Hi layingplans,

Everyone has a different strategy.  At the moment part of mine is to only buy stuff that I can drive to after work if necessary to get a personal visual on any issues.

Can you help us understand something of your lives?  Where you live, what industry you work in, where your family is located… this will help us understand what towns are not a major bother for you to visit often for research, reno, etc…

jacm

You will build equity at the same rate regardless of whether you are on a P&I loan or an I/O loan with offset.  So longer as you pour the same amount of money in, it is the same.  eg if you normally pay $700 a month towards a P&I loan, of which $400 is the interest component, then on an I/O loan, you'd pay your $400 interest, and you'd whack the remaining $300 in the offset account.  Thus you are indirectly "paying off" the property at the same rate.  The difference is you didn't hand the $300 over to the mortgage.  It's harder to get that money back once you do so.  You have to re-apply for additional loans and thus pay the application fees. 

The penalties for not playing by the rules within SMSFs are very very harsh.  Do yourself a favour and be absolutely one million percent sure you are playing by the rules.

Ahh then you have four years to refine your saving skills, and also to identify stellar properties.  Here are few suggestions:

You could spend some of your weekends educating yourselves on things like:

– What kind of properties offer you more for less?  For instance, is there a massive loungeroom that could have a piece sliced off it to create another bedroom?  The cost of adding a wall might be say, $1k-$2k, whereas the cost of buying a house with the additional bedroom ready-made is more in the order of $40k.

– What kind of things can you see that you could do to improve the property?  eg does it need a whole new kitchen?  or would simply changing the handles on the cupboards and doors suffice?  Or perhaps keeping the carcass and changing the doors and handles?

– What sorts of things are prevalent in your chosen area that are likely to cost you a heap of money? eg is it an older area where the houses are all on old stumps?  Upskill on the cost of things such as restumping and re-roofing so you can look at a property and say to yourself "bang, right there – that's gonna cost me $5k".  such costs can be included in your reasons for your offer on a property.  eg "I know you want $400k, but I know restumping is required and that will cost $10k so I offer you $390k".

– Are there parts of town where the blocksizes are bigger, offering opportunity to subdivide and sell the backyard?  Take a visit to council and ask to see the zoning maps and have someone explain block size minimums to you.  Realise that the zoning and min block sizes might change during the next four years.

– Help some mates out with their renos.  It will give you a bit of experience in a few bits and pieces and give you the confidence to look at something and say "yeah I can see it needs this and that but I know how to do that and I know where to buy the hardware from, and the task will take me only 3 weekends".  You'll also be able to look at an ugly or dated room and look past it to say "yes this room is awful, but I know that if I paint it white, change the window coverings, the door handles and the lightfittings, it'll be just lovely".

– spend a bunch of weekends in the hardware store to understand what you can buy there, and what things cost.  it does sound stupid, but it is handy to know for eg, "well a solid new chrome doorhandle will cost me $25" for instance.

– visit free DIY sessions at your local hardware store.  watch "how to" videos on youtube.  You'd be surprised how much you can learn!

just a few things to get you thinking.  good luck!

Hi Miranda

If you intend on doing a lot of the reno work yourself, then you are going to have to be within a reasonable commute of the reno property.  Otherwise you'll spend heaps of money on petrol, and you'll get very very tired.

When looking for a feasible property to renovate, you need to look at the cold hard numbers.  If buy the time you pay for the acquisition of the property, the relevant stamp duty and legal fees, buy the materials and pay the relevant tradies for the reno work, pay for your petrol running around, pay for bank interest during the reno, pay the real estate agent's cut of the event sale price, and your legal team again, will there actually be a worthy profit?  (Remember any profit you make will be subject to CGT – capital gains tax – unless you live in the property and declare it your PPOR – primary place of residence).

Look at what un-reno'd properties are selling for in the area, and what reno'd properties are selling for.  Not the advertised "we hope we can sell for this amount" price, the ACTUAL sale price.  This will help guide you with realistic expectations.  It's also important to have a grasp on how long properties take to sell.

Hi Stephen

Welcome!

Just to clarify:  you are wanting to buy a place to live in?  Or an investment property that tenants will reside in?

If it's a place you'll live in, I presume you guys are eligible for the First Home Owner Grant?

If you can tell us what state you are in, and what approximate area you are hoping to buy in, it will help us understand the stamp duty taxes and so on relevant to your situation.

But generally, the rule is that land is king.  The more land you own the better.  Better still if it is within an hour commute of a major city such as Sydney or Melbourne.  Personally I prefer houses or townhouses over flats in multi-storey buildings for this reason.  It is land that goes up in value, not the building sitting on it.  So the more land you have, the better.

here is an example of roughly what you ought to negotiate next time you get the chance:

7% of rent inclusive of gst, or thereabouts
One week's rent to sign a new tenant
$55 re-letting fee (resigning existing tenant) inclusive of gst
DO NOT pay an agent by the hour, nor at all, to attend VCAT hearings.  If you agree to pay such things there is absolutely no incentive for them to get a good tenant for you and take care of the property properly along the way.
There will normally be a statement fee of $2 a month or thereabouts.
You should expect an agent to inspect each of your properties twice a year, and you should insist on seeing a written report and photos which clearly show the state of the property.  It is not acceptable for the property manager to send the agency secretary to perform inspections – it needs to be the Property Manager who is trained to know what issues to look out for.

If I were you, I'd look in the Blacktown through Seven Hills district for a house on a big block of land.  You can fix up the house, and build another dwelling in the backyard later, or just subdivide the backyard off and sell it.

$200 is ridiculous.  It sounds like you've been charged a re-letting fee as well as a re-advertising fee.  That said, a re-letting fee can be negotiated to zero when originally recruiting your Property Manager.

It is true that when a 12month contract expires, the tenant can stay on a "periodical lease" which means they can stay on a month-to-month sort of basis.  The difference is that they have to give you less notice if they want to leave.  It is important that 120days before the lease expires you find out if the tenant wants to re-sign, and if not, you must give them notice that they must vacate at the expiry of the lease.  Otherwise yes, it can lapse into a periodical lease if the agent doesn't bother to get them to sign a new lease.

Colin's right.  I like to do the same thing with a clause on insurance.  "Subject to the buyer being able to secure an insurance policy over the property that is acceptable to the buyer".  Some property types are tricky or pricey to insure.  You would not want to be left holding a hot potato that you were contractually obliged to buy, but for which you were unable to secure insurance…