Forum Replies Created
You will need to give the tenants a notice of rental increase.
In most cases this notice is around 60 days. I am sure you could give that notice once the property is unconditional and your ownership is locked in. (Terry ?) It may be that you will have to sign a property management agreement with your property manager before they will issue the notice.
When talking to the property manager you should ask why the rent has fallen behind market rates – I suspect the REA hasn't been proactively working with the previous owners and things have lagged. In discussion and in your agreement I would make sure the REAs are required to advise you of current market rents when a lease is due to expire and in sufficient time that the new lease can reflect current market conditions.
Too many lazy PM out there.
Hi Terry,
Some website have a lot of bells and whistles to disguise a lack of substance.
Zoning can affect the LVR banks will lend on.
Banks generally see rural property as greater risk and therefore will lend at a lower LVR. Not all banks are the same and not all rural areas (postcodes) are the same.
Land area can also play a part.
This is where a broker comes into their own – they can, without doing any formal work, tell you what result you are likely to obtain before you do any formal work.
Hi TheRock,
"If I aim to purchase 2-3 low cost properties in 2013 and have them all paying for themselves I would then try and tap the equity and develop the block and build in Ipswich. In parallel I would have another 12 months paid down on tax debt which would have me in a lot better position financially as well."
When assessing your borrowing capacity banks will look at your income and your security.
So when you are planning your strategy make sure you address both of these issues. One without the other will see you hit a wall.
renel wrote:Ok so $10k on hand is ok then. Cheers everyoneI assume you have arrived at $10K based on Jacs (?) comment about three months.
While three months may be OK for Jac you do need to consider what is right for you. Typical selling times also come into play.
Let's just assume for a minute that the wheels fall off your life and you need to sell. The market your properties are in may be extremely slow – lets say 180 days. All of a sudden your cash reserves are short by three months.
For me the right amount of reserves is a formula based on your SNAF, monthly costs, selling times + a little bit extra.
PS If your reserves are cash – put them in an offset account.
Hi Songrad,
Certainly worth doing your PAYG Tax Variation now. If you have ordered your depreciation report and it is not far away then consider waiting until the information arrives. If the depreciation report is still some distance away then you can submit a PAYG variation request now and then update it when the report arrives.
Either way you do not need to be a mathematician to work your variation out.
Word of caution be a little conservative with costs and slightly bullish about income. This means the ATO will still be paying you a refund at years end rather than you sending them a cheque. The ATO is much happier with this.
Have you ordered your report yet?
kong71286 wrote:propertyinvesting.com
Where do I find propertyinvesting.com ?
So many on the market.
Finance difficulties (as per Richard's email above) mean the number of buyers can be reduced.
You may also find that when things get financially tough then the holiday house on the beach is often one of the first things to go. Given sentiment around the country generally seems to be wallowing in its own sorrows at the moment – this could be one reason there are a number of units for sale at the moment.
Some people buy holiday units on the romantic notion of wanting an annual holiday in their dream location each and every year. Trouble is their preferred holiday time often also coincides with peak season and a great percentage of their projected annual income can be lost while they holiday.
Some people also buy holiday accommodation so they can have a holiday house on the beach and get great tax benefits too. Unfortunately it isn't quite that simple and complications can occur. If tax saving was one of the reasons you were considering holiday accommodation then make sure you speak to an accountant, at length, about what you can and cannot do.
Hi Songrad,
'Dodgy' tenants do seek out private landlords as the landlord doesn't have access to tenant's database.
By way of contrast the REA can check TICA before even considering a potential tenant.
This reason is the major benefit of REA.
Better to find out now than in the future when life gets a little tough.
Hi Bruno,
I can personally confirm what Terry and Richard are saying. Being an ex School principal my super is locked up in the govt system until I reach 55. Gives me a few more years to work out what & how I'll use it.
goatus wrote:@derek – I estimated $8k each… but i was overestimating all my costs to be safe. So prices on average (we expect this to be long term -I realise it might move the wrong way in the short term) would have to go up around 2.5% a year to break even. Is that reasonable from your experience?
Hi Goatus,
No-one can predict the future.
