Forum Replies Created
And also what sort of increase of theweekly rent that the improvement will have.
Chris.
Xenia wrote:Yes, IO will maximise your cash flow as Simon said
IO will also maximise your deductions as you will have a constant debt for that property which is tax-deductable and not a decreasing one.
Chris.
L.A Aussie wrote:A couple of basic calculations for you to help work out cashflows on an I.P:
1. allow for approx 20% of the rent to be eaten up by the "holding costs" such as management, insurances, rates, repairs, 4 weeks vacancy, etc (this doesn't include the loan interest). This is probably a little on the over-cautious side, but it pays to over-estimate the expenses.
2. purchase costs for an I.P will be around 6% of the purchase price. Again; maybe a little high.
3. never take an agent's estimate of the likely rent as gospel. Do your own research on what the actual rents are for your type of property in the area.Those are good calculations. I have always wondered how I will go about working out my expenses(other than interest).
20% nice figure, i'll run that through my calculations currently and in future.
With the purcahse costs. for me first home, so the purchase price will be very low. But ill keep 6% in mind.
I agree with you on the third one Marc, these agents may(will) inflate the rent to try and get an easier sale, and maybe a higher price. So do your due diligence and don't believe everything real estate agents are saying. "they are working for the sellers, not the buyers".Thanks for those tips Marc.
Chris.Tysonboss1 wrote:There is no piont waiting for the perfect property market, once all the statics, facts and figures are correlated they are months old and the good times have passed.I agree with you. (nearly)Everyone is always late to the party, so once you see the fundamental changing direction and moving up, you pounce and once they reach there max then you can get out if you want as you will get out before the slump.
Chris.
Welcome to the forums Nicole,
A good place to start is with setting goals.
If you have equity in your house that you cna use for a deposit then don't worry about this.
You will need some sort of deposit. So i guess the a goal to set is to save a certain amount of deposit for this property.Or if you have outstanding credit cards debts or personal loans, set goals to remove them and get the deposit going.
When you set the goals. Be specific, dont just say i am going to do something. Say i will do this(specific thing) but this time(date).
Break the goal down. So say you need a 20K deposit by this time next year.
You break it down. ok 20K in 52 weeks. that is about $285 per week you need to put away every week for the next year.
While you are completing this goal you can set others and acheive them.
E.g. read some books on property investing.
Go the some real estate agents and check out some properties.
Search for properties, so that once you get your deposit ready you can get straight in and know exactly what you want to buy.
You could go to a bank and see them so that you may be able to rationalise your deposit(what i mean by this is that you can work out exactly what you need for a certain house).
Educate yourself(this links to the books above) but also do what I do, I ask many many questions on here, whenever i'm in doubt I just jump on here and ask away. Everyone here is happy to help, it has rubbed off onto me I'm happy to help anyone(as long as they are willing to learn).I'll leave you with those thoughts.
Kind Regards,
Christopher Fife.Thank you for that clarification Marc. I think I will stay to the "3 x 2", early 90's, sounds good.
Thanks,
Christopher Fife.Maybe you should check out this current thread, it is relevant to your post.
https://www.propertyinvesting.com/forums/property-investing/general-property/4321476Regards,
Christopher Fife.Thank you so much marc, your help is invaluable. Very helpful indeed.
I will check out that book too.L.A Aussie wrote:I look at the price of 3 x 2 houses as my first guide, then look at the rent returns they get. It doesn't have to be a 3 x 2 that you look for, but I find that this is a very common property and easier to judge against. In 5 mins I can tell if there is any point continuing with the area.This is the only thing i'm confused about, what are "3 x 2 houses"?
Marc, you now have me on a D.D. spree for a while, realestate.com will probably be set as my home page for a while now, hehehe( instead of propertyinvesting.com).
Also, what is the actual specific date that a property needs to be built after to qualify for this thing. e.g. july 1987, therefore anytime in july and thereafter you can claim.
Also, you know i'm the 6 months FHOG and reno type, so will a property built in this building write off period(after 1987) be that old that I will be able to do much???(I don't know if this question sounds right)
Thanks again,
Chris.Thanks Marc, that cleared it all up.
I do need to set my sights higher, and not settle for yields that low, I can do better. About the moving away thing, hmmm, How does everyone find information regarding there due diligence for an area. Like how can I search somewhere to determine if its good or not? I really need an education in this field of D.D.
Thanks,
Chris.IMHO stands for 'in my humble opinion'
and LVR is loan to Value Ratio.
e.g. You own a $1 Million property and you have a loan of 800K with it, so your loan to value ratio is 800,000/1,000,000. (or 80%).Chris.
Marc, you have summed it up great there.
But i'm a bit confused about this one;L.A Aussie wrote:5. Rent return at least 1% higher than current interest rates for better cashflow.So, what I get from this is that you want a rental yield(return??) 1% better than interest rates. Ok, so say interest rates were 7.5%, you would want and 8.5% yield or $8.5K rent on a 100K property per annum.
Hmm, how do you acheive this?
You have said that you can increase the rent by renovating, thus also producing more equity.So this will push the rent up, but not the rental yield by much.So where do you invest.
I live in Sydney, I will be investing in Sydney, I don't think I am adventurous enough to venture out. Maybe after a few IP's I can venture out.Back to that interest/yield thing, in sydney I'm calculating yields of like between 3-5%, I don't know how your getting these 8.5% yields.
