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One goes about it by using either of the following techniques with the owners of the title or titles (much harder if you have more than one) whose land enjoys the benefit of the caveat;
1. Use the ol’ quid pro quo method.
2. Grovel and scrape.
3. Cash inducement.I’ve found techniques 2 & 3 go nowhere. You need some leverage against the people who enjoy the benefit of the caveat.
In our case, we have a height covenant on building heights only so as not to block out their view. However, we have oodles of very large trees that completely block out their view.
Compromise of course is to agree to chop down the trees and, in return, have an elevated caveat whereby we agree to keep everything (buildings / antennae / trees / the lot) below a certain height, but that certain height is raised somewhat – we are looking for an extra 2m from the current height, such that we have the right and ability to build a 2 storey.
The value created by doing this is not actually building the 2 storey and capturing the views, simply having the ‘right’ to do it.
Clear enough ??
Why not pop something on the block, rather than ditch it and buy a house & block ??
1a. The window.
1b. Talk to other tenants in complex. Face to face works for me.2a. It’s possible.
2b. Face to face works for me.3. No.
Hi Chris,
The wife and I were going through this exact thing back in ’95. We decided to buy the residential IP’s first and keep renting. The IP’s were as expensive as we could possibly afford at the time.
In ’98 with two IP’s under our belt, we bought our 3rd house which was a small 3×1 brick and tile house on a decent sized block in a pretty dodgy area. The kids were so small they didn’t really associate too much with the dross in the suburb…so we didn’t care about that.
The PPoR was about 1/3rd the cost of the IP’s, and hence we paid it off real quick.
My biggest tip would be to not hock yourself up with a fairly large non-tax deductible debt on your PPoR. The wife and I decided to be modest with our first PPoR and that made all of the difference. We have friends who bought at the same time, but they bought a snazzy 4×2 with all of the mod cons. They have another 15 years to go to pay their NTDD off.
Economically, this will likely be a massive fork in the road to wealth. Only you and your partner can decide which path you wish to travel down.
My personal experience on the matter is a majority (not all) of young women today get together, have a natter amongst themselves and then want the latest and greatest in a suburb similar to that which they have just left that their parents strove 30 years to achieve.
Originally posted by redwing:Originally posted by Rob_W:And it’s VERY close to the airport, too. Great for when you’re running late for the plane!
Seriously, is this an issue? I looked up what’s available after reading Ausprop’s comment, and the RE seems pretty cheap. Is this because you’re buying the Perth equivalent of the home from ‘The Castle’?
[cap]
Old houses, also a problem area which Bassendean council are trying to rectify by decreasing Homeswest housing..albeit slowly.
REDWING
Seriously, this is not an issue for us at all. We bought an old 3×1 on a decent block of land as our first PPoR right under the flight path (It has a great big red arrow attached to the roof that the pilots all line up with that says “This way –>”). We considered it exactly like ‘The Castle’ and my name is Dazza so that movie was really close to home so to speak.
We’ve had really good growth out of it for the past 7 years (ave. ~ 13.5% compounded p.a.) and thankfully only had to put up with the noise for the first 3 years. I love chatting to the locals out there, they always say you get used to the noise, a bit like beating your head against a brick wall…you don’t even notice it after a while.
It gets a tad scary when those big Antonov planes occassionly land, you can make out the rivets on it’s underbelly as it scoops in real low. Small kids love the excitement however.
Well done Dan on realising part of your dream.
I have to agree however with poor ol’ Ben.
After Mr Carmody and his merry men have had their way with your profits, especially given that contract to contract is less than 12 months, it’ll definitely take the shine off.
I don’t think it’s ever wise to do calculations with properties and put in brackets (forgetting CG). That’s a pretty big item to forget / ignore !!
I would’ve done what Ben suggested, collect the rent and leverage the $ 45 K equity created by your hard work. (The bank doesn’t rip 50% off you like the ATO does).
Each to his own though. It seems the freedom created by losing the meatworks shackles, like most self employed people, is hard to put a true value on.
Good luck…onwards and upwards for your budding new career. Cheers.
Hi dammit and dammit’s dad…
From an earlier post in another thread. Something to mull over…not suitable for everyone.
I reckon two props would be the ideal number.
1. Buy a nice vacant residential block in a nice suburb hopefully with some sort of view for the full $350K and pay cash and get the title deed. No whingeing residential tenants but still get all of the growth…fantastic, and because it’s fully paid off, not missing out on any of the tax benefits.
2. Walk straight into the Bank and slap the residential title deed down as a 20% deposit on a $ 1.4 MM industrial property renting for 10% nett yield.
