Forum Replies Created
Jarmbie
The minimum deposit allowed is $50. Get that written into the contract sign it and you are in a better position without tying up $1000.ausierogue
Sorry if I come across as being too dogmatic, inflexible or too locally focused but I am always aware of the fact that we (Aus.) are not really a significant force in the world economy and thus cannot really justify strength against other currencies often even though our economy has performed very well over the last few years. This is due to other countries not really having a compelling reason to want to hold our currency. In the past this desire may have been driven by our much higher interest rates in comparison to other major markets but as our rates have converged this has become less incentive. What other major factors could there be, competitive labour (not likely), cheap resources (used to be but dont know anymore), highly technological industries….?China may be a manufacturing powerhouse because of their cheap labour but their business systems, financial markets and society as a whole have a lot of catching up to do. If their labour continues to accept being exploited remains to be seen but one would expect that the communist history would suggest not. Dont get me wrong, I dont think it will change soon. It would surprise me if unions and the like would really come to the fore over the next 20 years, but one never knows.
AusProp, I do agree that China are a player but think they will be willing to continue to swap goods for US dollars for quite some time. Someone from Aus. can hardly comprehend the extent of their population and the fact that even if only 20% of their population were poor (probably more like 90%) then 300 million would be poor which is bigger than the US population. The scale of their problem cannot be fixed in a few good years but more like decades. I dont believe that a system which is based on ridiculously cheap labour is sustainable in the long term anyway.
As far as the US$ being bought by central banks is concerned. This has happened as these banks have moved away from holding huge piles of gold as backing for their own currencies. Until there is an alternative to gold or US$ this is not going to change no matter how large the US deficit becomes. I think the whole system is very sick but dont expect it to break anytime soon.
ausierogue
I dont agree that the aussie dollar strength is here to stay. I feel that the reason it is high at present is because the US dollar is weak. When the US dollar gains strength it will push our dollar and other currencies lower. When this will happen is unknown but I am sure it will happen. The US economy is far too large for this not to happen.Also, I feel that interest rates will rise gradually over the next few years – nowhere else to go. This will mean that the yield from cash become more attractive and one should consider allocating a portion of ones portfolio to cash or near cash investments (probably around 10-15%) when rates start exceeding 5%pa.
Although I normally lean towards the “doom and gloom” movement with respect to the current state of the property market, I do however think that property is the best investment by far in terms of safety and sleeping well at night. With the right properties one can make a huge CG and get a reasonable return with very little downside risk.
My strategy is to move some of my less desirable IP’s and get into better quality IP’s. These will almost certainly never drop in value even with a “crash” and at worst will show zero or very low increases in yield and capital value. This is a lot better than some of the other class of investment, including businesses which although can generate bigger yields normally need much more hands on effort by the investor that property does.
Of course, when one has a sizable portfolio one must not put all ones eggs in one basket (investment class), so which other classes does one consider right now. Well, if I had a pile of cash and a huge portfolio of IP’s I probably would do what you are doing Steve and look at franchise businesses. These are by far the easiest to run as they provide a proven system. They are also the most successful types of small/medium business out there with very low failure rates.
I know I said I would not participate further but I feel I really must point out to others (not SIS as he just doesnt get it) that all expenses including every last one of the above two lists that SIS has posted are only allowed as expenses if they have been directly incurred as a result of endeavouring to generate income from the investment. In other words, you cannot claim alcohol while inspecting your IP (on holidays) if you are just having a meal with your family. It will only be allowed if you have a valid reason for needing to incur the expense and the expense was reasonable (cannot claim $100 for drinks at a 30 minute meeting with the RE agent). Furthermore, if you argue that if you did not spend the money on alcohol (or whatever the item is) then it would have prevented you from earning the revenue, then the ATO might allow it. Another example is TV. If you can make a case that if your IP did not have a TV it would not be rented out then they might allow it, but will also only allow the depreciation on the TV in a similar manner to non-fixed items (cannot be removed) like dishwashers etc.
