Forum Replies Created
Hi,
Getting an Australian PR offers both options of living in Australia whilst retaining ethnic citizenship.It involves wanting to live in Australia & is not too difficult under the skilled migrant intake scheme. Took me about 3 months & I applied from overseas.
Since then, I’ve bought a number of investment properties & have retained my original citizenship and have Australian PR on a 5 year term. Pending my decision on citizenship, this has gone on for 10 years.
Hope this general info is of some help to you.
By the way, I found that the hardest bit is the social isolation that comes with migration.
Good luck,
Kum YinHi, I was told it’s from building which probably means completion.
I’m not totally sure about this but my accountant had been murmuring about it.Raises some issues:
1) what do you do in the intervening months? Rent?
2) GST will still apply. In which case, why not wait out the 5 years & not have to pay GST?Will surely appreciate it if anyone could add some more opinions/facts/ideas.
Good luck,
Kum YinHi, thanks all for sharing. Great topic. Good to review progress.
My year’s been SLOW. Finally, demolition’s completed. 2 weeks later, I see 2 piles of dirt on the site.
I was very bothered at first but then I decided to let it ride. The delay costs me plenty but median prices go up very fast because of nearby developments.
Interest rate hikes means I need to be more conservative. Doesn’t help that family members are all warning me not to be too gungho.
My sister’s into shares & needless to say, has been on a high. Greens, costing 55 – 60 cents, is now 81 cents. That’s 40 – 45% in 18 months.
She’s given me a SEVERE WARNING that property is DANGEROUS.
I have taken her warning seriously and bought another investment property!!
Good luck to all,
Kum YinHi, same thing’s happening to me. One and a half years down the track, finally the demolition’s done. Costs are 20% more than initially estimated.
Site works cost $75000 in my case. But spread over 4 homes, it’s not so bad. This doesn’t include landscaping.
I tried throwing a major tantrum & it worked! Prices came down $20K right away.
I’m praying right now.
Good luck to you.
Kum YinHi, I’ve spent the largest part of my working life in Singapore & am familiar with both countries’ laws etc.
About the easiest way to get +ve cashflow from property investing is to get a SGD loan at approx 2% interest on a new house or shop returning 5% or more in yield.
One way is to build on a sub-division (I'[m currently doing this even though I don’t have access to a SGD loan).
The reason is that the sub-division & building brings the cost down to near or below the median price & therefore the yield (from rental) goes up to about 5-6%. The new properties can be depreciated to increse the yield.
The downside to this are:
1) The property market is slowing. We are now buying into a potentially down market.
2) Rental vacancies.
3) Holding costs.The most important part to all this is the overall financial plan you’re after. What I’m doing requires a lot of cash. The SGD loan is risky because the SGD is more stable than AUD. It works only if you have money in Singapore.
My post is very lengthy. If you wish to discuss with me, send me an e-mail.
Good luck ,
Kum YinHi Paul, I was reading your numbers again. You’re saving an impressive amount of money in % terms. A young man who’d walk to the end of the earth with me was like you. He was 24. He came to me and said, “I’d work for no pay if you teach me how to invest.” I’m not like Kiyosaki’s rich dad. I didn’t have the heart to exploit him. I paid him 25000 a year. He diligently saved $1700 every month. He had $10000 to invest. I took him to my stock-broking firm. He bought 1000 shares in Devt Bank of Singapore. He had no more money left but he had a margin account even though he paid cash and didn’t owe any money.
Then came Sept 11. If that was not enough, in Singapore, we had SARS. That period was the darkest I had ever seen in Singapore. The fear was thick enough you could reach out and touch it.
I said to Pengzhi, “In crisis is opportunity. Buy another 1000 shares in DBS using debt. You pay 7.5% , so what? You can pay down $1700 every month. To me, that’s earning 7.5% on every dollar saved thereon.”
Pengzhi feared debt. He didn’t dare. 3 months later, DBS was $12.90 Together with another transaction, he made $4000. In his position, I would have made $9000.
I share this story with you because you’re so young, so ernest and dare to dream.
