Forum Replies Created
Hi again, got confused between freelance and barnsee. The last part of my post refers to barnsee's plan to buy PPOR & renovate. And since you already own an IP, you'll be aware of the $ and cents.
KY
Hi freelance, are you sure Richard meant rush in to set up a trust or NOT rush in to set up a trust? Can Richard reconfirm? It reads like a typo to me.
The cost of setting up a trust may be not much, mine was $1600 but thereafter, administering the trust means accounting / audit fees etc.
You need to ensure that any tax advantages are more than what it costs else you may end up losing money.
Your plan is not a bad one but do be aware that profits may be far smaller than you 1st think.
Good luck,
KYHi, wish there were easy answers. Noted in your other post, there are a couple of idiotic rantings of 30% falls. The fact is in Adelaide, prices have not fallen. Vendors are not lowering their asking price as yet. A property I sold in April with DA is now on the market @ $360-380000. When I did the sub-division, my end value for the new house was only $320000.
However, there's definitely a discount rate of at least 5-6% which means one can offer $350000 for the above house.
The other point to note is property is not selling. They sit around for many weeks. I have a house on the market @ $325000 and there was no interest at all.
So what do I do? I withdraw it from sale. It's renting for $280 per week & will probably go up to $290. The difference is that now I don't need to sell. I was on 10.69% interest & now only 6.19% The property has become cashflow +ve
My other properties [commercial] have all had rent increases of 5.1% last year's CPI and I'm paying more rent for my business premises.
Why not consider the rental prospect of your England house & rent when you arrive in Adelaide? Rental is still very low compared to house prices. You need to consider whether there might be any vacancy problems and factor that into your yield over in London. Here in Adelaide, you can rent @ around $350-400 pw the yield is around 4.7% so the house would cost around $400000 or so. Why the need to buy?
I'm giving you the facts in Adelaide now. Any decision you make is at your own risk. Many think house prices will fall. When and by how much, no one knows.
Good luck,
KY
Hi, one of the problems is that you don't have cash upfront. It's important because without a cash injection, the commitment isn't there.
A sensible thing to do is to get an existing property in your cousin's name & sub-divide it and the other portion in your name.
I saw one property for sale in Braybrook DA already done. Your cousin can buy this & then sell you the new devt then both of you can get the FHG
The only problem I saw is that the asking price is rather high – $360000
From what I saw of the plans [2 storey townhouse] it'd cost $238000 to complete. Not a lot of cap gain in that plus holding costs & risks of property mkt collapsing. That's why more mature investors aren't very interested.
This kind of deal might suit you and your cousin but you have to do your own arrangements.
You might also get a discount [depends on circumstances] off the asking price. Don't forget the seller needs to make a profit too. He's put in a heap of work and money into the DA. At a time when interest rates were very high.
I'm interstate & I'm looking at Melbourne & Sydney, something that I didn't do in 15 years.
If you do decide try to PAY something then you can register a % of ownership. Upfront cash is expensive but as newbie, you have little choice. See, it commits you to regular repayments. Banks won't allow you to default. $15000 shouldn't be too difficult to raise. It is paying it back that's tougher. If you can't raise that amount, it'd be wiser to wait.
Good luck,
KYHi, I'd like to share my experience as a seller so you have something to ponder about. My sister wanted to sell her house, very proud we were of it too, & the agent advised auction. This was a long time ago, in a buyer's market. Not much interest, it was a dreary auction & the house went back on the open market.
Many people came & liked the house. No offers. 6 months later, one of the 1st groups of people made an offer. Asking price was $239900. Later I checked. My sister paid $239500 & put in the garden, the driveway, the curtains & automatic roller doors.
The prospective buyer offered $225000.
I told my sister I'd save her agent's fees & paid her $225000 which was the last offer price.
It rented immediately at $300 pw.
From there, we know that the true value of the house was nearer $250000. I later sold it for $395000 after the bank valued it at $360000. Today [sold in 2004] it'd cost $450000 to build one like that.
Try to determine the replacement value, not just use the asking price. Does the asking price reflect a discount? When my sister was selling, she didn't put in the discount %, just what she would accept. We now know better.
That's why i don't think property prices will plunge 50% as some suggest. Unless a lot of people die & houses are empty.
Good luck with your house hunting,
KYYili, my name is Kum Yin & I suggest you steer clear of hbbehrendorff.
If you don't know any more than anyone else, your money would be safest in FD.
Buy a house/unit to live in by all means [& get the 1st home owner's grant] if you really wish to own your own home.
However, you've already picked up the fact that it'll cause some financial difficulty. PPOr is consumption. Why not continue where you're living for a little longer?
Shares at this point in time have far more upside [capital gains] than property. I placed 50000 @8.5% on 18 May 08
When it matures in May, I'll buy shares. I'll also start to restructure my current portfolio to see how extra cash can be generated.
Warren Buffet is buying shares. We can't buy Berkshire Hathaway but we can surely buy something on the ASX.
I will also tell you that I believe PASSIONATELY in property investment. I own property that is fully paid up that has many zeroes in it.
