Hi Bacchu,

Select a good PM and they will do the necessary checks and balances for you.

A good PM will check for references and the tenants data base to see if there is any ‘history’ with the prospective tenant. They should then talk you through their findings and allow you to make a decision based on their research.

As for low income earners in a $330/week property – you need to consider the sustainability of the rental payments as a percentage of their bring home pay. Bear in mind banks like to keep loan repayments at ~30% of gross pay as a safety margin therefore I would prefer to keep rental payments below this line too.

There seems little point in accepting a tenant and then find that they cannot sustain the rental payments over the long haul. This is asking for trouble.

Ultimately it is your decision but…….

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

For a starters get onto your property manager (BIG TIME). They have a responsibility to chase unpaid rent and they know the legal requirements for this to be effected as a matter of priority.

I would be sending your PM a letter post haste explaining in no uncertain terms that they have not been fulfilling the requirements of a PM.

As an investor you need to manage your PM to ensure that the likelihood of something like this happening is minimised.

I would also recommend you get a copy of the relevant tenancy act for your state (do a google search) as this will provide you with additional guidance.

You also need to reread your PM agreement as it will also include guidance on sacking your PM. Based on what has been said this one needs sacking.

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

HI Giddo,

Fences are usually paid for on a shared basis to a costing which is typical for the council concerned.

Retaining walls will also come local government by-laws and thus the relevant council is your best source of information.

By way of example Baulkham Hills Council has a fact sheet available at the following which may be of use.

http://www.baulkhamhills.nsw.gov.au/factsheets/retainingwalls.aspx

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

As stated above Kambalda is not a place for investors who are looking at stability of investments.

The nature of the community and its reliance on the vagaries of the mining game means that property prices and rents are generally unstable.

For some school population stats for the two schools in the area look at
http://www2.eddept.wa.edu.au/schoolprofile/home.do

In both cases you will see that school numbers are dropping.

Sure some (many?) of the workers are fly in fly out basis but this also creates a sense of temporariness (is there such a word?) – for me too risky.

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

Hi Craig,

There are a few points needed here.

While rental yields for an area can be a useful guide this does need to tempered with the fact that individual properties can have a rent outside the norm. This is where solely using median prices and rents can be somewhat problematic.

The key question that an investor needs to answer is whether or not the rent being received (or projected) is realistic. This is where conversations with REA who have no vested interest in the sale can be useful – this is part of your research process.

In essence the rental return is determined by the relationship between rent and purchase price. Around 10% seems to be the cashflow positive point.

Both of these items can be determined by comparing past sales in the area to determine fair market value. An investigation of rent rolls etc to determine fair market rent.

Steve Navra uses a rental reality formula to determine reasonable buying price. Steve’s formula is, from memory, based on five year rental yields. He uses this as a starting point when looking at purchasing prices and determining his negotiating position.

Not sure if that helps or not but…..

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

Hi Craig,

In a sense you are correct – however the key issue is to find a cashflow property (if that is your preferred investment strategy) where the tenant is paying market rent. This means that should this particular tenant leave then you should still be able to find another tenant paying the same rent (or better) to replace them thus helping to avoid the scenario you alluded to.

It is important that your research measure the validity of the stated or projected rent.

Investors have been ‘burn’t’ making investment decisions to buy investment properties based on artificial rent being received or projected to be received at the time the sale was made. In more extreme cases some dodgy back door deals have been made to paint a better picture in order to move a property.

Note this issue can be present in any property purchase and is not solely the domain of cf+ investments.

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

Hi Steve,

Give Julia a call. Julia used to post here sometime ago and certainly showed coonsiderable knowldege while present.

Her website is http://www.bantacs.com.au (not sure about the au)

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

Hi Clair and Jenny,

To me it sounds as if there are more important matters for you to research before you even start looking at properties.

Issues relating to finance, taxation, asset protection and ownership are a few that quickly come to mind.

Given the circumstances outlined (two unrelated people, one of whom having a spouse) does create some special circumstances that could come into play.

For example buying as tenants in common (assuming no trust structure) typically means that should Jenny die then her share is inherited by her husband and not you unless steps are taken now to avoid such a chain of events.

While you and Jenny may be good friends I am concerned that Jenny and hubby are not jointly involved in an investment project rather than you.

I have this vivid image of things going awry with the IP and Jenny having to get additional funds from hubby – who really all along wasn’t entirely happy with the investment. All of a sudden you have a third party involved in the investment who, even though they may not be financially tied up, they certainly are emotionally tied up with it.

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

Hi Milnev,

If you do rent out your PPOR then you will be able to claim all allowable costs associated with this property as deductions. BUT temper this thought with the longer term impact of capital gains tax that may come into play.

Some quick comments that will improve your cashflow.

Investment Property/ies
Are your loan repayments interest only?
Have you had a depreciation report done on your investment property?
Are you using section 15.15 of the tax act to reduce your regular pay period tax thus increasing your pay period cashflow?

Other thoughts.
Without being Scrooge – are you living the good life too much?
Are there some discretionary expenses that can be pruned?

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958

Hi Mogul,

As the purpose of your refinancing is to ‘buy out’ your PPOR the additional or transfered borrowings will remain non-deductible.

Derek
derekjones1@bigpond.com
http://www.pis.theinvestorsclub.com.au
0409 882 958