Forum Replies Created
Hi All
I have been researching Adelaide suburbs for about 4 months now as an alternative to Mildura where I live. There was an auction, if anyone was interested, today or over the weekend for a very old house (large and could be modified) with future development potential – 800 sq mt in Clovelly st Christies beach it was offers over $175k but that was just the price on the listing. Between the beach and the shopping centre and only a couple of blocks from what looks like the main road to the beach (Beach Rd). Great spot. I think Christies Beach area will be where we buy our first IP, but at the moment we are getting some help from one of the forums’ finance wizz’s to get ourselves structured right before buying as it seems that is something that most people regret not knowing more about when they look back. So I have cooled my heels on getting involved in this property. Back to the house in Clovelly St, from looking at land and homes in the surrounding area I think that it is very close to land value so you could put a renter in the house while you get a planning permit to subdivide. I have been on the SA gov website to see the places earmarked for higher density housing and this area is included in these planning areas.Cheers all
Julie FisherHi Michael
I understand what you are saying but it sounds like you are presuming that we build set plans when we build a house. We are custom builders so every house we have built is unique/different; we have never built the same plan twice. If what you are saying is correct then, most custom builders (as opposed to the large companies with their own designs) who build architecturally designed homes are (for all intents and purposes) project managers; the difference for us will be that instead of building 3 unique homes/villas in three different locations for 3 seperate clients, we will be building 3 unique homes/villas in the one location for ourselves. It also could be that maybe in the major cities there a builders that specialize in the seperate stages of construction whereas in regional areas where the amount of work is smaller all builders run the job from start to finish. The only stage in Sunraysia that seems to be consistently subbied out is concreting, whereas we do all of that ourselves as well. Thankyou for your help Michael. It is much appreciated.[exhappy]. I feel confident now that we can more than handle a small scale development ourselves. We tend to agree with the comment about working for architects. We think trade experience is what seperate great architects from the ones that don’t understand what can, and cannot be built. Some just draw it in anyway and hope that someone can come up with answer to make it work.Julie Fisher
Daryl Fisher HomesHappy Birthday Richard
I was going to make an effort and get that stuff off to you today; but now I’m not so sure that your advice will be much chop!!!![wacko] or [inlove]. So Daryl and myself hope you have a nice dinnerRegards Julie
Daryl Fisher HomesI don’t think that as a rule you can buy a cash flow + property. I think you have to create it. You may be able to buy something as close to land value as possible – it will be a dump which is why it will be cheap. Do your due diligence. Tart the dump up with some good old fashioned hard yakka (or employ someone else to do it for you) new fence, coat of paint, new fence, new 2nd hand kitchen (half of them come with new appliances etc etc and then get the property revalued. You will probably been unlikely to find one in any capital city so look in major regional centres for areas with various economic input to the place (especially gov spending on infrastructure). You may be able to buy a large block with one house subdivide and sell the land and pay off the mortgage on the remaining house (or PPOR I hear the finance wizz’s saying) and rent out the remainin house. It will probably still be worth a similar amount as most people dont have time for large yards and most of us don’t have enough water anyway for gardens and lawns…Ah the colour green…I miss it……Get out there and tell a couple of real estate agents what you are looking for and if you have your finances sorted and they now you are a serious buyer then you may get a call before a potential buy even gets listed (it happened to us this week). It’s not always what you know but who you know (and how often you call them to say g’day). Cash flow positive homes are never in the best suburbs but they could be in the ‘burbs’ next door so look around a bit wider and you might beat the rush. A few months ago I didn’t think that I could find cash flow + but maybe we can if you we are patient and are prepared to buy some ugly ducklings. You could even depreciate some of the repairs/reno’s. Read Margaret Lomas’s books, not for everyone but gives you and idea on how to work out if something will be cash pos or not.
