Forum Replies Created
Steve Knight’s book are a good start, especially the 3rd one (0-260+ properties in 7 years), but there are heaps of others.
1. As a rule of thumb you are right about land going up in price.
– Apartments may give you better cashflow.
– Apartments are often strata/community title (you have to deal with others parties and a different set of expenses)
– But an apartment in a good area may go up a lot more than a house in a bad area.
– Houses are often easier to rent out.
– Houses have yards that need looking after.
– I like houses with big yards that allow me to subdivide.
– I also like run down houses for renos, a lot harder in apartments.2. That seems to depend a lot on the area that you are in. There is another current thread about property managing in WA. They charge through the nose.
Look for this thread in help needed:
How to negotiate flat fee for property management? by deedeeLets agree to disagree.
Hi Sue,
I have had lots of dealings with councils in my work and I have learned to avoid them whereever possible.
They want all kinds of totally unnecessary plans and documentation, charge a lot of money and normally do not have a clue.
Ask yourself what could be the worst possible scenario if you do not apply. If you erect an illegal structure they can ask you to tear it down, but this is internal renovations we are talking about.
If you first ask a load of questions and then you do not apply, it will be a lot worse. And my customers have been told that they had to submit apllications, when their are clear guidelines to the contrary. But once have asked the question, you will have a hard time to get out of it.
I just checked out their website. I would be very careful.
The interest payments get added to the principal of the loan.
This means the property is not really cashflow positive. The hope is that the property value will rise quicker than your debt.
Would be interesting to find out if they foreclose if the LVR gets too high as the market does not go up as they predicted.
They work on a 10% growth (doubling every 10 years would be a 7.2% growth).
They also assume that the rents will grow just as fast.
Assuming that rents will only adjust according to the CPI of about 3%/annum you may be out of pocket quite a bit after the first couple of years.Their interest rates are slightly higher than standard products, but not outrages (about .5-1% higher).
In general I believe you would be better off trying to find/create cashflow positive properties.
I don’t want to damm the product totally, but I see a big danger of being based on best case scenarios. And we are currently in a flat market.
Maybe it could be good for somebody who wants short term loans, but I suspect that the DEF’s are quite high
“I’m not sure I would class adding and ensuite as not requiring council approval. Particularly if it is to be connected to Council services such as stormwater and sewerage.”
As long as you do not change the outside walls of the house, I would not go to the council for approval.
This is from the Randwick City Council Website:
“Exempt development is development of a minor nature which may be carried out without consent subject to compliance with specified criteria. Exempt development includes certain:
* non structural internal alterations”So unless you are taking out a load bearing wall, you can do internally whatever you want. And even then I would be more concerned about getting a good solid job done than what the council has to say. They only look at the engineers report.
Oscar, there is no such thing as buying below market value. Whatever you pay IS market value.
I have found one property that was cashflow positive. It was a commercial shed for $235,000 at $1,800 rent per month plus outgoing. But it was only a periodic lease and I was not sure enough that I would attract a new tenant, so I gave it a miss.
I think in the commercial market cashflow positive deals are still available. But there is normally a problem that you have to overcome.That is a tricky one.
I would probably try to buy now. It will be really hard to predict when the market tries to cash in on the new road.
Do some research. What are the vacancy rates now? How high are the rents.
Spend time in the town and talk to lots of people (in cafes, shops, real estate agents, etc, etc). Get a feel if your assesment is on the mark.
See if you can achieve a cashflow positive property.
Good luck
That is a very good point tassie.
Considering the boom in nursing homes, maybe you don’t even have to subdivide, maybe they would love to buy the land off you and all you have to do is move the boundaries.
I would approach them informally. Firstly find out who owns the building and who owns the nursing home (maybe two different parties). Then set up a meeting and explain to them what you want to do.
The problem if you put it into writing (either yourself or your solicitor) is that you are much less flexible. You can always do this later.
Go and see a solicitor to enquire about the different possibilities. But I would probably not involve a solicitor for the contact until you want to set up a contract. Remember you want something from them, and lawyers normally alianate people.
Good point demkel.
Some more hints:
Don’t rush into anything. Talk to lots of people (morgage brokers, accountants, real estate agents, friends, etc, etc).Read books about investing.
