[House CallMember@house-callJoin Date: 2010Post Count: 165]

January 18, 2011 - 10:17 am

started 2010 with no interest in property, other than owning PPOR and my business building.  Broke toe in January 2010 and could do nothing but read.  Ended up reading money magazine and finally understood the power of equity.  Devoured every property book and mag I could get my hands on then me and the Mrs bought 2 interstate IPs and one locally for me to renovate as a form of LSL this year.  Plan to buy more IPs this year, but unsure where (want to get in Sydney but not sure where to start).

[House CallMember@house-callJoin Date: 2010Post Count: 165]

January 18, 2011 - 10:06 am

Thanks all.  I have looked at the list in API and the list on duckster's link. And thanks Jane-I have sent you an email.  All much appreciated.  I have bought a house that the previous owners had had great plans, ripped out the kitchen, bathroom and a heap of gyprock, then plans changed and they moved overseas for a couple of years and now they have fully changed their minds about the house and sold it to me in its ripped up state.  I have a big project in front of me as a result (well, big for a white collar worker, anyway).  Hence the question.  Thanks again.

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 20, 2010 - 8:22 pm

I live in Tamworth and I can tell you Tamworth is booming at the moment.  It is one of the fastest growing regional areas in NSW recently. A lot of regional business HQ and a progressive council. Huge new housing developments going on in several directions, capable of housing 10-15000 more people over next few years.  Also a lot of new unit complexes going on. 

Drivers are RAAF flight schoot, National equine centre (AELEC), many industries such as beef, poultry abbatoirs, expansion of all the major retailers (eg 3 Coles now, Woolies wants to add second store, more Macdonalds recently etc-those guys do their research).  Just no ALDIs, which sucks.

Also a lot of surrounding mining activity at week in/week out commutable distance (within 2hrs). 

Rental return quite good.

Tamworth floods but levibanks all upgraded and damage usually limited to playing fields and occasionally to low lying businesses.

Tamworth also one of the "Evocities" (along with some of those other towns mentioned).  Although no Uni here, there is a large UNE and Uni of Newcastle presence here, esp in the medical world, as v good regional hospital and teaching facilities.

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 20, 2010 - 8:05 pm

KellyP wrote:

Thanks for the help guys..  Sometimes it's just easier to ask outright than to ponder the hard questions for far too long. Sometimes it's especially to ask people you don't know personality, besides the fact you don't feel as much like a lunatic it's probably much easier for someone else to see logic with no involvement. 
I need to do the right things and good things will follow!

Good call KellyP.  Very true. I hope you figure things out without too much emotional or financial pain.  Merry Christmas

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 20, 2010 - 8:04 am

I would suggest see a marriage counsellor to work at the marriage part; see a lawyer to protect assets part, and a financial advisor for the long term finance planning part.

 IMO you are nuts to go guarantor or joint anything if the marriage is on the rocks.  It spells more trouble.  Also take a step back and ask yourself what the future of your r'ship is?  Why were you attracted to each other in the first place?  Go back to the original reasons but I would definitely advise against creating more potential mess by increasing debts etc.

This statement of yours is a warning bell:    "vino make me happy… be still my thinking bit sad concerned mummy mind!!!!". 

Get help

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 19, 2010 - 8:36 am

I am no expert but I think your $12k is capital expenditure so it raises your capital base (relevant for CGT if you sell).

Then when you rent it out you can depreciate the $12k you spent.  (as opposed to claiming anything now. )

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 19, 2010 - 1:35 am

jacqui_03 wrote:

House Call,

Just to confirm,

I am not selling – It was a Buy, Renovate, Hold project. I plan to hold the property for the long term.

And the figures you have calculated are not accurate. If you read further down the post you would see a change in figures.

Purchase Price was $200k – The valuation at Purchase was $215k – So I bought it for $15k under market value prior to renovating.

Purchase costs were – $5600 for stamp duty, $1000 legals, $600 buildling/landlord insurance.

Renovation was $20k – Not $25k. $25k was the very maximum if something went wrong.

I have not got a valuation yet after the renovation as we have just completed.

We do not have any sale costs either as we are leasing the property.

The property was purchased due to being Under Market Value, Opportunity to Add more Value and decent rental yield.

Oh Yeah.  Sorry Jacqui-I did not notice there was a whole second page of comments after the first page!

Your photos look excellent.  That is a brilliant job.  Inspiring. 

Also going back to my last entry, your purchase costs were a lot less than I guessed then.

So assuming you get a valuation in vicinity you thought, your numbers are:

purchase: $200k
costs:  $7200
renovation: $20k

valuation: $270k

total capital gain: $50k
(profit if you sold with 5% costs: $29k)

That is more like it, for your 3.5 weeks work.  No wonder you want to do it again.