JulieI can sympathize with the crazy by-laws some councils have. We have 4 large dogs (2 on their way out and 2 up and comers) on an acre, but we do have neighbors and fences so we are very mindful of how much noise they make. I view my dogs as a preventative security measure. Our dogs have beautiful temperaments (althought strangers wouldn’t know that) and as 1 is a retired pig hunting dog he looks fairly awsome so it would take a desperate thief or sicko to jump our fence in order to burglarize our home or harm our children. I would rather be notified when someone is at our fence or gate than when their head is halfway through my daughters window. In saying that some insurance companies give you a reduction on your home insurance if you have a security system so lash out and have both. The only thing we were told is to not put one of the signs that say ‘Dangerous Dog’ on your fence because you are admitting that there is a dangerous dog on the premises so if a burglar (or worse) breaks in and gets bitten he can sue you. We were told to only install the sign ‘Guard dogs on Duty’ as it notifies that there are dogs on the premises that are trained to behave a certain way in certain circumstances. I couldn’t imagine life without my mate ‘Duke’. Julie
In Victoria the zones are allocated by the state government but those decisions could be made with some influence by the individual councils when they need to free up some land for specific purposes. We bought a PPOR on an acre with the intention of selling off the back half to pay for renovations on the front half (as the agent said we could). When we spoke to the planning section of our council they told us we were zoned rural (now called farm zone) and that in that zone only blocks over 20 acres could be subdivided. They couldn’t do anything about it as they said the State Gov designated the planning overlays. We just had to wait and save for our reno instead. Julie
I should have mentioned to get on the Gov site for your state and it shouldn’t be too hard to find a legend to explain the terms. I think it is the Department of Sustainability and Environment in Victoria. Good LuckHi Richard,
Now that you have sorted that out for me (and anyone else reading), would you now advise me to go and see a financial advisor and get advice on how to set up correctly and then see a mortgage broker to compare finance deals? Obviously there is some benefit by not having all your IP’s financed through one property. I always thought that a bit of loyalty given to the banks would earn a bit of loyalty back (yes, I know, it even sounded weird as I was saying it[withstupid]). I don’t want to get the banks off side for our mainstream business reasons. We are in Mildura (Vic). If you are able to help I would be happy to send you whatever info you need. Just email me at address below and we can discuss it further if you have time.Regards.
Julie Fisher
Daryl Fisher Homes
[email protected]Thanks Richard, I didn’t take all he said for gospel hence my question. He is a bit more on the super side of the fence than the property side. Your rationale makes perfect sense to me Richard except for one thing I cannot understand. Will a bank let you borrow the full amount for an IP plus costs without additional security? I understand that the IP itself is security, but is that enough for lenders? Obviously there is a knack to it otherwise no-one would be able to accumulate more than a handful of properties.
I did ask if we could release the PPOR down the track (which wil incur a small fee) and the bank said yes. I suppose I would have to ask what criteria would allow us to release our PPOR from the IP loan to work out how quickly that could happen (maybe I’m naive now).
I have read one of Margaret Lomas books which placed great importance on making sure the finance and tax side of things is correctly structured which is why we haven’t quite finalized anything yet. Your advice and the advice of the many other finance wizz’s has been very helpful for me as I was beginning to tear my hair out?Regards
Julie Fisher
Daryl Fisher Homes
[email protected]Hi Finance Wizz’s
I am also very interested in this topic. We have just started to organize finance with our bank for our first IP. They suggested we first talk to our accountant to find out his recommendation. He told us to take out a interest only loan for the full value of the IP, set up a seperate mortgage offset account (against PPOR) for the rent repayments as all interest from IP is tax deductable, whereas if we deduct our deposit from our existing home loan then that portion isn’t tax deductable. Our accountant said that worst case scenario the banks will find a way to take everything off you anyway. ??? We have just had a valuation of our PPOR for $315K and owe $75K, we work for ourselves (builders) so we can buy, renovate sell in short time frames without too much loss but would rather buy and hold long term with the properties that we feel will be off most long term benefit. What do you all think??[eh]I agree with looking dirty. The main problem with the grooves facing up (aside from water retention) is that dirt, mud etc gets pushed into the grooves and it doesn’t always come out with a going over from a broom. If you had alot of traffic (kids) and/or had a fair bit of exposed dirt around the place combined with a reasonable rainfall I imagine you would soon be sick of scraping the grooves clean…
Hi there wayne
For many years people thought that the grooves in decking where there as a feature and used to lay decking with the grooves up. In fact the grooves are put into the decking to help keep the timber straight. If you look on the bottome of timber floorboards you will see grooves cut into the base also. As far as which side is correct, like Marc says it is personal preference although we prefer smooth side up. Best way we have found to install decking is with a coil nail gun with galvanized nails for durability if the spot will get alot of weather (wet). I am pretty sure you can hire these nail guns from hardware stores. I saw and ad on TV the other day showing Haymes have a new decking oil out that cleans up in water. But the other oils mentioned by Marc have all be used by us at one stage or another and are good. You can apply your oil with a very soft broom or a paint roller which will speed up the initial process as well as the reapplictions every year or so. If you need any more tech advice PM me and I will get Daryl to jot down some instructions for you.Thanks heaps Michael! I really appreciate your time and advice. The question regarding PM’s wasn’t intended to diminish the role of the PM but because where I live I would doubt that there are any. Only one architect up here is Uni qualified as far as I’m aware. Some of the architect/drafting firms in town offer this service but as I know how often Daryl has to visit them to explain to them that something they have drawn is unbuildable; I cannot imagine they would manage a project better than we could ourselves. We are 6 hours from Melb and 4 hours from Adelaide so importing a PM would be a serious financial cost and this would reduce our ability to compete in the market place with the many other local builders who also don’t use them. So I was sort of trying to ascertain whether they perform additional duties to what we would normally perform in the construction of a house in order to justify the cost. If they just handle the planning side of things then our building inspector has a planning expert on his staff to handle that and we just get the bill when the planning is approved. Kind Regards Julie
Anything structural can be depreciated over 40 from the year is was constructed (not the year you bought it) but there are probably costs inside that figure that can be depriciated quicker. For example if the kitchen was updated and included a freestanding stove (not an inbuilt oven) then as far as the ATO website is concerned this can be depreciated over a few years and not 40. This is one example of many so get on the ATO website and check out the list of 150 or so items that are listed and you can get a rough idea of what is a capital cost and what isn’t. If that $150K included the builders margin then that has to be deducted also as that isn’t able to be depreciated. If you are serious about the property then part of your due diligence may include getting a quantity surveyor to do a depreciation schedule for you; you may be pleasantly suprised. Keep in mind I am definately NO tax expert! Regards Julie[biggrin]
I think there are a few things to consider here Show-me-the-Money (SMTM).
