Hi Russ,

Maybe those investors needed to make two extra phone calls – local police and city offices.

An independent second opinion would have been useful – it gets back to the old adage the cheapest properties are usually in the worst part of town.

Derek
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Hi Chan$,

And the person in the chatroom = none other than Mr Jenman himself.

And my prediction for the expose’ – banks generally not disclosing valuations.

Derek
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Hi Hodgson,

Don’t forget generally speaking a financial planner has little understanding (or interest?) in property investing as their [rimary income source is from selling managed funds. Sure there are exceptions, but they are just that, exceptions.

I am sure there is a growing school of thought that shares may outperform most property in the medium term on purely raw returns and growth.

However what some ‘expert financial’ planners overlook is the power of leverage and the increased returns this can provide on your money. As a matter of interest ABN Ambro (???) recently complete a long term comparison between shares and property and foound that since the 1920’s each asset class was neck and neck around 11.3% compounding per annum. Add the power of leverage to property and you have a clear advantage.

As for ‘worries about debt’ this is only natural – most people I work with feel the same way and until you come to grips with this it can be particularly disconcerting. By the way I felt the same way for the first $300K of deductible debt.

You need to understand that the debt you are currently considering provides you with access to a growing asset as distinct from a depreciation gadget – there is a huge difference.

Consider also that your bank manager may similarly not be the best person to help you with your finances. I strongly recommend you also speak to a broker so that you can compare the total package. Using a broker enables you to establish a relationship with a finance expert who can access more than one bank’s product depending upon bank policies, and your circumstances, at the time. For example my loans are with three different institutions.

Derek
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Hi Kaleb,

Soory to rain on your parade but I believe you needed to find out the answer to this question before you bought the block.

Without knowing Tasmania, the block, building costs etc it is very difficult to provide any diefinitive advice other than to say – speak to local REA and see what property types are most popular in the local area and what comparable rents can be expected. Then consult with a builder, home relocater, kit home builder to determine likely housing costs. You will also need to find out from the local council what restrictions/requirements they have.

Hope it works out for you.

Derek
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Hi Tammy,

You have found just the people to answer those ‘silly questions’ as you put it. They are here on the board and will gladly answer those questions.

In the meantime you may like to read a number of the posts to get a feel for what is right for you and invest some $ and purchase some of the books listed in the ‘Heads Up’ section of this forum.

https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=6845

I would also recommend you consult with a broker and find out what your borrowing capacity is so that you have an idea of what market is affordable. With $150K equity you are well placed to start investing – the next move is yours.

Hope this helps.

Derek
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Hi Rachel,

I am assuming these will be your first IPs – if so I suggest you are on the right track.

Start ‘slow’ (if you can call two properties slow) and build up as you get yourself established.

Buying the property is only one part if the equation – managing and maintaining it with associated changes to cashflow volumes can take some time for some people. As a consequence you may need to develop some ‘business’ like process to assist this aspect of your journey.

And then when you feel comfortable you have sufficent funds to use as a ‘deposit’ on additional properties.

For me – I would leave the additional funds in an offset account – linked to one of your property loans so the interest bill is reduced. This will serve to either reduce your I/O payment required or speed up the debt reduction process depending upon the way you are treating your loans.

Hope this helps

Derek
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Hi Lisa,

I believe the key issue for you is suggested in your comments “so should we leave it till then? Our affordability would be tight otheriwse re: day to day expenses etc? What has anyone else done in this situation? Is it worth the risk if we can get the finance??”

Sure you will be able to purchase positively geared property but the key issue is whether or not you have sufficient reserves to cover those little things that go wrong with property.

If you do not have the financial or mental capacity to manage at these times then maybe you are better waiting. There is no rush.

You have the ideal opportunity to spend the next 18 months learning as much as you an about property – reading books, asking questions, listening to others, researching areas, working out what you can and can’t or will and won’t do so that ultimately when time passes (and it will) you can move quickly and with surety.

Using an approach like this will mean the time isn’t ‘wasted’

Derek
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Hi all,

I suspect that the “5th Spruiker” is every other unnamed spruiker and is Mr J’s way of warning people off all spruikers.

Me just pondering the imponderables.

Derek
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Hi Jobee,

Agreeing with George – certainly a capital cost as deductible repairs are just that ‘repairs’

As an aside – you need to consider more than just the taxation issues when owning and managing property. Your primary consideration is to make money – this is achieved through growth and/or rental income and upgrades of the type you have disussed have the potential to do both.

Its all good then [exhappy]

Derek
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Hi Benno,

A QS report can be arranged at any time but I would recommend you organise one at settlement or as soon as possible thereafter.

This way you can maximise your deductions from day 1 if you want. A QS report, depending upon the building, can realise significant deductions but a qualified QS is best placed to say whether or not they can make the report worth it in the case of your particular property – a phone call to a QS would be worth your time.

Bear in mind QS reports are recognised by the ATO and as such will give a better result than can be provided by your accountant. An accountant is not qualified to prepare a QS report so they (generically speaking) tend to underestimate any claims they make.

A pre 1985 property will still have a number of depreciable items – any objects that are not considered capital (building) will be considered suitable for depreciation. And any significant renovations post 1985 will also be eligible for depreciation.

Derek
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