Forum Replies Created
up to you but i hate em cause i think its a passing fad and a niche market and thus more risky
I raised this issue previously as I thought it had potential. I think it could work, but it would need to be well organized. We are talking possible several days stay, so discounted airfares, accommodation, food, entertainment ( local pub or club ) hehe! etc would need to be organized. Sort of investors junket tour. Well you could develop different products to suit a range of investors, depending on the type of property they seek and the budget. You would need a form to get info about the investors so you can place them on the right tour.
I see this as a viable service, but as I indicated, it needs to be professionally done and handled as a complete package. I mean you may choose to start small, but I would see you becoming the manager and hiring a mini bus driver for pickup etc.. You would also need to get some insurance in case of bus accident etc.. as you grow your business.
You would buy accommodation and meals in bulk, making deals with local establishments etc… basically you would need to make the whole show economical, but service driven.
If you can get say up to 30% discount on all costs compared to a single traveler, by buying in bulk and offering a steady stream of clients to local establishments, you could attract investors on a budget and skim some profit for yourself.
You would need to build a contact base with local real-estate agents and establish commission deals with them for client referrals. i.e. commission for referral and commission for sale. You could do a well run honest service, to differentiate from those scumbags flying people up to Brisbane and the Gold Coast, who then use pressure and psychological tactics on clients to get them to sign up to overpriced high rise units or properties out in nowhere land. But as I said you need to do your research.
roger doger
Boothy I think you are in a strong position to invest. You could sell your house and find a nice house to rent and try to negotiate a long term lease. Then invest some of your sale proceeds in quality brand new property negatively geared for near neutral cash flow. I suggest inner city brand new flats or units or townhouses. Stay well away from high rise big time ! I assume of course you pay income tax on your pension ?
If you rent for the next 5 years and acquire a brand new property each year, you will have 5 in 5 years and then you may want to sell one to restructure your debt into positive cash flow on the remaining 4. Then retire with you pension plus 4 cash positive properties all under 5 years old. This could put an extra few hundred bucks a month in your pocket. NOTE you would then be earning more and paying more tax, so you may want to buy another property to lower your tax burden. Thus you then have 4 cash positive properties and one cash negative property but one that is very tax effective being brand new.
I think 7 years is probably optimal I think they say as depreciation on internal fixtures and fittings ends after that.
just a thought for your situation. I’m still green at this really and this is just my hypothesis.
Yea I see this would definately needed o be handled professionally particularly from a legal standpoint and a risk management standpoint. If that could be successfully achived, I think this concept has powerful potential. Something for the future.
cheers.
not me, but I’m playing CASHFLOW for the first time tonight in Melbourne.
Yea I agree with the call your own shots take your own risks approach, but read widely and do research for a least 4 months. I think I spend 2 hours per night for 4 months 6 days a week, just researching the web for info on Aust property investment. This included anything related to property, tax, quantity surveyors, property valuers, banks, interest rates, conveyancors, government bodies for the building insustry, market research, bureau of stats, gearing calculators, practising by calculating hand, forums, other property related sites articles, market hype,
I ended up making a checklist of items that form my ideal investment property.
Terry yes, thanks I do see your quite valid point. Just now wondering if there is a away around this risk, such as some sort of insurance to cover the risk of other syndicate members not meeting their payments. You would definitely need some sort of insurance and some strict lending criteria such as , profession, years in job, salary, etc… This could be lucrative for insurance companies if the price is right. The insurance also being tax deductible. It could work a bit like landlords insurance in that it may cover the syndicate repayments for the lost member for up to so many weeks. This would allow the syndicate management team, time to source another investor. The management team could have their own buffer reserve of funds to also help cover this scenario, where they would then gain an ownership share of the equity to the value of the duration that it takes to find a new member. They then sell this equity back to the new entrant. The lost member forfeits some of their contributions to cover costs of placing a new entrant, legal fees, insurance claims etc.. They then get a residual payout of their membership policy.
Also through buying into highly sought after areas you could minimise the risk of no tenants and because they are optimally geared, there are no cash losses, just capital growth. in fact in high demad areas with high CG, rental yields will go up and create a cash positive effect even if when starting out it was neutral. This could help reduce the debt and offset losses on new acquisitions.
You see I see this as a lucrative way to target capital growth zones more rapidly via syndication. This way you acquire more properties more quickly in a growth zone well before the bubble bursts and the grow slows up. Thus you are maximising growth opportunity and rental return opportunity that follows it, with optimaly geared quality brand new property in areas that attract the high growth.
Otherwise if you are on your own, it would take much longer and by the time you as an individual investor can afford your next property you may loose 6 months of the growth cycle.
So pooling resources would enable a group to capitalize on the growth cycle early and then at some future point distribute some of the spoils through perhaps sale of a property or two or three etc..
The average property investor may only be able to buy at best two properties a year. But if they are all negatively geared they could only service so many of the properties before they could not longer grow. If each property is costing $50 a week out of pocket, the middle income investor could start to struggle after about the 3rd property. The exception is unless of course they are wrapping ( minority of investors ) or unless they have positive cashflow property, ( old property in rural areas with little capital growth and delayed maintenance bills )
I see the beauty of this is that you get to buy into brand new property, gear it optimally and get optimal capital growth in HOT growth zones as soon as they start to emerge. Thus the syndicate gets to carry both optimally geared property perhaps neutral or positive cash flow, whilst also getting optimal capital growth. [8D]
I think by syndication, the ability to structure the gearing more readily and optimally with quality investments in high CG hot zones, makes this attractive to me.
