Forum Replies Created
This is the main problem with negative gearing, it can greatly affect your servicability. With positively geared properties it increases your servicabliity, hence if you can still get deposits you can buy an almost unlimited amount (you may have to go to different lenders, etc).
In terms of assets banks usually only want the mortgage over the property you are buying (unless it is the NAB – beware!!), in the worst case scenario you might have to put up a 20% deposit ((depending of course on area (city vs. regional/rural) and the cost of the property (million dollar properties will prob. require higher deps.))
BasinView you should be able to borrow at least 15% of your PPOR relativly easily (unless your serviceability is bad – i.e. no, or very low income (meet up with a broker on this forum)).
Rgds.
Lucifer_auFrom a vendor view, I think you should cut down the expectations of making alot of $$$ on a wrap. Already you are minus -$70 and so another $50 will add $120 on top of the repayments, which can be alot for an apartment (wrap clients usually are families that want to buy 3/1, but you can of course wrap units, it’s just harder).
Juat make sure your not to far from the rents, as probably people in your market (young, more likly to be single, etc) will compare it to the average rents, and if they don’t feel like they are making enough from the deal, more willing to walk away from it (and it will be harder to sell).
Just a few thoughts…
Rgds.
Lucifer_auFrom memory Steve has less than a quater of his properties as wraps (the percentage could be even lower still).
So that means he has found many CF+ buy and holds. But he has used his knowledge of Problem+Solution=Profit to make some properties which were CF- into CF+.
Rgds.
Lucifer_auMichael_C they can pull the loans.
Rgds.
Lucifer_auThe ATO is currently looking for these kind of transactions (since they can data match with the banks). Right now it’s a kind of grey area, but it can (and does) bring up red flags aginst you, which increase your chances of an audit and also a please explain (it comes under non decleration of income).
Rgds.
Lucfer_auIn the US it’s called a 1031 exchange (or like-kind exchanges), but here it’s not really avalible (as per Julia’s post).
Rgds.
Lucifer_auFinding CF+ properties is difficult, but they are out there. Perhaps your still looking to close to the CBD/city, you have to move out to less desirable areas (rural/regional as an example).
Also in Steve’s 2nd book he talks about how problem+olution = profit. Because it’s difficult to find good CF+ you might have to think outside the box. For example find a property with a large area and you might be able to put up some storage sheds /car ports/ etc which might make the investment positive cashflow. Get Steve’s 2nd book for a better explination about the problem+solution=profit concept.
Rgds.
Lucifer_auI would implore you to read John Burleys Secrets of the Rich, mainly because I think it could help you tremendously.
While it talks about RE investing, it also talks about money habits, habits that can make you entirely debt free within 5-7 yrs (inc. mortgage).
So homework: Read ‘Money Secrets of the Rich’ and Peter Spans latest book (Yack has some excellent advice!).
Rgds.
Lucifer_auRgds.
Lucifer_auInteresting obiwan,
I recently read an article about apartments where there rental yields have dropped dramtically and many REIT (RE Investment Trusts) are selling their multi-family apartments mainly to private investors while yields for apartments have droped to their lowest level ever. Over there it looks like many unsophisticated investors are desperate for any ‘safe’ income (since bonds are paying so low).
Rgds.
Lucifer_au“Otherwise they are just no good for anthing other than advice on how to minimise tax”
And to tell the truth most are hopeless at that! I read a statistic that approx. 60% of business owners pay more tax than they have to, and that was using simple and common deductions, I would hate to see the figures if you took into account more sophisticated strategies.
Rgds.
Lucifer_auWow!!!! So according to your accountant every place must use only 40 weeks rental calc, so basically all properties are un-rented for 3 months (or 25% per yr!!!)!!!! Most places that are very CF+ in the US & NZ would be by that accountants definition CF-!
Perhaps for a hotel/motel/short stay accom. but for a rental??? If you are unable to rent a house, you can always drop the rent by $10 (so your return would of been a $320 profit).
When i said “Who would of ever thought that the ‘professionals’ could get it (so) wrong???!!!” i didn’t imagine that wrong!
Good choice for moving!!!
Rgds.
Lucifer_auIt usually isn’t the investment which is a dog, rather it is the investor.
This is a joke right??? Lucifer, you are such a cracker!!!>For want of a better word… perhaps bad would of been better?
—To me almost no investment is ‘bad’ it is the investors who are the ones that make an investment ‘bad’.
Oh …my mistake, you were serious!!!>Just because investments might have low returns dosen’t mean that they are dog/bad investments. For example at the moment US bonds are pay some where in the region of 1%-3% (depending on time frame, etc, etc, etc), however I’ve been reading a bond traders postings on a forum, and he is making 1-2% per month (not yr.) by trading US Gov. bonds (although I cannot verify it, he has posted his trades (inc. losers)) so I’m guessing he is making money… Hence it’s not the investment thats bad but it’s the investor!
