Forum Replies Created
Hi Purse,
I can email you a copy of the contents pages (4) so you can see the depth of the information.
Email me your address and I send the details through.
Renton also wrote a book on trusts – bit heavy for this little black duck.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Shushar,
Can’t pull the wool over that duck’s eyes.
It’ll never be ripped off by a scamster.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Lucifer,
Using 5% extends your leveraging capcity even further.
At 5% you could (simplistically) buy 20 properties – LMI may be a problem depending on where you bought and how much they were each worth.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Geo,
If buying a property with a rental guarantee you need to check who is providing the guarantee. How secure are they and what is the extent of the guarantee?
A $2 shelf company or HIH (I have seen them) isn’t much of a guarantee.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Marisa,
Suggestion number 1: Drown your other tenant and PM in it.
Is the swimming pool making a positive impact in your rental returns. Ask your PM what woul dhappne to your rent if you removed the pool.
Could the area be reused and retain the rental returns – gazebo, extra room, an outdoor entertaining area etc – all ideas that have less ongoing maintenance and less legal nightmares associated with them.
For me a pool in a domestic house is a little disconcerting – I would absolutely ensure I fulfil all of obligations with respect to maintenance, security and safety – I would hate for someone to drown in the pool.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Native Metal,
The key advantage of using a 20% deposit is that you do not have to pay mortgage insurance which is adds an extra 1-2% to purchasing, stamp duty and mortgage costs.
The disadvantage is that you use up more of your available equity with each purchase – whereas a 10% (or less) deposit maximises your leveraging capacity.
Consider the following – you have $100K in equity and find a number of properties all worth $100K.
To demonstrate the leveraging capacity (and ignoring purchasing costs to keep the maths simple for me) of 10% verse 20% deposits.
If you were to put 20% deposits in you would be able to buy 5 properties.
If on the other hand you were prepared to use a 10% deposit each time you could buy 10 of the same properties.
Obviously a very simplistic example and there are other issues to be considered; LMI availabity, purchasing costs, your mindset, serviceability issues and so on. BUT Hopefully this has demonstrated an advantage of using a 10% deposit against the use of a 20% deposit.
By way of an example we have used a bit of both, initially 20%, then 10% and now back to 20% as we have heaps of equity up our sleeves.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by pete3980:I ask have do you have a property their? and the answer was no, old saying It’s a bad cook who doesn’t eat their own cooking
Hi Pete,
Failed test number one – what about test number two – have you bought any of CWB’s property?
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Bid,
It is also available at http://www.businessmall.com.au as is Dale’s other book Tax Battles.
Product code for TM is GAT-2
Product code for TB is GAT-1Both $99
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by everdine:2. Manage your property manager very carefully
Derek,
Can you elaborate please?
Interested in learning how to do this better.
Thanks, DianeHi Diane,
Your property manager is the one that deals with the day to day issues and as such you tend to rely on them to fulfil their obligations properly.
Some strategies I use are;
MS Outlook Calendar facility to mark (with a two week warning bell) in when my leases are expected to expire. I get in contact with the PM at this time and remind them that the lease is due to expire and they need to find out what the tenant is doing and take appropriate steps. If they are moving out – start advertising, if they are staying renegotiate a new lease.
I also ensure I stay abreast of current rents for similar properties in the area and ensure I am not doing myself our of income. The need to maintain market rents can be balanced with long serving good tenant type issues.
I also check my monthly rental statements to ensure there is no lagging behind. No point letting a bad habit form – if the tenant is lagging I require that abreach notice be issued and copy of same sent to me for my records.
I also check through property condition reports and compare them to the previous report to see if there are significant changes or issues that need my involvement.
I also stay in regular touch with my PMs and develop a business relationship with them so that they know I am an active landlord.
Having said all of the above I have also fitted airconditioners to some of our properties and in one case with a minimal rental adjustment. I have refunded part rent on another unit when an airconditioner installation was delayed, repainted a property with no increase in rent and bought a good PM a bunch of flowers.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Redwing,
For me the six things I learned over the last 19 years are;
1. Look after your property and your will continue to attract a better quality tenant.
2. Manage your property manager very carefully – they are critical in the performance of your property after purchase.
3. Ensure you have good recording keeping processes so your accountant has an easier time of it – and so you can process returns very early in the new year and maximise your legal deductions.
4. Keep your eyes on the big picture without losing sight of the detail.
5. Ensure you talk to, and work with, people who know what they are doing and are in a position to help you.
6. Be committed to your investment goals – but ensure you have time for smelling the roses.
7. Your partner needs to be working in sync with your goals – but also has the capacity to put in appropriate checks and balances.
8. Know your financial situation.
9. Don’t leave it too late to start – but at the same time there is no need to rush.
10. Educate yourself and find a niche that suits you – even though this may be different to other people’s path.
11. Let compounding growth and time exert their influence.As you can see maths is my strong point – there are 6 things I learned. Compounding growth has already kicked in.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Sonja,
Property valuations can be significantly different – and can be influenced by a range of factors; valuers understanding of the current market state, how comparable the comparable properties are, their level of due diligence and research, the recency of comparable sales and the level of experience of the valuer – to name but a few.
Valuations are not as scientific as some will have us believe and I have seen (and experienced) considerable variations on my own home valuations.
