Forum Replies Created
HI Jaffasoft,
Of those figures you just quoted for the number of visitors to the region, how many of those are backpackers?? Do you know the dollar figure that those travellers are spending on average in the town??
And, if I may be so bold as to ask….which area are you looking at?? I know investors are incredibly antsy about revealing where it is they’re investing, but I’ve had it up to the eyeballs with backpackers, so have absolutely no intention of EVER stealing your idea!!
The reason I ask is again, I know the backpacker industry very well and know where it is the backpackers want to go to. You don’t have to tell if you don’t want to.
Cheers,
JunkersIn short, yes you will have to pay CGT if you buy and then sell at a higher price. 100% on the gain if you sell within 12 months, 50% on the gain if you hold it for 12 months.
You will need to speak to your accountant because money spent on renovations I believe can be counted as capital works, and so will raise your original price of the house, which means you won’t have to pay as much tax, but make sure you count it (estimated CGT you will have to pay once you sell) into your figures when you’re working out what price to offer on the house in the first place. Just make sure you check with your accountant to get proper advice. I’m no expert on CGT, all I am relaying is what I have been told.This is for EllaB….I’ve just had my mortgage broker around this afternoon, doing a variation loan on our existing loan to release equity from it to pay the 20% deposit on our next purchase.
Basically, our loan experience went like this:
We (Mum and I) applied for a lo-doc loan (I am self employed and have run my own business for the past 5 years) for 80% of the purchase price. The other 20% we funded through a LOC utilising equity from my mother’s home. My understanding is that if you are utlising equity from your home to use to purchase investment property, then the interest is tax deductible. Please check with your accountant, but that is my understanding. We have just accessed $44,000 out of our first property, which will go to the second property to fund the deposit, costs and renovation, which should increase the value of the 2nd property by $56,000, based on sales in the streets surrounding our new purchase in the past couple of years. We’re planning on selling once we’ve finished the renovation, but if all goes pear shaped, it would be cashflow neutral after costs of the renovation.
If you can speak to an accountant and get the answers to placate your dad’s fear, then I say go for it. My mother wanted to invest in property but had no idea how to go about it, and still can’t grasp a lot of the concepts behind some of the investing ideas of Steve etc, which is why we teamed up. I’m the so called brains[blink]and she is the money partner and my fiance and I do most of the renovating. It would be preferable if I didn’t have to have her as a money partner as she kind of gets scared easily about borrowing money, but all of my money is invested in building my business. All I can say is: if you never have a go you’ll never know.
But make sure you set the ground rules first. Because Mum supplies the cash for the renovations, she thinks she owns the whole house, when in fact we are joint owners 50/50. Make sure you set out what each party will receive when you sell the property (we for example will split any profits made from the venture 50/50, even though my fiance and I do the majority of work renovating and looking for deals.
It may be worth having an agreement drawn up by a solicitor at the same time as you are speaking to them about your purcahse, as you know the root of all evil is money and the last thing you want to do is divide your family by not communicating what each member is expecting to get from the deal from the outset.
Good luck, and hope it all works out for you!
Cheers,
JunkersFair enough….my loan was a lo doc loan, with the deposit financed through equity in my mother’s home. I am negotiating to buy another property using the 80% from the bank and 20% through the vendor to be paid 6 months down the track, so am interested in the outcome with your finance as I haven’t financed a deal this way before.
[suave2]That last post killed off discussion for a couple of days!
This is for Felicity….when you were negotiating to purchase the house with 80% down (funded by the bank) and the vendor was to leave 20% in the deal, did you tell that to the bank/broker/valuer when you were applying for the loan?
I have only got the one investment property at the moment, but I recall when I applied for the loan that I didn’t have to disclose where the 20% deposit was coming from.
One thing I have found with valuers, and please, anyone correct me if I’m wrong, is that if you mention what the sale price is, that’s what they value the house at. What then, is the point of getting a valuer?? I have now learnt not to mention the sale price to the valuer at all, but what’s to stop them asking the real estate agent the sale price when they call to arrange an inspection of the property??Hi CK,
Have you tried applying for a lo doc loan?
I was in the same boat as you when I started out investing (a year ago) – self employed, renting….but applied for a lo doc loan and was approved. It was a tremedous help, as I don’t think I would have been approved at a ‘traditional’ bank had we not had the access to lo-doc.
Also, what sort of business do you currently have?? Not to grill you….just may have some tips that you may not have thought of to help make it more profitable.