You may like to look at the growth rates of the suburb (s) over 10, 20 yr period. While this is not a predictor of future rates it will give you a reasonable idea of what you can expect in the long term going forward.
Note: if the properties are located in regional/country centres then you will need to be aware of the possible impact of any minor changes to the economy.
Capital city localities have typically seen median prices grow by something like 7% – 9% /annum over a ~25yr period. Some capitals have exceeded this figure. N.B. It's been a while since I had all of these figures down pat and I don't have these stats at my finger tips so take that comment with a grain of salt.
So in answer to your question if the $16K is affordable and you are comfortable you can achieve growth rates exceeding 2.5% it is probably OK to hang on. In making that decision you will also need to consider such things as career changes, kids, loss of income, your lifestyle and so on.
Hope this helps
Hi Freckle,
Good comments of yours.
@dave – if you are doing some editing – make sure what is included is absolutely clear. I have seen too many agreements of all sorts that become vague when push comes to shove. Suggest you get someone who is not party to read any adjustments and get them to tell you what it means. If there is any discrepancy reword or tighten things up
Hi Bruno,
Quick check can be done by searching ww.realestate.com.au – not 100% accurate as some ads are only bait. But quick snapshot.
kong71286 wrote:I have always been a fan of Honda Civics not only because of their stylish appearance, but also because of their reliability and fuel efficiency.
If you've never driven one, I highly recommend you give it a test drive
Kong = Honda Car Salesperson?
I believe HTW Monthly Report has a comment on all commercial markets including Perth. Suggest yiou check out their recent monthly reports.
Check out
http://www.yourinvestmentpropertymag.com.au/top-suburbs/wa/market-reports/
There is also a fair bit of information revealed on a google search. Some of it may be what you are chasing.
Not sure which state you are in so take what i say with a grain of salt.
By law the agent is required to present all written offers.
Mortgagee in possession present a couple of additional hurdles as the bank is required to get fair market value so the interests of the owner are still seen to be looked after. Having said that the bank will be very aware of what they are owed.
Suspect the agent may be hanging onto your offer as a fall back position in case the property is passed in. Did you end date your offer? Ie this offer is only valid until (insert date) and will be formally withdrawn at this time if this offer is not accepted.
Hi Renel,
Not a broker so take what I say with a grain of salt.
In your situation (no PPOR) it is even more important you take out an interest only loan with offset account. Most people, not all, end up trying to buy a home at some stage in their lives.
Many who travel down the path you are taking by buying an IP first then want to release and use the equity in their IP towards their PPOR thinking this is all deductible. Unfortunately this is not the case with the end result being a larger than necessary level of non-deductible debt. This is not ideal as you should be trying to keep the non-deductible debt as low as possible.
The other point I would add – even if you do want to pay off the loan it is advisable to take the loan out as if it was I/O but you make payments as if the loan was P & I.
As stated above I/O with offset is better but if you are committed to paying off the loan this may be a better option as it gives you increased flexibility if the wheels fall of your life sometime in the future.
Flexibility is one of the greatest allies you can have as a property investor – try not to lock yourself in.
Happy to have been of assistance.
goatus wrote:What is the capital gains implications now we have lived in each house separately for 2 years when we go to sell them later?Hi Goatus,
Your two previously owned residences will be CGT free for each of you from time of purchase and up until you declare the new place as PPOR. Each of the two properties will start incurring CG liabilities from the day you declare your new place as your PPOR. It would be in your interest to have a valuer establish the value of each property when you move out.
That comment assumes you each moved into the original properties from day of settlement.
goatus wrote:Does my logic here make sense, and is losing $8k per year too much?Is that $8k for each property or $8K across both of them.
The bottom line is only your can answer the question of affordability. Property investors who are 'losing' cashflow (as per your projections) would be wanting, as a minimum, for their properties to be increasing in value by more than the amount they are putting – which, in your case, is $8K
In most situations any piece of paper can form the basis of an agreement – provide both parties have signed said agreement.
Just make sure both parties sign the modified agreement and, in particular, initial any changes that are made to the standard form.