End result would look something like this ;
1. Land growing = $ 1.75 MM.
2. Cost of borrowing = $ 1.4 MM * 7.25% = $ 101 K p.a.
3. Tenant pay all outgoings on 1.4MM prop.
4. Outgoings on ressy block = maybe $ 6 K p.a.
5. Nett rent from IIP = $ 140 K p.a.Free cashflow in your pocket = $ 140 – 101 – 6 = $ 33 K p.a.
Growth of underlying land ~ 9% average = $ 157 K in first year. Cranks up from there.
Not for everyone, but I’m happy with the technique. For your 350K, you get about 9.4% income and around 45% growth.
What’s the dirt worth ?? The answer to that might solve a few queries, and eliminate a few starters.
It sounds residential, so if you can’t chop it up, and tenants won’t pay you any extra to rent it for the larger land component, it’s a dead duck from my view.
Even if you pick it up for less than land value, it’s going to be woefully cashflow negative. The only thing that’s going to make it viable is future CG.
What has it done for the past 30 years, compounded annually ??
I reckon second hand houses covers everything from a couple of months old that people are flogging off from a new build all the way through to structures that are many centuries old…especially if you are talking about something in say Europe. It pretty much covers almost all buildings, so the standard inspections would apply I’d imagine.
I prefer buying second hand, because I don’t have the patience to haggle and argue with builders, especially as my subject matter knowledge is nowhere near as good as theirs. I mainly concentrate on the dirt – where it is, how big is it, is it flat, access, contamination etc.
Buying second hand allows you time to study the finished product warts and all. It’s been exposed to some or all of the weather elements and hence you can assess how it performs. You can walk through it, listen, observe, feel and get a feel for the structure. You can crawl under, over or through it and have a real good squizz….none of which you can do with yet to be built structures. These walk through 3D computer images are a joke – I laugh and walk away when sales reps try and pull that…must be a successful ploy as they all do it nowadays.
I also like older buildings with say limestone footings from the 40’s era, something that most builders won’t entertain nowadays for a reasonable price. I also like big eaves and verandahs, something tested over time in the harsh Ozzy weather conditions. Whoever invented and sold this concept of these new buildings having no eaves whatsoever needs shooting. How the public fell for that folly and the subsequent A/C capex and much higher opex cost is beyond me. Looks dreadful too.
Everything now for new buildings seems to be really big houses squeezed onto tiny bits of dirt, centred around some TV or cinema room where the occupants sit and stare at passive entertainment, all on skinny little blocks that developers quaintly term “cottage blocks”, that are usually 250sqm in size with frontages as low as 8 or 9m in width, enough for a double garage and a door…that’s it !!! People wonder why everyone is getting so fat and we have so many petty neighbour disputes nowadays. I think if you graphed the average bodily girth vs average width of a housing block, it’d be almost indirectly proportional to a tee. Hey Foundation…do you have that stat up your sleeve ??
Lets stop living in each others pockets, reject the developers notion of “let’s squeeze as many handkerchief blocks out of this development as possible” and get back to living on proper 1/4 acre blocks where a normal family can live without treading on their neighbours toes.
Looking at the trendy trends of single people living alone in apartments US style, I think I am in the minority with my views, which is just how I like it.
I absolutely love old buildings that are cashflow positive. Can’t get enough of them. The rusty old tin sheds I bought are great and the tenants don’t want to go anywhere, having just signed up for a 4 yr term with a 2 yr option hanging off the end of that.
The best thing is these tenants love area for laying their stuff down, and I’ve got plenty of dirt….and boy is that old. Best thing is it needs no renovation cost at all, generates lots of income and continually goes up in value.
With the tenants having just spent $ 45K doing up the place for me before moving in – I think they’ll be there a while.
The +CF old place has certainly been a positive experience for me.
Now if you are talking residential…absolutely, people won’t pay you one cent extra for large blocks and when it comes to the building component, it’s apparently all at the Landlord’s cost and if they don’t like it they just up and shift. A very strange game indeed to play, especially the people playing it out the back of whoop whoop.
Hi Phil,
Yeah, we did the same to the front and backyard of our PPoR. Bloomin’ farmer was in there before we bought it, renting for over 15 years and went completely nuts planting all sorts of things, including monstrous big trees right near the house. I’ve been chipping away at it now for over 12 months, in fits and spurts, and the improvement is massive, yet the cost is very minimal. I think with your PPoR, the time effect is alot lower than say going to an IP and slogging away for a specified time. I sometimes go out and chip away for 20 mins and then go back inside. Hard to place a value on that time.