The lesson here is DEBT IS OK IF YOU MAKE A PLAN TO REPAY.
I hope that you’re reading and not feel bored by a long-winded old fart.
In April 2006, I saw an old house in Blair Athol here in Adelaide. I had no more cash. I asked Pengzhi & he wired me $35000 to buy it. Here are the numbers:
Purchase price = $223000
Closing costs = $12000 approx.
Cash needed [20%LVR] I’m on lo doc = $56600 approx
Survey cost = $400 approx
Running costs: [the close was 1 May] The tenant started paying 3 weeks from 1 May
1st month’s interest = $1000 approx
2nd month onwards = about $350-400 negativeWe took 3 weeks to tenant the property because we screened out all those we didn’t like.
The plan is to cut a skinny block down the side and build a new house on it. I’ve budgetted $160000. This is a fairly generous sum.
The new house will be worth at least $260000. Even if it’s only $250000, we can get a loan of $200000 on it. We can then rent it at $250-$260 a week, sell the old house. This way, we get back our original cash outlay and we keep the new house as a rental property for 5 years.
Paul, 2 weeks later, I saw another one a few streets away with the same potential and almost the same financials.
This was in May 2006, only 2-3 months back. And there was another one in Clearview.
You may already have enough to do the same. You may have better access to funding at higher LVR. Just make sure that the property you choose have ‘potential’ and a plan to follow.
GOOD LUCK & HAVE FUN
An addendum to Pengzhi’s story: he got more confident & bought 20000 shares @ $1.70 I bought SGX @ 0.88 and told him to buy it at $1.26 He didn’t dare. He said, “Wait and see.” I sold my shares at $1.45 to fund the NZ investments. He is now laughing because SGX is $4.00 and he has 20000 of them. This young man has gone to the top of the class. He has made more money out of the stock market than me!
Hi Paul, good reasoning. If you buy the standard residential property anywhere in Australia now, it’d be -ve cashflow. This is OK if you inject earned income & take advantage of -ve gearing. The cash injection will ensure that it becomes neutral or positive at some point.
Better yet, do what Jan Somers suggests. Buy a property that’s under the median price.
Please be aware that the property cycle is at its peak & no one knows what’s round the corner. Having said that, it is never truer that today is a good time to buy, today is a good time to sell. How do we know when to make a start?
That’s why I’m now known as a “developer”. Heck, what do I know about property development? I’m an English teacher. But that stupid little voice kept badgering me & I bought a ‘weird’ property at Taperoo that I’m now building 4 houses on. Demolition is to occur this week.
By sub-dividing, I ensure that the cost of each house is far below the median. Then I can keep the properties forever if the prices are not what I wish to sell at. And if the rental vacancies go up, I can still make sure that my properties can rent by matching other people’s rental. The difference is my properties are new so if my rents are competitive, tenants will want them.
I saw a couple of opportunities for development in Elizabeth. That was 4 weeks ago. But once I went to Elizabeth, the air of hopelessness was depressing and I’m biased against the idea of investing there. however, the govt is building a big industrial park there.
You might want to read the posts on this forum on investing in Elizabeth.
If you ever want to invest in Adelaide and wish to talk about it, send me an e-mail. [email protected]
Sincerely wishing you well,
Kum YinHi again, since I’ve told my story ( like giving away a bit of myself) let me add this.
I don’t wish you to rush out and buy a property. Need to appreciate that the most successful property investors built on a mountain of knowledge.
I feel like I’ve read every retirement and investment book ever written.
“Live long and profit” – very useful. American. Haven’t seen it locally.
“The richest man in Babylon” – well-known but I find it less readable.
“The millionaire next door” – must read. Australians have caught up to the Americans and you may find next door to you what’s described.Andrew Tobias is my personal favourite. His contrarian attitude is so me.
I was away and didn’t discover the Australian books until I came back last year. Steve Mcknight is the most practical and to me the most discerning. Reno Kings is also a must read because they’re hilarious. Read beneath the laughs and appreciate the seriousness of what they’ve done. Note that they were investing from gut feelings through the bad bad times when you could not give a house away. Notice that Elin Power is now with their team? Peter Cerexhe is very knowledgeable and the checklists are precious guides.
