Forum Replies Created
- wblack wrote:Thank you v8ghia, so it fair to assume that it's better to use our cashas a deposit, rather than our equity?
Not necessarily…
I take it you are trying to borrow from your Principal Place of Residence (PPOR) to buy an investment?
If so, you may want to check with a tax accountant whether you can claim deductions on the interest you pay on the amount you borrow for investing purposes.
If you can claim the interest, then you may find better ways to use your cash. I.e. cut down any non-deductable interest on other expensive items such as car loans or personal loans… Or maybe even on the portion of your PPOR loan that is not used for borrowing for investments.
I should add, I have only bought a couple of houses before but each time I ended up having to come up with last minute cash to resolve some sort of unforseen expense that my broker, bank manager, or myself did not count on (or was calculated incorrectly)… So make sure you have what you need to get the job done, and leave a little breathing room in the kitty!
Hi Tiffany,
There are a lot of variables to consider with your question.
The actual cost will be determined by how much the house costs to buy; how much you use for a deposit to the bank on settlement; and in which state the property is located. There are also a few 'extras' you need to consider, such as building and pest inspections, and which conveyancer you engage to do the legal stuff.
I am not familiar with most other states, but I can shed a bit of light with regard to buying property in QLD. At a minimum you will likely be up for:
Transfer duty (stamp duty), and a transfer fee – The amount increases or decreases with the price of the property. It is also charged at a different rate depending on whether you are buying the property as an investment property (IP) or a Principal Place of Residence (PPOR). The Office of State Revenue is the receiver of this duty, and their rates are listed here http://www.osr.qld.gov.au/duties/about-duties/rates-of-duty.shtml You can calculate it yourself, or use some online calculators provided by most banks on their websites. also, if this is your first property and you qualify for the first home owners grant, then there are some concessions to be made here, provided you comply with their requirements.
Conveyancing (legal), varies by which conveyancer you use;
mortgage registration fees, only usually a few $hundred;
Loan Mortgage Insurance (if you are using less than a 20% deposit), also varies dependant on which bank and their preferred insurer, as well as various other factors;
Oh, and landlords insurance/home insurance, etc… you may have to pay a month or so in advance depending on who you use.
That should just about cover off purchase of an established house, but I have no idea what the costs would be for a new build… Someone on here will have a clue with regard to that, and I would be interested to know also!
As always, comments are of a general nature and are not specific to your situation. Seek professional advice, your broker or loan manager should be able to help you out with determining the most of it or help point you in the right direction. The more research you do, the less likely you are to encounter any nasty surprises, but you will ultimately be responsible for identifying and covering all costs/problems associated with your purchase.
Oooh, that's a neat trick…. will have to check it out.
Nah the thingamagig replaces the wingwong, which is no longer in production… But what I really want to know, is why do gooses need bridges anyway???
gronk007 wrote:Am I over-reacting? Am I nit-picking?
I don't think so… It's a fairly simple matter figuring out who has paid and who has not. Particularly given the fact that many property managers are no longer responsible for rent collection. They have outsourced that function to specialist collection agencies who simply 'direct debit' tenants accounts.
Theoretically, this should free up more time and resources to focus on more pressing matters… like facebook.
But again, I don't think this is unreasonable. Late rent is critical information for all clients whom, depending on the way they manage their funds, may in fact be reliant on the rent coming in on-time to pay the mortgage or other expenses.
Prior warning can change a property investors reactions to the situation, saving dishonour fees or reallocating funds, buying baked beans instead of lamb shanks, etc. In turn, early warning can strengthen the relationship between investor and property manager.
This is also an indicator to go around and check that the tenants are still residing in place… wouldn't be the first time a tenant has done a runner.
This happened to my parents a number of years ago. The tenants had been behind in rent for a month, and despite repeated attempts to contact the property manager, my parents could make no contact to find out what was going on. Eventually it was the old lady that lived over the street (we used to live in the house) who called up and said she thought the tenants had bolted.
Turns out they had. We got up there as quickly as we could, but they were already weeks behind in rent and had trashed the house utterly on leaving…. There was holes in all doors and a few walls, and they had slashed every flyscreen in the house, drained sump oil in the garage, pulled apart engine bits on the upstairs carpet, smashed every 3rd tile in the bathroom (with some precision! now that takes patience!!), pulled cieling fans out of the roof, and stole every light bulb in the house…. including the little one from the oven.
