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I love this post.
There is no ‘educational’ information, but a lot of great stories and attitudes.
Keep it up
All of the above are good points. I know that some councils have rules that residence with more than 5 occupants are classed as bording houses.
So my understanding is that if you have a four or five bedroom house it could be very legal.
Talk to the relevant council and find out. Also talk to the insurance company to ensure that you are covered.
Remember Problem + Solution = Profit
And how do you find good buyer;s agents?
Good question, I have not heard an answer on that one yet. Also where do you find good buyer’s agents?
There are heaps of organisations supplying this for a price.
I know a SA site that provides 10 years of data for free up to 2003: http://www.upmarket.net.au/chart/ChooseChart.asp
The site below provides general statistical data, which is quite useful when assesing different regions.
http://www.abs.gov.au/websitedbs/D3110129.NSF/85255e31005a1918852558ac00697645/8004d570436cf521ca2567cf0006e034!OpenDocumentGood Luck
If you do not feel safe there because of the previous tenants, plus the skill and time that a good real estate agent will invest into your property, I would strongly consider paying the 2.5% for the agent.
To find a good agent you may want to go to some of them as if you were looking for property. You will very quickly get a feel for them. Then ask the good ones for an appraisal on your house.
But if you feel really confident, do what paybac and V8ghia have suggested. And I would always get proper valuation done by a licensed valuer. It will be $250 extremely well spent, as you know what your bottom line is.
Good luck
I would certainly advise you to get it independently inspected (especially if they are friends of yours) after it is finished.
Remember BUYER BEWARE.
Even if something is wrong which the builder has to rectify, a building inspection will save you a lot of hassle down the track after money has exchanged money..
I suggest you make the contract subject to an independent inspection by an expert before settlement..
While generally builders (I am not sure if your friends are licensed builders or just home handymen) have to comply with the Australian Standards, that is no guarantee they will and it is not common procedure for the builder to provide you with a building inspection. In my experience building inspectors normally get called when the s..t hits the fan.
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Richard, what is GR lending?
And did you mean my example is standard practice? Because I understand if I buy a property and build a house, you get finance on land and house price combined. But here I only pay $240,000 for the property, but will get loan on about $400,000 after subdivision plus extra for houses.
Please clarify.
I agree with the above statements.
I have my own business with 12 employees, which gives me a different kind of perks.
I do not intend to give it up, but rather spent my after hour time to build a nice portfolio.
Another point Chris.
If you purchase through a trust, I advise to make the loan in the trust name with you and/or your partner if applicable as guarantors, rather than putting the loan into your name. The banks do not care, but it may affect future loans.
I think you and terry are right, but I give you my current project as an example where I should get finance on valuation, not purchase price:
– Offer made now with 12 month settlement period.
– Subdivide property into 5 parcels over the next year.
– Get new valuation and five loans for existing house and four new parcels with building contracts at 80% LVR.
– My MB wants to get preapproval, but believes there will be no problem.
– Hope this helps.FHOG rules are dependant on the state you live in. EG in SA you have to move into the property within 12 month of purchase and live in it for at least 6 month.
Check out http://www.firsthome.gov.au/ for further information.
I think you need to decide what market you are targeting.
If you are selling to investors, the only inconvenience with having tenants in the property is that you may offer rent reductions. The investors will normally be happy to have an ongoing income and it may even drive up the price (especially if the house has long term tenants),
If you are targenting owner occupiers, you are better off not have strings attached (eg either vacant or on periodic lease). If the tenant is untidy, vacant may be better.
Ultimately it comes down to common sense. Talk to your agent as well, they know the market.
I am from SA and buying in SA.
As far as I can see there a no straight forward cf+ deals around.
But I just found a property in a regional town with 3200m2. It has a 1920’s 4BR house on it which needs some TLC and a stone granny flat which needs a complete internal fitout. I expect to subdivide it into 5 properties, build 3 more houses , keep two of these and sell the others off. Result should be cf+.
I believe that this property has huge potential. Very strong rental demand and I can have a 12 month settlement. Still working on some details.
