Forum Replies Created
Hugh,
Absolutely. Wife is all for it..no obstacles from me.
It doesn’t infer we are going to abandon them, but it does mean they’ll be going through a few of the hard knocks to toughen them up a bit. I find the city kids growing up now are complete Nancies and wouldn’t know hard work if it bit them on the bum.
One things for sure, we won’t be molly-coddling them ’til they are 30 still studying for their 3rd PhD.
Might start a thread on it actually.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Couldn’t possibly expand Tom.
This site only encourages fully lawful ‘by the rule book’ techniques.
I suggest if you have trouble, ask your friendly lawyer type to intercede. 10 weeks and alot of cash and stress later, s/he will still be pumping out a flurry of threatening written letters to people who sometimes aren’t literate and throw her/his musings straight in the bin.
“and if you are not completely sure, seek independent legal professional advice”….I think that’s what I’m supposed to say ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hey Wylie,
Our experience has been to choose the eldest and/or most responsible of the occupants and make them sole Lessee. That way we have one point of contact for all official and unofficial communications, and if we find out other people in the property have been playing up, we make the sole Lessee responsible and you achieve a touch of self policing on their part. It’s not perfect, but with the friendly assistance of our tow truck driver contact…most of them play the game.
When the other inhabitants flit in and out, you aren’t burdened with reams of paperwork with fresh leases / bond releases etc.
Our method has not been tested in a court of law, so I’m not saying it’s the only way to go. With the help of our driver keeping things in line, I don’t expect to ever get to the court stage…it has never been worthwhile with the piddling amount of money involved usually with houses and residential tenants.
Essentially we’ve found it boils down to the initial DD you perform on selecting tenants. That outcome would dictate whether having more than one tenant on the lease. As I said earlier, we’ve had problems in the past with “he said / she said / it’s not me / ask them” rubbish. We found it almost…I say almost…disappeared when there is only one person on the lease and they are fully responsible for the conduct and finances in the house. Each to their own I suppose, given different experiences.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Depending on what your background and perspective is, a four year lease could be viewed as too short or way too long. For RIP’s, it is quite long, which is great for you if that’s what you want – which it sounds as if you do.
In terms of particulars, I’d ask the PM to include ;
1. An escalation clause every year of x%, maybe 4 or 5, but at the very minimum CPI…so there is no bickering or arguing. Get it all agreed up front.
2. Include a clause in there that any improvements that wish to make are to remain and are to be owned by you at the end of the lease.
3. Maybe a 2 yr option period tacked on the end, with appropriate market rental review.
4. Get a decent bond…this 4 week residential limit is a joke. Lawfully, if that is all you can ask for, ask for a 2 month rental bank guarantee.
5. Get them to pay in 6 monthly installments in advance.
6. Make sure they sign a direct debit form for the rent.
7. Only have one person as Lessee, don’t accept both mother and daughter on the lease. I’d go with the mother only, otherwise all of this “she said…no…she said” nonsense might start.Make sure the PM does a thorough DD on their application. Are you near a Uni ?? First thought that comes to mind is the daughter has just started a 4 yr Uni course and they want a stable base for that time…
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
KLH,
How many IP’s do you intend putting in the trust ?
We currently set up a new company and new trust for each property so they aren’t linked in any way. We don’t want one clown in one property affecting or getting access to equity in another property. This whole convaluted process is surely about asset protection and covering your assets from greedy litigation attempts. The more protective layers between your bum and the snarling dogs the better I reckon…as does my accountant and solicitor.
Of course, if you are buying 50K flats with little equity and the like, this approach is pretty pointless. My suggestion would be to use strategies that are appropriate for your current position…big tools for little things aren’t effective.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
If you consider your time extremely valuable, just pick up the phone and let everyone else do the work for you.
If you consider your time to be not so valuable, be a TA for most of your pro help with jobs you can’t do, and be busy yourself co-ordinating the materials / cleaning up and preparing the work site and if you have spare time on your hands, fill it up by enhancing the garden both front and back. This is how we approached reno’s for RIP’s in the early days and it worked fine.
We drew up a big A3 sheet and split the house up into different rooms, plus front and rear garden and had an itemised list for each room / area of all the different jobs needed to complete that room – along with timeframe and who was going to do it, along with estimated cost. Every time we sat down for a cuppa and something to scoff (that activity seemed to take up an enormous amount of time), we’d diligently pull out the sheet and with a great sense of satisfaction rule off with a yellow highlighter the completed tasks from the prior session. Kept you motivated during the hard slog, when it all seemed a bit overwhelming with no end in sight.
