Forum Replies Created
- Originally posted by Ana:
Sorry, I forgot to add that we have 6 weeks for settlement which buys us some time to investigate.
I would have assumed this would have been one of the crucial planks in your due diligence process, well before you signed the offer to purchase.
Finding out rental levels now is like the proverbial bolting horse.
If it’s $ 70 per week…..what will you do ??
Wow, this is all a bit surreal as we have the carpenter and his 3 assistants around our place this morning slapping it up as I write.
Quote was to supply all labour and everything except the top decking timber.
Deck is 9m x 4m.
The quote was for 5K.
The jarrah decking boards were 1.3K.
They started this morning and should be finished this evening after I get home from work.
I figure I’ll get paid buku to do what I do best and let the pro’s earn a bit whilst they do what they do best.
That way I end up with a decent deck for the next 50 or 60 years, and the cost will long be forgotten.
Originally posted by L.A Aussie:A couple of tips though;
1. get the property valued professionally by a valuer first (your bank can provide one) for a few hundred dollars- don’t use an appraisal by a r/e agent to assess the value. Don’t tell the agent what the valuation was. This way you will know what the property is really worth, and you won’t fall victim to the agents’ over-quoting games to get your listing. If the property is the right price it will sell very quickly.
2. don’t tell the agent your bottom line – they will tell the purchasers to offer that much just to get the sale through quicker. In fact, after the valuation; tell the agent not to contact you until the price you stipulate has been met. That way you won’t get ‘conditioning’ phone calls every few days to try to get you to drop the price.
3. tell the agent to pay for any advertising they want to do (they hate that). Basically, your potential purchasers are already out looking, so as long as the property is listed in the agent’s window and on the internet, the buyers will see it. Don’t get sucked into the big advertising campaign that the agent will try to sell you. It is amazing how many agents say “we have a list of potential buyers waiting” then try to get you to spend thousands on ads. what the?
4. if you like to have fun, tell the agent if they try to sell it below a certain figure their commission will be 1% (or none), and above a certain figure the commission will be 2.5%. Put this in the agent’s contract. Or, offer them $5k flat rate whatever the sale price. It is up to you and make sure it is written into the contract how you want.
5. tell the agent what price to list the property for – not a price ‘range’. for example; you want $250k, they may try to advertise it as “$220k plus”. the only offer you will get will be $220k or even worse; $200k by a hopeful investor like me!
If you leave it to them they may try to advertise it as a price well below what you want, which will only attract buyers who can’t afford the property. Then they will try to get you to ‘meet the market’ and drop the price.
6. last of all – give them only 30 or 45 days to sell it with an exclusive listing. They will hate this too and try to get a longer selling period. This will keep them working to sell it. A long selling period allows them to have the property listed with them for longer, and makes their ‘inventory’ look more impressive. But they will lose interest after a month or so if they can’t get you to drop your asking price, and may even use your property as a ‘bait and switch’ to sell another property.
You are probably thinking my opinion of agents is low? Correct! Some are good though, but you want to protect yourself.
For further info on how to handle agents, look up the Neil Jenman website. It is great, and so are his books. they will save you a lot of money.
good luck.Cheers,
Marc.Excellent advice – and if you follow any of these, or heaven forbid a combination or the full set of the above you can be absolutely guaranteed that the Principal of the Agency shall never agree to such slanted conditions on their “standard” listing contract.
Sounds great of course…..but as with all things in real life, to have an agreement usually takes two parties….not one party smugly dictating conditions and the other rolling over like some fluffy puppy dog.
Good luck anyway – have a crack at the “tips” as listed above and see how far you get.
Originally posted by Pizang:This is a request to anyone who thinks they have recently (last 12 months) bought a good +ve c/f property. I would like to get the location and the details so that I know what one looks like and where abouts it is.
I’m sure you would Dan…..but I’d be surprised if anyone is going to go into that much detail.
Our group bought two of them last year, one doing 4.5% gross yield when we bought it, and 12 months later is now doing 10.2% nett. The other was doing 6.5% gross, and we turned it around to be doing 7.5% nett in 4 months.
Both were shocking condition, truly horrible properties that no-one wanted to touch with a barge pole….and believe me, you needed a pretty decent barge pole to touch them.
If you are looking for a nice little 3 bedroom house with white curtains, listed on some REA internet display, and a tenant in place paying 12% gross, enough to pay all of your holding costs and outgoings and still have some left over to pop into your pocket to fund your private lifestyle…..well then you may be looking for a tad bit longer.
Originally posted by bruham:HOW BLOODY STUPID !!!!!