Once a lender has sighted a valuation – you will usually have a great deal of difficulty getting them to accept a higher valuation. It can be done, and is more likely to succeed when you have a broker working with you – individuals can succeed but it largely depends upon your relationship with your lending manager.
Lenders will only accept valuations from valuers who on their panel – so there is no point commissioning an independent valuation unless the valuer is on the banks panel of approved valuers. This information is readily available from the broker or by ringing the valuers and asking them if they are on a lenders panel and are they prepared to value a property and make it suitable for finance security by the same bank.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Dreamweaver,
https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=9729
From memory BIS Shrapnel and Matusik also provide sales data.
I believe the Aussie link also exists in other states.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Patrick,
Not quite – but you are getting there [exhappy].
Deductible loan cost do not include principle repayments. Assume you are paying $1000/month with $800/month interest. Only the $800 is deductible as the other $200 goes towards loan repayments and is not considered a cost of the loan.
Any income in excess of expenses will be taxed and this is calculated over the course of the year.
So assuming your property is making you $300 month and is costing you (excluding principle repayments) $250/month – this means you are makng a profit of $600/year. This would be added to your other income sources and taxed accordingly.
If however the numbers were reversed and you made a loss of $600/annum this would be deducted from your taxable income.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Trev,
PC is correct most lenders don’t do an 80% lend on these and as such they may suck more from you than they give back. It really is a question of balance for you and your circumstances.
Management and ongoing costs can be a little high and rents are typically 85% of pension + rental assistance receied from the government. Soem units also include a food service.
Be aware they haven’t been fully tested as a growth option yet being relatively new on the market- as such growth is questionnable.
I recommend you do a search on pensioner units and also retirement homes as the topic has been discussed a bit before.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Skidaveski,
Try
http://www.realestate.com.au/cgi-bin/rsearch?a=loan&t=res
There is a link that allows you to calaculate all purchasing costs, borrowing costs, loan costs etc.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Boardy,
And how long is a piece of string. One man’s nightmare may be another man’s dream.
I can only give comment on the rudimentary information provided and as such it all needs to be taken with a grain of salt.
At the moment you haven’t provided much in the way of supporting detail such as other outgoings for each of the properties, where they are and even your basic investment philosophy. The supporting details are just as important as the numbers provided.
The key issue for me lies in your last line about taking on such a large debt.
How are you going to feel when you open up your bank statements each month and see you own them $360K – even though it may be a ‘good investment’ there is the mental side of things to consider too. Are you leaning towards this property because you want to or because the ‘salesman’ did a better job with you.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Daaj,
Only in accordance with any loan conditions but the question has got to be Why cancel it?
It is a little gold mine for your future investments and will only cost (after establishment costs) you interest based on what is drawn.
Nothing drawn out = $0 interest (maybe account fees depedning on your loan). For me having access to those funds at call is worth carrying any cost for.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Yarwood,
Recommend you do a search on ‘Perth’ and see what comes up – there would have been a few discussions in the past.
But in answer to your question – there is no definitive answer – your gem can be found in many localities – you just have to find it.
But if you are growth focussed look along the coast, river, major transport routes (without being on top of) and consider some of suburbs close to the satellite city areas being redeveloped. For mine get as close to the city as you and your cashflow can afford.
Don’t be hamstrung by your need to be close either – sometimes the better opportunities can be further afield. However, if the fundamental sof your local area stand the test then go for it.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Daaj,
A. Do repayments come out monthly on the $10,000 at %7.
B. If you put in $1000 back are you only charged for $9000?Repayments are calculated daily on the amount outstanding – which in your example is $10K and then reduces to $9K as per point B.
C. Does that $1000 offsets the repayment for the period in the loan?
If you wanted to, pay the interest bill of ~$58, and the balance remaining $942 comes off the principle.
D.Can the LOC loan be fixed at a rate?
My LOC is variable – see no reason why you couldn’t fix – fixing LOC is not on my horizon at the moment.E.Would it be better to take out a LOC with your own home or an Ip? (Tax Reasons)
Makes no difference as the purpose and use of the
LOC funds determines whether or not the interest is tax deductible.F.Is it better to have a LOC or a ‘card?’
LOC interest rate is cheaper – although both are considered fully drawn when banks look at serviceability. LOC is secured against assets and ‘card’ is unsecured.g.And has anyone done it and what are your experiences with LOC good or bad?
Works well for us – do not use LOC for personal and investment expenditure – your accoutant will hate you forever.Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Jaffa,
An impossible question because you haven’t indicated how much your total income is – which is the key determiner at tax time.
Check out the following scales and this will help you determine your taxation rate.
Income levels Tax Due Excess %
$6,000 – no tax up to $6K + 17%/$1 thereafter
$21,000- $2,550 tax + 30%/$1 thereafter
$52,000- $11,850 tax + 42.0%/$1 thereafter
$62,500- $16,260 tax + 47.0%/$1 thereafterSo on a total earning of $10K you wil pay no tax on the first $6K and then 17% thereafter = total tax bill of $680.
The distribution of the income from a trust will determine the tax paid by individual in accordance with their repestice income levels.
One of the advantages of a trust (the main one being asset protection) is that the income can be distributed to the trustees in a manner which reduces the total tax paid – not an expert on trusts – so I stand corrected
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