Dave I very much see your point. I’m just wondering how common this type of thing is and whether its worth being concerned about or whether its just a scenario that can be easily dealt with by correct property waste management planning. Anyway it’s on the first floor and it’s a brand new construction.
My other thought is that well if it was that dangerous now, the property would surely not have been registered by the local council. I understand standards relating to such matters are much higher nowadays. ( I hope
)Now that I think about it, I recently had a coat of oil based lead paint put on my own ceiling after rain damage to seal it. Then they applied a non lead water based paint on top of it.
At this stage I am leaning towards the gamble, as it is in a high capital growth inner suburb, but will gladly have my arm twisted if someone can convice me to abort take off.
cheers,
Daveman if you can use a calculator an pen and a pad you don’t essentially need software. But these heaps of free property investment calculators on various web sites. it aint that difficult. look at some of the free examples on the net or how the investment balance sheet works. If its viable in year 1 if probably will be viable in year 2 if its brand new.
income less cash expenses = net cash flow usually negative for new property 100% geared. then just add depreciation for building and fixtures and fittings to get deductible expenses for your operating loss ( cash and non cash ) calculation. deduct that loss against your income and recalculate your income tax. the difference in what you would have paid in tax to your recalculated tax is your tax refund. subtract the refund back from your operating loss, to get the net operating loss for the year. then divide by 52 to get your weekly holding cost.
In any event its always a good idea to work through the calculations manually as a cross checking mechanism and helps you get a better handle on the finance side.
interesting one. personal debts need clearing, but it may also depend on if you have equity in an existing property, and what your income cash flow situation is. Also the availability factor of the properties you seek. If you had to act promptly on two properties, I’m wondering if clearing debt completely may leave you a little short for up front deposits while you negotiate.
Also depending on how you have spent the personal loans may be another factor. Are they invested in some sorts of tax effective assets or is the money just spent on non income generating libilities ?
Although I tend to agree with the debt clearing philosophy, circumstance as always can be an influential factor. [8D]
hmm? your solicitor shoould send you some stuff but they keep some stuff for you in their files. It may take a few weeks before you get all the relevant docs. Not sure about title they may keep it on file.
Yea its a new block of flats just built. I have siged up for one, but the report says it has a site management plan to contain the soil contamination, like min 30 cm of clay then 30 cm of cement or soil. Must be some nasty stuff under there ! its got lead ans asbestos in it [|)]
It depends. Generally speaking, if you have outstanding debt to pay off such as a home mortgage or personal loan, it may be more tax effective to keep it as an interest only loan until that debt is fully paid off. . i.e. home mortgages and personal loans not being tax deductible offer no tax benefit in maintaining.
That said, it would also depend on the gearing of your IP and any tax benefits associated with it such as depreciation etc.. and cash losses.
I guess if you can service the debt and allow enough fat in your income for adverse circumstances that lie within the predicted range of scenarios, you are at least reducing you exposure to risk. i.e. if they talk of a property market crash in the order of 20% , can you still afford to hold your properties ?
Interestingly, what effect on rents would this have ? I guess after the crash, eventually they would go lower, with more properties having been sold cheaper and thus new owners demanding less rent income. There would be a delay effect though.
what are the rents like is Adelaide ?
Thanx.
Now I understand is taxedate you marginal rate of tax. Anyone care to expand on this ?
Yea Alison I see ur point, High cap gains can easily outweigh holding costs in 1 year. So if you couldn’t handle the costs you could sell and still come out ahead. If you buy quality property, selling would not bee too hard a task.
On the other hand +ve chash flow is also useful if you need the cash. But if you end up having big repairs down the track, all that saved cash could be eaten up. Now depending on the capital growth area, the scales could tip either way.
It’s a real challenge being able to estimate that far ahead. Some areas have been know to go backwards i.e. -ve capital growth. rural areas in particular more prone to this characteristic.
interesting you mentioned the 10% figure gross return on investment ( net return is much less say 4% ) , for a benchmark +ve cash flow property.
When you consider at my first glance, holding costs are appearing to me to represent about 1% of a -ve cash flow brand new investment properties value.
More interestingly good capital growth areas are yielding 10% + growth on the investment before CG tax. Thus a pre CG tax ratio of cost verses growth of 10 to 1 can be attained per annum.
Thus for every $1000 it costs to hold the property after tax effects, the property value is increasing by $10,000 over the course of a year.
Now if your investments are structured correctly, when you sell one IP you could reduce the CG
At the end of the day, the numbers have to work and either scenario can succeed or fail. It becomes an issue of risk management
Anyway I’m a newbie still so much to learn on this stuff.
So I guess its horses for courses.
PPP Position Price PropertyI thought the Tax Office was cracking down on the use of redraw funds for anything other than the purpose the loan was intended for.
I mean can you imagine using part of the redraw to go on a holiday, and whilst claiming the interest incurred on it as a tax deduction ?
Yea interesting ruling. So the Pool and Spa are now part of capital rather than plant and equip, thus included in the building depreciation at 2.5% ?
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