Forum Replies Created
Hi folks,
I am just entering into a professional relationship with a new accountant.
From our early discussions it would seem that he has a very good knowledge of property and trusts (inc HDTs) and he is based in WA.
A little early to be more definite but I will let you know when I am more certain.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Redwing,
The locals are still laughing at the prices out of towners are still paying for their properties.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi JY,
Need some more information along the lines of investors questions.
It sounds as if you are having buyers remorse – as such the $400 could be money well spent in ensuring you peace of mind.
If the figure is lousy you may well find that good legal advice could rescue you.
I would also add that if you are worried about spending $400 after committing to $000’s are you really suited to being a property investor. I know that sounds harsh but sometimes you do need to spend $00’s as part of your due diligence and set up costs.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Sand,
I am not a broker but as I understand it land is seen to be more of a risk than standard residential real estate and as such banks will not lend at as high LVRs.
You will also need to consider that for a normal run of the mill block of land there is no deductibility of interest so you will be holding this ‘asset’ entirely from your own pocket.
My advice is that you should see an independent mortgage broker (and not a bank) and see what you can do as the situation currently stands. You may be surprised.
A broker is a better avenue for this exercise than a bank as brokers have much greater felxibility than the banks who are usually hamstrung by their policies.
To give you an example I have seen the results of a brokers number crunching. WIth the same inputs the lending results varied from $191K up to $691K
If you cannot borrow then you will be able to develop a strategy that will enable you to do so. A bit of planning and head down tali up effort may be in order.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Go the interest only – as Terry says it can make a considerable difference to your outgoings.
Mind you the right direction wil ultimately come back to your final plans with this (and other) property.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI all,
Normally we wouldn’t let posts of this type remain on the forum so do not take it as an open invitation.
This post has remained in situ as it clearly demonstrates that with a little nose to the wheel and feet to the ground can reveal properties that suit an individuals needs.
Certainly not intending to rain on Lisa’s parade (a great gesture & example BTW Lisa) but individuals will need to do some comprehensive DD to consider rates, insurance, maintenance, liability and dare I say it legality issues etc in their research.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi all,
Further to the previous post – here is some more information.
Date is 16th May – 6.30pm – 9.30pm. Cost is $55/single or $44/head for groups of two or more.
Booking on 1300 553 503 or http://www.knowledgecentre.net.au
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Property WA
Hi creekacres,
Sure there is some forumites with some great creative answers – and no doubt you’ll get them soon.
But the one thing that stands out to me is that being on a disability pension do you really want to be on such a large property with all the assoicated maintanence and simililarly it seems be quite isolated?
Buying property isn’t just about making money, sometimes lifestyle is of far greater importance (just my little opnion).
Either way it seems like you’ve got a heap of options and that alone means your in a fairly good position.
Hi Daniel,
From my personal position.
1. Not keeping on with property investment from the early 90’s. Could have long left the workforce if I knew then what I know now.
2. Sitting on unrealised equity – now regularly monitor and track movements in property prices in the areas I invest in so I can leverage off equity as it comes available.
3. Getting my own valuations done so I have greater control over my releases equity.
4. Fixing interest rates for 5 years too ealry five years ago.
5. Being a focussed on interest rate costs and not the value of the assets the additional money could enable me to hold.Other than that I have seen people
1. Consult their trusted financial planners.
2. Over analyse and do nothing.
3. Who are not prepared to take on some risk and end up doing nothing to their long term detriment.
4. Consider that now is not the right time to buy well researched property.
5. Be indecisive.
6. Think small picture instead of big picture.
7. Not working to aplan.Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Bangers68:1) We have 3 I.P.’s, Value-$450,000, Owe-$384,250 (85% L.V.R.)
All good so far.