—Does that mean there are mongrels as well as pedigrees out there buying property??? Goodness gracious!!!
>Of course, they just look for different things!
—By the way i changed accountants.
>ARRGGGGHHH!!!! Who would of ever thought that the ‘professionals’ could get it (so) wrong???!!!
Rgds.
Lucifer_auIt usually isn’t the investment which is a dog, rather it is the investor.
Usually the investor is the one that wrecks perfectly good investments. I have seen CF+ properties turned into CF- & CG- by a bad landlords/investors. I have also seen profitable business (that needed no input from an owner), turn into dogs by bad owners/investors.
Investors are always seeking new information out and are usually near the front of trends (demorgaphics, the state of play, etc) so while your friend might of thought it was a dog, an investor looked at the potential for capital growth by looking at other cap. cities CBD growth rates, or saw rental yields becomming attractive and, thought it was a good enough deal to buy.
To me almost no investment is ‘bad’ it is the investors who are the ones that make an investment ‘bad’.
Rgds.
Lucifer_auLease Options have a number of advantages (and disadvantages) to wraps.
The first advantage is there relativly simple. It’s a lease with an option – easy! Because of it’s simplicity you don’t need a lawyer for the buyer (whom are usually high paid and hence do not understand why anyone would do vendor finance).
The disadvantage with them is you don’t get the FHOG also tennants are protected by tennancy legislation and you still have to abide by the tennancy tribuneral (which could mean a long wait to get you house back). Lastly there might be a higher non-repayment rate as people might not see themeselves as real buyers and don’t take it a seriously as a wrap (where they have to go and see a solicitor, etc), and the different mentality can make a big difference in terms of time and profits.
Rgds.
Lucifer_auI’ll add my bit (though it is the same) no if you are implementing a L/O you cannot claim FHOG, however your tennant can still claim rental assistance (where as with a wrap, to my understanding, they cannot).
Rgds.
Lucifer_auI know banks are more willing to lend to franchises (up to 70%).
Asfor what to look for, you should be looking at 3yrs of figures for a business (and it should show all the revenue and the business expenses – don’t listen to the old one liner about tax!, unless you know exactly how much the business is making). Also I saw a little book in a newsagency that gives you the figures for the average business (debt levels, income, etc) so I would pick that up (I cannot remember the name). Lastly ANZ has some good buiness calcs to help you out (http://www.anz.com/nz/calc/busfintools/default.asp)
Also check out http://keystothevault.com/ Keith Cunningham has raised a massive amount of money for his companies and has taken two of them public. He courses come highly recommended.
Rgds.
Lucifer_auSMSF are not allowed to borrow directly, but if you set up a structure they can borrow indirectly. See a good accountant.
Rgds.
Lucifer_auThe main benefit of being retired is the time…. And with more time it is easy to do more deals. I’ve had up to 6 go through at once. Also you are working on your business rather than working for some one elses and that brings it’s own satisfaction (I hatew being told what to do).
What I do with the money? Well I’m going overseas next year (twice) for a couple of weeks, staying at nice hotels, etc. And going on a cruise. Also I’m meeting up with other investors so it will be great.
I also tend to dine out more too, meaning alot! (I dislike to cook, but hay some people love to cook!). Also a nice (read expensive) boat within the next 2-3 yrs.
In the end though I find investing more satisfying than anything else. Being able to see what you can acomplish always creates a sense of achievement.
Rgds.
Lucifer_auAs always some people say easy credit is bad and others is good. I can see why the agreements about credit being bad are very valid, but had not easy credit been avalible well then I couldn’t of done all I have…. In the end it comes down to the user and their level of finacial education (and never in the history of mankind has their been so much finacial knowledge and information at peoples fingertips).
Rgds.
Lucifer_auWhen you say partner do you mean a money partner or a J/V partner (who will take a more active role in the prperty).
Taking on a J/V partner can be good, espically if your skill sets compliment each other (one person is used to getting loans, finance and tying up land (for example) and the other is a developer), it can also reduce the work load (which can be quite useful).
Taking on a money partner is adifferent ball game. When you take on a money partner they are trusting you (the management) to control the investment; That means the profit and the risk control strategy, and so therefor communication is vital.
Before I started to raise funds I had bought over 8 houses with a replicable strategy. I had an exit strategy if they investment did not do what I wanted. I minimsed the downside by using the proper legal structures and J/V agreement, as well as my own risk control strategies.
Taking on a money partner is not something you take on lightly (it’s their money, not yours) and the downside can be very bad (lawsuits) and your reputation can suffer badly. So beware – get a stable of deals going (and a track record, usign your own funds), be very careful who you take on as a money partner, get the proper contracts/ legal structures and know your investing method inside out.
Also on your first investor deal you might have to provide quite high returns (over 15% for example).
Rgds.
Lucifer_au