Dont get the wrong idea from the list SIS has posted that all the above expenses are all claimable because most of them will actually be disallowed by the ATO unless you have a very good reason and most people do not.
Now I can get out of here I hope!
PS – Kay, I also apprecaite you alternative views in these forums and in no way was upset by your questions.
RickHy
$70-85K sounds like a reasonable price but what is the return like?Well SIS, this whole discussion has become too much for me to further participate in, what with the inaccurate syntax and the misuse of terms like CF+ and CF-, and you trying to explain simple terms to me as if I am a child, etc. You may be thinking that you are ripping the system off (which is what the tone of your posts suggests) but if and when the ATO do audit you, I suggest that you will not be such a happy fella.
I dont have a problem with people minimising tax but I do have a problem with people knowingly claiming deductions that are inflated or not valid (i.e. holidaying in your IP and claiming 100% of the expenses as an inspection). This is why the tax rates are so high in the country.I’m out of here[
]SIS
Your replies are very difficult to follow and you seem not to be telling a consistent story here.
It just does not sound very likely that you would be able to achieve a “net rental loss” when you seem to be neutrally geared (if that is what you are saying?) especially when you say that your expenses are being used to reduce your taxable income but you also mention that you have this cash in hand/bank??? So which is it, have you really spent the cash on expenses or do you have the cash in hand/bank?Give the agent a deadline and if he doesnt meet it get another agent!
I agree with Kay, any seminar that is free or cheap is worth a look. Other than that, there are plenty of good resources around on the net, in books and through companies that can educate you on PI without costing an arm and a leg. If you are in QLD, try Financial Intelligence Corporation for their ideas. They give you heaps of ideas without any obligation and if you do join, the fee is small ($400) to start with. BTW, I dont have any interest in them but found their ideas quite good. They dont only restructure your finances but also offer many property related service and networking.
Bear
I would try getting the contract altered to give more time. If this is not possible you may have to decide if the lease is that important to the decision to buy or if getting another tenant would be little hassle. If this is the case you may want to go ahead and settle anyway else pull the plug now. If you do decide to pull the plug, do it through your solicitor and all in writing.SIS
You seem to be rambling in all of the above posts. You contradict yourself all over the above posts as well. In one sentence you say your properties are slightly CF +ve, in another you say they are CF -ve and in another you call them neutral. You also mention that you are only claiming depreciation on 5/13 properties, which makes it ever more difficult to offset the income. If you are not actually spending the money you claim on expenses (and thus would not have it in hand as you claim) then you are not entitled to claim as expenses (with the exception of dep.)It sounds to me like you are not being totally honest with your accountant about your actual deductions and thus are claiming more than you actually should be. Remember that your accountant is not the one who is accountable if you are audited but rather you are.
I reckon you had better pray very hard that somebody doesn’t dob you in and you are not audited!
Lovely area to live but anything bought there would be so heavily CF -ve that you would need to work 2 or 3 jobs to subsidise it. Do I think the CG on these properties will offset the weekly losses? Dont know! But the chances are they will. These properties are too expensive for normal working class people. They are (because of the prices) only really a possibility for the mega-wealthy, IMHO.
How can it be said that people should put no weight in any stories from TT and ACA just because the journo’s/producers don’t understand as much as we do about property. They often only interview “experts” and ppl who have been on both ends of good and bad experiences. Lets get real here and understand that there are too many ppl out there getting into property without any advice and education in property. These ppl should not be getting into a lot of these deals and these TV shows may be a way to highlight some of the issues even if the shows don’t reveal all. It takes many years to become an astute property investor and even then one learns new stuff all the time.
