Forum Replies Created
Hi Heath,
Sounds like to me you aren't prepared to make things happen and are prepared to use the councils apparent lack of movement as your excuse.
Now I know that sounds harsh but this is your future we are talking about. You either want it and are prepared to chase it or you aren't. Now I know council planning departments can be a little crusty from time to time but I would be going to see them to see what their current policy is, are there any re-zoning plans in the council pipeline, have any multi-density applications been approved by the council in that area in recent times and so on. Speak to the planning department and you'll get a good indication of where the council stands at the moment and what the immediate future looks like.
If you get satisfactory answers to your questions then you'll be able to complete your plans.
If the councils still says no then you can either wait or you can investigate (using reasonable estimations and research) what the costs and benefits to you would be if you sold and moved on.
This has to be your call.
Hi Janice,
Momentum Wealth do a similar thing. Haven't used them but might be worth a call.
Not sure where Terry is up to with this sort of stuff.
Last time I looked he was off learning a foreign language and learning how to pole dance but his posts reflect a comprehensive understanding of structures. I reckon he would be worth a PM at the very least.
PS – hope that didn't do irreparable damage to your reputation Terry
If the property is what you want – could always add a condition to contract requiring owner to secure council approval before settlement. May drag out settlement but ………. if the numbers stack up.
Given the structure is a deck which carries people I wouldn't touch it without said council approval. If the vendor does not want to get approval or the deck is rejected then walk away.
We attended a CPD course this morning looking at the effect of ACL on real estate transactions and clearly the onus is moving towards the vendor & agent with increased disclosure requirements.
It seems to me that the days of buyer beware are rapidly leaving this earth being replaced by disclosure requirements.
Hi Shell,
Don't ever forget the sleep at night factor when investing.
I'll challenge you a little on your comment, "ïf it ain't broke, don't fix it" and say to you keep your eyes open for opportunities that are out of your normal sphere.
I don't believe the change of strategy was the reason this deal did not work out – I think it was the choice of property. As I tried to point out in my earlier post my maths had a disconnect between the answers I got and your desire for cashflow. Cashflow neutral it wasn't.
Hope this helps.
Or change the asking price.
It is often more cost effective in the long run to drop a few bucks rather than extending your period of vacancy.
Drop $10 and lose $520 over the course of the year – how many weeks vacant before you lose $520?
Hi Prudence,
Retirement units are generally harder to finance and a larger deposit may be required.
You will also need to check to see what sort of net returns they give. On the surface 12% sounds terrific but there are often large and ongoing costs incurred which erode your profit margin – this making the ROI less attractive.
On a side note properties in niche markets (like retirement villas) tend to not enjoy the same growth rates as more 'normal' property.
Cheers
Hi Michelle,
Are you intending to borrow the lot, inclusive of deposit and purchasing costs?
If so I was just looking at the numbers of your proposed purchase and they seem to be contradictory to your stated aim of having "decent returns to make us around about cashflow neutral"
Note I have assumed full borrowings and no cash deposit here.
Total loan/s = $278K (excludes any money for renovation, even cosmetic ones will cost a few bucks)
Interest costs @6% = $16.7K
Ongoing costs @1% of purchase price = $2.6K
Management fees @8% = $1.2K
Rental income 52 X $280/wk = $14.6K (note this assumes full occupancy)
Net cashflow position – $6K (negative)
If you are using cash for the deposit and purchasing costs the figures change as follows:
Total loan – $214K (excludes any renovation costs & assumes 80% LVR)
Interest costs @6% = $13.9K
Ongoing costs @ 1% = $2.6K
PM fees @8% = $1.2K
Rental income = $280/week = $14.6K
Net cashflow position = -$3.1K (negative)
Maybe hubby has done some cashflow calculations and come up with similar numbes to mine. If your other properties have similar cashflow results it is possible your overall 'bottom line' is not that flash.
I would recommend before going any further with this deal – you take some time and revist all of your numbers before deciding whether or not to continue negotiations on this property.
Ultimately your property portfolio (exc PPOR) is going to have to provide both growth and income. If all of your IPs are not growing then you'll find your portfolio is being supported, from an equity point of view, only by your PPOR. In some respects you may be building a house of cards.
Hope this helps.
Hi RR,
Given you are not ready to be tied down consider a renting type option (Eg. studio unit, one bedder, board with others) to take care of your residency.
Then look to use your cash in some form of investment strategy.
For what it is worth I would try and keep the maximum cash available in an offset account so you retain flexibility over your funds. This gives you plenty of wriggle room, cash towards a PPOR in the future and a strategy to offset loan costs.
I'll leave you to work out the what and where.
Hoep this helps.