I’ve been back in Australia barely a year. I spent Saturdays and Sundays looking at open inspections. I don’t own a car. I take the train, the bus and I walk.
rgranger and Paul, if you’re serious and want to invest, start like this.
1) Develop a burning desire to manage your own wealth FIRST. Paul, you’re doing very well. Continue in that track. All the people around me who didn’t do anything was because they were afraid that they’d LOSE THEIR PENSION if they own multiple properties.
2) Do you know those books that I’ve mentioned, and hundreds of others like Kiyosaki etc? In Singapore, I was so exasperated with the little voice that said “Look at New Zealand, look, look”. I was so busy with my business but the end result is I have close to a million dollars worth of property in NZ. And then the stupid said, apropos of nowhere, “Look commercial, look commercial” It was insistent I snapped “How?” The voice said “www.realestate.com.au”
I looked around me. I was alone in my office, talking to myself. Un known even to me, thousands of miles away, I had been trawling the Internet for 2 years. Because I had invested in Australian property and I was afraid.
Success will come when your hunches are so strong that you hear that little voice.
rgranger and Paul, how many properties have you looked at? How many stocks have you tracked? How many investing mistakes have you made?
3) DO SOMETHING. SET A GOAL. MAKE A PLAN. Then ask “What’s the worst case scenario and what will I do in that case?”
3) is the best I did.
Good luck.
Kum YinHi,
I was 42 in 1994. I had $240000. I started looking at property in 1992 but bought only in 1998.Obviously, the timing means that I hit the jackpot.
A combination of fortuitous timing and personal circumstances.
I bought my sister’s house to save her agent’s fees. I lived in it free of charge for a couple of years after all.
I was $10000 short and it’d be hugely embarrassing to ask a lender for it when I had a house worth $240000 so I borrowed $100000.
I didn’t have income (I couldn’t get a job easily in Australia) so I had to go back overseas. The ATO would tax me and no bank would lend me what I wanted. I borrowed $200000 & bought house number 2. Then I thought those houses were too big for me but I could trade down when I returned and live in a small house and live off the rental from 2 others.
I bought a townhouse which I thought I’d live in and then through a mistake drew down too much & saw a 4 bedroom AV Jennings house I desperately wanted to buy.
Then I sold house 2 (to my everlasting regret) but the excess funds had to be reinvested & I bought 2 commercial properties.
Was I scared? Yes, scared <edited>less to use a rude word.
What the books do not tell us is the tough part. Throughout, I worked 16 hours a day 7 days a week, pressured by my own internal clock of saving half a million in 5 years. I never in my wildest dreams thought that the properties would earn me more than half a million.
What I wish to pass on to you now is that it is easier to get ahead through investment than through savings but there are many forms of investment. I made $80000 one year from dabbling in forex. It’s also very easy to get burned. I lost $30000 when I got scared.
$300000 equity now is like $50000 ten years ago. Please be cautious because the residential property is looking rather see-sawing.
If I were 41 and still working, I’d set up a private super fund to buy property so that I can cash in on employer contribution to super. Then, even if the property does not have capital gain, I’d still be ahead. However, I’m unsure whether this can work. Incidentally, I started putting away money in super when I was 25 because it’s compulsory where I came from.
This post is extraordinarily long but something in your position made it almost mandatory for me to tell you my story.
I wish you well & if you do see a property, run it by the people in this forum.
Good luck,
Kum YinHi, your posts are interesting. Last Christmas, my sister gave me dire warnings about my pending residential property redevelopment. She said all the experts predicted a huge crash.
I have since ‘gone slow’ but could not resist buying another property.
The purchase price is $223000. It is let at $220 a week. I have drawn up sub-division plans to build a house for a total cost not exceeding $160000. When the project is completed, the total cost should be $400000 with an estimated value of $500000. It should be completed in 2 years. The reason for the delay is that I’m held back by the other project. I’m OK to endure the -ve $3000 a year in holding costs.