If i owned property in West Aussie it would be on the market at this very minute.
I’m of the opposite opinion to you bruham.
We are keeping all of our stock and just about to buy again, this time something that is worth more than our entire portfolio put together….jumping in boots and all, as usual.
It’s great fun, come in the water’s fine. [biggrin]
No it’s not dead….
But then – is that your dream ?? And…is it a dream or goal ??
I’d go and spread 300K around the accounts to prop them up cashflow-wise for 2 years.
I’d use the other 200K to live off, travelling around Australia with the troops having a whale of a time. I reckon you could see a fair ol’ chunk of Oz in that time frame.
By the time I came back 2 years hence, I’d salivate for a while [specs] over the increase in equity and rock bottom LVR figures that we’d have….and then go get me some of those large boody-delicious chunks of industrial dirt.
It depends on whose goggles you are looking through at the time.
My 10 yr old daughter is a guru at putting DVD’s on and getting all of the knobs and dials just right. Leaves me in her dust. I’m sure the older folks here would relate.
Guru status I think is a very specialised area. I think there is a saying…something like “There is nothing that looks more stupid or acts so incomptently than to take an expert out of his / her area of speciality”. Just think of a fashion model out on a bush safari, more worried about painting her nails than changing the flat tyre…or a remote country farmer thrust into a high rise CBD boardroom situation.
If you know 2% of a subject, and you bump into someone who knows 5%, in your eyes they are a guru. Someone who knows 10% of the subject reckons the same person is a novice…..hence why humans disagree all the time.
This is a “frame of reference question”, as most things in life are.
For me personally, I would consider someone a property guru who is about 2 or 3 steps above me on the ladder of property wealth. Anything above that, and I wouldn’t fully comprehend what it is they know and / or can achieve.
I’m sure I bump into people occassionally who are gurus, but my radar isn’t developed enough to even recognise them as such. This is where life changing opportunities are subtlely presented and we squander them without even realising it.
One of my mates had an easment registered on his land title. It was for a large stormwater drain, that ran along the rear of his property, for the full width of the block and from his back fence to about 3.5m in.
He was told he was not allowed to build any permanent structures over the easement, but was allowed to ;
1. Put up a garden shed (no permanent concrete base….tiles only).
2. Brickpave the area
3. Vegie garden
4. Lawn and other small vegetationThe only things he wasn’t allowed to put there was permanent building structures or plant huge big trees.
He showed me the title deed before purchasing the land and asked for my comments. I said I would never touch any title that was hindered in any way (easements / encumbrances / caveats / height restrictions and a bunch of other stuff) that can permanently handicap your rights as the property owner.
He went against my advice and purchased the place and has been there for over 10 years now with no dramas. The authority has never set foot on the place, but assured him that what he had on there (brickpaving and a vegie patch) would all be returned to “as is” at the authorities expense if they ever did need to go in there and rip up the dirt to gain access to the large stormwater drain.
He’s just sold the place for a tidy profit, so I gather his opinion would be it wasn’t a drama at all, and obviously the new people who bought it off him also didn’t have an issue with it.
Your specific concerns, about placing permanent buildings over some diagonal easement sounds more onerous and restricting than what my mate had to contend with though.
Good luck Frank with your decisions.
We are paying out $300 p/week ($15,600- p/annum) to hold property valued at $1.350kIs it worth paying out $15K+ per annum to hold 3 properties in the current environment?
Only you can answer that one James based on your cashflows. From where I sit, it looks pretty easy. Just compare yourself to the next chap down the road who is renting for $ 300 p.w. (you wouldn’t get a really flash house for that type of rent).
So, he’s sitting there paying that amount enjoying his “lifestyle”, with nothing to do and little responsibility. You on the other hand have heaps of responsibility, controlling $ 1.35 MM worth of dirt.
That dirt needs to go up by 15.6 / 1350 = 1.15% pa. for you to “break even”. Capital gain = negative cash flow.
As I said, from where I am sitting, the decision is simple. If your expectation of capital growth is more than 1.2% p.a. you should hold and reap the benefits of property ownership. This is in essence, how people get wealthy playing this game (i.e. crank the numbers up to a level where even a small appreciation rate pushes you forwards).
Frankly, if you bought in an area that over the next 10 years is expected to produce gains of less than 1.2% p.a., your due diligence methods need sharpening up.
If the portfolio goes up by a pretty measly…..say 4% p.a…..your capital growth is 54K, for an outlay of 15.6K…..not too shabby for a measly 4%. Sit and wait until you score a 15 or 20% year…..you only need one every once in a while for “life changing” numbers to start appearing.
