Forum Replies Created
Are you trying to buy a PPoR or an IP?
Because I think it is very hard to make money from land packages. Somebody else is getting the profit for their work. If you want to make money, look for deals that you can improve. Remember Problem + Solution = Profit
It is up to you.
I believe that a building inspection and a valuation is a very cheap investment. For about $250 each you get peace of mind and more importantly avoid real lemons. If you only avoid one $5,000.00 mistake in every 10 houses you are ahead.
The other advantage is that you have some real bargaining power. with a known fault or a low valuation you may negotiate on price with authority. Do not be afraid to show it to the vendor/agent to explain why you are offering less.
Not doing it is saving at the wrong place. I am not sure about the pest inspection. They are a lot more expensive and look for only one specific problem. A good building inspector will often be able to tell you certain telltale signs and he also knows the area. Besides they come with so many exclusions.
I normally make my own inspection, get a valuer in before I make my offer and then send the building inspector in after acceptance of the contract (this also allows me a get out clause)
I have no experience with covenants at all and would advise you to approach some professionals. If you can afford it, you may be able to buy the block, put a nice house that suits you onto it and sell it again. You may kill two birds with one stone (keep the views you want and make some money at the same time).
.Reno and hold is the same strategy as buy and hold. If you can create a cashflow positive property by renovating, you do not need to sell.
The idea of cashflow positive properties is not to need the equity to fund your lifestyle costs, rather use the profits. As Steve said if you have 100 houses that make $20 a week, you have $100,000/year. That’s what financial independence is all about.
In other words if you find a golden goose, it is often better to get an egg a day rather than sell the goose.
This is really sick.
This is about the fourth or fifth scam in the last 24 hours. They are trying to get personal information from unsuspecting members.
All have yahoo e-mails, a similar layout and their credentials cannot be found in google and they try to attract people with really low interest rates.
Daniko I made a couple of comments to your original post:
– If you decide that you want a house rather than a unit, you may look in more rural areas where houses are still cheaper.
– You seem to be concentrating on long term capital gains. While that is fine, the current climate is probably better suited to either finding a cash flow positive property or making money by improving a property. Units often allow for better yields, while you can be more creative with houses. I advise you to read Steve’s latest book, where he gives many hints how to plan and implement a strategy.
– Paying off the morgage as quickly as possible is not necessary the best option. I prefer to have an interest only loan. This allows me to have as much capital as possible for other projects.
– Remember Steve and Dave needed about five years to become financially independent. I do not try to duplicate their success, but I am aiming at 12 years from now.Good luck
This is a very interesting situation.
I am thinking of buying a property on a long settlement (because of subdivision) but renting the property of the owner with the permission to carry out improvements to the property. I then want to sublet the property to a normal tenant. I certainly would put this all in my offer, but according to Dr X I could sublet without this. Will check this with my solicitor early in the new year.
I agree with Terry.
But I definetly recommend to talk to an accountant.
Mine gave me one page of advantages and one of disadvantages.
The main advantages are the possibility of income streaming to stay under the 30% tax and the asset protection.
The main disadvantages are the setting up and running costs as well as the inability to forward losses to the benificiaries. You can only carry them forward to claim against future income.
Also make sure that the trust has been created prior to making an offer on a property, otherwise and/or nominee cannot be used.
My recommendation is further that you make the loan in the trust name and you are only the guarantor. I have not quite gotten the reason behind it, but follow Steve’s advise.
“F.Y.I, my idea of a valuable property is one which is close to all amenities, in an area that has potential for future growth, is below the median house price for that suburb, has good rental demand for that area, is built after 1987, has land content and has a rent return higher than the existing variable rate of interest. As you can guess, this is harder to find right now, but that’s my system”
This is very interesting Marc. Could you please expand on the following points:
Does this mean you look for a property with a annual rent above about $7,500 per $100,000 purchase price?
Why do you want post 1987 houses? So you can depreciate the property or is there another reason.
How do you define potential for future growth?
Why do you want land content?
FYI My benchmarks are not so different:
– Enough land to allow for subdivisions
– And/or needs renovation
– Below median price
– If country town on a major aterial route
– High rental demand
– An area that I believe will grow
– And I ask the real estate agents for slow moving propertiesDoing this I have found two places that I did not get, but am in the process to purchase two others that I believe will do quite nicely.
In my case I have just started a family trust for investment purposes. But because I am the guarantor on the loan, my ABN (which is seven years old is good enough.
Argo it seems to me that your investment properties are cf-, otherwise you would not have a problem to service the debt.
The main advantage to sell the house and rent (not downsize) is that you access 100% of your equity. If you borrow against your house you will only get 80% without MI and 90-95% with MI.