Oh, and one more thing, get the biggest person in the house to jump down on the bin contents just before the rubbish truck arrives so you can cram in a few more things. We made a game of this with the kids, they thought it hilarious with dad being Oscar the grouch. If you get cheeky, you can also set up prior arrangements with your neighbours to do the same with theirs if they have some spare capacity. We found skip bins to be relatively expensive.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hiya E Nelson,
We were in your situation about 8 years ago. Bought our PPOR for cash ( to eliminate our NTDD) in a really dodgy suburb surrounded by dross.
We made a serious commitment, despite opposition from family and friends to just get out of there, to hang in there for 3 years so we could transfer the increased equity into another PPOR in a much better nice family area that the wife approved of.
Our girls at that stage were just small, so not alot of interaction was had with the dross. As the eldest got to an age where interaction with very average people was occurring, we made the decision to enrol her in a school where she was associating with normal kids with great parents.
The cost of travel was miniscule compared with all of the selling costs. We kept the house and turned it into an IP by me buying it off the wife (she owned it 100%) and transferring the equity without having to sell.
End result, no selling costs, no loss of growth on the prop – it’s gone up heaps, able to lean against it as security, and most importantly from your perspective, upgraded lifestyle to a better area.
Had a laugh over your husband in his Jam Jams. [biggrin] Not owning a pair, not sure what I’d do about the hoons, but in Canberra I’d suspect you’d need to rug up a bit more.
Out of interest, were you aware of the hoons prior to purchase, and if so, did you get it for a discount as a result. If you did get it cheaply because of the location, you are now simply paying your dues with the inconvenience, if not, you simply ripped yourself off by not doing sufficient DD.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hmmmm,
This one will take a lot of thought to get to the bottom of. OK, from where I sit here, the only hard fact is the following ;
You had a formal lease between Lessor and Lessee which has since expired in May.
As with all business situations with CIP’s, it depends on what is exactly written in the lease.
Specific questions that comes to mind are ;
1. Was there an option period associated with the lease ??
2. What was the notice period to renew lease – 3 months ??
3. What transpired – if anything – during the notice period. You’ll be kicking yourself if no formal paperwork was exchanged.
4. What does the lease say about the Lessee adding improvements to the building, if your lease doesn’t have a clause in their stating explicitly all the improvements remain with the property – you’re hooped.
5. I presume it has rolled over since May onto one of these ‘furry’ monthly agreements. You aren’t in the same fluffy arena as the Residential tenancies.
6. Your ability to evict the Lessee will be long and arduous if he won’t shift…and on his current deal why would he ?? I’m talking 8-10K in solicitor’s and bailiffs fees, 5 to 6 months of dragged out confrontation with no rent – typically headed for the Supreme Court for a ruling and then another 3 weeks for the bailiffs to move in and change locks. Then another 4 weeks of clean up if he leaves all of his non-essentials there. Yes….I’m speaking from very recent identical experience.
7. I guarantee you by the time he is out and a new tenant is signed up on a new lease, you’re talking 8 months as a minimum with not a jot in income and lotsa expenses.
8. Your Lessee’s motivations are almost diametrically opposed to yours.
9. Put it down to school of hard knocks tuition fees.My only tips are quite useless at this stage of proceedings. You should of posted something in February at, presumably, the start of the notice period.
1. Don’t play big boys games with your friends with a fluffy attitude.
2. Have deep pockets. You probably know deep down you’re going to need them.
3. Get the paperwork ball rolling immediately.Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Karen,
To answer the deposit question sensibly, one would need to know everything about the deal, the Seller, their motivation, your acquisition strategy, method of sale, any underlying advantages etc etc etc…
For example, if you thought the Seller was desparate for the deal to cross the line, you might go low ball with a high deposit and unconditional to show you are genuine.
On the other hand, if the Seller is nonchalant about the deal (i.e. they are in the position of power) and is making good money on the prop now, and may consider selling if an outrageously high unconditional offer is presented….well, that’s a whole different ballgame, and presenting an offer with a piddly deposit with a whole bunch of ‘get out’ clauses for you as Buyer will rightly get screwed up and go straight into their bin. Everyone’s time – especially yours – is being wasted.