Curious, how much of this job did you outsource vs do yourself?

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 18, 2010 - 11:10 pm

jacqui_03 wrote:

Market prices in the area for a 3 bedroom place is around $265k-$275k. Residex estimates it to be valued at $280k. Offer has been accepted at $210k however it needs a new kitchen, carpet, paint, new doors, finish tiling in laundry/kitchen. Bathroom & toilet have already been done renovated. I have negotiated a a 52 day settlement with early access so I can start reno's and give enough time to get a tenant in place. He has also thrown in tiles which had previously purchased but couldnt afford a tiler to complete. I am budgeting $20k- $25k max as this is my first renovation so I am trying to get extra conservative.

Going back to the original post, are these good numbers, anyone?  Correct my numbers, but there does not seem to be much profit margin:
purchase $210k
puchase costs (approx 5%)= $10.5k
renovations $25k
estimated sale price=$270k
sale costs (approx 5%)=$13.5k

net profit=$11k.
you then get slugged for CGT on $270-($210+$25)= $35k capital gains, so whatever CGT applies to that.

To me there is almost no margin, so why do it? 

(PS This is not a comment on what Jacqui is doing, more a question on how people calculate the numbers, as I have very similar numbers on a place I want to get and renovate and the above calculations stump me because there seems to be almost no fruit for your labour, as it were, unless you renovate and hold, which would mean no sale costs and no CGT.)

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 18, 2010 - 10:35 pm

Catalyst wrote:

. I can replace kitchen, bathroom and paint an entire house in 4 weeks and maybe even rip out a wall.

that's impressive.  How much of all that do you contract out to tradies? 

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 17, 2010 - 2:59 am

can you just cross out the "TBA" and insert the correct address on the lease, initial the change and then sign it without actually pointing out the change to your friend?
BTW I agree with everybody else-deals with friends get extra messy if they are not at arms length and completely above board.  Just the fact you asked the question on this post in the first place means you are not 100% comfortable with the TBA bit.

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 10, 2010 - 10:11 pm

Thoroughly recommend Steve McKNight's book: "From 0-130 properties in 3.5 years" for philosophy of positive gearing.
Thoroughly recommend Michael Yardneys book "How to grow a multi-million dollar property portfolio"- for philosophy of buying for capital gain.
recommend "20 must ask questions for property investors" by Margaret Lomas for what to actually look for in a property and how to select area etc.
Magazines are good too, for real life questions and current state of the states:  Your Investment Property" or Australian Property Investor" magazines at most newsagents for about $10 an issue.  Worth getting at least 1 issue.

And read read read and ask ask ask on this forum.  There are a lot of very successful, very knowledgable, very sensible people who assist and advise for nothing, on a regular basis.

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 9, 2010 - 9:12 pm

Looks fantastic Brian.  Inspirational!

Your costs don't include paint.  Also what did you do your floors with?

[House CallMember@house-callJoin Date: 2010Post Count: 165]

December 9, 2010 - 3:29 pm

duckster wrote:

What  you need to search on is the term trust surcharge
As you have not mentioned what state you have the land in you should start at the relevant state revenue office for your state.

NSW, Sorry should have said that.

Thanks Duckster.  That was one helluva helpful and comprehensive answer!

 Seems we will be up for $100K x 1.6% + $100=$1700 each year.  More dead money (along with rates and insurance).  Though at least with rates and insurance your garbage gets collected and you're covered if it burns down.  But land tax??? What a waste of money!

 Is a trust really worth it when it immediately triggers this rubbish?  This is just a direct hole in our profit and unfortunately wipes out most of the benefit.  As opposed to buying in my or my wife's name where we would have no land tax issue.

[House CallMember@house-callJoin Date: 2010Post Count: 165]

November 27, 2010 - 7:28 am

we were interstate on the week of settlement.  I thought next time I would pre-arrange to get my property manager to check it on my behalf on the morning of settlement and then phone me immediately.  Can you do that?

[House CallMember@house-callJoin Date: 2010Post Count: 165]

November 26, 2010 - 11:44 am

Terryw wrote:

Trusts don't pay tax (usually) what would happen, if it is discretionary, is the profit of $70,000 would be distributed to beneficiaries of the trust by the trustee. The money is then income/capital gains in the hands of the beneficiaries and they pay tax on it. Usually this is done with tax efficiency in mind with the low income earners of the family group getting the most so that less tax is paid. eg.. if you were an adult and not working you could get up to $16,000 pa with no tax payable

Thanks Terryw,
That was the plan.  I would do the actual renovating and then sell sometime after completion and distribute profit to my lower income earning spouse and 4 kids.
Or alternatively hold, and revalue/refinance to utilise new equity towards another trust purchase.