Selling your house and buying a slightly cheaper one will not help you to access extra funds, as they will be swallowed and then some by agent fees, stamp duties, etc, etc. (20% of $200,000 not accessible versus about $27,500 closing cost and $17,500 agent fees)
It will make servicing easier, as you do not have to pay interest on the money ($200,000 less $45,000 costs about $11,500/annum.
I am certainly too attached to our house to consider selling. And I have about $250,000 equity in it to use for investing. Bank’s do not think I can service IP’s, but will give me the money on LoDoc loans.
It only makes it harder to find properties that comply with Steve’s three rules in his 3rd book (Especially the danger money multiplier). But I just found two properties to subdivide that will do nicely.
There are several ways to skin a cat.
Good Luck ftareen and argoTrue, but if you have an ABN to quote you can get a lodoc loan without having to prove your income. The theorie behind that is that self employed people often cannot produce good financials. However I believe there is a two year waiting period applicable.
If you can get a lodoc (and there are lenders giving 80% LVR), you should not require more than one securtiy. That is something I would try to stay away from. It may mean that you have each property with a different lender.
If your partner only shows $30,000 on his tax return I assume he is self employed. That would allow him to get a lodoc loan if he has an ABN. But be careful, as the ATO may start asking questions down the track.
Lodoc loans normally get 80% LVR’s (loan value ratio) at about .5% higher than market interest rates. But you do not need to prove your income to the banks. But you still need to find the 20% deposit plus the closing costs (stamp duty on property and morgage, land broker, building inspection, valuer, morgage registration, title search, adjustment of rates, loan application fee, etc).
Having said all that, be careful. You have currently borrowed more than 90% of your purchase price in a market that is declining. So in spite of all the renovations that you have done, the value of your house may have gone down.
If you look at investing, I suggest you look at reno projects, as your hubby is good with a hammer and screwdriver. I just bought Steve’s reno toolbox and can recommend it.
Bootlace suggest to put the IP idea on hold and improve your financial situation. I totally agree with that. Read Steve’s latest book. It helps you to budget, set goals, etc. Use the next 1-2 years to get more equity behind you and learn as much as you can about investing. Look at lots of properties to get a feeling for the market, identify your niche, etc. Then when you are ready, you get off to a flying start.“The truth was that the vendor would have accepted a lower offer, we knew it and the other agent knew it, however, that information should be kept confidential, not for purchasers to know EVER!!! “
I think there is a fine line between keeping this information confidential and also getting the sale. If the vendor is desparate and somebody is obviously not putting in an offer at the asking price, I do not think it is against the vendors interest to indicate to the buyer that a lower offer may be accepted. There is certainly an art to it. And the agent should only give the buyer information that does not ‘hurt’ the vendor.
In your example enticing an offer of $25,000 below asking price may be a win-win. The buyer thinks he gets a bargain and the vendor still gets $25,000 more that his minimum sale price.
This is were a good agent also knows his market.The easiest way is to just ask the real estate agent, they normally have this in their paperwork. But it is a pretty useless figure. Eg I just looked at a house yesterday that sold for $63,000 back in 1988. So I know that if I buy the property for $180,000 the previous owner made $117,000 less expenses. Good on him.
But running this as a business has many risks associated that you can avoid in a trust. Imagine something goes wrong. If you trade as an individual, you could loose everything, including your personal home.
You do not need to have one partner as an employee in a trust. At the end of the year you can just choose how you want to distribute the profits from the trust to minimize tax. Eg One partner has a job and earns $50,000 and you made $80,000 profit with investing. You can now split the profit $15,000 and $65,000, so that both partners stay under the $70,000 mark and the top marginal rate.Strata Titles are on the way out and have been replaced with community titles. My understanding is that with community titles there is much less shared property (eg you own the roof on your unit and you do not have to coordinate with other owners if you want to reroof).
Normally community titles are used because the council will not allow torrens titles and/or because it is a lot cheaper to provide water, sewer and electricity to the individaul allotments (no need for easements).
It may be possible to change two community titles into two torrens titles, but probably not worthwhile.
The main disadvantage with community titles is that you have to coordinate with other owners similar to a strata group. You cannot make major changes without the approval of the majority.Hi Dave,
you definetly want to talk to your accountant about this one.
My understanding is, that as long as the land sale does not exceed the original buying price, no CGT is payable (as you mentioned, it is defered).
Buying as a trust is a good idea (again consult an accountant), but is not necessary for the CGT. You have to pay CGT on 100% of the profit unless you own it for 12+ month as an individual, partnership or trust. Then you only pay CGT on 50% of gain. A trust will help there further as you can distribute the income (eg between yourself and partner) and cap the tax at 30%. But be careful, the trust must be in place when you sign your contract.Did Steve’s mappers actually have licenses for their bird dogging?