You didn’t answer last time….once again….what type of Seller do you have ?? If the answer is “Not sure”….you need to do far more work before making an offer, IMO.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
What has caused her to have second thoughts ??
How robust was her initial plan…or is that the reason for the change mid stride ??
Karen,
With our last commercial loan, the timing looked something like this ;
Offer accepted by Seller
Finance clause released 5 weeks after offer acceptance
Due diligence clause released 9 weeks after offer acceptance
Settled 10 weeks after offer acceptanceIn terms of due diligence, timing we’ve found depends on two things ;
1. How thorough you are with your checking (in your control).
2. How sloppy or efficient the Seller is with their paperwork (not in your control).We found the due diligence process was a breeze with our latest commercial venture as the Seller was highly organised with all of the property details and had the lot neatly filed away in one manila folder. Timing allocated for DD in the contract was more than adequate.
Previous to that, the second last CIP we purchased had a completely disorganised, haphazard disgusting Seller who didn’t know what day it was, let alone any paperwork on the property. In that case, the same amount of time applied in the contract of sale was not adequate.
Which category does your Seller fit into ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Yes, we picked up a very average 3×1 on a good chunk of riverfront property for a modest price. The title is affected by a restrictive height covenant (crippling it by about ~ 300K), but we didn’t pay for any of it, and went into the deal with our eyes wide open. Town planners reckon it’ll cost about 60K to have a crack at removing it, but there is no guarantee of success, as it is totally up to the two props at the rear, who obviously want to keep the front house low.
It’s very cashflow negative, so much so that it was the last RIP we ever bought. Total cost of ownership is about 83K p.a. before tax, yet it only generates 18K p.a. in rent. Need about 3.8% p.a. growth to break even financially (after tax).
The house was worth 150K in ’84 and 20 yrs later we picked it up for 925K…9.51% p.a. compounded annually.
Anyway, it’s in a good pozzy, and earmarked for a house for the kids to go in and manage when we kick them out of home when they turn 18. None of this “stay at home ’til I’m 30 to save money” horse twaddle in our household.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Pete,
Well done. Nice post. Amazing how much of the learning is in the details, that even the best books only skim over. Practical learning and dealing with humans face to face negotiating deals and services….there really is no substitute for the real world thing is there. Getting out from behind the internet and book facade and mixing it with real live people is where it’s at.
Had a laugh at the “good street in Balga”. As long as it makes money for you right – good one. I consider all of them to be just ‘boxes on dirt’…even the flash ones. Just depends on the quality of the dirt and the finish on the box – right ??
Looks like you are on your way, keep it going.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Mary,
I know you only want positive thoughts streaming through here, but really, putting your financial future on ice for 3 whole years whilst you pay off a “bit of debt”.
My question to you is…have you and your partner rectified the lifestyle habits that got you into debt in the first place ?? If yes, I’d suggest you get serious and tackle the problem with all the grit and determination you can both humanely muster. If no, the chasm between where you are presently and successfully investing is fairly wide I would suggest.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
I remember being in Yr 12 (and hating it…going from straight A’s to C’s and D’s) when one of the teachers turned around to me whilst travelling on a bus back from a sporting function and asked what are your plans for next year ? I replied I have no idea, except that Uni was definitely out, as all of the big boys at the time (late 80’s) Bonds / Packers / Andersons etc didn’t have degrees, and instead employed all of the graduates to work for them, and thought I’d do the same. The teacher laughed initially, but then said why was I hanging around doing Yr 11 and 12…as the only reason to do them as to go on and do Yrs 13 to 16 at Uni, and I was now too old to get an apprenticeship…It sort of rocked me back for a while.
Anyway, I fluffed around for 2 years after school doggedly determined not to go to Uni. My parents thought I was a prime candidate for committing suicide (found that out 10 years hence) so bought a newspaper deliver round business to keep me occupied…every night and 5 days a week…my life for 2 years put on hold basically.
Eventually worked out Uni was the go and managed to get a scholarship that gave me more money tax free than what I was getting working full time…it finally dawned on me that in life there is a hard way and an easy way. Getting to Uni and seeing all of my age group 2 years in front of me brought home what a waste I had made of my life. It did spur me on to do well at Uni (Petroleum Engineering) ‘cos I knew what was waiting for me if I failed.
The degree is something that I have always been able to fall back on, and I suppose I will always refer to myself as an Engineer, no matter what I do in the future. The concepts and structural units definitely help in the property business, along with the studying of reams of data.
