Forum Replies Created
[angry2]Oh please, this is just advertising for your stupid pyramid scheme. Do you think we’re that stupid?
MODERATORS!!!
… and in a falling market, the results are tragic, particularly for lower income earners*.
The reason you can’t make the numbers add up is quite simple – even the CF+ strategy is reliant on capital gains to work.
Cheers, F[cowboy2]
*Imagine going to a bank to borrow money for anything – to shift PPORs, buy a second hand car or a new fridge or washing machine.
“Certainly Sir (or madam), how much have you saved for a deposit?”
“Well, I’ve got $40,000 in negative equity from my investment property…”[eh]Hi foundation. I’m not sure what you a getting at with that comment. Redhaven is taking about adding value and making capital gain, not working for wages as a tradesman. It is very very different.[blink] Well what is your definition of:
a) adding value
b) making capital gain
as relates to this proposal and how is it ‘very very different’ to doing the work of a tradesperson?
The way I see it, there are only 2 options, they either do the work of tradies themselves, or they pay tradies – either way, my point should be clear.Redhaver & husband are planning to make $80,000 per year by renovating 4-6 houses. They will need to clear $13k to $20k per house, after expenses. The problem I’m pointing out is that buyers will only pay a small (if any) premium for a renovated house over the unrenovated house.
For example, which will buyers choose –
a) a $200k unrenovated house requiring $40,000 to renew
or
b) a $260k house already renovated?If the answer is b), Redhaven is onto a winner. My point is that buyers have become far more cautious and savvy recently. Also, thanks to renovation tv shows, many have an unrealistic expectation of the costs involved and will therefore only see $30k worth of expense in option a). This may in fact be true if they are prepared to put in some effort themselves and live with the results rather than pay for tradesmen to do the work.
Most tradesmen I know would smash that 80k figure anyway.Sure, over the last few years – but with building approvals plummeting, how long will this last?
Cheers, F.[cowboy2]
Originally posted by kempsta:
on ave what sort of yeild would you need to be cfAnything better than interest rate % will be gross cf+ but for safety you’ll want to use the following:
7.3% Interest Rate (for example)
+
1.5% Potential Interest Rate change
+
1.0% Annual maintenance
+
?.?% Property Management costs (including rates etc)
+
?.?% Margin for rental voids.I know it seems fairly conservative to be chasing >10% rental returns when many are happy with <5%, but as I don’t see further capital appreciation in property for many years to come, it would be daft for me to consider anything less.
Cheers, F.[cowboy2]
fnccollector,
I nearly did just this a few years ago – the problem was finance. It’s just too risky for the lenders (in their opinion, yet the fibro/asbestos box is ok – go figure!)
If you have the cash or a line of credit, this kind of project can be a goer, particularly if you are handy with gyprock & plaster! Call around the house movers in your area to see if they know anybody who needs a house shifting. Many old Australian weatherboard houses were built on hardwood frames and if still structurally sound these will last longer than many new pine framed buildings – get a builder to check it over.
Look for:
+ colourbond (etc) roof with plenty of life left
+ solid frame, bearers & joists
+ solid timber floor (will save you floor covering costs if you can just puch, sand, finish)
+ decent weatherboards (not critical, these are easily replaced)Now the beauty of this plan is that although the seller will usually ask around $10k for a house plus removal of debris etc, they are generally prepared to negotiate as they’re not trying to make money from the deal so much as avoid having to pay for the house to be demolished.
The house movers/removal company will usually take care of preparing the block, stumps etc, and if they also look after permits it will save you some trouble.
Connections, external cosmetics and an internal refit (somewhere between a quick plaster and paint and a complete gutting!), driveway, garden & fencing – Bob’s your job!On the other hand you could just go for a 3 br Symonds or similar for $115k and save all the hassle! It’s still got to be worth more as a rental or for sale than the $200k fibro.
Cheers, F.[cowboy2]
Originally posted by nowork:Would anybody be able to help me to find population rates for areas around Australia that are free.
