Forum Replies Created
- Originally posted by terryw:
There is also a possiblity of a 95% LVR Low Doc loan coming onto the market in the very near future. Details are sketchy, but I expect a high interest rate for this one.
That is an interesting piece of information and especially considering the RBA was, not long ago, encouraging lenders to be diligent with the application of lending policy and assessments.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Iris,
I am with Brahms here – interest only and make additional repayments. If you want the property paid off before you retire then make sure you make the repayments necessary to pay out the loan as you retire.
As an aside have you considered the possibility of doing a ‘Jan Somers’ and leveraging off your existing property for growth and then sell a couple at retirement to pay oout your debts.
Just a thought.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Terry,
Thanks for that – your post also reminded me that last time the valuer was asked to go out again and value the property in question.
We (the valuer and I) had a good laugh about it and I suggested to the valuer that maybe the bank didn’t think he got the right figure last time and that maybe he should comply and add a couple of extra 00s and see what they say then.
Needless to say the valuer didn’t go out and spoke to the bank in no uncertain terms about their questionning of his first report.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Or Ed Chan at http://www.chan-naylor.com.au
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Spanky,
Notwithstanding the previous comments I recommend you read the Fred Johnson Story (Jan Somers – Story by Story).
Fred details major and significant events in Australia and/or the world in the last 50 years when people believed that it wasn’t a good time to buy property. Fred bought and continued to buy and ended up very wealthy indeed.
If you don’t have a copy of Jan’s book I would be happy to email the story to you.
BTW the book also has other anecdotes showing similar outcomes as well as detailing some of the successes people have had, and the way they did it, in a very short and concise manner.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Allison,
Just a few random thoughts that may (or may not) help.
You will need to be careful to ensure that your father is paying market rent for the property as the ATO may otherwise consider the property to be a true ‘investment’. Obviously this throws other considerations into the melting pot but it is, nonetheless, food for thought.
Once your father moves out and you do the renovation you may well find that you can ratchet up the rent pretty quickly. This should make a significant difference to your cashflow. This, and the likely improved value of the property (if it is in a good locality), would make it desireable to hang onto as your property portfolio will require a mix of growth and income to do the job you want it to do in 12 years time.
You currently have useable equity of around $90K (80% of value less existign mortgage) and can use this to fnd the renovation and/or deposits for other properties.
A drawback with lines of credit/equity loans is that there can be a temptation to use the available funds to purchase personal ‘nick nacks’ which then creates all sorts of accounting nightmares. If you do use a line of credit/equity loan then ensure you do not mix the two types of spending.
Lines of credit also have a tendency to let you capitalise the interest – this too is a big ‘no no’ as you then create another accountant’s nightmare.
We use a 100% offset accountant for depositing all of our income which is set against our home. This helps to reduce our non-deductible debt quicker than would otherwise be the case.
Electronic transfers of interest only payments into the various accounts takes place as required and we have time to steer the ship without having to worry about such mundane matters.
We have leveraged off our PPOR and IPs interest only equity loans which provide the deposits for our investment purchases. When we find a suitable property our broker organises a 80% or 90% loan for the property from a bank that is favourable to our situation.
And so on and so on.
You may well be advised to sit down with a broker and accountant and set your structure up correctly from the beginning. This will save you costs in the long run and will also ensure that these professionals are conversant (and suportive) of your plan.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Originally posted by Mobile Mortgage:Try these following lending institutions, they have a low Doc construction product, in no apparent order,
Adelaide Bank, ANZ, Bank west, Commonwealth Bank, Stgeorge, Macquarie Bank, Westpac.Or – even better – ring one of the brokers who frequent this forum and get them to do the leg work[biggrin]
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Originally posted by JasonBourne:You can avoid CGT altogether (if your living situation allows) by calling one of the houses your PPOR & selling it – quickly I imagine. Then you can move into the other house and call that your PPOR and sell it with no CGT either. But you may have to do this over a period of time & you should definitely talk to your tax adviser before doing it.
Hi Jason,
One of the stipulations in the CGT guide is that you can largely only have one PPOR at anyone time.
Your ‘solution’ would see Micasa still liable for CGT, albeit it would be apportioned over the length of time owner/length of time as an IP.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Originally posted by Micasa:
I purchased an old house, which I demolished and then developed two houses on the land. Initial cost for the house/land $210000 + $30000 for demolishing, clearing and some extras. Build two houses for $255000. Property value after one year is approximately $340000 per house. I owe the bank a total of $370000.CGT issue has been covered in Jo’s post but as Brenda said it would pay to check for any GST liabilities you may or may not have.
Your GST status has an impact on this aspect of your development. A search of the ATO website would be a good place to start.
I have the one option/idea to put some further cash into the properties and make them CF neutral or slightly positive, I would need use about $20000 of my cash funds to do that.
Set up your cash reserves in an offset account so that you do reduce your monthly interest bill and yet retain ready access to your cash.
This way you get to retain the properties and reduce your outgoings. Much better option in my book.
Any financial gurus out there that can point me in the right direction??
Not a financial guru
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Kathy,
I am an unashamed believer in holding long term so I am somewhat biased in my comments.
There are a couple of issues you do need to consider when determining what is the right course of action for you.
Initially there was a purpose for buying this investment property. If this purpose is still valid and the property is meeting the aim then hang on to it. Bear in mind that the same property will be considerably more expensive in the future.
