Forum Replies Created
Hi Dannads,
Hmmmmm – well that depends on oh so many factors.
It sounds as if your Dad is more focussed on potential growat and as a growth focussed investor I would seriously look at the Gold Coast but not a high rise unit – there are so many of them being built there on a continuous basis it is staggering – construction is everywhere, in one case 80+ stories of residential units.
ABS projections are that population growth in the area is staggering with 1000 people per week moving to Queenslnad and 60 percent of these to the SEQ area. This equates to 270/week into the Gold Coast.
Given your Dad has the capacity to borrow $500K that would suggest he has a ‘highish’ income and is able to write off greater deductions. As a result he should be able to find something that has minimal outgoings after tax.
But then there is the potential to buy lots of cashflow properties – is that what your father wants?
Derek
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Hi Ghoti,
Negative gearing on newly purchased investment properties was abolished in mid July 1985. For those of us lucky enough to own a property at the time the deductibility of interest remained in place.
Negative gearing was reintroduced as an allowable deduction in middish 1987.
Interestingly enough – depreciation as an allowable claim was introduced to offset the loss of interest deductions around the same time. During the two year window capital depreciation claims were 4%/annum over 25 years – in some respects people were no worse off due to the recognition of depreciation as an allowable claim and encouraged the savvy investors to more heavily focu their buying on newer properties.
1985 was also the time that CGT on residential property was introduced.
The abolition of negative gearing also coincided with a 40% jump in demand for public rental housing in NSW.
statitical reference – More Wealth From Residential Property
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Sarah,
First of all welcome to the forum – you wil find there are a number of people who will take the time to provide comment and advice to help you.
Initially you will need to determine your borrowing capacity as you may with the assistance of a good/creative broker be able to borrow more than you think.
Initially banks will lend based on your ability to repay and also the amount of security you have. Typically banks lend 80% of the value of the property – $100K house = you have to find $20K + costs of around $5K. You may be in a position to use loan mortgage insurance and/or the FHOG and/or funds from friends family etc to get started (check out the legal implication of this before embarking on such a journey)
If at the end of teh day you cannot borrow sufficient funds then you can put the time to good use by structuring a budget – saving money seems so much easier with a definite goal in mind and spending as muh time as possible learnign about property investment and doing your own research so you become more proficient as an investor.
At the end of the day the only real way to learn is by just ‘doing it’ – on the way you will need to watch out for people who will tell you ‘no’ – often their good intentions are based on misinformation and lack of experience.
Good luck with it all.
Derek
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Hi Stevie,
You wil also need to find out what your lender thinks of them – depending upon the size of the units some will require more than the typical 20% from you.
Derek
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Hi Drinksbunny,
You will need to check out your lenders policy with respect to resort units – some like more than the standard 20% equity if the unit is smaller than 50sqm.
In some respects these types of investments can eat up more than their share of your valuable equity.
A discussion with a broker will also help you get a definitive answer from across their panel of lenders. Also be aware that policies can change and while a bank may lend at 80% initially a review of policy can see them adjust that figure and you end up with a situation where the same lender will not recognise the unit as suitable security for subsequent lends.
Derek
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Hi Delboy,
For me the cut off point is 500 000, but then I am a growth focussed investor who likes the increased certainty of large cities.
Derek
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Hi Bendon,
The ‘first trip’ is not a considered as a deductible expense, rather it is considered a capital cost and will be written off against any future capital gains tax liabilities should you sell.
However should you be considering a trip to do an inspection, some maintenance or possibly a strata management meeting – then a diary with appointment times, some appropriate receipts to prove you were where you said you were, some appointments with builders, maintenance people, property managers, strata managers etc would all be advisable.
Also be aware that costs are only proportionally deductibly if the investment stuff ties in with a holiday trip.
Derek
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Hi Rebecca,
Originally posted by Rebecca B:We have been told we could easily get $200 a week if we rented it out.
We also live next door to a bad Co Op House and was told if we could buy that then the property value in our area would increase also. Is this true?
A few pointers from your post.
Be wary of the potential problems misuse of a line of credit can cause. There are documented cases of individuals using a line of credit like a big credit card with the result that they get further and further behind.
That is why we use an offset account which does a similar job – yet is cleaner and easier to maintain a disciplined spending habit.
I would also consider who is ‘telling’ you this will rent for $200 or buying a single house in an area will improve the value of the ‘whole area’ – sounds like someone with vested interests or possibly someone with little understanding of real estate investment.
And finally – what’s a co-op house? It may help in getting more valid opinions on your questions.
Derek
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Hi Paul,
This is definitely a ‘how long is a piece of string’ question – the answer will vary from person to person.
My intent is to never sell (well maybe not never but you get the idea) and the only reason I would sell would be if I had to due to some cataclysmic event or I could put the money to work somewhere else (pay off PPOR or No 3 on the 5th at Randwick etc)
Ultimately it will be your particular situation and your plans that determine if and when you sell.
Derek
derekjones1@bigpond.com
DerekRead my comments? Think I can help you? PM or email me.
