Forum Replies Created
- How are you supposed to make a decent income through real estate?
The first step is to establish a strategy.
This:Our aim is obviously to replace our income and ensure that we are making a steady and regular profit NOW from our properties and also draw from the equity to continue buying more properties – not just have the rentals pay the mortgage and see the profits when we reach 65.is not a strategy, it is a goal. Your current strategy of buying negative/neutrally-geared properties on maximum leverage is not going to achieve this goal in a stagnating/falling market. If this is the only strategy you are comfortable with, you might consider opting out of real-estate investment until the next boom or adjusting your goal.
My strategy is simple – timing the market. I believe the old saying “a long term investment is simply a short term investment gone wrong” is pretty appropriate to people who are holding multiple highly-leveraged properties at this point in the market cycle and hoping for capital gain sometime in the future.
Many here, however, disagree.I would not think of buying a property for rental unless it was returning well in excess of 10% pa, and only speculate on future capital gains with money I can afford to lose & gearing levels likely to prevent loss. I think an exit strategy and weighting / balancing is also important.
Meanwhile, Torachan – your frustration is entirely understandable. Fortunately for you, house prices have a tendency to revert to historic means* (or below!) after boom periods, and there is no fundamental reason for this to now change. While waiting may be painful, you will be in a far better financial situation than those in your (our?) generation who have stretched their finances to buy overpriced houses once this correction has played out.
Cheers, F.[cowboy2]
*in relation to wages, rental return, replacement cost etc.
Hi Westan,
Changes… or a foothold for a CGT?
Scrap his plans to liberalise foreign investment laws and instead bring in tighter controls, both to limit speculation on property and to focus the inflow of foreign capital on new, productive investment.Look at introducing a capital gains tax on properties other than the family home. This would help to deflate the property boom but more importantly would give the Reserve Bank the flexibility to drop the official cash rate.Yes, they welcome investment dollars, but not if the only result is unnaffordable housing. Real estate speculation does not sustainably contribute anything productive to the economy, and NZers are questioning the value of foreign investment in their houses.
All 3rd hand of course (friend’s brother works in taxation in NZ).
CHeers, F.[cowboy2]
Originally posted by MiniMogul:In NZ you can depreciate all properties, no matter how old or new. Another great reason to invest there, apart from no stamp duty, no cap gains tax,
OT, but I’d watch this one closely MiniMogul. NZ have already started to clamp down on foreigners withdrawing CG profits from the country without being taxed, and rumour has it that further tightening (including investment property CGT) will shortly be announced.
Cheers, F.[cowboy2]Well I just can’t work out why Melbourne’s house prices are stagnating / falling at the same time it’s population is booming![blink]
Hi Shelley,
This is not unusual at all. Real estate agents tend to overquote to attract business, then pressure sellers to lower their price once an exclusive deal is done.
The banks usually take valuations from more reputable sources, after all it is in their interest to ensure their money is secured. It is interesting to note that in some areas, valuations have been lowered recently.
As an alternative to a REA’s estimate, you could pay for a qualified valuer’s opinion and pass that on to the bank, but it might be a waste of money if the bank still won’t lend you your desired amount.
F.[cowboy2]1) You can’t borrow against a 100% financed house. You’ll need to own a minimum of 20% first.
2) The horse is named Friday.Cheers, F.[cowboy2]
[blush2]Of course!
I was thinking in reverse – that the protective value of purchasing properties through a trust is that private assets would be protected from liability in claims against the trust,
whereas,
the protective value of a trust is that trust assets are protected in the event of a claim against the investor.So do lenders require a personal guarantee from the trustee when lending funds for property to be bought through a trust, or is the trust itself the borrower and therefore liable for the debt?
Sorry if I’m a bit thick about all this. I think I understand the advantages (and disadvantages?) tax-wise, but am still trying to understand the asset protection side.
Cheers, F.[cowboy2]Unfortunately weatherboards come in all different sizes – matching your old ones might be difficult (or you could be lucky and find them easily!).
If you manage to match your boards you can replace single weatherboards or small sections. Just be sure to have a stud behind the join to nail the ends into, and seal all joins with a paintable silicone. If they are all in poor condition you might find it easier to replace the whole lot at once rather than a few each year (and repaint).
You’ll often find the top few rows have been protected from the weather enough that they don’t need replacing, in which case it is fine to use different shaped boards for the bottom and leave the old ones up top. The effect can be pleasing to the eye if well done.
Any old building supplies shop will stock some kind of weatherboard. I’d recommend Weathertex or Hardies Linea over traditional wooden boards.