The agent was completely oblivious to the situation… which is not really surprising…
But the REALLY shocking part, is that the tenants turned up at the office and handed in the keys mid lease…. The agent must have thought it was expired, because they gave them back their bond without so much as checking contract, the rent situation, or inspecting the property.
I was pretty young at the time, but that has stuck with me. The last place I rented out I handled it myself, and it was incredibly easy!!
Hmm… $10,000 + bunnings…. that's dangerous talk!!
For some reason, every time I walk in there for a $2 thingamagig I walk out with $1000 worth of doobywhatsits… and on most occasions I have completely forgotten about the thingamagig and have to go back!
Now picture 'store credit'…
That's awesome guys, thanks for all your help!
Excellent news! thanks for your input Richard.
I am confident with servicability. Indications from the various online calculators provided by the banks would suggest a borrowing capacity significantly higher than what I am looking for.
Can anyone shed some light on what the tax implications may be when doing something like this?
Obviously I will consult an accountant before doing anything, just wondering if anyone has done similar or have any anecdotes from similar situations they have been in?I should add, we do have a PPOR, but there is not enough equity in it to use.
Hi Nicole,
If you could, I would like those details please : )
My place in Booval needs raising and restumping too, before we renovate…. Though I still need plans and approval before any of that happens.
Which reminds me, if anyone knows a good and reasonably priced building designer and structural engineer (I presume I need one of them for putting in a deck) local to Ipswich, QLD I would appreciate that too!
Back to the original post though, check also how many of the stumps actually require replacing… if you can get away with just replacing one or two rather than the whole lot, then you will save thousands!!
The only concern I can think of when restumping and levelling, is that you mention it has been renovated…
I.e. If they have gone to all the trouble of straightening all the doors and windows in a crooked house so that they open and shut properly, then when you straighten the house all the doors and windows will become crooked… Get an opinion from a builder or two as to how much re-work there might be involved. I shouldn't expect too much, but if they have installed a spankin' new bathroom suite then the last thing you want is any waterproofing sealant to crack under the tiles in your lovely tiled shower…. as mentioned above, prepare for the worst case so that there are no bad surprises!!
As for actual costs to re-stump: My neighbours in Booval just lifted their house to legal height for $26,000. They said they had the option to lift it or just re-stump it, and figured "why not lift" because the quote they had just to restump was only 10k cheaper… So now they have an extra 100 odd m2 of partially enclosed space under their house to play with…
dtrump wrote:they sell that sort of stuff at IKEA…but im sure you'd get a better price elsewhere.Can any one comment on the pros vs cons of carpert versus floorboards for an IP??
There are numerous threads on this topic actually…. from what I can tell:
General preference for a rental property is builders carpet. It's cheap; it's easy to lay; looks great when laid professionally; it's the tenants responsibility to clean it when they leave; it doesn't get scratched up by people walking around with stones in their shoes or high heels; it doesn't warp or distort like some of the cheaper boards; a few pulls here and there are not a concern; and it's easy/cheap to replace if you get some tenant who decides to carry bits of his LS1 commodore engine upstairs and pull them apart in the middle of the lounge room floor….. Having said that though, there are exceptions. For example, in some areas trendy engineered floors or tiled floors are expected.
I'm personally not a fan of lino… Sure, it cleans easy, but one scratch in it and it's screwed…. then you start getting bubbles and all kinds of horror… And pulling it up is a nightmare!! Or maybe that's just my dodgy 80's lino experience talking. Feel free to correct me those who have used it with success more recently.
For an owner occupier, once again it depends on what the area demands but more people tend to be leaning toward hard floors… easier to clean, they look swish, and owner occupiers will tend to take more care with them…. The 'area' will also indicate whether you can get away with lino, or whether tile/engineered floors are expected.
I guess it also comes down in part to the style of house… if it's a post war style house that would normally be associated with polished timber or carpets, and all you have to work with is chipboard, I'd probably whack down some cheap carpet that looks good, laid well by the pro's, and splash out putting some tiles down in the kitchen and wet areas. That would probably cover off both kinds of buyers, opening up your market more.
Ooh yeah, the mortgage is definately a sting you would prefer to do without in the early years… But do the same calculation on rent increasing at a rate of 3% per year. You will find yourself paying about the same amount over the same time… difference is, how much will the house you own be worth at the end of it? And how much do you save in your retirement?
