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Thanks everyone for your replies and thoughtful comments.
I simply tossed it up as an idea for discussion. I don’t know for sure but I’d suspect the ATO will just lump the entire lot received from the tenant and call that the assessable income, they’re not usually that stupid.
However, I can see other benefits if you do fall under some pre-determined Govt threshold for something.
I’m simply trying a few of the industrial techniques I’ve become accustomed to, and trying to apply them to my residential tenants to bring them up to scratch. I imagine most resi tenants would run a mile if you even dared mention outgoings impost. Gotta explore all the options, this game we play is just about talking to people and agreeing certain courses of actions. I reckon throw a few wobblies into the mix and see what falls out.
Good onya Terryw for sliding the O/G’s onto the tenant. Great negotiating if you didn’t compromise on the nett rental value paid.
As to where I am, definitely not bobbing on the ocean – I get woefully sea sick in the bathtub. Currently enjoying the rarefied dusty, oxygen depleted desert air up here on the rocky steppes of the Yemeni peninsula. Getting back into my Arabic lessons and mixing it up with the AK47 toting bedouins.
Masalama nus shukran. [cowboy2]
There is a cleaning business for sale, 190K + SAV with the owner working 10 hrs/wk and his net is 90K/annum.This might be a way to get a reasonable passive income for the cost of an IP.
Hmmm, with a P/E ratio of 2.1, this business is either a steal, or something is not quite right.
90K p.a. for 520 hrs work is $ 173 / hour nett…after costs….I don’t think so, unless they are scrubbing off the green nuclear waste off Lucas Heights reactors and no-one else wants to get fried.
Methinks the easy money ain’t there…..I’d go the 190K IP and be happy with the $ 173 / week, not hour.
Heya Dr X and Dr Y if he’s also there….
I was also impressed with the storyline and your due diligence in the areas that you are concentrating on.
I’ve never bought or read the API magazine before, but your story inspired me to buy a copy at the airport just as I left the country.
I thought your logic and progression in investing was very sound, along with the realistic values portrayed in your portfolio summary table. Having spent over 3 years in Glenelg during the mid 90’s I have a fair idea of the areas you are investing in.
Compared to the Dutch guy in the other article – whose values were grossly inflated, like 150K appreciation in 3 months on a 280K prop, yours was good to see.
I was expecting to see a short kid with spiky blond hair….oh those avatars really do sway your opinions don’t they !!??
Onwards and upwards…..good luck with your strategies.
Well put shake. My brother-in-law just recently bought a boat and has it penned in a 30 ft bay. All of the bays are completely full and there is a waiting list of about 8 months at this point in time to get one.
If you buy a second hand boat from the guys that operate the marina, they guarantee you one, but it costs him about $ 75 p.w., which he says is great ‘cos he doesn’t have to haul it backwards and forwards all the time and launch and re-launch all the time.
I’ve had a squizz at the economics, and as shake says, as long as it doesn’t constitute a major portion of your portfolio, couldn’t hurt that much.
My love affair with “the dirt” would probably exclude me from investing in them, but if you are scraping around trying to find something that turns a buck – gotta be better than the 2 bed unit in grottsville.
My assumption is, and it seems to be true from the figures coming through, that with the general population becoming wealthier, discretionary spending towards boats seems to be a funnel in which the wealthy are placing some of their play dollars. Housing those play things may be a valid business opportunity.
Legal title and neighbouring pens rights / responsibilities would be a major due diligence point I’d reckon.
Good onya Redwing….a proud achievement in anyone’s language.
Hi Felipe,
We try and go for those properties that exhibit both good histories of capital growth coupled with the ability to more than pay for themselves.
Why not have both ??
Do the beasts that you describe need to be mutually exclusive ??
For research I’d go to the council and also car park space owners.
For purchasing, I’d go to either car park space owners directly or REA’s acting as a go between for the car park space owners.
Yup, I could be wrong about Perth about to slow, but the point is we can only offer opinions coz we don’t really know what will happen.I just spent 20 minutes preparing a detailed reply to your comments JES, but I’m a lot calmer now and don’t feel the desire to anymore. I’ll leave only one comment that I wrote.
Yup, you could very well be wrong.
Och aye it twas me laddy, I must confess !!!! Sometimes I have this urge in property investor meetings to ask everyone if they visit PI.com and if they do, what their psuedonym is. I’ve tried it once before and everyone looked at me as if I had three heads, so won’t be doing that again.