This was on 1 May 2006.
Property prices can crash for sure. However, there is still a dire shortage of low priced houses. My take is if I can still find $200000 houses within 6km of a city of 1m in population, and the median metropolitan house price is $285000, I can still ride out a crash.
A cheek in tongue comment is I will believe property will crash when I see people no longer live in houses!
Kum Yin
Hi, this is my personal experience of being a landlord in Adelaide. The overall cost of ‘holding’ a conventional 3BR property is around $2000 – $2500 per year. It may go up to $4000 if there’re maintenance & vacancy costs.
My previous manager (I chose a local man for the hills area) charged me ‘high’ rates 8% of everything including maintenance but he made sure there was no vacancy. I was working overseas and was happy to pay.
Currently, residential property yields 4.5% in Adelaide. I recently bought a development prospect that gives 5.5% yield. The positive aspect is that vacancy rates are very low now.
Most investors start out by being cashflow negative then use their own saving efforts to pay off the loans & continue like that.
Let me know if you’re interested in talking to me & maybe we can arrange a meeting.
Good luck,
Kum YinHi, I’ve never understood why semis make good investments unless you can buy the both on a big block. Why not buy a free standing home on 750 – 850 m2 in suburbs like Kilburn, Blair Athol or Clearview? Even Clovelly Park or St Mary’s may have cheaper old houses that are rentable as is and down the track may be good for redevelopment.
Having said that, let me add that this is just my point of view and I’m not offering it as advice because the yield on residential property is not very strong.
Good luck with your search.
Kum YinHi,
now is very late in the property cycle so please consider carefully. I’m Chinese, by race not citizen & I ‘bought’ a unit in 1 Park Avenue Shanghai. I wrote a $5000 cheque to book the purchase which was built and marketed by a Singapore company linked to the Singapore government. That was in 2002. I then got cold feet & withdrew. Now, if I had kept on with it, I would have realised huge capital gains.The selling agents returned my cheque immediately upon request.
The details are like this: payment is upfront in US dollars. A loan is easily obtained pending your own serviceability on 75-75% LVR
I pulled out because of the draconian upfront payments. The secondary reason was that I was unsure whether the Chinese government would not do a U-turn. The governments of Singapore & Malaysia are supposedly capitalist & democratic but both had reversed the regulations to punish foreign owners. Even Australia has a FIRB or FRIB regulation. It means that foreigners cannot the established houses or something like that. I’m trying to work around this for my overseas friends who want to invest in Australia.
Please get more advice before venturing into Shanghai.
Good luck.
Kum YinHi, I’ve reading with interest the mix of comments from relatively new investors & a couple of obviously seasoned property investors.
It’s difficult to get banks to lend on commercial properties. I have 2 small blocks of suburban shops,fully tenanted & only a couple of banks would look at them. The mitigating circumstance would be if the borrower has a secure job or ongoing income to service the loan. The interest rate I’m on is 7.5%[used to be 7.25%] on a business loan. I paid an arm & a leg in refinancing fees to get this deal & I’m pleased with the 7.25% variable loan interest only. The reason is that I could only get a private loan at !0% interest.
This is too many words, I guess. The bottom line is I would think that you’d not be able to redraw the 30% equity to use for other investments unless you can show other sources of income.
The more experienced people are right. You need higher LVR. By the way, my commercial properties are geared only 55% & the bank refuses to lend me any more!
Hope this helps.
Kum YinIncidentally, commercial property yield is fantastic if you have enough funds to go into it. 12-14% nett [Harder to find that now. I’ll sell mine at 6%!!]
Hi, just to add an old hand’s perspective to the mix. Most people take a long term view i.e. 5-10 years for property to realise enough gain to make it worthwhile.
Looking at your numbers, I would concentrate on ‘gathering’ more cash first. Jumping into another property without cash or income backup is very, very stressful.
A 20% deposit is much better. You already have about 10% sitting in the equity of your improved home [from $210K to $260K]
Save another 10%. Redraw the other 10% by refinancing. Then buy the investment property.
Bear in mind interest costs have gone up.