For NSW, I’d use these, but remember that they are based on mathematical models which tend to move extremes toward the mean. Good information anyhow:
SLA Population Projections 2004 to 2031 for Excel
SLA Age Demographics for Excel
Similar summaries for Victoria can be found here:
Victorian Popluation ProjectionsSimilar information should be available for other states – if you’re having trouble finding it, let me know which state you’re after.
Cheers, F.[cowboy2]
I don’t know about RP Data or Residex, but plenty of places sell data that is readily available from the government, or simply apply proportional distribution to all postcodes in an SLA…
I’d use these, but remember that they are based on mathematical models which tend to move extremes toward the mean. Good information anyhow:
SLA Population Projections 2004 to 2031 for Excel
SLA Age Demographics for Excel
Cheers, F.[cowboy2]
_2004_release_version_1_11.xlsHi Redhaven,
I’m not trying to rain on your parade, or to say that it is absolutely not possible to achieve what you desire. However, you desire to earn $80k per year through buy/reno/sell at the same time as spending more time with the kids. Here’s my problem – most tradesmen in your area would have to work overtime to achieve that kind of pay in a stable market, so how do you figure you & your husband will be able to add more value and work faster than somebody with years of experience?In a booming market, people are prepared to pay a high premium for freshly renovated properties, but not so post-boom. Buyers will look for value – if they can buy a similar property elsewhere and get tradesmen to renovate it, they will (as it will be cheaper than your property and renovated to their taste – not yours. Not to mention that they always underestimate the costs involved).
So I guess you need to have a strategy
– do you plan to do 20 x $8k renovations?
– do you plan to do 4 x $40k renovations?Using your own labour, you might get for $8k a new bathroom, new kitchen bench & doors, painting, floor coverings, minor cosmetics & basic gardening. If this adds a $12k premium to the price, are you prepared to repeat this 20 times a year?
You see what I’m getting at?Cheers, F.[cowboy2]
Well, I hope they get a really hard slap over the wrist![biggrin]
I’ve noticed this is common practise here in Vic. Even the H-Sun in it’s market wrap commonly has:
– Price quoted pre-auction: $400k-$430k
– Auction Result: Passed in on vendor bid $460k
or similar.
It’s no wonder everybody loves REAs!
Cheers, F.[cowboy2]Cost effective against oil doesn’t necessarily mean affordable for the average Joe, and I suppose it depends how quickly change is needed.But I don’t think the average Joe ‘needs’ affordable oil. Sure everybody ‘wants’ affordable oil, but as my dad used to say, “it’s healthy to want”![biggrin]
If petrol hits $4.00 a litre there would be a need for adjustment, but people are incredibly good at adapting.
It is possible to eat perfectly well for $25.00 per week… but does the average Joe want to?
F.[cowboy2]Originally posted by Fern:Quote:Originally posted by Nobleone:My take on it is Peak Oil is it’s not a doomsday theory, its just a peak in the oil supply graph. Oil will not run out ever, there will always be some to find at a price.
…and that change in price should be enough to make alternatives cost effective. This is why Peak Oil would / will (?) be a Good Thing ™.
Cheers, F.[cowboy2]I think it is significant that sentiment has fallen faster than during the stock market crash of ’87 or the recession we had to have![ohno]
Part of that planning may involve marginally cutting spending.or even the entirely ‘new’ concept of repaying debt as opposed to simply waiting for capital appreciation of assets![blink]
Interesting times ahead.
Cheers, F.[cowboy2][blink]Shoot! Thanks for dragging this back up techa. Congrats on a most remarkable result.
Cheers, F.[cowboy2]I for one am looking forward with interest to the time of PEAK OIL and beyond. Interesting times ahead.
I’ll chase up that doco too, thanks Fern.
Cheers, F.[cowboy2]Hi Turnby. I actully like your idea, but shouldn’t you be the first to make a suggestion?
Cheers, F.[cowboy2]
Well, he or she is going to have to find / borrow / steal it! Alternatively, you could give them the 7 Gs yourself…
Cheers, F.[cowboy2]Oh dear, one of my pet hates – the investment clock!