I feel it’s a dreadful shame that some of us are in the same room as one another and we just don’t know it.
After the chinwag, had a very interesting chat with the Branch Managers about TIC expanding out of just new ressy stuff.
Both of them supported the idea, but didn’t have the authority to make a decision. They’ve passed it up the food chain to big Kev over in Qld and he’s supposedly getting back to me. We’ll wait and see.
Could be a wee avenue for me to expand some more in the property circles and give up the day job.
Good onya Simon, at least someone is manning the fort. How was the hols ??
I’ve been out and about for the last three hours with the wife and kids doing due diligence on a big skip bin company…..too busy to be reading spam, although one could argue we were both just checking out a big pile of rubbish.
Yes Redwing,
The intent of the operation is to extract as much equity from the IP as possible so as to pay off as much of your PPoR NTDD as possible.
Example :
1. PPoR bought for 100K (no debt, in wife’s name only)
2. IP bought for 400K (full debt, in husband’s name only)
3. Roll forward 4 years…..PPoR up to 180K, IP up to 650K
4. Move into IP as PPoR.
5. Former PPoR now becomes an IP
6. Husband buys former PPoR from wife for full 180K, taking out a 190K loan, to include stamps.
7. Wife takes 180K funds and dumps it into the new PPoR debt to reduce NTDD as much as possible. Wife pays CGT if applicable.
8. Roll forward another 4 years.
9. Repeat steps 4 thru 7 for the next step up.
10. (This is the best one)…..finally achieve a decent bit of dirt to settle down in your fully paid off PPoR.Hope that clears it up a little. It worked for us, but if we ever sat down and had a chat with the friendly ATO man, the reason of selling would not be the above, but rather a lifestyle change or something else where the intent wasn’t to avoid paying NTDD.
Couldn’t help but ask Derek…..Is that golly ??….as in….golly gosh ??? [biggrin]
HUGE rent, what the property worth in the market ?Hmmm, not so sure about that. The prop is worth ~ 840, but the loan we have on it is only 400. So the increased rent is only just covering that 400 loan plus some of the outgoings.
At 2,800 gross p.c.m., we think the rent is still pitifully low.
As a comparison, I’m looking at a skanky industrial yard right now, listed for 862 and it rents for 7,500 nett p.c.m., with a 5 year lease in place. In our minds, there simply is no comparison. I’d dump the house in a heartbeat if I had my way.
Dazzling what are you doing over Easter ? Bring your spade, boots and bucket !!Hiya Amanda,
Ummm, won’t be in the country unfortunately, so you’ll have to get clones to help muck in for you. I’ve found for really skanky houses, you really can’t go past the steel rake and finish up with a good stiff broom. How do you optimise rubbish management with a job like that. Do you go the skip bin / trailer it yourself to the tip or slowly chip away at in the weekly wheelie bin, or something else ???
This house was listed on Thursday for $125000 not much more than land value. (Land $120, Double Shed $5, House “Free”)
[/quote]Great stuff…..96% land content with a rentable dwelling – nice one. That beats my best of only 93%. See if you can make it cashflow positive and then you’ll be cooking on gas. What time / spend have you allocated to fix it up and what end rent / sale price do you expect when you are finished ??
Yes, we’ve done this three times now.
Target the IP that has the most equity in it. Assume it is in your name only as you might be the highest income earner. Sell it to your partner ( incurring stamps) and use the funds to pay off your PPoR. Your partner simply takes out a loan to purchase the IP. Job done.
Partner has a loan for an IP (tax deductible) and you use the funds to eliminate the PPoR debt. It has worked well for us in the past. Stamp duty payable equated to between 4 and 6 months worth of NTDD on the PPoR, so after this time your strategy sees you in front.
Good luck.
I agree Wylie. Ol’ hb is probably trying to help the only way he knows how. hb wrote in another thread that in 60 years time he’ll be 155, so I can only presume he’s the most up to date whizz bang 95 yr old website surfer in the geriatics division. I’d also prefer to see his experiences detailed on this rather than derision…..apparently he’s not jealous as he’s done it all before.
From our side troyand bec, our PPoR is privately held, as are all our RIPs. It works OK and the threat of litigation is teensy due to the nature of the business…..we are comfortable with the exposure.