James, I think you are onto a winner and should hold onto your entire portfolio if your cashflows allow it. Remember, the guy across the road can afford to pay his rent and gets nothing. You pay the same amount and get bucket loads back.
Speaking to older, wealthier and more grumpy property investors, once you’ve obtained a sizeable portfolio, apparently the best course of action is “do nothing”. Also take the most staid boring route…..it’s usually the best.
Good luck with your choices.
Thanks F for enunciating your practical plans (theory was fantastic but the translation into practical investing actions is always the tricky bit.
Good luck with your practical choices in investing.
I think I’ll stick with the “property doubles every 7 years” camp, which I know you disagree with vehemently.
Trouble is, over here in Perth that camp has been doing backflips every 3 years, not 7…..and really when you are up to your eyeballs in debt, it only takes 3 years for the mire to be down at shin level again.
Jumping into mire back up to your eyeballs in deeper waters seemed like a good thing to do, as I wrote 2 years ago, glad I did.
G’day persuasionx,
You haven’t given a great deal about your situation, so the answer is going to be as weak as the input data it relies upon.
But anyhooo….
It appears you have a primary decision to make….sell or not sell.
Subsequent to that, if the primary decision is to sell, you have three secondary choices.
Frankly, I don’t like the sound of any of the three choices.
1. Negatively geared SEQ is something I know nothing about, so I’d give it a wide berth.
2. Commercial property with the funds you have to play with is risky at best. You simply don’t have enough money to purchase a decent CIP with decent tenants.
3. The third choice of just sitting on the money doesn’t appeal either.So, given that, I’d revisit your primary decision point….whether or not to sell.
Once selling costs, CGT, purchase costs to jump into something are taken into account, these all constitute a big kick in the pants backwards on the road to wealth.
What data supports your theory that the cap gains are totally spent ?? I was under the impression the commodity prices of what they are digging up in the Isa are going OK.
In terms of record prices, that’s what they were saying about Sydney prices in 1960 when houses were selling for 4,200 pounds. Way too high they said….ridiculously high, record levels, you’d be mad to buy when prices were that high.
Good luck with whatever you choose.
The people writing the stories, typically do not own substantial amounts of real estate and simply run with any old theme and grab an example to illustrate their point. Chuck in a comment or two from “an expert”, preferably one with a swanky title behind their name…..Prof X, or Mr Y Business Dev manager, or Dr Z – CEO of research group K etc….and there you have it….a top notch story.
A 24 yr journo cadet, still living at home with Mummy and Daddy, with not a jot of RE experience, either purchasing or renting manages to grind out a column filler, and then moves straight along to her next assignment of interviewing a little old lady about cat friendly garden designs……Suddenly intelligent, savvy investors worth 100 or 1000x her wealth are suddenly sitting up and taking note of what she has to say or imply because it’s in some widely read newspaper or magazine, debating the pros and cons of the material spewed forth.
Staggering stuff.
Another classic example the other day in the Age I think where the paper’s chief economic writer I think blathered on about nasty landlords chewing up taxpayers dollars whilst claiming negative gearing benefits…..using an us and them approach, implying he didn’t own any property whatsoever. Now how can a chief economic writer have no financial interest in property and expect to be taken seriously ??
Im in abit of debt,If that is true, then simply use a little bit of cash and pay it off.
If it’s affecting other areas of your life, I suspect you have slightly understated the true position.
If this is the case, I’d suggest ;
1. Pretend you are a miserly old bugger and refuse to open up your purse / wallet. Simply do not open it for anyone. No-one. Not anyone. Nada. Go cold turkey. Stop spending.
2. Stop hanging around the crowd you are either trying to impress or who are leading you astray.
If you want it badly enough, you’ll work through this problem and change your habits forever. If not, you’ll probably end up like most people. Ball’s squarely in court. What’ll it be ???
“Pay no deposit….no interest…..no repayments ’til Feb ’08″…….Dazzling is very quickly drowned out by the Harvey Norman jingle….
If we restrict ourselves to 300K, then Perth IMHO is a definite no no.
That’ll get you some 1br flat in Mossie Park at best.
But….if you lift your horizons a tad, then Perth offers some absolute bargains. Scratching through some at the moment…..still looking at stuff with 7 and 8% nett yields after all costs with excellent land content.
But with 300K……forget it.
So here ends my thesis. My point is, things look and work differently under a gold standard than they do under a fiat system. We have only endured some 35 years under fiat, so to project the capital gains from these few decades into perpetuity may be highly detrimental to one’s true wealth.Excellent F,
Now….down to the tin tacks….as I asked previously in one of your posts…..how do you propose to translate this undoubtedly impressive macro-economic knowledge into something tangible such that you (or anyone else reading it) can actually benefit from it.
