Forum Replies Created
So you are talking Off The Plan?
Hi, when calculating whether a property is REALLY cash flow positive I count ALL costs to me. I borrow 105% so calculate that. But even if you haven't borrowed all the money you need to calculate lost earnings.
i.e. You have paid $38,052 out of your pocket (does that include solicitors costs, building reports etc)? This should all be included.
If you had that $38,052 in the bank you would be getting interest on it (say $1500) so you need to deduct that from you "profit".
Then that gives you a TRUE representation of the change in your circumstances from before and after purchase. And that is what makes the difference. How much better or worse off are you if you make the purchase?
Some people pay a big deposit then kid themselves that they are CF+. Numbers don't lie but your interpretation of them can. Good on you for questioning. A lot of people would just go "how great am I" and jump in. LOL
If it was the Northern beaches your thoughts make sense but this is the western suburbs. There are lots of suburbs out west where houses can be built. I don't think people HAVE to live in St Clair for example.
Vent away!! That's property investing. Expect the unexpected.
I'd also offer the tenants (if they haven't asked) some compensation for the inconvenience. Even if it's a bottle of wine and chocolates. Cheap in the long run considering you could have lost a weeks rent. And they will always remember that when things come up in the future.
I have seen some and I think it's a great idea to get people in the door but I don't think it will transfer to sales as when the person arrives at the house it will be a letdown.
I think it's better to pay for staging the house or even to put a few pieces in yourself.
If it's cash flow positive why is serviceability as problem? If it's putting money in your pocket every week the bank shouldn't have a problem.
Or is it only positive on paper? And admittedly the banks usually only count 70% of the rent.
You would have to work out what's fair with the other person. If you are putting up the cash and they are contributing only good will, maybe do an unequal split 80/20? You need to take into account your cash contribution and the fact that you are losing interest that you would have if it remained in the bank. BUT the other person needs something. Even if they have part ownership and get the CG but you get the cash each week? Tricky!!
I would switch to interest only now. Put excess money in an offset if you have one or put it aside for when you buy your new home.
You are better having the current loan high and your new loan low as it's not tax deductible. Also take money from the loan to fund the build (or apply for a new loan) as it's also tax deductible. Do not use any of your own money.
For ease it's better to do it before you move out. Check the tax implications though. If you sign up tenants you will have to inform them of the construction and the fact that they will have other people renting there. That will scare people off which is why it's probably easier to do it before. And yes you will have to offer a lower rent.
Is the $420 what you would get now? Because it will be a bit lower with the granny flat there. Do they have separate yards? Are they going to be metered separately? If not how will the electricity/water bills work?
I think you've missed the boat. Western Sydney has had great growth in the last few years.
Property is very hot out there and things are flying out the door as soon as they hit the market. You'd be hard pressed to get a decent price now.
As regard to growth I think it still has some more growth there. This may be wishful thinking as I'm going to sell a few in the next year or so. But seriously I'm not the only one saying that.
I don't have specific purchasing info on Erskine Park, St Clair or Colyton though. What do you mean by minimal house supply? As in lack of properties to purchase? Yes because they are all being snapped up quickly (mostly by investors it seems). So vacancy rates have risen a bit in Western Sydney in general (but still low by comparison). Rents were climbing in 2010-11 but have stabilized now.
Hi, it needn't take 10 years, although that's a "typical" property cycle so that's what most people look at.
You can beef this up in different ways.
The simple ones being buy and renovate. By doing this you can have increased equity and be CF neutral or positive from day 1. This allows you to buy again straight away. You can just keep buying because your LVR hasn't risen and your out of pocket expenses haven't risen either.
We have done this recently.
Another thing people do is buy new or near new and take advantage of the great depreciation, making your out of pocket expenses lower, thus enabling you to purchase again. The thing that slows people down is buying hugely negatively geared properties. You can only hold so many before the payments get to you.
Or you can have a high paying job and pay down loans. I don't like this if it means forsaking purchasing. I'd rather purchase more, then you have more property to grow. Of course this is in the accumulation phase.
It's a great time to buy while you can live in a shared house and your living expenses (I assume) are lower.