With our IIPs, we set up a different company for every purchase and have the company go the trustee for the Discretionary trust which buys the asset. I am the sole director, but unlike GR, we are wrapped up and tied up with so much cross collateralisation it’s not funny. Guarantee’s coming out of our ying yang……wouldn’t dream of trying to sell anything, it’d be an admin nightmare trying to untangle the web. Happy to put up with that to get exposure to the larger deals where we find the sweet spot of both good capital growth in CBD properties and good nett yields where the properties more than pay for themselves (hence why we don’t need Hybrids).
Once again, due to the different nature of the beast with IIPs, it’s marvellous dealing with both General Managers / Operations Directors / Finance Directors etc of large national corporations when you can put at the end of your emails Managing Director etc etc of some two bit company……rather than just “Troy and Bec”. I perceive it to help me when going toe to toe negotiating with the above and their high powered solicitor friends, especially when negotiating / signing Leases etc.
Anyway, this whole carry on – which hb would agree, is advised by accountants and lawyers, for the sole protection against accountants and lawyers ?? I’ve never, by choice, been to court, so can only assume that all of this trust nonsense that the professionals advise us to get actually withstands a full on assault in a court of law. Hopefully I’ll never have to find out. I have my doubts though….and hence simply go through the motions.
As a final point, we’ve also found that even with the best of intentions and thorough research, circumstances within your structure change as time goes by. We’ve paid our reasonable share of stamp duties ‘shuffling the chairs around the deck’, due to different living arrangements / work structures / access to more finance etc, but in the grand scheme of things it’s small fry compared with your overall direction that the group is taking.
Chin up, get something happening and start down the road. I find looking at the smorgasboard menu is very very confusing when you haven’t eaten anything.
I really want to purchase another one but Im worried that I’ll lose my pension.Excellent Derek, those were my thoughts as well when I read the initial post.
My medium term goal would be to acquire enough income producing assets to happily ditch the pension.
I don’t know one successful ‘in control’ person who aspires to receive the pension. The thought of having to sit there cap in hand declaring all of your assets and income to some dis-interested beauracrat (sp??) who then threatens to reduce your pension because you’ve worked hard and had some successes makes absolutely no sense to me whatsoever.
Good luck with your IP journey – unshackle yourself from the Centrelink chains and begin to soar….you are in a great position to do so.
Cheers.
That’s pretty easy to answer – playing and mucking around with the kids.
Every morning for the past 4 days we’ve been playing pool chasey. No-one has slipped and cracked their head yet, and we always have a marvellous time, it’s great to see all the girls gaining strength and co-ordination, with that fire in the eye determination that will serve them well later in life.
We also play heaps on the trampoline, and throwing balls to one another.
Having scruffs on the bed. 3 girls vs Dad…..what a classic !!!
Sweeping out dusty warehouses……geez….that just slipped in there…sorry about that.
The wife walking in like she did today when I was growling at one of our fibreglass boat builder tenants and say “I love having you home in here in Perth….so you can do all of the yukky property jobs and I don’t have to deal with truck drivers and welders.”
I’m also starting to enjoy cleaning up other people’s mess….preferably stuff that has been laying around for 20 or so years……whoops…that also slipped in and shouldn’t be in there.
Did you get the email, or is the vision a bit blurry tonight after the glasses of red ??
Cheers Jen.
when your paying those sort of prices , i wouldn’t have thoughtG’day hb,
I’m assuming those examples you’ve listed are reasonably new and not 60 year old dives. I did say in the long term.
It would be fascinating to take the same amount of money you have quoted and purchased a nice waterfront vacant block of land.
Wind the clock forward 60 years.
Now check the value of the apartments (no matter how many bedrooms) vs the value of the block of land. My money would be on the dirt and I bet the market would think those apartments were indeed irrelevant, and ready for the swinging ball.
Good luck with your strategy.
G’day Lynnette,
You haven’t detailed whether the $ 7.2K p.a. is after tax contribution from your pocket, or simply costs are bigger than rent by 7.2K. If the latter that’s before tax, and so will be 4 or 5K p.a.
Either way, take the after tax bit you need to chip in and divide it by the value of the place. That’ll give you some idea of what it needs to grow by for you to “break even”.
Say the place is worth 100K
7.2 / 100 —> needs to grow by 7.2% just to break even —> dump it and run a mile.
Say the place is worth 700K
7.2 / 700 —> needs to grow by only 1%, everything in excess of that is equity straight onto your ledger. —> Keep it, you’ll make heaps.
This game we play is simply a big numbers game I find.
Good luck whichever way you go.