I’m of the opinion (shout me down if you disagree) one cannot buy the national average of anything to do with any market……you must purchase….because individually we are all so small….small individual parcels of the “market” we choose to invest in, and these, to me at least appear to react differently on a micro level – to that which you speak of on a macro level.
What’s the next step chief ?? Where exactly does one plonk one’s hard earned ??
My Grandmother (rest her soul) used to say….”If you haven’t got anything nice to say about something, don’t say anything at all.”
So, regarding that article….no comment.
Thanks for that blogs, I fear your comment added little to the subject being discussed.
If you must know, since the format on this forum changed, I’ve had quite alot of feedback (especially from elderly folk who’s eyesight isn’t what it used to be) saying they can clearly determine the words against the forum’s background, and the {navy / bold / font 2} combination seems to suit perfectly.
Not all of us are spring chickens.
Anyway….back to the topic….
3 years ago I was here warning that there would be 30% falls in Sydney & melbourne…..I was laughed out of town.What I can’t understand for the life of me, is the amount of people who need or want glorification based on some prediction of what may happen based on their obvious and considerable knowledge.
Whether people warn / predict / analyse / guess ?? / have a gut feel or were told by their rich uncle about some great event or non-event, what does it matter ??
I suppose in the end the people are simply looking for respect / attention.
The other thing I don’t understand, is if someone feels that strongly about something and are sure it (whatever it is) is going to happen, how they never seem to put that “knowledge” to it’s best use and profit from it.
The amount of people I come across who are absolute wizz’s on data and stats and what happened when and who said what and what legislation and the “rules” say can and can’t be done……and yet at the end of the day when all of the dust settles, they haven’t done a single jot when it comes to investing large sums of their own money – put it at risk and come up trumps based on that prediction / knowledge.
They simply stand there with their hands on their hips and say “See, I told you so….”. I cannot see where the benefit is in any of that ??
My brother-in-law is a classic case of this. He can quote dates / rules / laws / what Minister said what / who did what to who and when, and knows more about the property market than I could ever know……..yet……he controls and owns about 7% of what we do.
My sister started to get frustrated with all his knowledge, yet inaction, a couple of weeks back when we last spoke. After a spiel lasting more than 10 minutes (seemed a lot longer sitting through it all) I asked him how he can put his strong opinions to best use and expose his money to risk, such that it will grow based on his underlying philosophies……all of his gusto melted away and it was clear he had no intention whatsoever of following through with any action whatsoever.
If the wife and I fall and stumble with what we are doing, he’ll be the first to jump up and say “I warned you all”. He’s had to bite his tongue now for 12 years, and with good management it might be a few more years yet……
On the other hand, my only prediction is in about 10 years, after he has gathered alot more knowledge and “I told you so” comments on us, he shall own less than 1% of what we do.
People, stop worrying about what people say / predict……and get busy doing !!!!!!!!!!
Hiya Sarah,
Haven’t done one of these for a while, but I’ll have a crack at it for you, with 5 minutes to spare.
Gross Rent………$ 130 p.w. = $ 6,760 p.a.
Gross Yield = 6.76 / 85 = 7.95%Cost to Hold
Shire rates……..600
Water rates…….500
Land Tax………..800 (single ownership)
Insurance………300
Maintenance…..500 ($ 10 a week ain’t much)
Prop Man………..800 (all up with all of their poxy fees)
Total……………..3,500Net yield………..6,760 – 3,500 = 3260 = 3.8%
Compare the nett yield against the interest rate you are paying…probably around 7%.
This place you describe is definitely cashflow negative.
Your interest figure alone is going to be 0.07*0.9*85K = 5.4K
You’ll be needing to dip into your savings pot to the tune of about $ 2,200 per year (5.4K – 3.2K).
For the place to be +CF, you’ve only got 1.3K left for all of your holding costs after interest is taken out. I can never imagine a scenario when all of those residential Owner property costs listed above combined would be less than 1,300 for a house.
Residential outgoings almost always kill the cashflow golden goose. No point trying to palm these off to your prospective tenants, ‘cos # 1 it’s against the law, and # 2 (does there need to be a # 2 ??) the ressy tenants will run a mile before being lumbered with any of those. They rent so they don’t have to pay any of those costs. To pay them, would defeat the purpose of renting, especially when the rent money is coming out of their after tax nett pay.
Good luck with your choices.
