A sad but common story. The issue is always the same however – that people put their money into investments that they don’t necessarily fully understand, or neglect to look completely into as they’re sold on the returns they’re quoted.
Circa a 6.69% yield, reduced market size (as not a huge amount of owner occupiers would touch something like this) – not that stellar when you can reach similar yields for freestanding properties, or higher in quite a few areas in Australia.
Makes sure the capital growth potential is still there for the property, no point buying into a property with fairly average yields and subpar growth – invest in mediocre properties and get mediocre results.
A lot of clients buy sight unseen interstate – generally they will get a building and pest + get the initial inspection completed by a property manager who can take photos of any hidden issues etc.
I’ve bought properties locally that I haven’t even inspected – depends what you’re really looking for as an investment.
Completely normal – generally where possible it’s best to get any negotiations out of the way before the finance being submitted – to stop any reworks being required.
So long as you have a sufficient deposit and meeting serviceability, it’s not that hard at all if the right lenders are used – one of our clients were just approved for their first homes at age 62 & 60 respectively. Have a chat with a broker who can have an indepth looking into your situation and advise of the options available to you.
Definitely the way to go. One option I’d suggest is revert the soon to be PPOR’s loan to interest only and put the funds in offset instead of paying the PPOR down. That way if you want to buy another PPOR in the future you can just access the offset funds and retain deductibility on the remaining investment debt – much like you’re doing now.
I very much doubt the tenants would even notice the type of HWS used.
A couple years ago I got a call from one of my property managers saying the tenant had organised an electrician to fix their hot water service as it had stopped working and they’d let me know how much the bill was. I was quick to say I would not be paying the bill. Why?
It was a gas hot water service.
Pilot light had blown out – quick fix.
This reply was modified 9 years, 5 months ago by Corey Batt.
It’s been announced – rates for investors will increase 0.47% effective 7 September. Owner occupier rates are being adjusted down – the AMP Pro-Pack can get as low as 4.12% variable to try draw in more business which isn’t investor related.
Great question and always a double edged sword – fundamentally they can both work to your advantage. A PPOR for initial purchase can be used as a future equity base to make future purchases while you try to erode your debt as quickly as possible and increase your equity (renovations?).
The alternative if you can rent for significantly cheaper than the cost of ownership is to buy multiple investments before buying the PPOR – quite a few clients have significant investment portfolio and rent in their desired areas for a fraction of the cost of ownership.
The BDM’s I’ve spoken to from AMP have said they’re looking at consolidating the book to re-enter towards end of the year, so it’s a temporary change. Meanwhile they’ll try to be aggressive in gaining owner occ marketshare.
To correct Richard, there isn’t a 1% increase for the existing loans – only those in progress. Existing will no doubt see increases, speculated to be between 0.27-.49%.
SMSF lending options are certainly restricting in the current environment, with adjustments by many of the major lenders who offer this.
Commercial generally has significantly higher yields than resi, but that’s just due to the higher purchasing constraints meaning the prices aren’t as diluted.
If you had pure cash to place on purchasing property then yes- you might well just go for commercial to maximise your return potential. But realistically most people grow their portfolio incrementally and have minimal deposits/need significant CG to keep the wheels turning.
I generally find that most commercial investors start out with residential and then transition to commercial when their portfolio gives them a springboard to get into the new market – not too many go directly into commercial from day 1.
Very much doubt this is the beginning of rate rises across the board – it’s just ratcheting up of rates for investors as a part of the APRA crack down.
Quite a simple process – be careful to work on your end vals on those sub 300sqm blocks, the market doesn’t take to them as nicely. Sometimes a smaller 2 splitter will result in a higher return on investment as the block size will be above norm at 400sqm+ for a new build and your construction will be cheaper per sqm due to less narrow width requirements.
End of to end you can get it off the ground in 6 months after dealing with council, demo and getting infrastrucure together. From there another 6 months will generally see your constructions completed + all ancillary works finished off.
Just remember that just because Onkaparinga council allows it now, councils do change their rules frequently. There’s been quite a few cases where people have planned to development in x years, only to have the council up the minimum requirements leaving them with a property which can’t be developed at all.
Generally you’re lucky to see a 80% return on capital spent on the GF – they certainly aren’t a capital growth tool.
Be very careful to as I’ve seen a number of approved granny flats valued as too low spec to be considered a seperate dwelling so have been attributed as a $0 value add and any rental income ignored for loan servicing purposes in the future.
Planning policy is pushing for infill to support the growing population in SA, instead of greenfield releases.
With the current councils largely being resistant to broadscale townhouse/apartment development, standard subdivision with villas is the most common option AND simplest – so very easy for the average person to take on.
This low barrier of entry has made the prices push dramatically, even if it means the end subdivision is a loss maker.