Forum Replies Created
- Originally posted by APerry:
You should make sure that you can get finance for the deal and what sort of LVR is available.
Yep, I was just doing some calculations on that actually. After adding all the extra fees, LVR is about 86 to 89% – depending on a couple of things. For instance:
* Building Inspection Fee
* Land Titles Office Fee
* Conveyancing Fee
* Pest Inspection Fee
* Property Valuation FeeSince the property is one building, but contains four separate shops, will these kinds of fees be multiplied by four?
I’m getting a headache! [blink]
Allan.
What has been the capital gain of the prop, compounded annually over the past 10 years ??…
2. What are you expecting the capital gain of the prop, compounded annually over the next 10 years to be ??LOL – probably nil – in both cases. I’m not even considering it, actually. [cap]
What are you hoping to extract out of the purchase, CG, cashflow or both ??Cashflow only, in this case. : )
Allan.
Thank you for the reply… Tenancy is not a worry from what I understand (but of course I need to check this). They have been there long term. I think from reading your reply, I may not have described my concerns correctly. I’m concerned that once *we* own the property, we might find ourselves paying for constant repairs. I have yet to talk with locals working in the other commercial properties, to see if it’s as bad as it sounds.
Unless you meant that as a tenant you wouldn’t rent the place unless those things were in place?
So you’re saying a new lease can be drawn up to state damage is the responsibility of the commercial tenant or their insurance company? Is that common practice, or would I likely get a bad reaction from them if I asked them to sign such a lease? [angry2]
Allan.
Originally posted by The Mortgage Adviser:Quote:Originally posted by JustAllan:Quote:If we found a neutral-geared IP (its incoming rent would cover the IP loan repayments), will we be able to get a second loan?<br>
You would if you had the income to service the additional loan. Most lenders will not allow use of the total rent and will use only around 75% of it towards servicing. This allows for vacancy and other expenses like property management, rates, etc.So to get that second loan, would we need another 20% deposit saved, to avoid paying mortgage insurance? Or can we draw from the first property somehow to avoid it, even though we’ve only just started repaying the first loan??
Allan.
Hm… Answers here don’t seem all that well-balanced lately… This is called adding a clause (to a contract). I’m sure I’ve read Steve advocates using these, but probably not a good idea to use the particular one you mentioned as it might not be taken too kindly.
First off, if you’ve done your due diligence you should be pretty sure you want the property. Second, you can add a clause like, “subject to approval of finance” or “subject to structural inspection report”,etc. What this says is, “I’m serious about buying, but don’t want my head on the chopping block if something goes wrong with my bank or they find the walls riddled with termites.”
If someone had a problem with such a clause, I’d be wondering what they are hiding and move on to another property.
There’s a book about adding clauses too… Not too sure of the title, but I think it was something like “Clauses Made Simple”. Just search the forums for “clause/s”.
Allan.
Originally posted by lukebe2:Hi – just curious to find out what others have to say about this. I have seen some non residential zoning land for about $35-40K right on the water (lake) in NSW.
If you’re referring to the ones that come in the daily domain/realestate.com emails, in the Port Stephens area – yawn! – well, put it this way… I’ve been receiving those emails for two years and those blocks have been in every single email, every day, for two years. The only difference being, the twit that owns them thinks they are now worth 30% more after two years of zero interest.
From the typical actions of Port Stephens council (preserving natural areas, protecting buffer zones to the water, funding for greenies to give mouth-to-mouth to Koalas hit on the head by balls on Raymond Terrace golf course, etc.), the blocks are unlikely to ever be approved for residential development. (I live about 30km away.)
I’d think I’d rather buy that $18,000 burnt-out dog in Dubbo, where the local firebug is torching houses. At least it can be built on – once they catch him.
Allan.
Originally posted by FireCaesar:Suppose you’re young and unemployed and have about $10k~$20k to spend on the deposit of your I.P. Would you be looking for +CF types of IP (less growth, more income/cashflow) or CG geared types of IP (more growth, less income/cashflow)?
P.S I would suppose +CF is more “correct” based on the above situation since this person cannot afford to negative gear his I.P for growth (CG).
But if you are unemployed, getting finance will be the biggest hurdle you have to get over.Um… It’s not that big a hurdle. For instance, if he’s in NSW the government has what they call the “Government Guaranteed Loan Scheme”. As it sounds, it virtually guarantees loans to low income earners who are in, or qualify for, public housing.