I find, having been out of Uni for 12 years now, the degree has faded into the background somewhat, and employers are more interested in what I can do and what I have achieved, rather than what degree I have. No-one, ever, has asked to see my results from Uni…they simply aren’t relevant in the big bad nasty world of Oilmen.
Due to the large tax free income that the degree allows me to enjoy, replacing that income is extremely difficult via property investing. If I had a normal Australian job paying tax I think I’d be retired now, but it’s just too good to give up at the moment. $ 60 USD per barrel is a wonderful time to be in the industry. Bring on $ 100 USD per barrel oil I say.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hong,
What do you mean by ‘Perth market’ ??
When you say the ‘Perth market’, do you mean the ;
1. Little 2 bdrm flat in Yokine
2. Carpark in the CBD
3. 4×2 new house in Scarborough
4. Penthouse in an old block at South Perth
5. Container yard in North Fremantle
6. Beach shack in Mandurah
7. Industrial trucking facility in Welshpool
8. Hotel on Great Eastern Hwy in Rivervale
9. Supermarket in Balga
10. Boatpen in Mosman ParkI mean surely you aren’t trying to lump all of the above into one market…it is a complete and utter nonsense.
That is such a broad statement trying to capture probably 6 or 700,000 different types of property…how could anyone possibly lump them altogether and hope to come up with anything close to an intelligent answer.
You need to get way more specific. I guarantee you won’t make 1 dollar from any of the generalist advice you are offered based on your question.
Doing the ‘helicopter’ or ‘new age balcony view’ doesn’t cut it in property investing IMNSHO. Get down into the weeds of details and ask your question again.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Good post Endless Summer…whatever it takes hey. I suppose if the internal drive is lacking just momentarily, nothing like an external push to spur you along.
Well we had a bit of a turn up for the books yesterday regarding the prop we just purchased at the top of this thread.
Received a call from the State Govt ‘official property buyer’ saying they’d just noticed we’d bought the place as it was processed through DOLI. For some reason they really want it due to it’s large land content and it’s corner position. I asked them to make me an offer I couldn’t refuse, but reminded them the price would be nothing like what we paid for it, given the in and out costs, CGT, loan break costs and all of the back breaking work we’ve put into it over the past two months.
Nothing like being in the box seat from an unsolicitored offer to purchase from the Govt. Wahoo !! [biggrin]
We are thinking of telling them to come back in 3 or 4 years, when we have a clearer picture of what the CG has been, although it has done 12.9% compounded over the past 41 years. Has anyone been approached like this before ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
No JimboJames…I’ve never had that situation.
Yes JimboJames, you are missing something.
Sounds a bit like the ol’ mechanics car syndrome.
I find it’s the “hidden” price you eventually pay…not necessarily dollars…when you purchase less than immaculate properties for less than top dollar initially.
The options are pretty limited, either pay top $ upfront and avoid it, or pay it later over the course of ownership via lower yields, more maintenance issues and more stress and time. I am like you and choose the later option, usually to receive a larger land content for the same purchase price initially. However, I know for example most of TIC members prefer the first option.
Each to his or her own.
Nigel,
You crack me up with your ‘opposites’.
Firstly, you say you can’t get +CF in big Ozzy cities with no qualifications, and now you finally qualify that you are looking at the small first and second homebuyers sector of the huge and varied ‘property’ market.
Secondly, you say you do your own research, but won’t search the posts for previous threads and want to be spoonfed…and when your not spoonfed you say “that doesn’t constitute proof”….sorry, had no idea I was in court and you were the magistrate.
Thirdly you say the industry is full of waffle and talk….but then you’ve got ‘Buyers advocate and seminars’ in your signature footer, which I assume you talk alot about RE in your seminars ??
Fourthly, I couldn’t give a rats whether you think I’m rude or not. Coming back with garbage like “that doesn’t constitute proof” usually doesn’t elicit kind and welcome responses.
Fifthly, what I do is not in question here Nigel…we are talking about your broad sweeping statements, I shall indeed do what I do.
Lastly, I come full circle to my original point, and that is you need to qualify your broad statements about +CF props in the big Ozzy cities….just because you can’t find them or refuse to look doesn’t mean they aren’t there. Newbies will look at your footer and wrongly assume that you actually know what you are talking about. Get out there and have a look at the big bad world Nigel.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