I do not wish you to be misled into believing that if you invest in gold or in property or in shares, your money will surely double.
Please read the threads that discuss the looming recession & the direction that property will go.
Also identify who can offer advice or suggestions that work. note: look for those who have been there, done that.
Good luck,
KYHi, mostly nervous & uncertain but there's a flutter of excitement, maybe fear? Enough to consider going back to earned income rather than just relying on rental income. In case the sky really falls down, in case my tenants stop paying rent.
I resolve from this very minute to use fear & uncertainty to fuel a charge forward. There is nothing to fear but fear itself.
Hope I've experienced enough downturns to be prudent.
KYHi, can't comment on your numbers. What I can say is that Richard Taylor has always appeared to me a person to pay attention to and his comments have been measured and knowledgeable. I'd pay attention to his words.
KY
Hi, if I were you, this is what I'd do. Look for the house that I can afford and would like to be PPOR in 2 years time. Use the $50000 & if necessary top up with additional borrowing through existing equity – your current lender may agree to give you more than 80%LVR on the new purchase because you have excess equity in the other IPs. This way, you don't need to break your existing fixed loans [well done on that btw].
Then continue renting – your target PPOR will be -ve gearing, giving you tax breaks [a newish house will give you depreciation benefits]
In 2 years time when family needs are in the forefront, do some simple cleaning up, renovate a bit & move into PPOR.
Gives you 2 years to save maybe another $50000.
Good luck,
KYhi, do you dare do the unthinkable? There's option 3 – look for the best property you can get in Parramatta at this point in time. There may be some desperate seller & you can get a +ve reply to a lowball offer.
It's dollar cost averaging in property investment.
And I may suggest that 5% yield in property is quite a good return. That's why few people want to be landlords.
Long ago, I bought a mistake like you. $166200 rented for $400 a month. In hindsight, I should have sold at a loss [$105000] then I wouldn't have had to stress out. I could have bought a house 2 years later at the rock bottom of the market & then sold ten years later at the highest point.
Note: could have, should have.
Point is: I don't know what I would have done, most likely NOTHING. In which case, the result would be nothing. No debt, no house, no worry.
As it happened, I wore myself down to repay a huge shortfall & ten years later, I sold for $310000.
It's a process called forced saving.
If you sell your IP, do you have the discipline to pay what it costs you now to own it?
By all means, sell your IP if you have a better plan to forge ahead faster but remember you lose tax advantages if you use the proceeds to pay down PPOR. Why not do both concurrently? Hold IPs & pay down PPOR at the same time.
Sorry only you can make the decision. The rest of us just throw words at you to confuse you further!
KYHi Crashy, can you give me the info on Oanda? Where are they located & how do I reki opening an account?
I've done both leveraged & non leveraged forex pair accounts. The leveraged [10:1] made 4x as much but made me lose sleep & kept me working on the computer at night.
AUD/YEN non leveraged looks to be a fairly safe, constant way of getting a bit of arbitrage out of our savings.
Thanks to anyone who cares to comment,
KYHi, once did profit from USD/YEN. Hairy ride though during the sept 11 days. Everyday passed put USD10 into the interest column & at the end of 3 months I collected about 1500USD & the exchange moved back into my favour when the mess cleared up. Made about $30K after accounting for errors with AUD
Then I went on to buy AUD & hit the jackpot! But before anyone rush out to buy anything, I'll tell you that there was some kind of mad hatter reasoning why I did such an idiotic thing. I would have to eventually buy $500K AUD to pay for my property so I thought I might as well buy when it was 50 cents against USD.
I wouldn't touch USD with a barge pole today but AUD/Yen. Now that might be interesting. Anyone knows how toxic AUD might be?
As for the farmers? They should have hedged.
KYHi, from my very limited knowledge of thr forex markets, I'd say it's not that the rest of the world have suddenly lost confidence in the Aust economy.
Investors chase value. AUD rose to the heights with everyone expecting the rates to spiral upwards and rise some more. Even as late as May when I refinanced my loan, the broker tried to talk me into fixing the rate. EVERYONE expected more rate rises. When that didn't happen, AUD had to come down.
Nerissa said it's no mean hapiness to be sitting in the mean. To me, the mean for the AUD IS 60-75 CENTS. Obviously can change. I don't see the Aust economy in collapse, not yet.
Imagine what scorn would greet the brave soul who 2 months ago said RBA would cut rates by 1%?
KY
Hi Harb, just to let you know your common sense is appreciated. I'd far rather have water than gold bars, USD/AUD no matter how septic than cowrie shells, pesos or rupiah even ringgit.
Same old same old. It's blowing hard outside. 4 walls protect me from the storm. Day I give up property as an investment is the day I see the number of houses overtake the number of people who have to be housed. I'll appreciate who can tell me when that day is.
A lot has been said about baby boomers. Subjectively, the stats can be viewed like this: The absolute number of 'older' 60+ people is around 1.8M the bands below 25-59 collectively is close to 5M. These are from memory & not exact but the ratio is more or less correct.
