Hi, I thought that it'd be a good idea to buy broken down properties & ended up living in a house that could not be used for rental. Rebuilding costs a lot, I could still do it but mortgage costs added to the total. In the end, I decided to let someone else make the profit because the timing was not right for me.

I sold for $62000 more than I paid. After subtracting costs, I probably end up $15000 extra cash but I lived free for 20 months.

You might want to consider selling to cash in [you'll get tax exempt profits, even $5000 is good] plus your original 20% deposit. The cash can be used in a way to generate income straightaway, maybe a property more suitable for rental. Obviously, you'll wear the transaction costs but it's all part of the learning curve, isn't it?

Good luck,
Kum Yin

Hi, it could be that both parties are right. Some areas might drop in price but the 'drop' is a normal adjustment to sharp increases. Many areas in Adelaide are not likely to drop because as Mikey has said, unless building costs go down, to replace the houses is going to cost just as much. Put on top of that, transaction & holding costs, how can the median price be below $300000?

Anyone knows a brickie who works for peanuts? I have plenty of jobs awaiting! I'm paying close to $40000 to complete the paving for my project. I myself planted 300 new plants since 18 months ago.

What it means is simply, current prices reflect replacement values. House prices can go down only if land prices go down & concurrently, building costs go down as well. Or nobody lives in houses any more.

Payneham, like other suburbs in Adelaide, have gone up significantly [which suburb in Australia hasn't?]. You need to check that the property you're considering, is not overpriced in comparison with its neighbours. I think Payneham may still have some capital growth as it really went up in stutters. It appears to have plateaued for a while. Nearby klemzig has not come down. Windsor Gardens was really low priced 15 months ago & this year, it caught up. The house I looked at (Lowan St) was $265000 & today, would be around $330 – 350000.

I looked at Payneham at that time too & there were bargains too. You might find that today, you can still get something worthwhile. 

Houses are not monogeneous enogh to make snap judgements on. Adelaide is in a boom & we don't know when it will stop.

This is a long wordy post but I hope it contributes something.
Good luck,
Kum Yin

Hi, lots of angst here! Foundation is an old hand & I'd take his comments very seriously.

Speaking for myself, why waste all the emotional energy on time consuming legislation?

My manager didn't do very much & I stuck with him for 24 months. Things got nasty, we both agreed to part company, I appointed a new manager, 1st priority was to call in the bailiff! We got our rent arrears, a bad tenant is sent packing, we have a new tenant lined up, the rent has been put up 15% and we move on.

I didn't say the word "negligent", my ex manager did. He actually said, "I'm sorry if I've been negligent."

He's a nice man, too nice. Why sue him?

Have a good day,

Kum Yin

Hi, good luck. The price is not bad. Adelaide is still suffering a housing shortage. $180pw  is correct. So if you intend the house for rental, it's good yield.

If I had looked at Elizabeth earlier, I'd probably have bought. Out of curiosity, I went to an open inspection. Ex housing trust home on 700+m2 solid brick in need of refurbishment, asking price $130+K. Hundreds of people walked through the property & it sold with no fanfare. Probably achieved $10000 above asking price.

I'd have made an offer but I already have 7 houses in pricier suburbs.

Your Davoren Park property is at replacement cost. It's hard to build anything nowadays for under $100000 let alone the land cost.

However, the capital gain may be a long time coming. A semi is not a development option unless you get the neighbour's house too but you never know. If the neighbour is an investor, then it might get interesting as a JV.

Good luck.

P/S Not so long ago, new houses in Davoren Pk were asking $235000

Kum Yin

Hi, 600m2 isn't enough for sub-division if it's a hammerhead/battleaxe type. Where I'm at, the requirement is a 425m2 back allotment. The driveway will take away 75m2.

What kind of frontage do you have?

If your plans conform to existing council requirements, the initial costs for sub-division are not very high.

Survey + DAC application = $2000
House plans = $1200
Soil test + engineer's report = $1500

These are estimates only so roughly $5000 should see you off.

If your project is doable, why not build the house yourself? Selling land is not as easy as it sounds either.

