G’day grossrealisation…mine would be a two step process.

1. Buy a nice vacant residential block in a swisho suburb hopefully with some sort of water views for the full $ 1 MM 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 $ 4 MM industrial property renting for 10% nett yield.

End result would look something like this ;

1. Land growing = $ 5 MM.
2. Cost of borrowing = $ 4 MM * 7.25% = $ 290 K p.a.
3. Tenant pay all outgoings on 4MM prop.
4. Outgoings on ressy block = maybe $ 8 to 10 K p.a.
5. Nett rent from IIP = $ 400 K p.a.

Free cashflow in your pocket = $ 400 – 290 – 10 = $ 100 K p.a.

Growth of underlying land ~ 9% average = $ 450 K in first year. Cranks up from there.

Of course if you don’t have a cool lazy million lying around, tailor the coat to fit the cloth.

None of the above should be viewed as advice…you know the usual drill.

Do you need to get one of those really snazzy hairstyles like the big Don has to graduate ??

Or even better…does it allow you to meet the daughter Ivanka…grrrrr.

Last week I would have answered this definitely manage it yourself….but this week, having palmed off our block of 6 sheds to a PM I would now say it depends on the prop and your personal circumstances.

The things they eventually swayed me over the top were :

1. The PM is extremely dominant in the area and has probably 85% of the entire suburb
2. Father and son team who know everyone in the suburb for the past 35 years.
3. Wife has trouble on her own when I am not here managing 6 tradesmen who are all pretty rough and ready and don’t really like talking to a woman.

I agree with Xenia on being able to attract rents well in excess of what the agents can. Dunno why, but the agent taking over is staggered to read what I have managed to sign them up at.

I’m slowly coming around to the realisation of palming that stuff off and concentrating on the much larger acquisition side of things. Scale and size of your operation once again comes into play.

Good luck with your decision whatever you choose.

Hellman,

Sorry to be pedantic…but a 700% rise in 20 years is actually only 10.2% p.a. compounded.

If it was 35% p.a., it would have gone up 404 times….OK ??

Xenia,

It appears from reading the text that the Senior member of the tribunal found it unjust that the nominal rent from the property was $ 215 p.w., and yet the wrappers were extracting $ 1,700 p.c.m. or thereabouts for the prop…with no prospect of ownership of title, even if the applicant stumbled on repayment # 299.

It also appears that despite having tomes of paperwork on both the property and the wrap contract, the wrapper had not a jot of supportive evidence of the wrappee’s ability to pay.

It looks as if the ol’ maxim of if the yield is too low on a prop, simply zip in there and wrap it doesn’t quite cut the mustard.

Having never been involved with wraps and no intention to chase this trail…my opinion on this matter ain’t worth squat..

I saw at the back of Saturday’s West, that rents in Perth have jumped for 3×1 homes in Perth by 9.7% for the last year.

Which ressy Landlord’s have the gumption to jack up rents by 10% and reckon they’ll be able to keep their tenants ??

Despite living in Perth where we don’t feel down or negative at all over the property performance, the wife and I have decided to tart up the PPoR.

In fact we had a wee chat with an architect today about what to do out the back to zizz it up a bit. Man, those guys are out of the box when it comes to ideas aren’t they ??

We concentrated on three areas ;

1. Tinker with the facade and bring it back from the 1940’s forward about 70 years.
2. Gut the bathrooms and start again.
3. Put up a massive one room extension out the back….I’m talking about a real wow room out the back that is absolutely jaw dropping. Cathedral ceilings, glass type of conservatory thingy about 15m x 12m flowing from the rear of our house all the way out to the pool.

We’ve got a representative from one of the big builders coming on Wednesday to sit down and plan it all through….who knows.

The wife and I are pretty excited about the possibilities…but we haven’t seen any figures with dollars next to them yet…so the enthusiasm will be dampened I am sure when that comes through.

Our current situation is house is worth about 5% of the value of the property….if that.

Block is 1,100 sqm. Current house is 150 sqm.

Council has advised with our zoning (R10) we must have 60% open space, so we can build up to 440 sqm…so something up to 290 sqm extra. Builders have estimated $ 2K per sqm, which sounds a bit high…what do others reckon ??

Phil,

I fail to understand why you were invited to attend / speak to this group ?? If their intention to set up a group was to avoid male guru’s who they supposedly ‘feel’ they generally distrust, why are you in amongst the mix ??

Or is Phil short for Phillis or something.

I can just imagine how long a Men Only club would last for before some screaming banshee crashed through demanding for their right to join.

I agree with some of the things Xenia has written. Let’s all swim in the same pond. Leave the girls only clubs back in kindergarten where it has some merit.

Living in the Middle East where all of these men only and women only organisations flourish, it really is quite puerile when you look at them from afar. They are absolutely petrified of inter-mingling, just in case one of the rumours that grow like wild fire in these environments actually eventuates.

Jenny,

You want to provide your tenants with new carpets and paint (increasing your expenses) and for them receiving this you wish to lower the rent (lowering your revenue) to a tenant who has just signed up a 12 month lease given the original conditions ???

I thought the general premise of business was to lower your costs and increase your revenues. In the instance you describe we seem to be going in the opposite direction….especially given that the items expensed are depreciable…i.e. they will never go up in value ??

Jen, IMHO you really do need to start investing in assets that actually make money for you, both from a cashflow and capital gain perspective. This constant wiping the nose of tenants for their domestic pleasure at your expense really does confound me ??

I believe it depends on the quality of the income stream.

I’ve seen big banks take a variety ;

1. 60% for residential tenants on a rolling monthly lease in a pretty dodgy suburb.
2. 80% for residential tenants on a fixed term 2 year lease in a top flight well to do suburb.
3. 100% for a national company locked into a fixed 5 year industrial lease with a strong track record at the site for the past 10 years.

Banking personnel are usually reasonably accurate in their estimation of the quality of the income stream and set limits accordingly.

My Lender does not take into account tax refunds. Tax refunds don’t impress him that much, as it means on a cashflow basis you’re asset isn’t a real strong performer…they are interested in, and support things that actually make money.