[House CallMember@house-callJoin Date: 2010Post Count: 165]

November 26, 2010 - 9:40 am

We had a room the dimensions of a perfect cube-12'x12'x12' with very ugly bricks floor to ceiling, including an area where an old internal brick chimney had been removed leaving uneven broken brick in one section and soot stained/heat damaged bricks in another.  We Gyprocked the lot.  basically the method was get a hammer and bash the walls to scuff the brickwork every 1-2 feet apart.  The gyprockers whacked plaster in these scuffs and then just glued the sheeting to the walls.  Once dried, the filled the cracks between sheets as per normal and put up fancy cornice, then I painted it all as per normal (plus added a frieze etc etc, boring decoration details).

But it was no more expensive than sheeting a bare room with stud walls except for the 12' ceilings.

Thoroughly recommend it.  Great "normal" finish

[House CallMember@house-callJoin Date: 2010Post Count: 165]

November 26, 2010 - 6:36 am

update: I amicably phoned the selling agent who was very helpful, appropriately shocked and offered immediately to compensate us for cleaning costs.

Which proves there are some really reasonable people in the world and that now removes most of the slightly bitter taste I had in my mouth about all this.  So JacM you will be pleased about that. 

[House CallMember@house-callJoin Date: 2010Post Count: 165]

November 25, 2010 - 11:53 am

luke86 wrote:

Hi House Call,

You could get a solicitor to write a letter I suppose like GOM has suggested but I imagine that this will cost you another several hundred dollars. Maybe if it isn't a huge cost to clean then just treat this as a property lesson and make sure you inspect the property a few days before settlement next time around.

Cheers,
Luke

Yeah.  Thanks all for input.  Luke this is actually the way I am thinking, too.  In the wider scheme of things over a year or two of renting this place out the cost of cleanup is miniscule.  Annoying but not a biggie.  But yes, I have already notched up another thing for my list of don't-forget-next-time things:  Don't trust anyone to do anything they don't have to; make them accountable by holding a stick.  in this case, not settling until mess fixed up.

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November 25, 2010 - 4:56 am

Thanks IPfreely,  other variable is how is this altered if purchased by our family trust?  (if at all)

[House CallMember@house-callJoin Date: 2010Post Count: 165]

November 11, 2010 - 7:49 pm

Scott.Dunstan77 wrote:

 What I would like to hear is how some of you people got started and how is it going or the outcome achieved good? Bad? Any advice on books/education and general wisdom for a wannabe property investor will be highly regarded!!

Cheers and thanks in advance

Scotty

Great thread Scotty. 

getting back to the original post. This is our story…

We did what you should do-ie buy a house and pay it off as quick as you can.  We aimed low so that it would never be a stress, which it wasn't.  Now fully own PPOR.  Meanwhile bought local business premises against our will, (because we could,) mainly to prevent erratic business partner from having too much control over things (great person, very entrepreneurial, good friend, this helped it stay that way). This was never planned to be an investment.  Gave property no thought other than that it served a function and owning it meant not being kicked out unexpectedly when whoever owned it wanted it back. However this premises is insanely positively geared. (which I did not realise till later-read on)

Then in January this year while pulling out the BBQ on the concrete verandah, the gas bottle fell off and pulverised my big toe.  Suddenly all the watersports and biking/hiking/motorbiking etc we had planned for a family holiday was out for me for a month.  Couldn't even swim or walk properly. Our family holiday was at some friends' house who happened to have some investment magazines lying around (they were getting into shares), including Your Investment Property magazine and money magazine.  So while all the kids/other adults did active things, I bummed around with coffees, timtams and investment magazines and in the process suddenly understood what "equity" meant .

Then how we could go and buy more property without actually intentionally saving any deposit money at all. 

I have since devoured every book I can get my hands on, subscribed to YIP and API and Money magazines and the steep learning curve has resulted in us using some of said equity as deposits for IPs in different states this year.  Now we want to get another IP in a capital city-just not sure which city as we want something for capital growth.

Books that have been excellent:
"Rich Dad Poor Dad" by Robert Kiyosaki- very inspirational and motivational. (and quoted by many other authors in their books, I might add!)
"From 0 to 130 properties in 3.5 years" Steve McKnight (essentially about positive gearing and going ahead by volume)
"20 must ask questions for property investors"-Margaret Lomas
"How to grow a multi-million property portfolio"-Michael Yardney.  (He makes a lot of sense about how capital gain is so powerful)

In summary we are still learning and our goal is not really properly formulated, except for the common thread in all these books , which is "get started", which we did quite quickly.

Other common thread is "Time".  so we are learning patience and waiting to see what Time does to what we have bought.

A bit nervous about having over $1M in loans all of a sudden, esp with interest rates on the rise, too, but the numbers are all ok so have to trust my maths a bit.

Anyway, that's our story.