User pays. The electrician charged me $120 call out fee to change flouro tubes. I cringed but paid. Plumber ditto. Same young men would be in the 5M group paying either rent or their mortgage.
I can't buy or sell property now we're in a sideways mood. I gossipm make opinions & speculate what'd happen. It's free.
Have a good week, everyone.
KYHi, what I meant was draw on existing equity to fully pay for the property but obviously can't claim the interest which probably means it's not worth doing. In some circumstance, like in mine recently where devts. partially sold can still motor along on the original borrowings but the profits realised can be fully invested in a super fund, in which case one can really choose what to buy. The interest on the original borrowings would still be tax deductible.
Is this scenario correct Richard? Home fully paid up, worth $750000 LVR 80% = $600000
Buy house total cost $600000 in super fund. All rental goes into fund paying 15% tax
Interest paid from personal income is fully tax deductible @ personal tax bracket.Someone aged 55 can draw a pension from the rental & claim 15% rebate thereby paying no tax.
Sounds like a nightmare.
KYHI Kylie good to hear a sane voice.
Six months pass very quickly. I personally will wager an ounce of gold that it will not hit $1500 [we're talking USD I assume]
There you go – an easy $1500 if you dare back your convictions. If it doesn't can I collect $1500?
Gold has a transaction price, just like any other investment. The holding cost robs it of any shine. Buy gold bars & you soon discover you have to pay for its storage. 15 years ago, I wanted to buy 1kg gold bar @USD300 per ounce
I invested in stocks instead. Around 16.5% across 5 years & used that to buy a house & that started my property investment. I can actually compare what'd have happened had I held gold instead.
Strangely though, someone did mention that silver holds potential. Interesting if someone can keep us posted as the months unfold. I'll be monitoring the price of gold. I might have to pay out $1500!
Have a safe holiday,
KYHi Ummester, AUD came off the high of 95/96 cents to USD. How can that be bad? Parity [it came really close] was never sustainable at that point in time.
In 2002, AUD was 0.5 USD. At one point, I actually bought AUD/USD @ 47.5cents
We're now around 80 cents. It's a natural adjustment .
I do like your sense of humour though. Septic is such a graphic description of the situation & US of A is building up for a huge fall if they continue borrowing as will Ozzieland of course. Someone said the other day that it'll soon be US of C if they keep on floating their junk bonds!
Have fun,
KY
HI, most of your info is correct. I just set up a fund in May. I can buy a residential property in the name of the super fund but using borrowing from personal assets, which I assume is what you'd do as you have other IPs.
The rebates etc make it worthwhile. However, I'm building into the equation the possibility that the party may come to an end sometime. I suspect that a threshold will come onto play in future. I'm very sceptical that the govt will be so kind as not to tax pensioners who have a high enough income to be taxed.
At 55, one can draw a pension with 15% rebate thereby making the fund income tax free.
I placed cash instead of IPs in the fund while maintaining the maximum deductible IP loans outside the fund. Gives a small margin to pay accounting fees etc Don't make much but cost to maintain fund is almost zero. If interest rates come down half %, I pass GO.
Interesting times. Good luck,
KYHi, interesting but largely speculative. Only time will tell. My tenants are relatively stable, with half of them doing a roaring business. Not a hint of a downturn there as yet.
Property has definitely slowed but rental vacancies are still very low. People with or without money still live in houses, no convenient caves or trees to shelter them. Rent in real terms has gone up 90% [in rental belt conventional homes] from 2003 to 2008.
We can only do these things with money: spend it; hold it as cash; buy shares or buy property.
Like Harb, when everyone was predicting rate rises last year, [some red faces now, i'd think], I privately took the stand that rates would go down, not up. My reasoning was that there couldn't be such a big gap differential between USD & AUD
I placed $50000 in FD @8.5% one year while maintaining 80%LVR on IPs @8.77% which has since come down by 0.25%
Sure the banks can fold & i may lose all my money but how does that make my situation any worse than Unmester's or Scamp's or Harb's or anyone else's?
Other points: money is finite. it doesn't vaporise. like water or blood, it circulates. there's trillions of dollars out there, just a question of who has it. someone lost it, someone has pocketed it.
And Steve had been suggesting caution in property investment for quite sime time already.
KY
hi, wish i'd read steve mcknight earlier – got it in dec 2005 after an argument with my sister who thought i was risking too much. based on steve's 2nd book , i found my position far too conservative & proceeded to increase my exposure to around 58% LVR. the properties exploded & yielded 45% in 2006-2008
i ran out of books to buy! i bought them all & don't even bother with discounts. get enough with the tax deductions.
the most inspiring albeit a bit outdated is 'ordinary millionaires'. all the strategies are in that simple little book.
geoff doige is exteremely funny.
an older book i found in the national library should be required reading in any uni curriculum. it's called 'missed fortune 101'
all young people including my high income niece should read it. there's a section on arbitrage that is the cornerstone of any wealth creation.
happy reading,
KY
