Forum Replies Created
thanks scamp for enlightning us with your wisdom as usual , you are entertaining………on your reccommendation we should all sell up, take our lowsy 50%, put our money together, built a giant ark, fill it with 2 of every kind of property investor, and then wait till the doom and gloomy rains end.
good point LA aussie,, I have one aquaintence my age in a better position…….the rest of my friends are first home owners or renters ……..its true enough…… you have to have drive and passion in anything to get ahead…thanks for the reminder…though it does feel like we are all a bunch of monkeys sometimes……….and we are growing to unsustainable levels (us investors)………. perhaps its all sustainable and we are just at the beginning of the new norm……
milt,
the other point i should mention to ease your mind further regardinf those examples i used beside the interest rate rise effecting the discount was this…
the 810k property was on the market for 3 months but was listed as a must sell………he was getting desperate and it was a lemon by then…. it also needed substancial work.. It was an old victorian house that had the typical 1970s migrant reno if you know what i mean… it needed its architectural integrity brought back, like remove all the concrete the rough render the alumium windows and a interior overhall, then you would have a million dollar house when the market turns upward..no prob…. THe other house was a total dump and unlivable……What can happen when the market flattens is these types of propertys dont look very attractive to buyers or investors as they cant justify the uncertainly in the market against possibl future profits.. (you will find the quality assets will be more robust in a downturn for this reason as theres a broader buying base) . But look what happens in a fast rising market… Sometimes these proteries of opportunity can attract premiums as renovators can see $$$ signs and a place they can refurb to there tastes….. The point is again, dont let those stats deter you as it doesnt mean you are making the wrong choices….SOmetimes its very good to do the opposite of what everyone else is doing..
yes thats the discounted amount as you stated,,,,,, in terms of the price reduction my theory is this…. Statistically we get iproperty nfo from a zillion sources APM, APdata, domain etc etc, etc telling us the rates of growth in suburbs and they are always different to each other and that is becuase of how they go about calculating and crunching the numbers,, what date they start and finish, how they collate ther own info etc etc…. it can only be used as a guide, besides stats are not reliable…. i.e if you see as you can on domain right now 350% growth on units in 12 months in some suburb that i cant remember , you can pretty much guarentee thats becuase that suburb had a major (probably expensive) unit development sold off and there were very few old crappy units sold that 12 months……………or some other infuential reason…..
Getting back to your question and my point, in my previous example of (apparent price falls) a mentioned a house selling less than the highest bid at Auction after the auction and another house selling for 120K less than the original asking . This doesnt neccessarliy statisically theres a falling market…this is really about smaller micro changes happening …FOr example look at clearance rates in the first week of January… very low…. So what happened with the above property was a direct result of the last interst rate rises, as this was a week later when there is a (fear induced) micro climate and people dont buy… a month later people adjust and get back out there ( but perhaps in smaller numbers) statisitaclly you might see a flat market for 3 months ( usually the minimum time period for the stats) but in reality there may have been a 2 week window of bargains and then stable prices……..When a market recovers and or optimism returns the same micro climate happens. Prices jump back to more optimsitic levels, this can happen very quickly. The house someone was prepared to sell for 550K could all of a sudden be on the market for 600K in a month in a different market as buyers move back in, but the stats agian might not show this…..So in my area i beleive the market is still stable for example despite the examples i stated earlier. Besides im only talking about individual properties and there is alwys gogin to be opportunity in any market…
hope this helps.
sounds like a good strategy, particluraly if your looking at future inner city areas ( I assume you mean up an coming lifestyle areas).