For your first option.
Organizing and timing trades and costs efficiently are critical to a job coming in on budget especially at the moment with costs and trade rates rising (skills shortage) so in order to keep prices attractive many of the larger companies will mass produce plans and any changes made incur variations to you purely due to the time taken to change. These building companies also negotiate lower prices with their tradies as a substitute for the quantity of work that they will get from them. If variations to the dwelling are made then you will get a variation to the contract that isn’t in your favour as this is when these guys are able to make their money (usually whether the variation reduced the price or not). Developers who also build will also reduce the margins on the land and/or building to make it cheaper for them to do the total job rather than have someone buy the land and employ another builder to do the home. This is becomming more common where we live. We are custom builders and if we want to build a spec home we get charged full price from the developer to buy his land, we then have to build the home and include our own margin on it to make it viable. For the developer he is able to build the exact same house and sell the package for less as he didn’t charge out his land (to himself) at the same retail price and when the new home market is slowing this is exactly what happens.
We often get asked why we haven’t built our own new home as we are builders. The answer is simple-It costs us nearly as much as it costs everyone else. Most people have an unrealistic notion of how much profit is in the final product, which is why nikikb’s father only saved $30K, and I say only because he probably didn’t charge out his own labour for his own house. If he had that $30K saving would have been lower. Unless you are trade qualified to do some of the work then you will probably not save even this much. I do not know a single custom builder that uses a project manager to organize their jobs – we don’t , we do it all ourselves to ensure that the job runs on time and that we don’t loose money on the job. If you are in a larger city and the developer/builder uses PM’s then you may be able to take it on but there could be reservations on their part if they are concerned about your experience costing them time and money. If you decided to go owner builder and employ all your own trades then you would pay more for initial building permits and also for warranty insurance if you ever sold the house. Unless you have trade contacts you may also find it hard to ensure trades turn up on time and woe to you if they do and the job isn’t suitably prepared for them (that idle time means money they are not earning). An architect who is doing a custom design will almost definately charge more for the plans compared to the mass drafted plans of the big companies so this is eating into your savings as well. Once you remove the GST from $200K you are left with approx $181K. Remove from that permits, engineering, architects and insurance and you have b/n $170-4K left. How many squares of living do you want to build? $170K isn’t going to go far for a custom home. Even we as builders cannot compete with the prices of the big companies, but we certainly can on quality and finish and this is where our niche is. If the bottom line is your bottom line then I would suggest that you get one of the mass builders to build you a home. While they are doing it watch, learn and get as involved as you can and then you will get a good idea if you can handle it next time. Make sure you do all your homework before you make your mind up and good luck. JulieHi, you are right! There is an inland Marina proposed for Mannum in SA with provisions for 200 houseboat mooring sites and smaller recreational craft, 550 residential allotments (200 with water frontage). If you go to http://www.planning.sa.gov.au you can follow the major development links where you will find more info.
JulieThanks for those links Michael, I will check those out!
