Forum Replies Created
Hi Bindin,
The main thing to consider is that you are in a position to positively effect what you can do. While time has been eroded you do still have five years to take some action.
When seeking professional advice try and steer clear of a FP – they tend to try and sign y ou up for the latest and greatest managed fund on offer at the time.
PS. I read an article yesterday suggesting more and more of us will be working longer than we planned. So bumping your 5 years out to 7 may not be the end of the world.
Hi Berkeley,
I would suggest you sit down with a pen and paper and do the maths. Get some quotes in and speak to real estate agents about what sort of price improvements you could reasonably achieve with the renovations. You'll probably find a lot of the renovations can be largely cosmetic and don't require a lot of money – just time on your part.
Once you have established possible sale prices (be conservative) then look at the costs associated with relocating.
Once you have analysed the financial side of things then undertake an analysis of the lifestyle benefits a change will make.
Once all of your information is in you'll be in a position to make a decision that suits you.
I've made it to the big time – overtaken Terry (for all of 5 minutes)
But JacM – you Victorians have some fantastic places to explore in the Otway Ranges and the Central Highplains.
Bloody lovely country.
Pretty tough question as there are conflicting goals involved.
On the one hand most people buy a home to live in with the major part of their decision making revolving around emotions and practicalities such as; nice area, good schools, room layout, number of rooms, size of backyard and so. You can insert your own reasons for choosing one home over another.
At the other end of the scale most people tend to choose an investment property on fundamentals such as likely growth rates, value adding potential, rental returns and so on.
Sure there can be some overlap of required characteristics depending upon your circumstances.
At the end of the day only you and your partner will know what is right for you.
Hi Ryan,
Not a broker so take what I say with a grain of salt. A couple of questions/comments.
1. Will banks do 95% lend on vacant land? When I last looked this rarely (if ever) happened as banks generally consider vacant land as greater risk.
2. With NCCP coming on board banks steer clear of high LVRs to people without genuine savings. Simply using a FHOG as deposit isn't likely to be a successful approach at this time. They used to do this with Rudd's FHOG Boost scheme but the wheels have fallen off quite a few of those mortgages. Banks being risk averse have reined in lending to people without genuine savings.
Now I'll leave it to one of the resident brokers to tell me I am wrong.
JacM wrote:Mitsubishi Challenger. Very awesome for going places off the beaten track.A fellow 4wder?
Landcruiser 100 series – Turbo Diesel. Great for heading out into the WA deserts every year and exploring the hidden treasurers on our south coast.
Hi gng,
I would write to your strata management pointing out the errors of their ways and once again request the arrears be removed from your statement. I would also place a time limit for this to occur – say two weeks.
After time has elapsed, and assuming you do not get a response, follow-up with phone call to the manager you have been talking to find out if the matter has been attended to.
If the manager again says 'ignore it' then follow up with a further letter from you confirming that the debt is an error on their part and that you will not be liable for the debt and any subsequent accruing debt resulting from this matter.
You need to resolve the matter just in case new management come in and/or starting accruing interest on an outstanding debt
Hi Bindin,
The 5 year timeframe is going to make things difficult to achieve.
Paying off your LOC of $234K (see Terry's comments above) in 5 years is going to be a hard task. I am not sure that I could manage that. The downside of this is that you only improve your cashflow by around 16K/annum at 6.5%.
Let's assume you have managed to pay off your LOC then you will still be left with a net shortfall of around $7K.
Sure some of this may be partially addressed by rental increases – an overall increase in rental income of $135/week over 5 years will bring you to a neutral position. Not having a shortfall but not having an income either.
There are a couple of options as I see if available to you.
1. Work on the LOC debt.
2. Hang onto both properties and in 5 years time reassess your position with the possibility of selling one to pay off all debts and retaining the other relatively debt free (or with significantly reduced debt) to improve net cash flow position. N.B. I am not fully across pension thresholds but I envisage you would be below them and any impact on the aged pension would be minimal.
3. Look at adding cashflow positive properties to your portfolio. This will mean borrowing more money.
4. Investigate the use of value adding strategies and regular selling down process to assist with debt reduction.
Clearly seeking specific professional advice at this time is important.
PS – Vendor finance may also be an option. Best do a google search as I am not fully conversant with this strategy.