If you find that the either you goals have changed or that your needs are different then a sale may be a prudent course of action. However when analysing this you will need to factor in such matters as CGT liability and agents fees etc and, most significantly, whether or not you can put the money to better use.
But back to my initial comments – Peter Spann sums it up when he says sell if you get an offer too good to refuse, if your property is underperforming or you can put your money to better use.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Squeaker,
Suggest you visit http://www.gatherumgoss.com and purchase a copy of Dale’s ‘Trust Magic’ ~$99 but easy to read and informative.
Also receommend a search of the legal and accounting forum to see what else is suggested.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi esshole,
Such a post would be deleted and or edited as advertising is not permitted in this board.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi MH,
DHA housing has the attractiveness of ‘security’ as you identified in your post. I prefer to work in the open market as I believe that there are greater gians to be made.
There have been a number of discussions about the worth (or not) of DHA property. I suggest you use the search facility located under the forum boards button on the top left of your screen.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi MH,
At this stage of your investment journey it is important that you know what you are trying to achieve through your investments and how you will utilise the ‘profit’ in the future.
Having a clear understanding of why you are investing and what your are trying to achieve will then help you determine where your property will be, what features you will be looking for in it and what your subsequent steps will be.
Once you have a clear idea of this side of property investment then the next steps become somewhat clearer and by virtue of this somewhat ‘easier’
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi HC,
The OSR (NSW) uses the same determining factors when identifying a property as a main residence or not. The following is an excerpt from the ATO CGT Guide.
IS THE DWELLING YOUR MAIN RESIDENCE?
The following factors may be relevant in working out
whether a dwelling is your main residence:
a) the length of time you live there – there is no minimum time a person has to live in a home before it is considered to be their main residence
b) whether your family lives there
c) whether you have moved your personal belongings into the home
d) the address to which your mail is delivered
e) your address on the electoral roll
f) the connection of services (for example, phone, gas orelectricity)
g) your intention in occupying the dwelling.A mere intention to construct or occupy a dwelling as your main residence – without actually doing so – is not sufficient to get the exemption.
Even though the settlement dates are used to calculate the period for which the main residence exemption applies, the dates you enter into the purchase and sale contracts are important if your main residence is not fully exempt.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Originally posted by terryw:Banks usually will not accept your valuations – often even if done from a valuer on their panel.
Hi Terry,
Is this a recent development as I have used this approach in the past without a problem. In getting the valuation I have ensured the valuer is a panel valuer and that they make the val suitable for financing purposes for the lender involved.
As an aside it makes you wonder why the banks maintain such a policy and once again brings into question the reliability of valuers figures.
I mean to say the same valuer looks at property X on one day and does a valuation for finance with institution Y – surely the figures should be the same after all they are trained and do their market research of the area.
The cynic in me wonders if ‘special instructions’ are sometimes given to valuers by the lenders.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Marisa,
Without knowing the ins and outs of the Mandurah difficulties the Nullaki difficulties were all related to a major backlash against development by the locals who valued their pristine wilderness. The struggle to get planning approval and the never ending delays associated with that was the reason for the financial difficulties.
The ‘locals’ and green interest groups ‘agreed’ to the current level of development with siginificant environmental considerations and restrictions in place for construction on each block.
The Wilson Inlet catchment area, which Nullaki is a part of, is being extensively surveyed and plotted with a view to ensuring the long term viability of the inlet.
Moves to further subdivide the large blocks, while attractive, just will never happen. If anything the desire to maintain tracts of land as naturally as possible remains deeply entrenched in communities in the south-west as well as in other parts of WA.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Originally posted by Marisa:If you want to be one step ahead…. try Nullaki Peninsular, 28 km from Denmark, is a development to watch in the future. Waterfront blocks up to 100 acres are on the market from $350,000.
Nullaki is one of those areas that on the surface sounds so attractive – lots of acres near the ocean but forget any ambitions of development. There was enough of a stink when the original subdivision went through ~20 years ago. Sent a few developers to the cleaners.
Goode Beach (sometimes listed as Frenchman Bay).
And you can keep out of my neighbourhood [biggrin]
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi Nemo,
If there is a lease in place then that will determine how much rent can be charged and if/when there can be an adjustment.
So in terms of your calculations you will have to get a copy of the agreement but for now rely on the market rate of the day.
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
Hi all,
Only regurgitating a brief article in a recent paper which said that Walpole was going ‘gangbusters’ – well at least the one property quoted as an example had.
Walpole is a little small and is heavily reliant on tourism for income and a number of CALM officers living and servicing the area.
The school has had declining number in recent years and is listed to be down graded.
Denmark has experienced a surge in prices along with many other parts of the south coast. Once again there is a heavy reliance on tourism with a large number of vineyards supplementing tourism based income.
There have been a number of redevelopments taking place in the hills areas of Denmark and the school there has had an influx of student numbers in recent years.
While a number of people move to Denmark seeking a relaxed lifestyle (and stay) a number return to the big smoke due to a lack of suitable employment opportunities. I suggest you do a search of the ABS website so you can get an accurate indication of income levels.
In both places I would strongly recommend your insurance policy covers ‘fire’
Derek
derekjones1@bigpond.comProperty investment advice and researched property in quality locations available.