Try this as an approach:
Buy a cheap house needing TLC on a longish settlement (3 month) with right of early access.
– Do the house up with minimum of expenses and maximum of effect. Their are several strategies to make this successful.
– Get the house valued before settlement to increase the needed funds or onsell it before you even have settled (Make sure your offer was bsgupta and/or nominee).
– A quick example:
Buy house for $150,000
Invest $15,000 in upgrade
House now valued $200,000
Closing Costs $8,000
80% LVR = $160,000
Total cash needed $13,000
[biggrin]It is very important to be sure of your figures, otherwise this can very quickly go pearshaped.
Richard,
this seems to be an issue where you and Steve are miles apart. I am trying to sort through this myself.Steve says at several occasions (especially book 2 pages 114-115) that he believes selling is a very important part of his strategy and he believes that it helped him grow so quickly.
Steve calls it multiplication by division and he list several advantages for it.
Dean Parker in the renovation toolbox has a similar approach. He list 3 approaches:
1. buy, reno and live in
2. buy, reno and rent out
3. buy, reno and sell
He list the danger for no. 1 as overcapitilasation as you are doing it for yourself rather than for profit.
Danger in no.2 is that tenant may not look after your property as you would like him to.
So he prefers no.3 as giving him the most control.Hi Unreal,
while everything Richard says is true, I do not agree with the never sell attitude. Read Steve’s 3rd book where he gives samples and suggestions. He has an exit strategy for each and every property. In my understanding this is twofold.
1. If a property does not perform to his expectations, he gets rid of it.
2. If he had a lot of capital growth (= the yields have gone down), he prefers to ‘divide and conquer’. With this he means he sells the property and tries to find a market where he can get two properties for the same price as this one property. Not only does this allow him to grow faster, increase his cashflow and reduce his vacancy risk, he also likes to show his CG in his tax return as it helps secure future finance.
Steve has outlined this very well in his 2nd book “$1,000,000 in property in one year” on pages 114-115.Give the newbies a chance, they want to learn. [grad]
For me the scams are most annoying. [grrr]
I am happy to answer any question even if it was posted 1,000,000 times before. It is very hard for newbies to go through old topics and try to dig out the gems they need for their current situation. [strum]
I think if you are looking for capital gains, now may not be the best time to enter the market.
I am in the moment looking in regional centres with the aim to renovate and subdivide. I am following the advise from Steve’s third book. He calls it Problem + Solution = Profit. I rather call it unlocking the hidden equity in a property.
By doing that, I believe I can make money in any market. I am currently in the process of making two offers in a small regional centre. Both parties verbally agreed to long settlements (12 month) if I give them their asking price. This way I do not have to pay interest and tie up my capital while I subdivide and they do not have to drop their asking price.
I am now in the process (a bit hard over the holidays) to find out any potential hurdles in subdividing, costs for houses, prices fo similar properties in the area, etc. My intention is to split the block (3200m2 into five community titles) and build 4 more 3BR houses as well as doing up the existing house.
My current budget needs $145,000 of capital input for a gross profit of $118,000 6 month after settlement if I sell all houses. But I intent to keep two houses, which will now be positive cashflow. [biggrin][strum][strum]
Totally agree with Marc.
Also be aware that the market has flattened. Don’t expect the 17.4% to just keep going. I heard of house in Sydney the other day that was bought for about $450,000 a couple of years ago and now had to be sold for !!!$270,000!!!!!!!!!
I think in the current market you are better off looking for something with good returns, rather than looking for capital growth.
If you say you want to borrow 100%, do you mean you borrow 80% LVR (Loan Value Ratio) and fund the other 20% plus closing costs through your own home or do you want to have a higher LVR with MI (Mortgage Insurance).
Also I suspect that the property would be heavily negatively geared.
If you buy something a little bit older, you may be able to do it up (often a coat of paint, some new handles, etc is enough) you may get a lot better value for money.
And if depreciation of the building is very important to you, buy something that is about 15-20 years old. But if the premium for the depreciation is more than the depreciation is worth, there is no gain.