Good luck with your journey.
The thing is, with each purchase you want to make sure it gets you closer to your goal.
We have interest only loans as we were in the accumulation phase. We are going to sell a few now to pay down debts and increase our cashflow as my hubby just retired and I'm following shortly.
Yes but in order to get finance you have to have insurance.
When they ask is it habitable and you say no then that is recorded on the insurance. The bank will see that.
It involves more than just sitting and waiting for rents to rise.
Rather than repeat things that are in many places- Type "Living off equity" into google.
There is lots on it.
Type this into google for lots of Living Off Equity dicussion threads.
site:somersoft.com "LOE" Look for comments by Rixter. He's been doing it for years.
And same to you and everyone.
Looking forward to this year.
For general I base it on ALL purchase costs (eg purchase + stamp duty + buy costs) and rent.
But you need to compare apples with apples. For example a unit may have a higher yield than a house but have high strata fees.
Yield is just a number, which in isolation doesn't mean much.
I'm more interested in the whole picture. Money in/money out. How much will it cost me to hold or in the case of a CF+ property- how much will it put in my pocket.
APWPG wrote:Hi Catalyst, most financial advisors will try and sell you insurance product thats what they know , i only belive in people who have done it themself .Street smart people are the best ones ,and ofcourse later down the track you will need good property servey accountants ,they are hard to find but there are some out there .Yes I totally agree. You stated though that you were disappointed with your accountants property advice, and as I stated they are not supposed to give advice..
I did the financial advisor run around and came to the conclusion that I had wasted many hours of my time with NO benefit.
Now I only listen to those that have what I want. Their strategy may not fit exactly with mine but they made it and have a lot of knowledge.
It took me a while to find a great property savvy accountant. A good accountant is worth their weight in gold. I LOVE tax time (except the paperwork bit). LOL
jmsrachel wrote:$7k for a seminar?? How can they justify the price?That's pretty standard these days.
They give you LOTS of paper- and usually a weekend workshop. Most offer follow up and some mentoring. They do them often as they know that usually only 10% follow through.
I've never paid for a workshop but I've been to a few free ones. From all I've learnt something, some not much though. I've met some great people through them though (some of whom have become friends). Networking is THE key. There are loads of people out there that know something you don't. Many of whom are willing to chat.
Remember- you don't know what you don't know.
Or you could renovate and keep. If done well you will have increased equity and be CF+. Then you are in the perfect position to do the same again and again.
That has been our strategy for the last few years.
Granny flats are all the buzz in western Sydney at the moment. It seems everyone is trying to put a granny flat in their backyard to increase yields. Sometimes it's good, sometimes not. It depends on privacy of the 2 tenants. Sometimes the house rent will drop considerably and be difficult to rent.
If there is privacy for both tenants this is not an issue. As mentioned the price of the granny flat isn't added to the value of the property so you need to take that into account.
Parts of Mt Druitt for example are being gentrified but I think too many granny flats in a small area will have negative affects. To many people together is not a good recipe for increasing a suburbs desirability.
My opinion anyway. .
APWPG wrote:Hi MelbInvestor,I use to be in your shoes few years back ,my accountant told me to buy negative geared properties but he never told me where to buy and how to structure my finances lucky one of my friends reffered me to his Mentor and he told me to buy to buy positively geared properties he even showed me where he was buying and why ,I really thanks this guy otherwise my accountant would have put me in a very steep position . I am happy to recommend this guy but not happy to recommend any accountants advise.
An accountant is not supposed to give financial advice. You need to be a qualified financial advisor for that.
The pushing is over the top but why not just go and have a look. Unless you lack the willpower to not sign you've lost only a few hours of your time and you may gain some valuable insight into areas to purchase in etc. AND you can network with like minded people which could prove beneficial.
Nothing to lose, something to gain I think. Keep your $7K for your first deposit.
The tax department don't look at the actual depreciation schedule. If you have done reno's it would change anyway.
Is it worth getting another one done? I can't see how they would be different. What's different- the amount they are depreciating on different things? because the % depreciated on each item should be the same. Or is it that you are changing from diminishing to flat? You aren't supposed to do that.