I totally agree with giving a balanced perspective and this means showing many points of view. I also agree that TT and ACA are a valid forum for those who don’t have as much time or education in property, to see these perspectives. I do however think it is a bit late for those that are not too savvy and have already overspent in the last few years. This amounts to many thousands of ppl (especially moms and dads) who bought on the positive hype generated through the media by ppl with a vested interest in property (e.g. real estate agents, developers, builders, banks, etc)
The main issue here is do the media sensationalise (of course they do) and does this cause the info being represented to cause an undesirable effect on ppl (I think it does). But this does occur in both directions, in favour of the “there will never be a downturn” lobby in some cases, and in favour of the “doomsday prophets” lobby in other cases. I feel sorry for those ppl that cannot see all of this media input in a balanced perspective and also are not prepared to gauge general sentiment and other information like unemployment data, job ads, clearance rates, etc to reach an informed decision. There are many ppl like this!
Pisces133
I dont think you read my responses correctly. I do think there will be a correction soon and I do think it will need to be a large one to return true value to the market. I do however not expect this to happen and certainly not overnight. I instead expect some areas to be more affected than others (as always) and many IP’s held by moms and dads that are not very property savvy will be feeling a lot of pain because they paid too much for their IP’s. This will drive prices of these IP’s down quite a fair bit but not overnight. I expect the downturn to actually last well into 2007 and not 2005 as other predict. Although a 50-60% drop in prices is needed to return the market to equilibrium this will probably not happen and I expect a 30% drop over the next 4 years and no sky falling in.To answer another question you asked. No I am not selling all my IP’s so that I can buy them back at 30% discount. Good IP is hard to find and selling the good ones I have now would take many years to replace. I am in it for the long run.
I believe in buying for CG and at a price as close to neutrally geared as possible. Thus I will still buy –ve IP if I think it will grow and that the rent will grow. Besides, there is very little choice but to by –ve if you want CG in the long term. Over time these IP’s become +ve anyway. My approach is to aim for these IP’s to turn +ve in 5 years. This means that I am limited in how many I can buy but this suits me.
In response to your statement that there is a large influx of immigrants. The government allow 65000 skilled immigrants into the country every year in their immigration program out of a total of about 110000. These immigrants represent about 0.55% of the total population. This is not a large enough number to affect anything. To add to this the birth rate in Aus. is declining which offsets this 0.55% influx of immigrants to some extent.
Terrorism is a huge factor and was the direct cause of the stock market crash in 2001. This luckily affected the property market in a positive manner. It is just a matter of time before the next attack and its nature will determine how property is affected.
One major factor that will affect the property market is a stable/unstable share market. If it remains stable for 10+ years people will move back into shares and managed funds to support their retirement. This will reduce demand for IP.
Pisces133
I dont think that the wording is too strong.
The extent of the contraction is dependent on the extent of the boom. Nobody can argue that today is at or close to the peak of one of the biggest booms that Australia has ever seen. This should be an fair indicator to the extent of the boom and thus the extent of the bust that is required to return balance to the market.Aus Prop.
My point was that the long-term trend indicates for e.g. that the CG growth in Brisbane has been about 2% over the last 50 years. Therefore, the CG’s of 20% and higher p.a. every year for the past 8 years amounts to 144% (18% X 8yrs) higher than the long-term trend.Kay
I agree that there are always bargains in any market but I also think that a lot of people are fooled into believing that 5-10% discount off the current market value is a bargain. What if you buy now and negotiate a 7% discount off the asking price but in 2 years time the market value is 30% down on now just like happened in the past. Would you still think you bought a bargain?
Always consider the long-term trend currently which indicates that almost every property for sale today is overvalued by about 100-150%!Wayne
There are many steps in the subdivision of rural land and it does normally take a long time. Councils are often understaffed and overextended hence the delays. If you can pick up the land for $330K and are prepared to wait it out for some time, building your interest and other holding costs into your feasibility study along with realistic projections of selling prices for the 33 lots over different timeframes you may find it to still be a worthwhile opportunity even over an extended period.
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