Cheers, F.[cowboy2]Interesting that PMI are forecasting significant interest rate rises in 2006.
Apparently so is Alex Erskine
The RBA will soon have to come clean on just how bad the inflation outlook really is. This will be a matter of shame for the RBA – imagine overshootig next years’s target (a range of 2-3%) not just by 0.25% (which has been admitted) but by a monstrous 5% inflation rate. 5% is a conservative outcome of a continued rise in wages of 4%, a collapse in productivity growth to zero and a move to a weaker – more export-friendly and import-repellent – exchange rate of say US$0.70. What will interest rates have to rise to then, dear Alan?I guess property investors just have to hope the government resists pressure to abolish negative gearing
But scrapping negative gearing and the first home owners grant is gaining traction among policy thinkers. The Reserve Bank of Australia chief Ian Macfarlane recently called for a review of negative gearing.
Leading think-tank, The Centre for Independent Studies, also blames the Federal Government’s generous tax breaks on housing for causing a blowout in prices and affordability.Cheers, F.[cowboy2]
Start from the bottom?[biggrin]
Originally posted by kay henry:Gazundering- quite the worst concept I have heard of… I would question the legality of it.
No question really – contracts may be amended by either party until exchange.
Gazundering is simply the buyer’s equivalent of ‘Gazumping’ (vendor accepts an offer then chases a higher offer from alternate buyer/s) which has been an accepted practise for the last few years.
Welcome to the ‘Buyer’s Market’.Cheers, F[cowboy2]
Originally posted by PurpleKiss:Not sure you can Gazunder in WA as our offer and acceptance that we sign and countersign when negotiateing in WA is a legal document.
I could be wrong, but I think you’ll find that even after the exchange of contracts, the buyer can pull out during the ‘cooling off period’.
Or perhaps WA have their own laws… I’ve only bought in Vic.
Cheers, F.[cowboy2]Originally posted by collie:How do you actually practically access equity?
How do you get to that money?Sell you house![biggrin]
Alternatively, aquire some additional debt using the increased value of the house as security for the loan.
Cheers, F.[cowboy2]Gazundering – Simply lower your offer before contracts are exchanged. The vendor stands to lose legal, conveyancing and perhaps agency costs by pulling out. It doesn’t work in a booming market, but as sellers become less secure this can be a great way for the unscrupulous to get a good deal!
Cheers, F.[cowboy2]Sorry richmond,
I didn’t have time to write a full reply. I was pointing out that the article is a thinly veiled promotion by a vested interest (the newspaper) for a vested interest (the RE advertisers) who are the main source of income for the newspaper. I wasn’t in any way referring to your good self, and I congratulate for your successful speculation.
I particularly liked the statement:And you only need to look inside the massive 36-page Property Week guide in today’s Weekend Bulletin to gauge the strength of the local real estate market.Of course!
Cheers, F.[cowboy2]So if the trustee is potentially liable for losses incurred by the trust, in what way does a trust structure protect either the investment assets or personal assets of the trustee?
Thanks in advance,
F.[cowboy2]Call back tomorrow with your original offer of $175k. Regardless of the EA’s response, explain that you will lower your offer by $2500 every day for a week then go elsewhere…
The vendor is prepared to negotiate and your cash is king. Make him/her know it.
If you’re absolutely ruthless don’t forget to gazunder the week before contracts are exchanged. Don’t go overboard, just 2 or 3 thousand for good measure.Cheers, F.[cowboy2]
…and not a VI in sight![blink]
Does the use of a trust structure absolve the trustee of personal liability in the event of insolvency?
Well, here’s the thing tom; while HPI isn’t included in CPI, it is at least in part (IMO largely) responsible for some of the inflationary pressures now and into the next few years. There are 3 main ways that domestic supply of money increases – government spending, foreign investment, and debt (consumer and business).
Australia is nearing an unsustainable level of household indebtedness, and surveys have shown that this is not linked to job security. I read recently that 40% of mortgage holders have ‘released equity’ for discretional spending over the last 5 years…
So whether the CPI measure of inflation includes HPI or not, house price inflation does lead to price inflation.I laughed again tonight to hear the Labor Party claim their victory in the by-election for Mark Latham’s seat was caused by the Lib’s breaking their promise to keep interest rates low! I don’t doubt it either, the kind of voters who are likely to make such tenuous links are the same ones who would have several credit cards maxed out and no savings (perhaps they don’t need any as they have several highly geared IPs?) – the very people who’s excesses have forced the RBA to raise interest rates!
Cheers, F.[cowboy2]