Further to Plummers comments.
Most of us are aware of the need for smoke alarms to be fitted into properties. Most of us are also aware that batteries need changing every 12 months (ever hard wired alarms).
But not a lot of people are aware that the alarm only has a life of 10 years – it needs to be replaced after this. Just down my own house as the alarms were 12 years old.
Electrician wasn't even aware of the 10 year lifespan on alarms.
This was only brought to my attention at a recent structural fire fighting course I attended as part of my volunteer fire brigade work.
Hi Plummer,
I wonder if the property was self-managed and if it was professionally managed did the inspection reports mention new wall and 'other beds'
Message to all LL makes sure you go through your inspection reports with a fine tooth comb and attend to items identified.
True – this so much.
Hi Bindin,
What sort of timeframe are you looking before you retire?
If we look at your current situation (all estimations) and in todays dollars.
Total rental income = $35K
Ongoing costs = $7K
LOC Interest @6.5% = $16K
Loan I@ 6.5% = $35K
Pre-tax shortfall (loss) = 23K
Obviously paying off the LOC would be a start but even if you managed to achieve this then you have only improved your cashflow position by ~$16K/annum. You would, in today's market, still remain a shortfall of 7K.
Sure rental increases will wipe out some of the shortfall buy a rental increase of $200/week only adds $10K to your bottom line.
I suspect the issue is that the properties you have chosen do not match your retirement plans. You may wish to consider an sell down approach but this would need some capital growth in the period between now and retirement.
The key is what timeframe are you looking at?
Hi Bindin,
I assume you are frustrated by the lack of growth in the two properties since date of purchase. Is this correct?
Are both of your properties in Armadale and do you live there too?
Your situation is not unlike too many other property investors who bought in the Perth boom of 2006. Hopefully you bought at before the boom was daily news and didn't follow the herd who bought through the later stages of 2006.
Your original post indicated some frustration with 'delayed retirement options' – how were the properties going to help you retire? What were your plans for the properties?
Anyone who bought a property in the intervening years and, in my opinion, for a little while longer, with a view to achieving capital growth from 'off the shelf'' properties will be disappointed. Now is the time to be looking for value adding potential if capital growth is your aim.
Armadale is a classic outer suburb and suburbs like this typically are the last to move. Added to your problem is that Armadale does suffer (rightly or wrongly) from historical perception. As a result long term capital growth tends to be constrained. Having said that there are some recent developments in Armadale which may positively impact on the growth rates of your properties.
Doing some quick maths it would appear that approximately $180K of your LOC $234K drawings was used for deposits and costs for your two properties. Is this correct?
EDIT – Should have said in 'now is the time to be looking for value adding strategies' in 5th para.
MosicLandscapes wrote:Just came back from a holiday in Cairns and am now very interested in investing up thereA recipe for disaster – holidays and investment decisions should be made a long way apart.
You indicated the Cairns rental vacancy rate has dropped by 1.3% – what is it now at?
I agree with Bardon – Cairns has a degree of 'one trick pony' about it. When the Japanese stopped visiting a few years ago the bottom fell out of the market.
There was a rumour floating around a couple of years ago about the US wanting to use Cairns as one of their preferred places of leave for servicemen and women in SE Asia, Not sure if this amounted to anything though.
Hi Ante,
Well done and welcome.
I enjoyed Peter's books – a different slant on property investing.
I would get your dreams and aspirations onto a piece of paper so you have a grand plan in mind.
Then once you have a plan in mind and if you want to get serious about property investing I recommend you start building a team around you: accountants, solicitors and mortgage broker.
Hi Rob,
Given you have experience with sub-dividing & developments I would go that way again.
Start small and build up rather than trying for the 'kill-shot' with your first (second time around) effort.
My thoughts FWIW
Hi Kate,
Oops – I can't keep up with Govt Department name changes.
DOLA = Landgate
Thanks for reminding me
RPData is probably your best option.
I am not aware of a free site of that information.
DOLA do a title search facility at $24/search.
HI JL.
Not sure which state you are focussing in on but http://www.reiwa.com.au provides a snapshot of each suburb & locality. The stats are sifted from ABS census data. At the moment though the census data being used is only 2006.
Link for an example – note I do not consider Donnybrook a Boom Town