Start at http://www.nsw.gov.au and follow the housing links – it’s pretty easy to find. Basic info is… It’s through the Commonwealth Bank at their standard variable rate, but is farmed out through only one mortgage broker in the particular area the buyer is located.
There are No Doc loans which you could use, but often regional areas are not acceptable locations for these. There are also minimum loan sizes, so with a small deposit like that will make it hard.I saw the other day in some fine print in a pop-up Internet window, that the ANZ won’t allow anything less than $5000 for a mortgage – for amounts less than $5000, they should apply for a credit card instead. I’d say that’s pretty low. ; ) Secondly, I wouldn’t be searching for a low-doc loan. (Usually higher interest for one.) Third… I’m on a disability pension and getting a loan sure doesn’t seem to going to be a big problem for us. Wouldn’t unemployment benefits be the same, considering the NSW government is giving out loans through a scheme designed just for such folks?
It would have to be positive cashflow or they could not make repayments. Unemployed means NO INCOME. There is no choice.Or neutral – or slightly negative. And of course, it all depends on how well they budget. I know people with $60-80K jobs who pay the minimum on their mortgage and have nothing left at the end of the week. We can save two thirds of our Centrelink payment – and that’s while paying rent.
Here’s some other things I’ve been thinking about that would apply to you, FireCaesar…
Most will say to keep saving – but as you’ve seen (and instinctively know) – while you’re saving and paying rent, everyone else in the property market slowly leaves you behind at a rate of increase of 5%-10% annually.
What these people forget is, you are paying rent. And the upper limit a lender will give you will means you’ll have to purchase a cheaper-end property anyway. Furthermore, you have no job restricting you to staying in a high-rent area. What I’m getting at here is – the type of property you/we can afford to buy – after thrusting ~ $27K into a deposit – the repayments will be VERY close to the rent you are already paying – and if you move from say Sydney a couple of hours inland – the repayments would actually be LESS than your current rent.
Of course, depending on where you are, it may mean you have to move for six months – for two reasons:
1. To get the $7,000 First Home Owners Grant.
2. To live in the house for six months in the first twelve, to qualify for the grant.The result of this is:
1. $20,000 deposit +
2. $7,000 FHOGIf it’s your first home, you are exempt (in NSW at least – maybe other States too) from stamp duty, etc. And $27K is 20% of… $135,000. The reason it is important for someone on government benefits to keep their deposit at 20% is twofold:
1. With a 20% deposit, you can avoid paying mortgage insurance – which protects ONLY the lender – not you. It’s designed to protect them if you lose your job and can’t make the repayments. But since you already don’t have one… And… You’d have to pay their insurance company back anyway, if the lender every claimed on the insurance – this means you’d be paying for it TWICE!
2. The lower the loan amount/property value, the quicker you can pay it off and gain equity – and/or – the more likely it is that when you rent it out, it will be cashflow positive or neutral (just covers loan repayments and outgoings/repairs/etc. with no profit).
NOTE #1: Someone unemployed wouldn’t qualify for a loan of $135,000 anyway. You’d have to check, but it’s probably more in the vicinity of $70,000 + your saved deposit + the $7,000 FHOG.
NOTE #2: Sometimes lenders will only accept half the $7,000 FHOG as part-deposit. But there’s nothing stopping you paying the other $3,500 off on day #1 of the loan.
So the main idea is, as someone who is unemployed, you don’t want mortgage insurance. Buy a $80,000 property, whack $20,000 deposit down on it, shove the $7,000 FHOG into it as well as soon as you get it, then count what you’re saving in rent… Say $6,000 – and you must’ve had money left over to save $20K in the first place… It all adds up to a huge amount of equity being payed it off in comparision to the original loan amount – thus creating a +ve cashflow property (once you move out and rent it to tenants).
If you’re going to rent it out immediately instead, and it’s cashflow neutral – well, you got the first loan and now have an investment property that is paying for itself. So I don’t see why you couldn’t now get ANOTHER loan where the rent covers the repayments.
Whew!
So to directly answer your question – either way I’d pick a cheap property – and aim for cashflow positive or even neutral – since someone on Centrelink benefits won’t qualify for the loan amount required for a Capital Gain property anyway.
Allan.
Thank you – for making my head hurt… [blush2] I’ll do some helpfile reading!
Allan.
Originally posted by manofaction:
<br>Whether it’s a house or a car, I’d rather buy direct from the seller than go through an Agent.Hey, no argument from me… I was just pointing out fewer people will see the property. (Not that it’s wrong to do it that way.) But that most people are planning the largest purchase of their lives and so are wary.