Other things that would improve for little or no cost would be ;
1. Remove a height restriction caveat – we are looking at $ 600 fees for a 300K jump in value.
2. Tart up the facade.
3. Let your neighbour who wants to put up a dirty big nice fence and is prepared to pay for the lot.
4. Paint.
I think the one that most accurately describes our particular circumstances would be “The Basic”.
Thought I would update the forum…
Fifteen days after writing my initial post, the wife called to say she had received a revised land Tax assessment from the State Revenue Office lumping all of the “jointly owned props” in one pile and hence the Land tax bill went through the roof again….substantiating what Benson above has said.
Well I’ve sat down with my accountant and he dug out the relevant sections of the WA Land Tax Act and we both sat down and had a jolly good peruse.
It appears that the wording is very very unclear when it comes to differing percentages. My accountant contacted one of the Land Tax guru’s in Perth and his comment was “Although I have never been asked this question before, it appears a strong case could be argued either way. The Act certainly isn’t clear cut in this regard.”
Due to the amount of money involved, we have decided to challenge the validity of the Land Tax bill received from the SRO….arguing that the legal ownership of each property is different given the differing percentages, and hence should not be aggregated together. The Act certainly does not preclude this possibility.
Anyway, we’ll throw the dice and take our chances.
any suggestions would be much appreciated.G’day lobochick,
My humble suggestions are the following;
1. Because this is a residential situation, the contract you have with the PM agency isn’t worth the paper it’s written on. The standard contract they make you sign is “not good”, when you are in your situation. There is a reason why the wording is such, and has been tested over many cases and over a long period. You’re going uphill on this one. Their spiel in their brochure about putting their owners concerns first isn’t quite ringing true right about now is it ??
2. Readjust your expectations of what the PM can and does do. It’s your property, all risk and responsibility will always end up in your lap. Most of your problems originate because you are under the assumption that a PM will manage the property. Perhaps you will agree with me that their job title is a misnomer.
3. Next time assume all responsibilities for all of your properties. That way you won’t get disappointed. The buck stops with you…never the PM…despite their beautifully presented brochures and other legally non-binding gumpf and marketing fluff they hand to you to get you to sign up.
Is it worth taking further??Absolutely not. I’ve been down this road to nowhere with residential PM’s. They take no responsibility – you are the investor – you are the one solely at risk…not them.
Would it be possible to post some numbers. Real estate is a numbers only game….without them we are all clueless.
The decision to proceed or not is all within the numbers.
I’m not an accountant but I have read a fair chunk of the Tax Act.
I reckon the answer is no.
The ATO would surely deem all of these things done (whatever they are) to be capital improvements. You cannot repair something back to it’s original state when bought…if you’ve just bought it…hence it ain’t a repair…hence you can’t claim it.
What you can do is pop the expenses into a depreciable schedule and claim it back dribble by dribble.
My thoughts only…don’t act on any of the above.
Hiya willy123,
We’ve got a funky little pad in Guilderton which is right next to a Gabbadah Park….is that getting close ??
Or is there another Gabbadah that I’ve never heard of before ??
suzieq,
Without sounding like a smarty pants, I have no idea where he is located…other than on the end of his mobile phone.
He has done heaps of jobs for us, all over the Perth metro area. I don’t think he discerns between areas. As long as there is a rubbish tip somewhere close, he’ll do the job no problem.
Tell Gary he comes highly recommended from Dazzling….he’ll probably have a good laugh and not have a clue what you are talking about.
After all of thatWell done Abby – good to see you posting…after all of that…I’m absolutely exhausted just reading what you do…I think you should have a lie down and put your feet up…not start all of the property stuff you have going on. Where do you get all of your energy from ??
Fantastic variety on the forums…do we have any politicians in the house ??
Leave all sense and sensibilities at home when you go to an auction. The auctioneer and his agents peppered in the crowd are trying to create a farcical show where you the bidders are their puppets. Upset their routine.
Bid as you see fit….all of this “I’ll take your 10 thousand bids.” is a complete crock – slow it right down, bid in ‘000’s, not 10’s…if you embarrass easily or have a whole bunch of social graces learnt and really care what people think of you, whatever you do don’t go to public auctions and bid.
You’ll spend many many thousands extra just so you don’t commit the mortal sin in your eyes of embarrassing yourself in front of complete and utter strangers….who cares…give it a fling…the worst that can happen is you don’t get it.
Just remember that the auctioneers have all gone to school and learnt every trick in the book and probably have years and years of dealing with ‘difficult’ bidders….your shenanigans will be small fry to them, get stuck into them. It’s a drama and they are trying to create some drama and pent up emotion…defuse the situation and play your own tune, see what happens.