CheersEach person has their own risk tolerance and “sleep at night” factor….there is an element of risk in everything inherent with investing – share trading is riky, but the rewards can be substantial if you get it right and have a good knowledge of what you are doing. Property is risky if you don’t know what you are doing and just buy anything hoping that it’ll go up in price or because it’s +cf. Being in business is risky, but it can be less risky than having a job and relying on others up the chain to do their job properly as well – not having the directors not blowing all the profits on bonus packages etc. Ever been retrenched out of the blue?? I don’t believe a job is more stable than running a business – one of the interviewers on “The Apprentice” said something quiet funny…..you’re not going to fire yourself when you’re the boss are you? But you can be fired if you’re an employee. So to me being an employee is less secure than running your own business. To others being an employee is their idea of being secure.
I personally don’t try to do anything too complicated, just buy, renovate, sell – if I know what my target market wants and can afford, an I factor in risks such as interest rates going up or down, and property investing is my job and my business as the mappers have made it, then how can that be dangerous?? IMHO it can only be dangerous when you jump in without any knowledge and hope to become a millionaire overnight.Duritz,
I’m glad to hear you are trying to make a better life for yourself by investing in property as we all are.
I can understand you trying to find out correct information etc, but I got fired up when I started reading the negative comments that were being expressed in the thread.
As for buying a property with $1000 down, all you have to do is ask. The vendor can say yes or no, if they had said no then I would have walked away from the deal because it wouldn’t have been the deal I was looking for. There’s always someone else out there that has a property to sell…..Why should I give my 20% deposit to the real estate agent who then puts it into a trust to earn money off, when I can leave it earning money for me for the next 6 months if the vendor is happy with $1000??
All I am doing is looking outside of the square – please don’t assume I’ve got a lot of cash lying about because I don’t, which means if I pull this off I’ll be very proud of myself and not put a lot of my money at risk.
All I am doing is putting some of the techniques that I have read about and learnt through seminars like Steve’s into action.
To Kaloni and Duritz and all the other knockers of anyone attempting to better themselves…when you achieve success and you’ve got the formula for producing money day in day, then life becomes more about family values and doing things other than chasing the almighty dollar. These people weren’t handed the holy grail at all, they were made to work hard and dig deep to get to where they are today. If you’d read the 2nd book, you also would have found out that having Steve as a mentor was a considerable expense in itself, having to get to Melbourne for each month’s meeting and sacrificing family time to try and get ahead in their life. You might also have read that out of 23 people who started, only 13 remained at the end. So 10 people dropped out because it wasn’t handed to them on a silver platter and instead of hanging on and working hard, they took the easy way out and quit. Or found an excuse that they convinced themselves was the truth to use to justify why they should drop out of the course. I can’t speak for them personally, but it seems to be a universal law.
Every body wants the secret pill, but nobody ever wants to do the hard work to get it.
I met several of the mappers at the Sydney seminar, and they are lovely, down to earth people who have achieved monumental goals. Good on you guys and well done to Steve and Dave for sharing your stories and knowledge with others. All I can say is that on Friday, after going to the Sydney seminar on the Sunday prior, I had an offer accepted on a house with $1000 down, a 6 month settlement and early access to complete renovations prior to putting it on the market again. So THANK YOU to all of the people at the seminar that I spoke to and inspired me to get off my butt and get things rolling again.Ooppps….sorry about the misleading information….I will get onto my accountant and tell her that it wasn’t right.
This is why I read this forum…I have been living under a rock for the past few months (namely, have just had a baby), so haven’t heard about the tax changes. Thanks for picking me up on it.Oopss……meant to say property was NOT a depreciating asset! Meant the car….
Geo,
I’d have to agree and disagree with you there on the image thing….sure, image is important and if you look successful then people perceive you to be successful, BUT, as Steph said, the bottom has fallen out of the second hand car market and you can pick up very decent second hand cars that are good and reliable for a lot less than a new car around the $15K mark. Cars around the $5K mark can be quite decent, and if Jspri uses his head, he’ll be able to pick up a car that looks good, goes well, and spend the other $10K on buying a property that earns him cashflow and is a depreciating asset. He could also put some of his money towards learning how to market his fledgling web development business properly, a $15,000 moving billboard is a complete waste of money if you can get one just as good for $5K. And as a student, you should be looking at a smaller car like a Holden Barina or Suzuki Cino, they use bugger all fuel and are easy to park.
In marketing your business you should always test and measure, and I’d prefer to put my money towards several marketing ideas, rather than all in the one basket.
I hope your web development business takes off Jspri, but keep an eye on the dollars going out, because you’ll be regretting it when they’re not coming in with the right marketing.
Cheers![biggrin]I just recently received this email from my accountant explaining the land tax.
