Forum Replies Created
With a gross rent return of 9.1% sounds like this will be a 'cash flow' only type of buy.
If your girlfriend has to sell to release equity it suggest the banks are not overly comfortable with the area, or the property's value has not increased, or there are underlying problems with the town/property. You'll need to investigate further.
How are you buying this property? Full borrowings or cash + borrowings? If you can provide this information I can run some numbers for you.
From a cash flow perspective (assuming 80% borrowings of $68K)
Annual Interest @6% = $4,000
Ongoing costs = $1,500
Management Fees @10% = $950
2 weeks vacancy = $360
Outgoings (exc repairs – you'll be able to estimate this better than I given you know more about the property) = $6,810
Gross income @100% = $9,360
Before tax profit (est) = $2550
To be successful as a property investor you will need cash flow and growth. Either, by themselves, will not do it.
I am not convinced this property is a great buy.
Hi Dab,
If you grab yourself an accountant with property experience they will be able to provide guidance and assistance with the tax aspects of your journey. A word of caution some accountant are very negative gearing focussed and they see saving lots of tax as a great thing. In reality if you are saving a lot of taxing you are often outlaying a lot too. When you are ready to start your journey don't get hung up about saving tax – look more so at the cashflow AND growth prospects of your possible investments.
The process of property investing is not 'rocket science' and there really is no mystique attached to it. Those who peddle expensive courses and mentoring programs try to make would be investors think otherwise.
However there is a lot of work, research and time involved particularly if you want to self-drive. But the rewards are worth it.
Any expenses will be deductible for the period of time the property was tenanted.
Hi Donna,
Only you can determine whether or not a NRAS property suits you and your portfolio.
For me make sure the property stacks up without any NRAS benefits. That is, is it priced fairly in comparison to similar properties in the area, does it tick the infrastructure/location boxes required for good property, is there a demand for such property in the area, tenants who fit the NRAS tenant's profile and so on?
Like Jamie I have seen property that is over-priced for the local area. In one instance we were asked to sell some NRAS property and offered an 8% marketing fee. Somewhere there was significant loading in the property's price if this level of marketing fee was being offered. I might add, in this instance, the type of property being built was totally out of kilter with the suburb profile they stick out like sore thumbs.
When doing your due diligence make sure you look beyond the 'tax advantages' and really look at the property.
Hasn't she already done that?
Wasn't there a recent announcement to do with NDIS administration/centre being based in Geelong?
Things have slowed down.
Given we were running on all cylinders + a couple borrowed from other states a 'slow down' was probably inevitable.
Mind you some figures will be reviewed upwards/downwards/sideways (you choose) over the coming months when more detailed analysis will be done.
I notice Commsec had WA GROWING by 7.6% during the last quarter in this article http://www.perthnow.com.au/business/top-economist-wa-not-in-recession/story-fnhocr4x-1226658613073
Now to grab a Bex and lie down – my head is really hurting.
Hi Dab,
Coaches, in my opinion, are over-rated. What is it that you want from your 'coach'?
Sounds like you have done a fair bit of thinking and that will place you pretty well for ongoing success. See if you can refine your thinking even further and you'll be almost able to drive yourself.
If you let us know which coaches you have identified some other forum users may be able to tell you how they found your prospective coaches to be.
And the response from Federal Treasury.
http://au.news.yahoo.com/thewest/a/-/newshome/17499555/wa-not-in-recession-treasury/
My head hurts!
Hi Phoebe,
Amended R Codes come into effect in WA from 2nd of August this year.
Media piece – http://www.watoday.com.au/wa-news/the-rise-and-rise-of-the-granny-flat-20130501-2it7s.html
Another media piece – http://www.abc.net.au/news/2013-06-03/changes-to-wa-planning-code/4730278
And another one – http://spionline.com.au/home/11526-granny-flat-opportunities-to-open-up-in-wa
You can also check out the official site at http://www.planning.wa.gov.au/637.asp – you will need to know what you are looking for with this one.