Make as many offers as you feel neccessary as often as neccessary, ive certainly made 5 or 6 offers in one day of looking on the fisrt day in the feild and had 3 excepted and taken the best deal.. thats pretty normal practice when you are buying an investment if you have already done your research, understand the market in your chosen area and can compare apples with apples. It also gives you the opportunity to play the properties off each other. before or while ne3gotiating. ie…" well i made an offer on this other place and its in my view a better deal becuase"…………. "so thats all im prepared to pay for this place", besides this place needs this and lacks………….(insert issues you consider shoul reduce the value and justify your offer) etc etc…….. its always better to state your reasons for your offer, negotiating is really about the agent giving your feedback back to vendor and pressuring them for a sale…. lets face it, all agents want a quick sale to get the commisiion and move on to the next sale, so take advantage of this by using it for you rather than against. Find out the reason for the sale…….is a long or short settlement advantagous, for example, would the owner want to rent back the house for 2 months while they find another home to buy…… if you can find out the vendors situation then your in a more powerfull position to bargain.. there are so many ways to reduce price… have a think….
as for the 5% slashing, thats not really that much… have a look again at domain and see the discount rate for your suburbs.. it may well be 7%….. Also remember jsut becuase a house isnt selling doesnt neccessary mean its a bad choice. Sometime these houses are a good choice. THink about what happens when a house is listed. Usually the best offers are made in the first few weeks so if a vendor misses those opportunities thinking they can get more they might end up with a lemon.. people (just like you have) start wondering whats wrong with it and if they are pressured to sell you could find yourselve with a bargain..
IN my neighbourhood last month i saw a unlivable dump of a house passed in for 580K, i walk in after the auction and said to the agent, so whats it on the market for now, 615K was her reply and i though wow really they should take the 580K, it sold for 550K 1/2 months later. and another place listed for 810K I made an offer of 750K without going inside (didnt bother following up as I changed my mind). It then when to auction and was passed in after almost 2 months already on the market . Eventually selling for high 6s…. a good deal for someone, thats a least 120K of the original asking ( may well have been to high obviously), well more than 10%. So if you no the market you should figure out the discount also maybe 5% is a good deal on a particular place You can play the waiting game even if your offers get refused and still get the house later…. anythings possible…..If you will have a small mortgage than you are lucky, the last thing you want in a uncertain market is negative equity so dont worry to much.
if petrol goes up considerably there would be more downward pressure on the market (thats not to say it would actually go backward) and the effect would most likely be broader in terms of demographic but it will however be more pronounced in the mortgage belt , It will have economical as well a direct impact to those areas becuase they are usually poorly serviced by public transport… if you can stick to a transport route/node within your search area you would be reducing your risk is my view. particulary if it has fast access to the city, like express trains for example…
kenzel
just to add,
that means your new equity will obviously be the total value of the 2 properties combined minus the loans against them.
kenzel,
ok i get it!!
Your equity on the existing remains the same as it currently is. The equity on the new purchase will depend on how you intend to finance it and how much of all costs you plan on borrowing.
Remember your lender may only lend you 80% of your LVR and if you get a loan for more you need to factor in mortgage insurance plus all the usual buying costs..
welcome milt,
where to buy you ask! , thats a very broad question and will depend entirely on your person circumstances and future goals and when you want to get there…
second question about when to buy, interest rates etc… again that depends on where you buy but general speaking I dont think i would be rushing into anything right now…its likely growth will be fairly modest over the next 6-12 months (there will be exceptions no doubt) . 2 more rate rises…. i dont know… cant read into the future but I think 2 is quite unlikely, my belief is a drop in rates in 2009 but who knows..depends on alot of unknown factors
third question re Melbourne property.. Im no expert on melbourne but obviously its been very kind to people lately in terms of growth and yet, depending on your sources, it still has a cheaper Median than Brisbane and Perth and Canberra at the moment which is historically unusual. No doubt WA and QLD are riding of the back of Mining, economic prosperity and rapid population growth just to name a few drivers. The question is will this mean Melbourne will permantly loose its mantel as Australia second most expensive city… Bernard Salt seems to think that melbournes population growth (which has been also moving along quite nicely) that at current rates, it will have a larger population than Sydney in 20 odd yrs… obvioudsly population growth is not a constant and will fluctuate….