Hope this is of some help to anyone confused about the land tax payable on their investment properties.It is essentially a tax on the value of land held as at 31 December each year
The office of state revenue determine the value of land for assessment purposes based upon council valuations and any land owner has a right to objection if they feel the valuation is incorrect
The land that is part of the home you live in – your principal residence – is generally exempt from land tax
The exception to this exemption is if your land value is $1.970million or more (2004 figures)
Please note that should you ever be in a position where your principal residence is subject to land tax then this property is assessed separately to any other property that you may hold (on own or jointly) at that time
If land held with an investment property and the value of the land is less that $316,999 (for 2004) then there is no land tax liability – remember it is the land value and not the market value of the whole property you look at
If land held with an investment property is valued at more than $316,999 (for 2004) then land tax is payable at $100 plus 1.7% of the excess over $317,000
I have quoted the NSW land tax rates for you above. Land tax is a state tax therefore should you buy a property and land in any other state of Australia a different threshold and rate will apply ( more information to digest should you invest interstate!)
Cheers!No problems with the advice – more than happy to help! And it doesn’t mean that your idea is a bad one, just that you may have to think a little outside of the square to be able to make a profit in the competitive industry that is the backpacking industry. Backpackers are notoriously tight with their money, but a total contradiction as well – they’ll try to screw you to pay bugger all for their nightly accommodation, and then go and spend $200 at the pub on a night out. Hostel prices range from $15 up to $25 a night – depending on what season it is (low season on the east coast is June, July, August) They’ll also expect free or very cheap internet, meals and sometimes transfers – depending on where you are located. The biggest problem in the backpacker industry is that because there have been so many players in the game, to acctract business they’ve cut corners, given lots of freebies etc to get marketshare. So it’s something to be aware of before you get involved.
As for the stealing from the till, the best way to manage it is not to let your hostel be run by the backpackers themselves, some smaller backpackers rely on the backpackers – they may have run out of money, so they stayin the one place for a month or two and work for room and board and a little pocket money, until they save enough to move on to the next town. that’s where you’ll run into trouble, you would need to make sure the person you employ to run the hostel is trustworthy. Just like any employer, we all have to make sure that our employees are trustworthy with money that comes through their hands.
Hope this helps and good luck.
Cheers,
JunkersHi Jaffasoft,
I really don’t want to rain on your parade, but your idea has been done to death in the backpacker industry already. I would suggest having a look at TNT Magazine, The Word, Backpackers guide to Australia, Zinc magazine, Travel Australia etc, and you will find that there are already many chains of backpacker hostels right throughout the country. It is an incredibly competitive industry out there (I know as I own a backpacker tour company) so you’ve already got your YHA’s, Base Backpackers, Koala’s Resorts etc, and the biggest players of them all, Oz Experience, Greyhound Buses and Adventure Tours which really have the transport side of ferrying tourists around all sown up. Of the backpacker campervan providers, there’s ‘Wicked’ vans, Britz, NQ, Maui, Koala’s and many miore based in Sydney that cater for the backpacker who buys a piece of junk then sells it back to the original seller at a cheaper buyback price. In the 5 years I’ve been in the industry, I’ve seen many new start ups come and go, including the biggest backpacker travel agency in Australia going under owing millions to backpacker suppliers. Backpackers are a lot more sophisticated these days than they ever were, and because of the extremely high standard of hostels these days (many are like hotels) you’d really have to have your marketing and business plan well and truly researched before you put any money into it. Just because it’s cheap accommodation doesn’t mean you’ll get droves lining up at your door to take up your offer. More likely you’ll get a lower standard of tenant, which possibly means higher maintenance bills when they trash the joint after a big night at the pub. Smaller backpackers in regional towns employ backpackers to run the place, so proper management would be an important issue. I don’t know where you are from, but our tours cover every state except WA and tasmania, and we use hostels all the time.
My advice is, research it very, very carefully before you start buyinghouses to accommodate backpackers. Also remember, the travellers bible is the Lonely Planet, and many backpackers will go to places listed in there ahead of other places that have people spruking for business at train stations etc. I don’t know whether it’s illegal, but i don’t think you can spruik for business at the airport – you run the risk of being clobbered by the taxi drivers, shuttle bus drivers and every other Tom, Dick and Harry operating out of there.
Like any good business, get your business plan and marketing plan researched first before you do anything.
That’s my 2 cents worth….hope it’s of some help.
Cheers,
JunkersI am just about to finish our first renovation project, and I have learnt so many things just by being involved in the project that I would never have learnt any other way.
Firstly: you need to know who your end buyer is going to be if your intention is to buy, renovate and sell. Are they going to be a first home buyer, a young family, downsizers or a larger family.