Why? Because every investment clock I have ever seen is either broken or has been broken! The very concept requires that the primary variable is time, with every event on the clock being intrinsically linked to a previous one…1) The London School of Economics ‘Economic Clock’ has events in this order:
+ Falling interest rates
+ Recession
+ Rising share prices
+ (Rising) real estate
+ Rising interest rates
+ Falling share pricesWhen what we’ve actually seen is:
+ Falling share prices
+ Falling interest rates
+ Rising real estate
+ Rising share prices
+ Rising interest rates
+ Falling house pricesSo where does that place us?
2) The European Property Clock
+This diagram illustrates where Jones Lang LaSalle estimates each prime office market is within its individual rental cycle as at end June 2003.
+ Markets can move around the clock at different speeds and directions.Given that the four positions on this clock are:
+ Rents falling
+ Rents bottoming out
+ Rental growth accelerating
+ Rental growth slowing
and the only direction options are forward & backward, how could any market move in a different direction?
ie:
+ Rental growth slowing
+ Rental growth accelerating
+ Rents bottoming out
+ Rents falling
and how could this possibly relate to the Australian rental market where rents only ever go up?Cheers, F.[cowboy2]
Of course it’s not the role of government to control its constituents’ spending!
On the other hand, I don’t see anything wrong with the RBA raising interest rates as opposed to looking after those with credit card and mortgage debt at the expense of the all Australians & the economy.
I also wouldn’t have a problem with a government interested in raising financial literacy standards rather than leaving the lessons to ‘wealth building’ gurus who leave ordinary folk with nothing but debt at worst or a tax deductible ([angry2]) loss at best.
F.[cowboy2]What if rate rises have no effect?If this measure is to believed, the rate rise may indeed have its desired effect!
Consumer Sentiment Index Crashes
Now all that remains to be seen is whether consumer demand follows confidence…I don’t think years and years of excellent leading economic growth can be dismissed as a bubble.…unless there was a significant correlation between GDP growth and household debt.
Domestic consumption funded by exponentially increasing consumer debt has been a major contributor to GDP over the last few years. Unfortunately, this unsustainable practise has lead to government complacency and delusion of the masses, not to mention a ballooning current account deficit.
On the positive side, at least the government is talking about using the budget surplus to shore up its unfunded pension liabilities. It seems rare these days for our elected representatives to look beyond their term. Next stop IR reform, then taxation! WOOHOO!
Cheers, F.[cowboy2] (who incidentally is not a Liberal Party voter).
Originally posted by DD:Just an idea. I have them all the time.
Are they all this reckless and dangerous?
…So if you just get standard 80% loans this equates to a total investment portfolio of $835kSo get 7 x $100k investments that are neutral or positive cashflow plus costs just off your PPOR. With 7.5% return the banks will love you, then sell your dog of a first investment (negative little beast) and all of the profit goes off your PPOR as non deductible or bad debt component.
Ok, so now they have $955,000 in debt. I’m sure that will give pasandbec a great feeling of security.[blink]
That’s $3,000 per fortnight in repayments! What happens in the event of a vacancy? If interest rates ([whistle]) rise by 1%, where are they going to get the additional $390 per fortnight to keep their heads above water?Do this and if you do it right in 2 years you have 7 x 60k profit from your small investments so sell 2 pay off your ppor bad debt then with 5 left use this as your base to grow. With increased rents 2 years later as well, these smaller IP’s will then be positive for you and things will be rosy in time for the kids.In your perfect world maybe. In the real world $100k properties don’t appreciate by 27% year after year. In the real world you can’t sell two properties with $120k CG, pay selling costs, pay CGT and have enough left over to pay out the $235k PPOR loan.
In the real world, houses / units costing $100k now are far more likely to be worth $60,000 in 2 years time than $160,000.
In the real world there are thousands of Australians who have followed this kind of bad advice and are well placed to reap the ‘rewards’ of their ‘investments’… in the form of personal insolvency.PS146 Certified Financial Planner[blink]
Regards, F.[cowboy2]
Oh, pasandbec – I’m glad you have apparently come to a sensible decision, as opposed to this type of bad advice. There is nothing wrong with crystallising your gains by selling.