Hi Mini,
Welcome to the hard part. As the old Chinese proverb goes the first step in the journey of a thousand miles is the hardest (I hope that wasn’t misquoted )
Reading the books is the easy part as you haven’t taken any risks as yet (apart from buying the books).
As you have already indicated there are many, many diferent strategies and variables when it comes to property investment – and you will get conflicting opinions from all sorts of people – including those who have no investment properties – and are really in no position to comment effectively.
You now need to work out which form of investment best suits your mindset, your current financial situation, your end point goals, your timeline, your personal situation and …………
Taking all of these factors into consideration will (or should I say may?) help you clarify what it is that suits you.
You may well know someone who currently seriously (more than a one property and has been investing for a while) invests in property who would be willing to act as a mentor.
Ask them the questions you need answers to and this will help you along – this forum will also provide a good opportunity for you to help refine your investment plans.
Watch ourt for buyers remorse and ultimately you will do most of your learning after you buy that first property.
Hope this helps
Derek
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Hi Penguin,
Many (all?) property managers will charge you a letting free when they first set up the lease with the new tenant. In some instances they will also endeavour to charge a full letting free for a lease renewal.
In W.A. it is fairly common practice for the property managers to collect the equivalent of one weeks rent from you and another weeks rent from the tenant for a 12 month lease. in some instances I have also seen property managers attempting to collect a total of three weeks rent as a letting fee.
The reasoning behind the fee is loosely described as being costs incurred in setting up the lease.
Ultimately all property management fees are negotiable and generally speaking how much you end up paying is determined by your negotiation skills.
Derek
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Hi mky,
Land tax can be avoid for only so long. Sooner or later (in some states very very soon) you reach the threshold at which land tax applies.
To a certain extent you can distribute the ownership of your properties across different states to delay the onset of land tax.
Be aware that land tax is a levy imposed on the unimproved value of land – it doesn’t include the buidling’s value (yet?)
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Paul,
I would certainled go with ‘use the equity’ approach rather than save the money. This way you can leverage the lowering debt and increasing value of your home into an investment portfolio – this approach puts paid to the myth that you need cash for a deposit.
Imagine buying a $200K property.
You will need approximately $52K for deposits and costs – less if you are using LMI.
The key issue is how long will it take to save $52K with after tax dollars? How much has the property market changed in this time?
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Dean,
Whether or not you start negotiations will largely depend on how this property fits into the grand scheme of things.
I tend to think that being a riverside property that this may end up being your family’s preferred ‘home’ and as such you bought with a long term occupancy in mind.
Bear in mind riverside land in Perth isn’t being made anymore so in many respects above average growth is ‘guaranteed’
Sure selling now (if the REA is genuine) will realise $80K (less costs) but what are replacement homes worth in the area you will move into if you sell up. My take on profit on your PPOR is that in most cases it is a question of relativities – what cost to buy something else?
Is it possible the local council, state government etc have big plans for the area that have slipped under your radar? A phone call to the local council planning department would be advisable to see if subdivision plans are underway.
Derek
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Hi Kay,
You’re spot on and that is why I monitor the market movements and will only contract a valuation if my research shows it to be worth it – after all there is no sense throwing away money when I could use it more effectively somewhere else.
At the end of the day if what you are doing works – then why fix it.
Derek
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Hi Tycoon,
You may like to visit Michael Yardneys website – he is Melbourne based at http://www.metropole.com.au
There is another person Peter Combden (sp?) – might be worth doing a google search. Peter also had an ad in the recent API.
PS – haven’t done either course though.
Derek
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Hi Kay,
I prefer to monitor market movements every 6-12 months (certainly in todays – or is that last years? – market) so that I can contract a new valuation when my research shows it will be ‘worth it’.
This way I can maximise my line of credit facility so that all systems are ‘go’ should I see something that matches my criteria.
This approach also enables me to leverage my assets into other assets on an ass needs basis too.
Derek
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Hi Tony,
You are asking specialised questions and I therefore suggest you do a browse through the ATO website for some more definitive answers.
http://www.ato.gov.au and do a search on the very questions you are asking.
Derek
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Hi Taz,
Scott said “Of course, to make what they advocate work you do need to be able to acquire property at the right price, and I’d say that’s getting tougher these days.”
I would add and ensure you do not overcapitalise for the local area – no doubt this is a key message in the seminar.
Derek
derekjones1@bigpond.comRead my comments? Think I can help you? PM or email me.
Hi Penguin,
Property management fees are higher than Queensland – 8.5% w/o GST is not unusual and then there is a little pocket in Perth that charges 9.5% for a management fee.
Letting fees vary considerably from one week to 9% (yes you read correctly) 9% – needless to say these guys get very little business from people I know.
Strata management fees are generally less than Q primarily because unit complexes do not include some of the ‘fruit’ seen in Q. I can recommend some good strata managers if you like.
Water rates and city rates are levied by separate bodies over here whereas in Q they are levied by the city council.
Real Estate fees are deregulated here – but expensive.
Property settlements are usually conducted by conveyancers in WA.
Land tax kicks in at a very low level (around $10K from memory) whereas Q kicks in at $270K (also from memory).
Derek
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