You see, when i deal directly with the vendor selling their house, I get a level of co-operation far inexcess of that ever achievable through an Agent.Yep, but you know this – many folks don’t. Hey, *I* don’t! As I think I said, if I saw two properties I liked, similar price, I’d go through the REA simply because they sell properties every day – the private guy might sell one in his entire life – and what if he got some paperwork wrong? (Just an example of how many people think.)
Allan.
Originally posted by Brisbanite:Well, thanks for you reply, but I wonder if you’re a REA?
LOL. Me? I wish!
they just want a sale, any sale.Oh, for sure.
I’d bet that they are the reason WHY prices have come down…they just want sales and don’t care if their commission is slightly less. They are actively conditioning sellers to now expect less, because it’s money in the their bank to now say that it’s a buyer’s market.As I said in another post, something doesn’t have to actually happen for people to act like is happening – then because of that, it happens! If you get what I mean. (Propaganda is another word for it.)
I will get what I want for my property, I just have to be patient, which I am.Everyone likes to think that.
I wasn’t saying YOU were overpriced by the way – just that most on those private sites are so. I had a look at that site after I posted my reply to you and found it was still true.
I think that selling privately has an enormous way to go if the US is any guide. There, about 20% are private sales, whereas here, it’s only 1-2% …Yep, all I’m saying is a huge proportion of people don’t like to buy privately. Yet.
Plus, with the marketing power of the internet, like the site I’m listed on, REAs just seem too expensive to me…Well, marketing online is good – but only if people know to look there in the first place. Everyone online knows domain & realestate.com, but how many know the private sites? (Not many I’d guess. Again – yet.)
I would probably still advertise elsewhere myself – and direct people to the link. Just a note of interest… I emailed a lady on that site about some acreage yesterday. She was shocked to even get my query. I guess that shows that either:
1. She is overpriced.
2. She gets no interest for her property from the site.All the best with it anyway!
Allan.
Probably not what you want to hear, but…
Although I agree in principle with the idealogy of selling privately (the less money lost to REA’s the better)… The reality people that write these books etc. gloss over (or completely ignore) is, people don’t trust real estate agents much – but they trust private sellers even less.
It’s not personal, it’s just that there’s a certain “professionalism” that people expect to get from a REA, that people *believe* they won’t get from a private seller.
This is at least partly true too – since I will always look through private property sales when I stumble on them – and the properties invariably seem to be overpriced compared to others in the same area.
It’s like this… If you saw someone selling a new car you really wanted on the side of the road or in someone’s front yard, and then you saw it in a car yard for the same price – which one would you buy? Now assume it was $2000 cheaper privately… Nearly everyone would STILL buy from the car yard, for the security they perceive they are going to receive.
I think the BIG mistake private sellers make is, they try to sell for the same (or more) value than it would have sold for through the REA. Therefore, people go to the “car dealer” instead. And in that time, the media is forcasting property prices falling further. Maybe in an “up” market, I’d patiently wait. But when it’s on it’s way down?
All the best with it though…
Allan.
Originally posted by richmond:We’ve all read and heard about what the baby boomers will do in their retirement, ie sell up their place in the city, move to the coast etc.
I only put a certain amount of faith in the written word/theories etc… I’d love to hear what other oldies are planning for their golden years, because some property investors are saying “chase the boomers”, and while that might be true to a point, I wouldn’t bet the house on it.
Keep in mind, something doesn’t have to actually HAPPEN in order for it to have the same effect as if it actually DID happen.
For instance:
John Howard said interest rates would go up under Labor, even though he himself said a few months earlier (when interest rates kept increasing every couple of months), that a government cannot influence interest rates. Even so most of the goobers I’ve met who voted for him say their reason was exactly that – they were worried interest rates would rise under Labor. BAAAAA!!! Sorry – I can’t type a sheep bleat very well. (Sheep follow the one in front, even if they have no idea why the previous one just jumped.)
Another example is, over the last few years the experts said constantly we were in a bubble that would soon burst (and those comments started six months into the boom). Three years later, after the constant barrage of hearing this, people began to drop out of the market – mostly BEFORE prices began to deflate (and they never did “burst”).
Allan.
You’re brave. [biggrin]
I’d be saying, “If I wasn’t serious do you think I’d be buying TWO properties from you at once!?”