right now i think I still would be careful in melbourne, but again depending on your goals income etc , but for me I would stick with no brainers and not take to big as risk, what always work for me are properties that have scarcity value (cant build anymore of them such as an old terrace house for example) with high demand for both owner occupiers and renters, in close proximity to all the neccessary infastructure, rail, bus, hospitals, university, shopping, cafe society, etc etc and preferably and area going through a change in demographics (ie an ugly ducking suburb) thats undervalued……a year ago I would have said Footscray Coburg possibly satilite bay suburbs like south frankston, geelong may do well due to the new by pass coming maybe, those kind of suburbs might be the place to start you research, perhaps they still have potential , i dont know im not from melbourne but that my distant observation.re the drop in the sydney market.. if you take the western and south western suburbs out of the equation the drops are very slight and have only been in the last quarter. (Which is why i stick with assets that are move robust) obviousy there was a downturn in 2004 but there was a holt almost nationally, sydney just has lagged behind and been flat while other markets recovered well in 2005-2006.. as did the eastern suburbs inner city of sydey around mid 2006..till late last yr.. I for one are not concerned with the kinds of dooms day reports where hearing… If we get a recession it will be the secondary asset classes that will suffer first as they already are in some parts of the country..and as in the US and the UK…Dont forget that we are more economically aligned with CHina and India and no doubt as you know they are holding up our ecomony quite well at the moment with an unrealenting thirst for our resources which id expect will continue well into the future….
NOw to your price resources question
, There are heaps of resources for pricing, yeilds, capital growth on all suburbs
buy a Australian property investor or my investment property magazine for example ( i recommend subscribing as it will give you lots of ideas answer questions ,get you motivated etc)
also go to Domain website. they have a new link for investing plus if you go to the suburb profile section you can get quite alot of stats..
Most of all take all info (including mine) with a grain of salt and digest it and formulate your own ideas about what you feel is right, I dont have all the answers anymore than anyone else on this site, best of luck.
EH
kenzel,
yes you can borrow again the equity regardless, not clear on what you mean when you say
"Also when borrowing aginst the equity, will that mean the principal of the property gets reduced assuming the loan is P&I? i.e. more interest repayments"
are you topping up the existing loan perhaps? Cant figure it out??
bardon, waterfront for 700K are you joking!! apartment yes but houses start at 1.5M on the peninsula, unless you go to swamp front of Dbay maybe you might find something , but its still water reserve front but not waterfront. Id be going 2 cheaper houses for the following reasons.
1. buy below or near suburb average price.
why, you are in the investors market, young first home buyers market , ie.e you have a property that is more sellable to more people and 2 younger people which are moving into the area, which are effectively creating demographic change and growth.
2. easy to sell one cheaper property if need be then one expensive one. You cant sell half a property.
3. Your yeild will be better on a cheaper house , (look at yields in water front Point Piper sydney versus liverpool) 1-2 % versus 5- 6%, yes its an extreme example and there will be acception but generally speaking there is truth in it.
4. Unless it really is waterfront or you can buy with large land value then capital growth will be similar.
having said all of that i would still investigate properties with large land component, (perhaps you buy one for 450K say and an apartment for 250K or something or a house somewhere else.
But back to the point, I would focus on land first particulary in redcliffe scarborough near the water… You realise that anything over 800m2 or 1000m2 (check council) can be a development site and be turned into apartments which will be a very valuable peice of land in the future as there is less land to develop. You could put up your own duplexes for example later on..yes is the short answer,
However all though there are many ways around it , such as buy a property you can sub divide sell half the block and clear some debt and hopefully get your property into pos cash flow. maybe Rent individual rooms rather than a whole house, renovate to increase yield, take a gamble and buy in a mining town or soon to be mining town. research research research.