Kind Regards,
Christopher Fife.Welcome Tuansen,
I'm a bit confused what is a 'hybrid' trust??
Chris.
Devo, your prediction would be perfect if it came true. I would have atleast 2 IP's by the supposed 2013 Boom, excellent. Maybe even three.
The only big problem I'm having is that I hope that the boom holds off at least till the start of 2010. Please, please. then when I buy my next one, shortly after i hope there is a boom and i'm sitting pretty for now.
Chris.
Hello Tylon,
The depreciation, if you are renting it out for the 10-11 months(thus it is income-producing) you can claim the depreciation for that portion of the year. With the FHOG, I advise you to do a google search for the FHOG website to check that you are eligible.
With the FHOG, you are saying that you will live in their in the first 12 months to get the FHOG, that is kinda true, you also need to satisfy that you have lived there for atleast 6 months out of the first 12 months to get the FHOG.
I am using the same approach and I will be moving in at the start(for 6 months) and doing a full renovation, then renting it out at the end of the 6 months, that will enable me to get the FHOG and I will also be able to grab more value for my property.
Also for depreciation. If construction must have commenced on or after July 18, 1985.
Where construction commenced between 18 July, 1985 and 15 September, 1987 depreciation is applied at 4% of construction costs and is claimable for 25 years.
Where construction commenced after 15 September, 1987 depreciation is applied at 2.5% of construction costs and is claimable for 40 years.
If the older house one of these cases then you can still claim a substantial amount.
Also what percentgae do you reckon of the purchase price that is land???.
I've read that house's its very high and in units the land % is like 5%.
-Land appreciates.
-Buildings depreciate.
SO with the unit are you primarily buying a building or some land.IN the time that you have to live there for 6 months you could do those renovations that you listed and also many more, so you can get your moneys worth out of those interest repayments. Also notes that during the 6 months of you living there it will be counted are your principle place of residence and thus you won't be able to claim the interest as a tax-deduction, until you move out and get tenants in.
Ah, the second last sentence, of your post.
Its true, you can add alot of value to a property and then get another separate(a split) loan against your property that will cover things like the 2nd IP deposit, closing costs, maybe even renovation costs for the 2nd IP.
There is so many things you can do with property investing, it can become overwhelming at times.
Kind Regards,
Christopher Fife.wealth4life.com wrote:build duplexes sell one keep one … lots of other strategies …I've never heard of that, build a duplex, sell one and keep the other one as a rental. Your mortgage will drop so much with the sale of one and you should get CF+. Hmm, and if you build you can also get the advantage of depreciation to the max.
I'll have to research this, building eh.
Ah, also you could mix it up a bit and mix strategies together, e.g. build a duplex and sell one then wrap the other one.
So much you can do with property investing. Shares, boring, the praying investment. Property, the proactive, exciting investment and wealth building investment.Chris.
Thanks for your replies guys,
So this is where i'm at;
I get a credit card and say with a 10K limit(seems practical in this scenario), I pay for normal expenses with it; petrol, transport, etc. I get one of those 30(or 55) day interest free ones, so that I borrow on it and pay it out and pay no interest. I do this for say 3-6 months prior to engaging with the lenders(for the mortgage) and they can see from my documents, that I do have good paying habits. From what your saying Richard, this liability would be nil.(e.g.It wouldn't harm my position of borrowing).But can it help. In that they can see that I have taken on debt before and that I have payed it back everytime before the interest kicks in. So will they consider me to be more reliable???? and hence make it easier to lend to me?
Best Regards,
Christopher Fife.Tatts_83 wrote:Why not use the $8,000 that has been made from the IP on the personal loan as well. maybe keep a few thousand for maintenance or any other unexpected issues arising from the IP but put the rest into the 2nd personal loan to get it down further?Thats what I was thinking aswell, but maybe personal loans have problems with lump sum payments, I don't know.
Slam the higher interest rate loan off, with lump sum, and with max repayments, get an offset for house(investment), pay minimum off house when paying off personal loan, then once personal loans are done you can move to doing the same to the house and searching for another IP as your equityin your home(investment) rises quickly.
Wraps can achieve positive cashflow. Have you considered them, Steve McKnight did tonnes of them. In my calculations my first IP can acheive "atleast" $150 per week cashflow positive with only 20K put down on a 200K house. After my renos and a decent price margin and a 2% interest margin.
My calculations read $180 per week but I dropped em, because of my inexperience.
Look at wraps they can get you +CF with a 10% deposit, a 5% deposit. You don't need a 50% deposit to get CF+.
Be creative.
Kind Regards,
Christopher Fife.1% sounds nice.
I know it can vary according to lenders and the LMI company used.
Also, this counts as a borrowing cost, and it will be over $100, so it should be tax-deductable over 5 years.
So say it costs $2,000.
Over 5 years, $400 per year.
Say 30% tax rate thats $120 back each year for 5 years.
So i'm actually quite happy with our findings, thanks.Christopher Fife.
Thanks again Richard, that webstie helped.
I also found out another website(actually a PDF) http://www.prosolution.com.au/articles/gear.pdf
From a quick skim, a 200K house with a 180K mortgage(90LVR), ON AVERAGE it would be 1.00% of the loan amount, e.g. $1800. If the LMI is going to be this, then i'm not worried at all. I was expecting like atleast $4,000 even up to 6-7K.
Thank you for your help.
Kind Regards,
Christopher Fife.