Furthermore, *I* would not sign anything until I had amended the contract with a couple of escape clauses. (Subject to structural report, subject to lender/loan approval…)
But that’s just me I guess…
Allan.
Originally posted by [email protected]:[withstupid]
I have about $20,000.00 in shares and managed funds…… can only get finance for $170,000.00 as I am employed as a mechanic and earn about $27,000.00 per year. Where do I start?
Unrelated, but I’ll tell you one thing… I have $20K in the bank, am on just under $30K, married with two kids under 10. (Nearly the same position as yourself – except for the family part.) Most lenders are offering us around $130K.
My one thing?
Don’t get married before you buy! (Unless you ship her off to her own job of course!) : )
To give some info though, you are entering the property market at the end of a boom.
Prices are stagnating – or falling – and many investors have left the market. Banks are seeing a huge drop in loan applications and all those who drew on their equity to buy worthless toys like a new commodore or entertainment system (instead of wealth-building assets) will now settle down for the next several years and struggle to pay just their minimum loan repayment.
What this means is, banks are falling over themselves to offer loans, trying to maintain their turnover of the last few years as long as possible. (This is evidenced by the fact some are offering fixed-rate loans with interest rates lower than the standard variable interest rate.)
Because investors have left the market and first home buyers now have a fighting chance, rental vacancy rates will begin to creep up. (Fewer people looking to pay rent.) So rental incomes will decrease – property investing suddenly doesn’t look so rosey – so those who jumped in without knowledge will begin to sell off their investment properties. BUT. Many will get this idea about the same time – and suddenly there’s a glut of homes on the market. Sellers begin to think they are not going to sell their properties. And how do you sell when there’s a glut? Reduce the asking price.
Some first home buyers may now have a chance to enter the market. Lower prices, more first home buyers, less tenants, lower rents, higher vacancy rates, more investors selling up… And round and round it goes.
What we plan to do is buy our own cheap home – and I mean – CHEAP. Pay it off over the next two or three years. The herd mentallity of the market will have settled by then. If other properties fall dramatically, our cheap property won’t have fallen that much when compared to Sydney, etc. since these places were overinflated to begin with. (A 10% reduction of $60,000 is better than a 10% loss of $600,000.)
Then when the market begins to turn again, we will be able use all our income to direct into investing.
Have you considered something else I just thought of… There are always garages for sale in smaller towns. I have seen several online – a few just yesterday – some with residences attached. Less workload than the city, but cheaper residence and a slower lifestyle – which means you can use that time to hit the library and read, read, read.
Allan.
Thank you!
Thanks Terry!
Originally posted by Qlds007:Allan
If you wish to breach State legislation that’s a matter for you.
No i am not getting on my soap box just slightly fed up when i hear people want to cheat the system to save a buck or 2.
Oh, I wasn’t being unethical – it just seemed strange to me, as it wouldn’t even cross my mind to let the government know I was painting & carpeting my house. Admitedly, I wasn’t thinking far enough into it to consider tax deductions though.
Allan.
… you would have to been crazy to have and miss out on the share market boom… that is currently happening…Oh, I don’t know… When you don’t understand something enough, so that it seems more like gambling than investing – I call staying away from it a move of a very wise man.
I thought about getting into stocks/shares. After two weeks of determined research, it became obvious the learning curve was beyond me (and most other people if they’re honest, unless they’re content being gamblers instead of investors).
The learning curve with property seems much less stressful. Companies can go bankrupt overnight and there’s no guarantee that those that seem successful according to their prospectus are not fiddling the figures (as many have found out in recent years).
But there’s not many properties that can reduce in value to zero in one day – even if they burned to the ground with no insurance, you’ve still got the land.
Allan.
Hate to say the Act has made provisions for that.Splitting the work up doesnt get you around it.
This has me intrigued and I just have to ask…
How would they even know someone has renovated their property? (And if they turned up to inspect it with the view of giving out a fine – how would they know what condition the property was in prior to renovation!?)
Allan.
Thanks Steve… To begin with I thought it might be for notes, etc. but there doesn’t seem to be anything there to indicate this. But there also doesn’t seem to be any “midway cutoff” of information that I can see.
Still waiting for Brent’s reply too, by the way.
Anyone else got blank pages on 54 & 62 of Buyer Beware?
Oh – just inserting an edit here – I was just thinking… I just purchased the 2nd book/combo offer a few minutes ago. If my Buyer Beware book *is* missing info on those pages, would it be possible to send a replacement along with that purchase? Then I could return the one with the blank pages back to you if required.
Allan.