However my view is this…Steves approach was achievable with relative ease when he was one of the few doing it. Now every monkey wants in on the bandwagon and a free ride to property wealth. Unfortunately now that the bandwagon wheels are in full motion and every mum and dad investor wants in on the latest sunday BBQ conversation those towns where steve invested arent neccessarily good investments any more becuase once the yeilds become unservicable theres very little else driving demand. In many ways the paradym has shifted back to what steve was rebelling against, ie buying in high demand areas such as capital cities for example. Steve was smart he was well ahead of the pack, saw an untapped opportunity ignored what everyone else was doing and told him to do and made his fortune (or so he says). You need to think intelligently about the future, have some insight into whats happened in the past, theres a lot of benifit in hindsight but how does it effect the future in your chosen areas your considering to invest in, Its not just about property but the whole dynamic of things such as changing demographics, cultural change, economics, population growth, supply and demand and the way society functions as a whole. Sorry I know that sounds like a wank but my point is this…Dont just focus on some Formula you read in a book.
Hope this helps
chat2howie
I have a 80yr old 60yr old and 120yr properties and i still get back substancial tax on depreciation, you cant generalise that its not worth depreciating becuase its 20yrs old, there is cutains, flooring, appliances any building work relating to maintainance, plant, fittings fixtures etc etc, you would be suprised what you can dig up for about $500 you can get a profession depreciation expert (rather than an accountant) to asess the property on site and this of course is tax deductable and if they cant find $500 in deductions then you dont pay, highly recommended.
Id be talking to your solicitor engaged in the sale as they will have the most knowledge on this subject.
Given that your keen to buy the property your will need your solicitor to put pressure on the vendors solicitor to get all the inspections valuations sorted out or your solicitor may likely advise an extension extension of the settlement date to the Vendor/solicitor . Dont forget that you are still in negotiation until settlement so if there are issues with your inspections etc than you can still negotiate on the current sale price (i have done this just 30minutes before 5pm on settlement day, though i woudnt recommend it) which may motivate the vendor to get there shite together…. hope it works out.hi mini,
i agree with everything said above, stop paying any extra onto the loan and set up interest only to max deductions as mentioned and pay down other debt. ideally if you had had an offset acccount rather than an all in one loan with extra repayments you would have been better off (as you could have isolated this money in the offset from the loan and got the full tax benefit of the original amount you borrowed and not the lesser amount you have now.. My view is consider when setting up a PPOR loan if theres a chance of moving out and renting it out.. .
Even if you dont plan to move and rent it I still think the best setup for a PPOR is an interest only loan with an offset account as it allows full flexiblity and still reduces your interest repayment on the PPOR the same as as a principal and interest loan with extra repayment allows you to do.
So if you move back after the 6 yr rule than keep it interest only with an offset account, just dont use the offset account when you renting it out obviously unless you have paid of all your non deductable debt.
hope this helps too.
EH
Personally i would be looking on the inner west train line (heavy rail close to the city will be more and more sort after as the city grows and its harder to commute by car) becuase thats as close as you can get to the city an be close to transport on a budget and in an area that is going through a demographic shift which inturn is improving the lifestyle faclities (and property value). Of course it all depends on what type of area you choose to live and what your lifestyle priorities are. If you looking/considering the hornsby area (as suggested by someone) than you probably woudnt want to live in say Petersham in the Inner west anymore than someone in Mosman would choose Newtown. However as an investor i definitely wouldnt buy in hornsby, but I would invest in the inner west particularly on the train line, between 5 and 15minutes to central, too easy.