If you’re renovating for a first home buyer, you need to know what the prices are that first home buyers are paying for properties. Most (but not all) first home buyers can only afford the lower end of the market, but most first home buyers don’t have the time, the money or the desire to spend their weekends renovating. I’m possibly wrong, but that has been my experience – if someone can purchase a home in their price range that has been renovated and is somewhere that they can show off to their mates, then they’ll buy it. We’d all love to be on The Block, but when it comes dwn to it, I think there are a lot more Renovation Rescues out there than we think!My new strategy for my next project is to find a run down property, get the purchase price down as low as I can, and look at the end price that someone would pay for that property in that area, factor in the buying and selling costs plus the costs for tradesmen to do the work (after this last reno, if I can cover the cost for tradesman to do the same job in less time, then I’m happy to pay them if I still make my desired profit – I’ve realised I’m great at visualising how the property will look and co ordinating it all, but I’ve not got the patience to actually do the work!! My mother on the other hand has found a hidden talent for carpentry – she’s amazing!)
The house we’re working on is in a great location, but would only really suit a first home buyer or a retiree – it is quite small, and so wouldn’t appeal to a young family who may have that little bit extra cash to pay for a bigger property.
we kinda got a little bit carried away with this reno, in terms of what we thought we’d get for it at the end – and that’s what i mean that I have learnt so much just by doing the reno.Secondly, stick to the budget!! You can get so much stuff at auction houses, there’s not a real need to go and pay retail for materials.
Hope this helps![cap]
Thanks for your help guys, it really helps.
The vendor has already bought elsewhere, but is not in a hurry to sell – she just comes back to the property on weekends to clean up and collect mail. So I’m sure if I can get her to agree on allowing me to have access, and negotiate a long settlement, and offer her what she wants for the property (Steve’s tip: “their price, but your terms”) I think I could be on to a winner.
Cheers!Hi guys….thanks for all your input. Haven’t had a chance to get back on to the forum until now, and i appreciate all your comments.
Markpatrick, I have put down $1000 deposit to show the vendor I am serious about this property. I would like to get just another $5K off the price of the property….the building inspection has shown up some minor faults, but nothing too serious that would worry me. The only thing I am worried about is the rusty water….if I put a tenant in it’s going to be the first thing I have to fix anyway, and I’d rather get it off the price now than not worry about. I have already managed to get $14,000 off the asking price, and I originally thought the asking price was quite reasonable. (209K down to $195K)
I had already factored in to my offer what we would need to do to it with relation to faults that a 60 year old house has, the bathroom and kitchen are quite new (1 yr old), so don’t have to worry about the cost of that. It’s mainly painting, landscaping and general tidy up of the place, so the 101 tips thread is quite good for me at the moment.
I have already developed a relationship with the RE due to another property that I was looking at buying, but the deal went pear shaped….the vender ended up taking the property off the market and decided to do a reno on it himself….so the RE knows I’m serious on this one, we’re already to go with finance etc and the vendor has agreed to allow us early access to do the painting etc prior to settlement. My main aim now is to just get that little bit extra off if I can, even $2.5K would be nice.
I did make a mistake with this one, mainly because I did have a relationship with the RE, my starting offer was too high and then I had nowhere to go.
To me, I see this property as a good investment, it’s got great position, it’s in an area that’s had great CG and with a tidy up it’ll come up looking really good. But at the end of the day, I’m not going to get too emotional if it all falls through as there is always another house. I was just following Jenman’s advice “Don’t Sign Anything!’ as I’m still new to this game and am bound to make mistakes. As I said in an earlier post, the property has gone off the RE’s website with a big SOLD sign, so it looks like I’ve found a RE who isn’t into gazumping!
Thanks for everyone’s comments, it’s good to read what you all have to say.
Cheers! [
]It’s a worst house/best street situation…..I also think the vendor was being greedy and originally asking too much for the property, but is now desperate to sell it. It’s not in that bad condition, just the few things I have mentioned. We are going to be doing a lot of the work on the place, I’m just curious to know the sequence of events that occur when you make an offer….I’ve only ever made offers on 3 properties before. One was for another property in the same area as this one, and the building inspector advised me not to buy it, so I do trust him on what he’s telling me. And no, my solicitor has not been recommended by the agent – I never use anyone recommended by the agent – i prefer to use my own research to find good people.
I haven’t put in a written offer, only a verbal one.
The house is about 60 years old…I did budget for some various things with a house of that age, and offered what I thought was appropriate at the time. Obviously I’m not a pest inspector, so couldn’t tell whether there were termites in the body of the building, but looking over the property myself, I couldn’t see any termite damage. However there is masonite on the walls in the lounge room with wallpaper, so whether there is termite damage there, I am waiting for the inspector to let me know. My main concern is that the house hasn’t been tenanted for 5 months, and when I ran the water in the bathroom, the water was rusty. I took that into account with my offer, but now think there may actually be a blockage in the pipes from what the building inspector has told me. I just want to know if this is a negotiable point with the vendor.
Thanks for your help….I’m still a newbie at this game.
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