For ball park I use 5% of purchase price. This is inclusive of stamp duty.
For accurate stamp duty assessments go to the relevant state government website. All states have different rates & thresholds and ways of calculating the amount payable.
If you are buying in a trust – that amount can be different again in some states.
Isn't it great that we live in a society where some people always look to blame others.
They have drawn a blank with you and now they chase the real estate agent.
The heart of the problem lies in the fact the purchasers did not get correct legal advice, did not use a qualified building inspector all to save a few bucks.
Really, some people should not be left alone to buy milk from the corner store.
Hi Kara,
Some other things to consider are;
1. which location is most suited to your (potential) clients?
2. are there complementary professionals in both areas?
3. would an older/newer property be more consistent with normal expectations of premises in your health field?
4. is the population moving thus making one locality more desirable, long term than another?
Hi Mosic,
Agree with Freckle – use the broker you referred to in your opening paragraph.
Quite frankly I don't know why you are trying to arrange this yourself as your questions about serviceability and offset/loc indicate you have so much to learn.
Based on a $560K val with $280K loan means you may be able to release a further
Calculation 560 x 80% = $448K – $280K (current loan) = $168K available to be released if I have read your opening post correctly.
All lending is based on security and serviceability.
The funds you are seeking with be available to you in a loc which is more similar to a loan than an offset account.
Hi Carson,
In effect you will be financing the new place at around 105% and your structure would look something like this.
Core loan secured by new property approx 80% of property value.
Line of credit providing the balance being 20% deposit and 5% for purchasing costs (stamp duty, legal fees etc)
N.B. – any rehab would be on top of the figures I have mentioned.
In some cases you could go above an 80% loan on the new property. There are so many factors that come into play when lender assesses whether or not to go above 80% and this is where a broker earns their keep.
N.B. note I have assumed in my posts that your bungalow is suitable for an 80% lend. It may not be – once again this is where the broker's expertise is invaluable.
Hi Caron,
You may be able to use the equity you have in the bungalow as security for a line of credit type facility from which you can draw your deposits.
Depending upon a whole range of factors which are not limited to land zoning, postcode, premises size, your income etc a bank may allow you to borrow approx 80% (in some cases a higher percentage) of the value of the bungalow as a line of credit facility.
For example assume the bungalow is worth $250K it may be possible to set up a credit facility of up to $200K. From this you can take funds to use as deposit and purchasing costs on the next property.
I have significantly simplified the process and I recommend you grab yourself a decent broker to work through scenarios that suit your situation.
I wonder how they go bluffing at poker?
Section 32 sounds like Vic.
In Vic it is a legal requirement that the section 32 be completed and provided to intending purchaser BEFORE they sign a contract. More details here.
If, after reading the information provided on the link, you are still interested in pursuing this deal make sure you get legal advice and at the very least make any offer you choose to make conditional upon receipt of full section 32 and your subsequent due diligence.
HI Vista,
If I was in your shoes I would go back to the property lawyer and get them to write a "get lost, you stuffed it, my client has no responsibility' letter.
Pay a few bucks and send the purchasers on their way and regain your peace of mind.
Hi Ketauk,
You said, "I am planning to buy an investment property in Australia around the northern beaches area of Sydney for approx $800,000. I will rent it sometimes (holiday rental/short period rental) & my parents can use it when they visit Australia from the UK for 3 month chunks (saves them renting a place)."
And a little later, "Basically allowing me to negatively gear myself and become more tax efficient here in Oz, which currently I am not as I do not get any tax deductions."
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Make sure you get good tax advice on this aspect of your plans. Buying an investment property and then allowing your parents to stay in it for extended periods of time may compromise your plans to reduce tax.
From a strictly 'keep it simple' point of view your later option, "- Buy a new property in Australia and rent it out 100%, leaving my parents to rent when they visit for 3 month chunks" makes most sense to me. It keeps tax matters very clean, opens up a range of investment options within Australia, including your local area which was your earliest option.
Hope this helps.
Hi Simon,
Just read the thread and it seems, to me, as if you are meandering and going nowhere. Each of the points above (all valid I might add) appear to have clouded your thinking. This is probably because you may not have done enough pre-thinking yet.
Given you are not fussed going across the country this really does open up your options. Trouble is opening options also opens yourself to over-analysis.
For what it is worth.
1. Work out how you intend using your property/ies in retirement. Sell and realise profit type strategy or live off rent type strategy. Now those two options really are the extremes of property investment strategy and combination of both is dooable too.
2. Once you have worked out what your preferred strategy is then you have gone a long way to determine where and what sort of property you want thus eliminating some of the distractions you currently appear to have.
3. I would start by finding out which state has the best economic outlook and work from there.
Hope this helps.