The other thing to consider, is whether you are better off taking on a house at the top of your borrowing capacity, or one that you could breeze in… I take repayments I can make easily for several personal reasons.
1. What happens if my partner gets knocked up and pops out a kitten??? My bank account would say Meouch.
2. Extra repayments. The more of those you make (particularly in the early years) the less interest you pay overall.
3. Spare cash for renos. Particularly when buying older places, you're going to need it or work on the house will go nowhere (particularly for things you can't/don't want to do yourself).So in answer to your question above, extra repayments can reeeeeally bring down the interest over time. The calculator I used with the info you provided threw out some different numbers… but making 10% extra repayments (about $60/week from your figures above) from day 1 made a saving of near 150k, and took about 7 years off the mortgage…
Offset accounts and whatever fancy bank things people use do similar things on a 'day to day' basis… I am not expert at such things, but from what I understand, the cash you leave sitting in your offset account each day (when your pay hits the account or whatever) reduces comes off the balance of the mortgage for interest calculation purposes… but you still have access to the money to do with as you choose, and can even have cards linked to the account for your weekly shopping etc.
Having said that, there are sometimes more profitable things you can do with your cash that outweigh the benefits of putting the cash on your house up-front. i.e. if you can deposit 10k on your house in a year for extra repayments, but came across an opportunity to turn that 10k into 30k from a subdivision, flip, or other project then you would need to consider your options and risks very carefully.
Investor 888, very blunt… but accurate.
As a 20 something myself, I know how hard it is starting out…. Not having 'equity' to play with in an existing house really prices you out of much of the market…. But not as much as you might think.
You do have a lot of options available, but it's what you're willing to trade off to do it. As the saying goes, "Nothing ventured, nothing gained."
So you can't have that 500k 4 bedroom mcmansion with the media room and the pool in the new estate down the road…. honesty, few of us can. but why????
Because nothing you can do to juggle your existing situation short of getting a better paying job, finding other cashflow, or winning the lotto, or coming into inheritance will help you afford the repayments or bring the price down….
But there are sooooo many other things you CAN do!
Subdivision, for example, has been very profitable for many users on this forum…. And you don't even need to live in the same state as your project to do it!
Can't afford to do it yourself??? neither can a lot of people….. Herein lay an opportunity to find other like minded and similarly cash flow challenged people (that you trust) to partner up.
But as with all things, developments have an associated risk that you must be comfortable to wear… figuring out what the risk is, and how much you are comfortable with, is entirely up to you.
If the level of risk associated with developments and subdivisions is not for you, or you can't find someone else to partner up, then you are looking at what you can do with your first home to make it more affordable.
You could look for a smaller place than you may initially have wanted… Maybe an older place that needs work, and bring it back over time to increase its value… You could look at moving away…. Or you can look at how you can improve your weekly cashflow while living in a bigger place you do want. For example, you could buy the 3 bed place next door to the 5 bed mcmansion, and get a couple of boarders in to help pay the mortgage.
These solutions are not for everyone. I myself have lived with others before, and hated it… I have a partner with 0 risk appetite, so developments are out. But I do live in an older place, needing work, 35km from my day job. I can chip away at it every weekend for the next few years, and feel comfortable that I am already doing something about my future.
Hi dreamteam,
Apologies for the brief response before, was just on my way out from work ; )
What I took from your first post is that you are seeking a solution that increases your cashflow, gets you into some place bigger but still close to work, and allows you to keep both of your existing properties.
So maybe if you could refinance the unit over 25 years again for the same amount as you currently owe on it, then the outgoings on the mortgage wouldn't be quite as high. That is assuming you are still making repayments on the 290k you bought it for???
If you can do that (someone like richard or terry should be able to advise further), then you may find yourself in a position where you are making a decent amount of income from the property each week 'on-top' of the lower mortgage… That should help the burden of the negative geared regional property a bit, and you will have cash flow equal to the mortgage repayments you were previously making on the unit to put toward another place (rent or buy depending on your situation).So really this doesn't even touch the equity you hold in either property, or try to balance it elsewhere. Just extends the time you're taking to pay the unit off, in an attempt to retain both.
I would definately recommend seeking professional assistance with your situation though… I am not even sure if a bank would go for something like that… I don't see why not though, more cash in their hands from your interest payments over the long term.
Unit should be almost paying for itself… could you refinance it, use the difference to offset the amount you're paying on the other house, and rent somewhere closer?