2) Parents willing to sell us 2 of their I.P.’s that they have held for
over 5 years Value-$520,000, Owe-$0, Willing to sell to us for
$300,000. (Instant equity of $220,000 and L.V.R. now at 69.8%!)Transaction will need to be at arms length (ir market rate) otherwise ATO could conceivably consider the transaction as tax avoidance and you could fall foul of section 4A.
3) Will our parents have to pay C.G.T., or can we minimise this?
(One of the houses was pre-1985)Parents will have to pay CGT on the sale of the property that was purchased post 1985. The other will be exempt from CGT but when sold to you it will become subject to CGT if you sell this property some stage into the future.
Given the unique nature of this property I would strongly suggest that they do not sell it (even to you) but rather they look at ways to leverage off it for their own benefit.
4) Would it be more viable to give them the $300K, ask for $200K
back and purchase (outright) another I.P. returning $250/wk
rent, thus increasing our debt servicing ratio (D.S.R.) We would
then be able to give our parents $100K per year without
detriment to our D.S.R.If I understand this you are getting two properties for $100K up front and then progress payments of a further $200K over the next two years.
Well – not being it for me to say but it seems you are only looking at these transactions from your perspective. What are your parents goals? What do they want? How are they using these IPs?
They do have needs that should be considered too.
5) Total wages income p.a.- $ 80,000 (gross)
Total Rental Income p.a. – $ 36,140 (gross)
Total Mortgages p.a. – $ 47,688 (nett)I think this equates to a D.S.R. of 75.78% (30% of wages plus 80% of rental income) So it seems we have bucket-loads of equity but bugger-all servicability!! Is there a way around this as well, or are we stuck for a bit?!
If you do have bucket loads of equity then consider a no-doc loan. Interest rates are comparable and they are relatively easy to source by a good broker.
6) Is this making sense, or have we left out some important details
out??You haven’t told us waht you parents want.
Whatever you do you both need to get some serious independent financial and accountancy advice.
Slightly confused
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Houston:First my situation. I live in Perth and currently earn about $90k per annum. I am 33 and purchased my first property, a duplex for 157k 3.5 years ago with a 21k deposit. I have managed to get my mortgage down to 90k and current property value is approx 270k.
Hi Houston,
Welcome aboard and I trust that you do pick up some useful information while here.
My question, I want to start building my property portfolio and to look at PCF properties but with booming property prices in Perth and surrounding areas this seems impossible! I currently have a 25K deposit saved towards my first investment property.
You have considerable funds in your existing property that could be used for deposits. Based on the figures provided (value $270K and debt $90K) you have $126K at and 80% loan value ratio or $153K if you extend yourself to 90% loan to value ration available in equity in your current property.
These funds can then form the basis of deposits and purchasing costs towards another property with the balance ofthe funds coming from security provided by the next property.
On an asset basis alone you have potential to borrow further funds well and truly above what you would imagine.
Keep the 25K in an offset account and use your equity to further your investment journey.
Option 2 is to purchase a larger property for myself and my partner (just finished studying and looking at joining the defence forces in the next couple of months) and our dog as our 2 bdrm duplex is starting to feel a little on the small side. A home of the calibre we want would be 350-400k. My partner should be earning about 40k a year in the armed forces for the first couple of years So I have a few options.
I wonder about the value in this – I assume that armed forces still move you around a bit. If this is the case you may be better off, from a long term perspective, living in DHA housing and using your funds to create an investment property portfolio.
1. Should I positive gear the duplex and purchase the larger home (though this doesn’t seem sensible without any tax benefits)
See my previous comment. A home loan is one of the more difficult loans to pay off so some delayed gratification may be in order.
2. Refinance the duplex so that it is negatively geared and use the equity to purchase the larger home?[headphone]
You can do this but the refinanced equity is not deductible – if that was your reasoning behind this line of thought.
3. Look at purchasing a property we can do cosmetic renovations to and sell it off within 6 months in this rapidly rising market to get some quick cash to be used towards future investments?
