’ was where most of the ‘2-tier’ marketing to interstate buyers was done. 10 years ago people bought vast lots of new housing after being flown up from Melbourne and Sydney for ‘free weekends’. High pressure sales and nasty tactics resulted in a lot of people owning RE that has only recently reached its sales price again – before that many were sitting on a $50,000 loss. Why? Because they didn’t know anything about the local market and didn’t get a proper valuation.
The industry has been cleaned up a lot by the QLD govt, but I’m sure it still goes on. I’m not saying don’t buy there, but I am saying do your research and get independent opinions and valuations.
People have short memories but 10 years ago much of this area had estates full of empty homes.
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We all need somewhere to live – but do we all need a CBD apartment?– Regarding the loan affordability question –
I remember going to a seminar that Steve McKnight put on in Brisbane when he was just getting started (predated this forum even). His whole focus back then was getting people to think past negative gearing and onto positive gearing, and the fact that he was buying property all over the place, whereas most people only had 1 or 2.
One guy stood up and asked the question which is appearing in this thread ‘I have already got 4 properties and the bank won’t lend me any more – can you tell me how to fix that?’. Steve’s reply at the time shocked me – he basically said – I can’t tell you how – you’ve got to work it out for yourself. The guy thought that Steve was pretty useless at the time and the dissapointment was obvious. But if you think about it – you need to stop blaming the banks and find a solution to your problem. By blaming the banks you are absolving yourself of responsibility for the predicament. ‘I would have gotten rich if it weren’t for you meddling banks’.
Banks lend on affordability balanced with risk. If you are servicing 4 or 5 mortgages (including your own house), all negatively geared, you are high risk for default on one or more of these. I wouldn’t lend you any money either – and I don’t have shareholders to answer to.
If you go to a private lender they may discount your income situation by concentrating on the cashflow of the property itself – if it can’t pay for itself they might not lend to you either – or charge higher interest.
I read an article (I think it was in API) that if you always buy IP at 10-11% yield, you won’t fall foul of most banks lending criteria. If you buy lots at 4-5% yield, you’ll soon run out of money.
Ask yourself this – how many properties can you afford if they cost you $100 / month. Most people can only afford a couple. How many properties can you afford if they pay you $100 / month. Maybe 130?
I’ll admit there are few positive cashflow properties in todays market. But 5 years ago they were everywhere. It could be a matter of just waiting for the opportunities to arise.
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We all need somewhere to live – but do we all need a CBD apartment?I got married a couple of years ago. At the time I had a few assets and my wife didn’t have any. I spoke to a few friends (some divorced) and they all advocated speaking to a lawyer. First I spoke to my wife (fiance then) and we talked about it. She was happy enough to discuss an agreement and spoke to her sister about her side of it (her sister is a lawyer). She just wanted to do the right thing, and didn’t want to appear as a ‘golddigger’ only interested in money.
I sat down and thought about it – it felt ‘dirty’ to me and I thought undermined trust. If we did split up down the track the money we have made and invested while married (even if it only lasted a couple of years) should greatly outweigh the money I brought to the table when we got married. In that case the original agreement would be virtually worthless, particularly when you start redrawing equity and reinvesting it as a joint couple. I also felt great being able to ‘provide’ when getting married.
So – in my case, I scrapped the idea and jumped in head first with no ‘protection’. I’d rather risk the potential monetary and happiness loss and work towards reducing that risk (ie, working on marriage) than take the definite monetary and trust loss up front. That’s my situation, whereas others who are more established might feel otherwise. Hey, it was a few years back and I’m still happy, and true enough, since we’ve been married the assets under control are double what they were on day 1.
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We all need somewhere to live – but do we all need a CBD apartment?Simple really. Ask the RE agent for a complete copy of the rates notice so you can check the council charges. Ask them for something else as well, such as body corporate meeting minutes or something. Do it while you are in the RE agents office so they don’t have time to doctor the copies.
The rates notice should have the owners name and address on the top of it (depending on how the local council formats the letter, of course).
This will give you the owners name and address – then its a case of getting out the white pages or getting in the car and going door knocking. Be warned though – once the agent has found out you contacted the owner directly, I would expect them to be very unco-operative and you may well scuttle the deal. Tread warily and your best course of action is trying to arrange an inspection while the owner is there – difficult if a rental property though.
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We all need somewhere to live – but do we all need a CBD apartment?GR
Do you mean a rental yield?
The best I have found recently is a 2×2 duplex which yields a ‘fantastic’ (as per ad) yield of 5%. The price was 279,000. As of this morning it was shown as under contract.
Personally, most houses I look at seem to be yielding about 3 %. I’m not sure what long term yields are (don’t know where to find the stats) but I thought a unit should be around 9% and a detached house about 7%. To me this indicates the level of overpricing in the market – either the rents have to go up or the prices have to come down.
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We all need somewhere to live – but do we all need a CBD apartment?