Research different areas to determine which may be good for investing.
Look at lots of houses in different areas and how you could make them work.
The more research you do before you start, the better off you will be. But once you got a good foundation, just do it. And remember, the deal of the century comes along about once a month!
To access equity in your own home, you must increase your loan. As you are already over the 80% mark (and I assume you did this recently), you may have trouble accessing more.
If you had the property for a while and the value went up a lot, yes you have to either refinance or increase your morgage with your existing bank. It would definetly be worth the exercise to not only talk to your bank, but try different options. Even so you may have to pay additional fees, you may find a loan with lower interest rates or one that allows you higher LVR.
But be very careful, moast areas are in a flat to down market and you may be over commiting yourself. Your best approach may be debt consolidation and budgeting to get some working capital.
Good Luck
thanks millions, millions
A couple of really good ideas coming through. Here is another one:
– If you know somebody (eg a friend of your parents) that has an IP, they may be willing to give you a rental reference. But be careful that you do not go to the same agents with this reference that you told last week you never rented before.
The key is be creative. Good Luck
There are certainly ways around it. Eg I believe that if you own the trust but your wife (if you have one) rents the house, you are legally not renting and can treat it as an IP.
But I will certainly pay to check with your accountant.
Depreciable Expense means that when you buy an expensive item in a business, you can claim it over several years in your tax return. Eg if you buy a TV for $1,000 and the ATO says that if can be depreciated at 25% you can claim $250 off your income each year.
You can also claim depreciation on your floorcoverings (carpets, vinyl, etc), curtains, light fittings, etc.
Consult the ATO website or your accountant for the correct percentages.
Similar because your flatmates pay $10 extra rent, you can claim at least 2/3 of the internet costs. Same with rates, electricity, water, etc.
Think of every expense that you have in relation of your flat and think if it is related to your income.
The only drawback of this is that you may have to pay CGT on 2/3 of your profit should you sell your house.
If in the end you live in it for some time alone, you may be able to ‘forget’ about the tenants, but legally you have to account a pro rata amount for the time it was an IP.So much to the depreciation issue.
I think you would be well advised to stay in your house. After all you have achieved what we are all looking for, a cashflow positve property. You pay about $7,000 in interest plus perhaps $2000-3000? in rates and expenses.Furthermore you should be able to access about $90,000 in equity from the house. This allows you to look for property around the $350,000. Well done
Rental Yield is calculated yearly rent/purchase price
Rule of thumb is you need 10.4% (weekly rent is 2x purchase price/1000) for positive cashflow.
You will not find many properties that you can buy for positive cashflow these days. Some comercial properties may be, but only because the lease is about to run out or it is a periodic lease.
To create positive cashflow in a property you will have to be creative (renovate, subdivide, find good commercial tenant, etc.)
It is hard work but rewarding. Good luck
If you use a vehicle of over 1 tonne, you can normally deduct 100%.
I would strongly advise you to make a list of all the things you want to do and find a good accountant with knowledge in real estate investing.
Run your ideas past him and get his opinion on the best structure.
Important points to explain to him:
– are you having a buy (,reno) and hold or a buy, improve and sell strategy (the latter means you may be classed as a trader rather than an investor
– is it more important to you to keep costs to a minimum or is asset protection a major consideration.
– is the possibility to stream your income importantGood luck
thanks guys, will look into it
Thanks bootlace, that was what I meant. Appreciate your clarification.
I appreciate your comment wayne. According to my broker I do not have to declare my income, but so far I did not need a lodoc yet. It will be interesting.
Yes, but the agents either follow instructions or have their own criteria.
The idea of going with an older person has a lot of merrit. Sometimes it also helps if you can get somebody (normally mum or dad) as a guarantor.
Where have you been living before? If you shared a house with friends, you may be able to get a reference from them and/or the agent/owner.
Another helpful thing may be to get a reference from your employer. If you have been with them for four years, they should be able to give you a good reference.
The trick is to convince the agent/owner that you are going to be a good tenant. They are afraid that you trash the place, have lots of parties, etc. Like with everything (job, credit, etc.), once you can establish a history it gets a lot easier.