Do you have the skills and expertise to do this. Renovations can ‘blow out’ and you alos need to factor in your time costs.
4. Look further afield (as others have commented it seems to be the more rural towns like Geraldton, Bunbury and Kalgoorlie that have the most chance of getting something that is closer to being positively geared or could be with a bit of hard work for a couple of years) for PCF properties.
Bunbury is worse than Perth at the moment for CFP, I would suggest that Geraldton and Kalgoorlie, while not as bad in terms of CF will be difficult sites for CFP property.
I would certainly not go looking in anything smaller than the towns you have mentioned. Cashflow in Woop Woop is not a good investment.
I just don’t really know where to start and my head is spinning with all of the different ideas out there. I have been procastinating for 9 months now and the CG in Perth has gone through the roof in some of the still relatively “cheap” areas I have been looking at.
Is it better to purchase a newer property ie brick and tile or go for say an old character which are all the rage and can be fixed up with a bit of paint etc?
Go back to what your goals are, work out what you are trying to achieve and consider the exit strategy (how will you use your properties) – the answers to these questions will largely determine what direction suits you.
I want to take action but just don’t know how and everytime I see a property that looks worth investigating it has sold already! Most within a few days of being advertised.
If you do know what it is you are seeking in investments then this will help you to make a quick, but educated decisions.
Any advice would be greatly appreciated.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Adam,
Check out the following thread – it may not be what you are chasing but then again, it could be.
https://www.propertyinvesting.com/forum/topic/6845.html
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Andy,
You will need Landlords Insurance on top of building insurance (make sure you include landlord’s contents and public indemnity coverage in your policy)
Landlords insurance will typically cover you for malicious damage, break lease and untenantable property due to repairs. Note accidental damage (spilled red wine on the carpet) is not normally included as standard fare in landlords insurance policy. If you want to include this you will need to specific additional coverage.
Your strata insurance will cover damage to buildings but it does not cover damage or loss to your contents – eg window treatments, carpets etc. As such you do need to include this type of cover in your policy.
Do not short change on public indemnity insurance. You may get a tenant who wants to take you to the cleaners because you floor tiles in the bathroom are slippery, or the carpet on your stair well is tatty and so on.
As for the depreciation bit – I am not 100% on this so I will defer to a learned accountant. However as I understand it your depreciation schedule will calculated as from the day the unit becomes available for rent.
Note I said available for rent. The ATO does allow you to make claims if your unit is available for rent – there is no requirement for it to have a tenant in it. In effect if you moved out and it took a week to find a tenant then all costs incurred in that week are still deductible.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Andy,
Pleased to hear the light is a little brighter.
As for renting it – I would make it available to rent towards the end of the financial year. This will maximise your depreciation claims that available to you in the low asset pool ctaegory. Many of these will be immediately written off, or at worst, lumped at the front end thus maximising your deductions.
You will need to get landlords insurance for the property.
And finally get the move out of the way so you and your wife have time to settle into the new place and make that feel like home. Don’t leave the move to the last minute as your wife will probably somewhat tired closer to end of term.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Daniel,
At the end of the day the decision has to be yours and the options in front of you are many.
For mine the key iingredient is what do you really want – from your comments it would appear that a ‘home’ is your preferred option.
While this is admirable your home loan is one of the hardest loans of all to meet. The repayments and costs all come out of your pocket after the tax man has rifled through you pocket, the loans are generally on the large side and the period paying off the loan is usually quite long.
I would also add that there is a tendency to get the ‘best house in the street’ and load it up with all the current ‘doodads’ that money can buy.
I must admit that I got a sense of this from your initial post. For me oneof the best lessons I have picked up is that delayed gratification is one of the best and safest ways to wealth. Try and overcome the need to continually buy goods on credit and you will be well on the way.