You’re doing the hard yards that most of us did before. When interest rates went up 2% in one year in 2000, I desperately worked 3 jobs & paid down $26000 in one go. Then interest rates went down again while property prices went up. I bought 2 more properties with the excess. Needless to say, I have not looked back.
Another point to consider is this. Capital gains of less than 25% is hardly worth selling. Transaction costs swallow up the bulk of it. When I sold my 1st house, the gain was $28K. After tax & all, I calculated the broker made more than me!
It is good you have the desire. You’ll do well. Time is on your side. Be patient & research.
Good luck,
Kum YinHi, in your situation, the worst case scenario would be that there’s no rental income i.e. you can’t get a tenant. That means you must have $2600 every month to pay the outgoings.
You will get back the -ve gearing on your ‘loss’ but this comes off your tax. Therefore you must be earning income that is taxable. So if you earn $100K a year and pay $25K tax, that 25 K reduces by your tax bracket (assume 30% x the interest + costs incurred $2600 per month)
At tax reporting time, you put in depreciation on the property say $20K in year 1 ( you get back 30% x $20000) to reduce the tax bill further.
In this example, if there’s totally no income, -ve gearing reduces your tax by about 9K and depreciation reduces it by 6K. You will still be out of pocket by about 16K.
Please note that this is only an example. It is very rare that a property cannot rent at all but it’s possible. There are also other costs (advertising, insurance, rates etc)
Capital growth is also only guesswork. Don’t be fooled by the mantra that property always goes up. It can go down & remain flat for years on end.
Hope this helps you understand -ve gearing.
Good luck,
Kum YinHi Manic, I looked at the numbers you posted & can tell you 12K liability for anyone working in Singapore is no big deal. You can pay it with beer money!
I was contracted to the government on $50K p.a. and I first borrowed $200K against my house. Then I upped the borrowing to $420K. I eternally regretted not borrowing the extra 80K that I could have. One word of caution is that I was buying into a rising property market.
Andy, if you’re reading this, good luck. Working overseas is probably the fastest way you can get back on track. Good luck to the both of you.
Kum YinHi, I’m Australian PR, bought my sister’s house & had no money to live on so went back to work in Singapore for 6 years.
I geared the 1st house to buy 3 others in 1999/2000.
There’s a 6 or 7 year rule that allows Australians to rent out their homes (depreciation applies) and still claim primary residence CGT.
Another negative gearing can be carried over. I did not want to be taxed on the rental income (in those days a paltry 15K p.a.) so I worked on getting 0 income, in fact slightly negative.
I was working so hard & didn’t know anything about tax & didn’t lodge any tax returns for 5 years. Finally, I lodged the tax returns & was pleasantly surprised that not only did I not suffer penalty but the tax was much less than expected.
Singapore tax is so negligible ( I paid six & a half thousand on 98K taxable income) but the living costs can be high.
There’s a tax consultant (originally from Ernst & Young) now operating in Singapore. His name is Steve & you can find his company in the yellow pages in Singapore. The company is Australasian Taxation Services. He’s at the Concord building on Beach Rd.
Good luck with your venture (and do talk to Steve. He’s very good & the charges are so negligible).
Kum Yin
Hi Redwing,
It’d boost my confidence if you’d kindly explain why SA looks good. I bought a couple of low cost properties for development & everyone I know scares the s out of me with their negative remarks.
Thanks,
Kum YinHi, I bought a block to sub-divide into 4 lots & 12 months down the track, still haven’t got approval yet.
Look into these:
1) the holding cost : your outlay will be around $420000. This means around $2500 per month in holding cost. Multiply this by the number of months before approval is granted.2) the site preparation may cost more than originally projected. Connection of services – do you know how much this costs?
3) assuming everything goes smoothly, the sale will take time. Again, holding costs plus advertising & agent fees will need to be included.
Sub-division is a wonderful way to buy at wholesale price so I say if the numbers stack up for you, then go ahead.
By the way, 20 lots is a fairly substantial project for a beginner if you haven’t done sub-division before.
Good luck.