Anyhow you really need to decide on your budget and what you want out of it before you can get some sound advise from us in terms of property type.However if you went with a unit my advise woud be to go for scarcity value to max capital growth and to have a solid investment. Like an Art deco unit for example, make sure its a small block (no more than 12 apartments preffer 6 or 4 as ideal)) , these will always be sort after and in demand, character homes are always going to hold value better than poorly designed new apartment developments which are usually overpriced (and about to start depreciiating rapidly and supply is always fluctuating).. Buy an older style on the trainline do a minor reno and hold on and youll be in a good place in the future.
hi chris,
Firstly a good choice, definitly a solid blue chip area, close to a capital city CBD and set for continued solid growth short or long term and excellent rental demand. You probably are aware of the West End /Woolloongabba council plan (google it) which earmarks this area for major development and gentrification and government spending on infra structure etc in an area that already contains a community lifestyle with plenty of original character houses ripe for renos all surrounded by the river. There is also a seperate Development plan for Woolloongabba central (google that 2, most of the industrial area south of the gabba will be transformed into a new retail hospitallity and commercial hub) and of course the Hail street bridge is coming (google) etc etc. Working in Architecture I can tell you that there is alot of urban planning projects in the pipeline etc etc, Factor in traffic reduction due to the North South bypass Tunnel currently under construction and the fact that this area is in my view undervalued compared suburbs the same distance from the city such as say NewFarm for example where gentrication is more advanced and hinting at what lies ahead for south brisbane area. I think of Westend, Woolloongabba like Balmain/Rozelle in sydney 10-15yrs ago before it became posh and out of reach of most. Theres a similar demograhical shift happening from rundown to uptown and these are the solid growth areas to buy into (close to capital city centres) and its only really just beginning here. I cant think of many places in the major capitals Bris Mel Syd, perth, where you can still find a 2/3 bed freestanding house under 600K on 400m2 of land or more, less than 2kms from the city. How could you go wrong. Rents are also very tight and climbing rapidly and id expect it to continue at least in the short term.
If I was looking for better yeild and good growth my pick would be Woolloongabba becuase w,gabba will still ride off the back of the Westend development , cap growth will be the same possibly more becuase your coming of a lower base. THe gabbas a good 100K less to buy in yet just down the road with similar rents, just lesser known from an investors point of view. it also has the benifit of the busway, park rd train station to the south, closer to major hospitals and freeway access and the as i said the changes around gabba central will be 10 fold in the coming yrs as it transforms from an ugly duckling.
HOpe this helps
Mini
Also need info on finance situation,
how are your loans structured if you have one.
do you work? Do you pay tax?
IF you have a loan, Are you paying principal and interest on the loan currently?
Do you have an offset account or is your loan bundled with a redraw and free extra repayment options etc, ie, have you payed down any of the loan beyond standard payments?This will all effect how you set it up from a tax point of view.
hi tracyd
havent been to Dbay for a while, not since i lived in Brisneyland a few yrs back so which is the nicest pocket, is it in the triangle between old bay rd (park road) and deception bay rd ,ie east of old bay rd on the northern side of Deception bay rd… I seem to remember this is the old established part as there are alot of nasty new house development areas that i would like to avoid if i go down the Dbay route. Wheres your place? where are the main shops ie not the shopping megshoppolis centre but the community small shops to buy the milk etc. I assume theres a local.. 22% sounds right, id say thats conservative for the area given 12-14% per annum compounded is the long term trend. Better to buy in a long term performer than a hot spot I always say in the long run it will be the better performer if your buy and hold like me.
yes thanks chris.. So I guess your saying hold on to any variable loans we might have
MOst of us should be getting at least on.07 to 0.9 or even 1.0 off (for the million dollar borrowers) standard variable which is under the fixed rates available. This always makes the decision to fix that much harder because you have to predict more than 2 rate rises consecutively otherwise theres no point fixing. Unfortunatly there has been a shite load in a row. Shall we wait till 2009 and hope for rates to come down then lock in again. Wish all my loans were 6.75% fixed that one currently is. That would be nice..
TTB,
if you read the ryder hot spot report link again you will notice that its actually showing the results of hotspots terry picked up to 2 years previous as they are showing the recent growth. Hes making the point that these areas were recommended 2 yrs ago and this is the growth you mistsed by not buying his report and acting on it.. So if your chosen areas is on his Dont invest list but was a Hot spot 2 yrs ago then that would make sense to me.. its to late…. you misted thee boat.