Hi Tanner,
Re: Commonwealth Games Effect.
Not convinced the Commonwealth Games will do much for the GC property market.
The event itself is only 2 weeks (or so) so those seeking accommodation only do so for a relatively short period of time, particularly in property terms. Any upswing will be created by construction and as I understand it the great majority of venues are existing ones and have already been built so even this impact will be negligible.
Any benefit will be psychological.
As Scott has said the bypass solution does not work for all towns. For Berri, it could go either way.
From memory Berri is that type of town you would deliberately drive to so you could appreciate all that it had to offer. The question is would the loss of much of the passing traffic be outweighed by a desire to go to Berri.
Geez – that news came out of nowhere.
As Tom has said it will be interested (or not) to see what the knock-on effect will be across the country and what response we get from the state government who, I might add seem to have been quiet with this piece of news.
As for real estate – might mean some of the heat gets taken out of the market and we can return to normality.
Hi PDimi,
You haven't placed any restrictions on your initial question so I am assuming everything is on the table.
Not convinced the property market is poised for a surge – methinks more of the steady cyclical market type movements.
Have you considered looking at strategies which allow you to add value (capital growth). By extension the same approach often also realises higher than market rate rent returns. You may wish to investigate renovations, sub-divisions or JV projects.
Hi Kser,
What sort of price and rent are you looking at?
Sometimes projects like this can have higher than normal body corporate costs, particularly if there is a lot of common property to maintain.
Location wise the project ticks a few boxes.
Hi Dadul,
Remaining focussed when first starting out is often the hardest task – clearly you have managed to overcome this and your approach is admirable.
Have you spoken with a broker who will crunch your numbers to see how much you can borrow today?
With recent interest rates drops you may well find your capacity to borrow has improved too – albeit you will need a deposit of some sorts.
If you find yourself a decent broker they should be able to give you some clear financial goals you can also work towards.
Hi KoL,
As I understand it any capital gains liability is determined by the date you sign contracts and not settlement date.
I did find one source consistent with my understanding – check out this link
Note – I am not an accountant so double check this & as Jamie said make sure you speak with an accountant to determine which is the best option for you.
Jay Sizzle wrote:Either way, the agent has asked me for what the figure the valuer gave us on several occasions – which I have not done.Don't understand why you wouldn't show the valuers figure. Think it through.
You want the place.
You have paid for a valuation.
The valuation has come in below vendors price & at a price you are prepared to buy at.
Methinks you are better off using the valuation as a last shot (after all you have already invested some money in the deal by paying for a valuation) to try and get the vendor to see reason.
Nothing to lose – it sounds like you are prepared to move on and would have 'wasted' the cost of the valuation if you don't throw it at the agent/vendor. Having an independent party tell the vendor they are being unrealistic may just seal the deal.
If I was the vendor/agent and you refused to show the valuation (which you are within your rights to do so) I would think that you are trying to make me lift (oops should read drop) the price.
Make sure you seek good taxation advice before you sell – there will be CGT and GST issues you will need to consider.
These two issues will erode your projected equity profits if not managed carefully.
Hi Cameltoad,
We do JVs in Perth and buy our blocks through agents.
The agents flick us numerous properties and many do not make the grade and the delete button gets a fair workout. I would suggest you speak to an active local REA anyway and just listen to what they are saying.
Not sure where your block is located, what the current zoning is or what of price you are seeking. These factors are crucial as far as we are concerned as they do de-risk our process.
Hi Jeremiah,
You need to have a budget too – have you seen a broker to establish your borrowing capacity?
No point using the process you have outlined if the suburbs identified are outside your budget limit.
Also look at where government and investment money is going to improve infrastructure. I have heard of people following Coles, Woolies, Bunnings and piggy bankking their investment decisions on the work of these large corporations.
As a word of warning – be careful you don't over-analyse and end up paralysing yourself.