For example if you do borrow an extra $20K for furniture it will largely be outside the home loan as the bank will lend on the basis of their valuation. This will be done without any consideration of furniture. In effect this means that the $20K for furniture will come from either your own savings (thus in a round about way increasing your borrowings or via credit card or a Harvey Norman special – no repyaments now deal)
A better avenue to explore is to aim a little lower – pick up some solid furniture from auctions, second hand places etc so that you furnish your place at a functional but not flash level.
On a similar note do you really need a $500K home?
While getting into the real estate market is admirable – getting in at a level above your needs is not necessary smart. Maybe a suburb further out with a smaller price tag will do the job. If the suburb of your choice is it then consider something a little smaller and less pricey.
If you do buy a ‘home’ then you may want to consider renting it our for while and continue to live at home. This way you will have tax advantages for a couple of years while at the same time having your foot in the proeprty market. At this stage of the cycle it is generally cheaper to rent than to buy – this option may be a combination of that suits your long term goal.
If you do buy a home I would suggest that you get in touch with a broker and accurately determine your borrowing capacity. This will give you a target to aim at. The lending market has changed considerably and higher LVR loans are now available as commonplace.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113HI Fatman,
I would suggest that you use the search facility as this topic comes up time and time again. The search function is located under the forums button across the top of the page.
In short, naive investors, are seduced by the cashflow returns on these types of investments. The total return including equity is substandard thus making long term wealth creation problematic.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Dave L:Would it be beneficial to borrow the full amount now (interest only payments of $896.00) place it in an offset PPOR account therefore all debt would be tax deductable
Hi Dave,
I like the way you think – however when banks lend for construction purposes they initially approve the loan based on their valuation of the plans – but hold onto the money.
The building contract stipulates when and how much is required through a series of progress payments. At each of these stages the builder will invoice you and/or the bank. The bank will then make the payment directly to the builder in accordance with the agreed process.
At least this is how it worked when we built our house.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Originally posted by Stuart Milne:$50,000 doesn’t buy much advertising anymore. Apart from that I couldn’t see anything that made me cringe. Is there a contingency fund? If so how much? Is this forecast prior to return so it’s a bonus if all goes well without delays or unexpected price increases on services?
Hi Stuart,
Caught these couple of figures that may, in part, address your valid comments.
Margin for risk $ 50,000
Marketing expenses $ 30,000It would seem (a bit of guess here) that the project has allowed something for contingencies. But $50K in a $2.8m project only represents a fraction under 2% of the project’s total.
Very skimpy there.
Without knowing the area of the proposed development, nor the history of the developers, there could well be significant delays experienced in planning and rezoning, contruction etc that could significantly eat into the 2%.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Neil,
I have looked at your previous posts and it seems to me that you are currently throwing darts at a dart board without really knowing what you are trying to do – no offence meant.
I assume that this is your first foray into property investment. Is this correct?
Based on this assumption I make the following comments.
1. Work out what your investment goals are?
2. What is your preferred investment strategy?
3. What timeline/s do you have?
4. What skills and resources can you bring to bear to ensure your short and long term success?
5. What risks are you prepared to wear in your journey?
6. What risks are you not prepared to wear along your journey?I would argue long and hard that investing overseas is not for the feint hearted and that the problems (and there are problems wherever you invest) are compounded the further you move from home.
When you do move further afield then you do and will require and very substantial and well credentialled back up team.
Finally, I would highlight that there are no givens in real estate, particularly in the short term.
So for someone to say you can buy at $45K and sell for $75K next year reminds me very much of the sales pitch used to entice numerous mums and dads into inner city apartments in Melb and Syd in recent years. Many of them are now, according to the popular press (which isn’t always accurate) many of them are now sitting on negative equity.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113I would suggest you do the one step two steps forward manouvre.
That is refinance the property and buy out your father’s share and then move forward from there. The fact that your father’s ideals are different to yours and his willingness to focus all energy and cash on paying this property out without consideration of the next step will hold you back in the long term.
Pay these costs and then move forward.
Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113