Regards ;& good luck,

Kum Yin

Hi, like eveyone else, I worry about my exposure to property prices.

It's in the news that SA govt is freeing up another 20000 new allotments. Quite a few people have commented that it'll improve housing afffordability as it'll bring house prices down.

Qualitatively though, housing is not quite statistics alone. Sure, new houses in these new estates may be in the $230000 range though it's quite doubtful.

However, I don't know a single person who is thrilled that the govt is releasing these allotments. No one I know wants to live in Hackam, Blakeview or Virginia/Gawler.

How can these new allotments compete with the suburbs within 6km of the city?

House prices can and do come down but who can tell me when? Million dollar question, isn't it? I'll be happy with 5% growth pa.

Good luck,

Kum Yin

Hi, yes, there are people who have done it & yes, even at 80%LVR, they're still slightly -ve.

This is what I did & receiving plenty of put downs from family & friends.

Purchased property cost $260K + $30K other costs.

2 years on, 4 houses almost at completion. Total costs inclusive interest = $920000 i.e each house cost $240K

The value is around $300000 each. Expected rental $280 – $300 pw

I think everyone can do the sums from here on.

I do have a massive problem. I have about $150-180K of equity but a large loan.

For those interested, this is my 1st project which I jumped into without knowing anything. I wasn't even aware of this forum when I bought it. The original costing was around $200k to build each house. Note the $40K extra making it $120K in total that I have to find from somewhere?

Believe Michael Yardney, the risks are substantial & if I had known of them, nothing would induce me to start.

But like the fire walk, I'm already walking on fire what can I do but walk if possible run to the end?

If anyone can help me with funding, I'd love to hear from you,
good luck to everyone,
Kum Yun

Hi Mikey, spot on! I cursorily gave Christies Beach a glance & thought, "Gee, that looks like a potential – that was $180000 for an ordinary house near the beach.

Unfortunately, I had a bias because my sister's 1st housing trust home was in Christies & she couldn't get out of there fast enough! Did that in 1981. So all of us had this idea that that was not a "salubrious" suburb.

I finally went to look around Christmas 2006 & it looks like Glenelg used to look when I was looking around Glenelg long long ago. Unfortunately for me, the price had gone up to $275000!

There are other parts of Adelaide you can still buy – how about one advertised last week for $220000 rented @$220 per week. It's a large block with development potential.

i'm not advertising – just saw it in the papers. I have other properties on my plate & I've decided to hang on to them.

Adelaide is landlord heaven. Only 8 months ago, I was winging a bit on this forum. Now I feel as if I'd died & gone to heaven. It's pure bliss being a landlord at this time. Long may it last!

Good luck to all,
Kum Yin

Hi, Your post suggests that you weren't sure that you can claim the interest on the 20% deposit drawn from the home loan.
It's true that you can claim all interest paid no matter which loan it is. That's why it doesn't make sense not to use it! However, if the PPOR loan is used, calculating the interest is much more tricky.

When I started buying property, it never occurred to me that I'd need to do the tax & it was an awful mess. What saved me was that I didn't have an initial loan on PPOR so whatever I borrowed was for investment only.

If you do a 20% redraw on PPOR as a deposit, you might want to make sure that the interest on the 20% is very clear and can be defined as investment interest.

Good luck,
Kum Yin

Hi, this thread has turned into that interesting Foundation theory all over again. 18 months ago, I was very nervous about the over supply issue in Adelaide/South Australia. I'm happy to report that I followed my guts that we build not just for migrants (in fact, we don't build for migrants – a lot of them here can't afford to buy their own homes).

More than a year has passed & our rental vacancy has hovered between 0.5 to 1.5% There's no question now that we're not in over supply at least not in metropolitan Adelaide.

However, I respect Foundation's formidable store of knowledge, really eye opening. The graphs provide good solid info but I hope that the crash theory won't eventuate until I'm well out of debt. Still, I will only go on 50-60% gearing myself.

I wait with real anticipation on the bet with Michael Yardney.

Good day all,
Kum Yin