Just going back to when it would be prudent to prepare or commission a FS; do you prepare a FS for every development you do, or just the larger ones? (I would like to know if you feel it necessary to go through the process for a 2-4 unit/villa development or is it necessary only for larger projects). Would the banks view an application for funding more favorably if a FS is submitted when applying for a loan? How much would we expect to pay for someone to prepare a FS on our behalf? We project manage all our own construction so would you still recommend another PM for our first development? We do have the support of our local building inspector who has encouraged us to jump in. JulieI agree with marsden! If you are replacing it to improve the look of the roofline then go ahead but don’t do it just because it is asbestos. Fibrecement or AC sheet has indeed been around for a long time, the brown & blue asbestos was removed from manufacturing in the 1960’s but the white asbestos was only removed in the mid 80’s so any housing that was built prior to this would most likely have asbestos somewhere. There were many profiles including ‘shadowline, highline, striated, ribline and coverline as well has flat sheets. If your roof sheets are asbestos then it is most likely that your gutters and downpipes are also asbestos as it was used to make, not only roof and fence sheets, but ceramic tile backing, water pipes, fence panels, conduits, flues, shingles, eave sheets, ceiling sheets etc. The two main types of asbestos are broken down into friable and non-friable. Friable is the nasty one in which the asbestos can be crumbled by hand pressure. You should be absolutely sure that your asbestos remover is licenced. In NSW you have to be licenced to remove any more than 200 sq mt (for memory) as it has to be disposed of at special tips and has to be wrapped in builders film and taped. In Victoria it is only 16 sq mt. I am not saying that the guy you have got a quote off isn’t licenced, but his quote seems fairly cheap. Most asbestos sheets have a small criss cross pattern on the back (like it has been pressed into a coarse hessian). There is also an asbestos called Tilux which has a brick type imprint on it as well as a laminated type asbestos sheet commonly used in wet areas and has a little print on it (common print is white background with tiny brown flower). I am sure there are plenty more and the only way to tell for sure is to have it tested. Of course if you treat any cement sheet product over 20 years old as potentially asbestos you would be sensible and save yourself the cost. Unfriable asbestos (as in AC sheet) will pose no risk unless it is severly deteriorated or unless you start ripping into it with a grinder and making the fibres airborne (hence getting professionals), there is a certain way all asbestos has to be removed and disposed of. There are plently of websites about asbestos if you need further info. Good luck
Hi Sopkat
I am in the same dilemma! I live in a major regional centre in Victoria but have been looking at properties in the nearest State capital (Adelaide). I pulled info off the state govt planning website to view all the major infrastructure that is or has been planned to go ahead in the next few years.
I also think that my own city will do very well though; we are just about to get the first inland Marina in Australia and have had Government approval for 2 solar power stations to be built in the near vacinity and this is beside the tourism industry and nearby large scale mining.
I have been reading books and forum contributions now for about 4 months and have decided that I have done my homework and am going to spread my risk (investment dollar) and buy properties in both rural and metropolitan. I have used API magazine and tips from websites such as this and Reno kings to hint at what suburbs to look into and then I do my own research. I havent asked any real estate agents, mayors etc as I don’t think that they could honestly provide me with the information that I need…it took me months to work out what to even look for so I wouldn’t imagine that those people would really know what type of internal drivers would be needed to ensure a good return. Anyway that is my very humble opinion as I am definately a newbie to the game. I am having more trouble with trying to work out whether a property is going to be CF+ or not and how to structure my finances. That is my next chapter of research!!! I wish you all the best in your search.[confused2]I can sympathize with you there! My husband and I extended our conite PPOR about 6 years ago and when we started to remove the external walls that needed to come down we found that the conite had been installed over the top of weatherboards. After speaking to our neighbour we found out that both our house and his house were conited at the same time 20 years previously as the upkeep on the weatherboards had been let go and they had deteriorated to the point of no return.
We clad our extension in blueboard, insulated every external wall that was stripped, had a plasterer come and tape all the joins properly and painted the blueboard with a very shaggy roller and a textured paint to give a stippled effect similar to rendering. We scraped the telltale ‘conite’ bumps off the remaining conite walls with a concrete blade and painted the original walls so they all matched in together. We set the windows (old timber windows to keep in character with the rest of the house) in flush with the blueboard and before painting we ran a timber architrave around the windows and over the join. The final effect is tidy although the original weatherboards would have been preferable.
I must say that blueboard is a cement based cladding and while we were fortunate enough to be able to install insulation in every external wall of our home from either the inside or outside we also have a 1800mm verandah around most of the house now also which keeps the heat off the walls (when you live in Sunraysia you don’t need heat on your walls!!!) so I definately wouldn’t install cement based cladding in really warm or really cold areas if you couldn’t insulate.
I can appreciate tradespeoples opinions on the finish of cladding around windows etc; we also built a western red ceder home on stumps for some friends of ours on Kangaroo Island and while the new windows did have a flange for the timber to butt up against, there was still small gaps above the overlap. My husband had a work experience kid cut wedges from timber to fill the gaps and each window had a trim placed around the edge to finish it off.
I notice these days that there are alot of franchise cladding systems around. Some of these look terrible, the finish is plastic and cheap looking. But I suppose it comes back to who is doing the job. Some people take pride in the finish of their work and others get in and get out and either presume that the home owner will know no different, or they don’t know enough about what they are doing to do it correctly. I would imagine that you would still have to eventually repaint or maintain some types of cladding anyway wouldn’t you? Good luck and good on your wife for having a go!! I am also the painter in our partnership![thumbsup2]