I know that would mean a number of sacrifices to lifestyle (moving) and your investment (paying off the unit over a longer period, and therefore more interest)…. but what are you really willing to trade off???
You could always sweeten it for them with a longer settlement date, so they can arrange for their next place in their own time….
Not a problem for you either… You get the place for the price nominated, save yourself a few weeks mortgage, and score a few weeks extra time to line up a tenant.
Andy,
What makes them so good?
I have heard some of the bad points about student accommodation before.. poor capitol growth, and that they are only rented for so much of the year, for example.
But what are the up sides, from your experience?
Lisa,
Also have a look around for properties that may be worth more than that, but which you may be able to negotiate down to that price… i.e. mortgagee sale, deceased estate, anyone in a hurry to sell, house has been on the market a long time, or you could try plain old 'lowballing'.
This way you get a house within your budget, worth substantially more than what you're paying for it.
Hi sammmeee,
This is an 'offers over' situation which, when done properly, can be a very good way to sell a house for maximum profit… Which is why the Scots love it!!
Of course, the reverse of that means that the buyer tends to pay top dollar or above for the same house… which is not so great!
It's similar to a car salesman asking "What price will get you in this car today?"
It puts onus on you to provide a price for what you think is reasonable (or lower), but on doing so the dealer is immediately in the position of strength with the ability to renegotiate or flat out refuse your offer. In turn you can only raise your offer on their terms, or walk away…. Good for them, but not so good for you!There are negotiating tips available all over the internet that can help with this sort of situation… But whether for a car, house, business meeting, or who gets stuck with washing up duty, negotiating is negotiating!! Ultimately the same rules apply as if you were buying any property, under any terms of negotiation.
So with that in mind, get your requirements in order, and make sure you have taken care of your homework. Research the local market, properties available, comparative sales, time on market, average rent for that kind of house, increases over the last umpteen years, and estimates to repair any problems with the property.
If you think your offer is reasonable, by all means put it in. But be prepared to:
1. Cite the reasons why you are offering below the asking. Your conclusion should be based on your home work and backed up with evidence.
2. Go one step further and anticipate the agents possible responses so that you can nail them with logic and more evidence to back up your conclusions.
3. Back away if it’s getting toppy. Performing the above two steps well may not affect the way the vendor or agent views your offer (or they may receive higher from someone else). You just need to stick to your guns, not get carried away, and identify your upper limit.
It's a buyers market out there right now, so if it comes off then great… If it falls through, there will always be another house just around the corner. The last thing you want to do is pay too much for a house, and then spend years in a slow or flat market trying to make it back!I looked at a corner block recently in Ipswich. My dad and I were looking at it for what appeared to be a fairly simple sub-division… (as simple as they come for rookies anyway)
As you would expect, the price was slightly higher than other neighbouring houses (with comparable characteristics, condition, and configuration).
But when I checked with the council though about the possibility of sub-dividing, they advised me of two potential problems.
1. The size of the block was 850sqm… Ipswich council prefers to make blocks a minimum of 450sqm…. that's not to say that it couldn't be done, or that they would definately reject it, but it is another point in the 'risk' column.
2. While it wasn't shown on the plans I could muster, the council indicated a major storm water elbow travelled right under the 'back yard' which would need to be relocated before approval for any dwellings could go up (and possibly before they approved the sub-division)…. I don't even know how much it would cost to dig up and relocate a council storm water drain, and I dare say it would have been quite off-putting to potential buyers had I left it there…
We figured that for our first sub-division we probably didn't want to take something like that on, even if it turned out to be cost effective, so we didn't take it any further.
My point is, if it is a corner block and the sale price is increased to highlight the 'development potential'…. that doesn't necessarily mean it's viable to develop or sub-divide that particular block.
There may be other advantages though…
e.g. If there is a garage connected to the house at the front, you could possibly turn it into another living space, rumpus, or bedroom without too much hassle. But the benefit of a corner block is that you still have access and space for a double lockup in the back yard with alternate street access… You could even put a carport out the front to double your parking, and increase your floor area for considerably less cost than an extension.
Unfortunately, the example I was considering above had none of these things.
One disadvantage though, is that you'll be hard pressed finding a private space in your back yard that isn't 'overlooked' by passing traffic (foot and vehicle)… which means pants become mandatory at all times… that would definately be off-putting to some of the tenants I have had before, and likewise the value of the street ; )
