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hi, share my experience with you. i was a non resident but i had PR status. could have qualified for FHOG but didn't take it up as i bought a better house than that'd have allowed.
i was taxed from the 1st $ earned & quickly realised that paying 40% tax on rental income was REAL stupid. Bought house 2 just to ensure that I had zero income.
if you have enough income elsewhere to live on as I did, I'd go for maximum gearing. Then when you come to live here permanently & you have other income here, all the 'losses' you have carried forward can be offset against the tax you have to pay in future.
My strategy if it could be called that [ i just mainly blundered along & found the mother lode], is to DEFER whatever payments I could. if i don't have to pay today, i'll worry about the payment when it's due.
And before any hotshot do the same, I'll remind everyone that it works only if you can pay up when it's due. One year, I paid tens of thousands in tax but I had already factored that into my cashflow.
there's no such thing as the perfect investment.
good luck,
KYhi, $135K renting for $160 pw sounds far more doable than the unit.
check the stability of tenancy. if it's a major city eg Adelaide in Elizabeth it's possible to find such properties. it's a rental belt with 1000s of people renting so tenants are not hard to find. Also, rent has caught up & it's very unlikely to plummet to $60 pw that was the norm 8 years ago. that gives the benchmark for the property valuation.
even in rural centers, they may be high rental demand. my former tenant moved back to the riverland as the cost is much lower compared to the city. they were on work cover / etc etc
still, people have to live in houses & centrelink pays half their rent.
let me know how your negotiations are going. i'm temtpted to give you just a little boost towards that deposit. i remember your saga.
have a good weekend,
KYhi, property is at an impasse so might as well gossip. share this experience with you.
a young man aged 24 came to me & offered to work for no pay if i taught him how to invest. i looked & sure enough he was holding Rich Dad in his hands.
i asked him his objectives & he said he 'd saved $10K in 2 years & aimed to continue like that. told him his aims were too low for me. i set him the target of $100K net worth in 2 years & his eyes bulged! he was earning $1957 a month. I know cos i was his employer.
i took him to the stock exchange & helped him open an account.
he didn't quite make it in 2 years but came darn close. Today, he's my godson & probably worth $350000 in total. The reassuring thing is that he's so conservative he always has cash so anytime, I'm in a jam i ask him & there's money in my account for speculative/higher risk ventures. Did one project with him that earned $110000.
so if you're 20 something, 30 something or whatever, aim for the stratosphere. do something, anything & progress from there.
good luck,
KYHi, I remember your previous posts. Congrats on coming this far.
Fear is very normal.
More impt do the numbers stack up? It is a flat period to be buying property now but if you have a plan & work it, you can progress a la get rich slowly & steadily like most people have to do. A wildly successful 1st IP is usually pipe dream stuff.
You've already picked out a salient point – the net yield is unattractive to an investor. Don't believe every word the agent tells you. If the rent is potentially $290, why is it currently only $150?
Reno cost is unpredictable unless you can do it yourself. There isn't much change left if you factor in transaction costs if the end value is $235000 after reno.
If you really are keen to buy this property, offer a low low price. If they laugh, too bad. Why not offer $135000? All they can do is reject it. Then you know that the resistance level is above that.
Another bit of 'advice' – understand the body corp stuff thoroughly before you finalise your offer. you don't seem too clear on the costs involved.
Isn't there a freestanding property with no body corp hassles?
Good luck.
KYhi, my 2 cents worth.
you're starting your portfolio late so no boom to drive your investments. Good is that no rose coloured spectacles to cloud your vision.
your yield is quite realistic thus 'too low' thus bargain for a lower buying in price.
you need to look for a yield of around 6% if you can.
Property 2 : reno cost is going to kill any return you can get unless your property has the potential to achieve the cap gain to offset it. Salt damp costs minimum $15-16K to fix.
Look too at the seller's point of view. 1999 to 2009 is 10 years. He gets what? $82K minus costs. Net yield around 3.5% almost exactly what he'd get letting money sit in the bank. Is that what you'll get from this property?
Property 1 : I'd add on the costs of transaction i.e. your selling costs. A bit hard to bargain when a reli is involved.
End result still the same – you're the only one who can make the decision.
Question: is there another property freestanding, with devt potential further down the track?
Good luck,
KYHi Scamp, someone on this forum bought a house in Adelaide in late December for $273000 & it's renting at $345 per week.
It's on 700+ m2 & can be developed in future though it's not quite worthwhile to do it right now.I was the one who brought up that property on this forum too. I looked at the house & was quite interested but I dithered a bit & quite frankly, I disbelieved the agent who said she could get $350 a week for it.
Still think it's a bad idea to invest in property?
KY
Hi, what's the end value after building?
Cost of land = $75000 +
Building = $160000
Total cost = $235000Can you sell for $430000? or more? Any less means it's silly to build.
The other more interesting/exciting idea is to build two. Does your zoning allow 1000m2 blocks?
Then you have:
Cost of land = $75000
Cost of construction = $380000 [$20K more for holdingcosts & contingencies. You can increase this number for safety]
Total cost = $445-450000Each house sells for $350000 = $200+K profit.
Don't forget GST & tax.
Good luck,
KYHi, there's no evidence on the ground that Adelaide property is going to go down significantly. It has slowed & properties are taking longer to sell but they sell & not necessarily at a discount.
I'm kicking myself now for not buying the house I liked at Alberton 2 weeks ago. It was a Brocks inhouse auction & I left without finding out what happened to the house which was last quoted at $365000. It's no longer on the books therefore must have sold. I thought up to $380000 would be a good price for that house – vintage Aussie style with good modern extensions at the back on close to 800m2. The suburb is interesting, not rough. It's just off the hot Woodville/Ethelton corridor but close to Cheltenham where the racecourse will be redeveloped.
The tramline to Semaphore is a foregone conclusion, just like the redevelopment of Newport & the Swinging Basin of the Port area. Cheltenham Racecourse devt is also a decided conclusion. When the devt is complete in a few years, property would have gone ahead 50% & by then, everyone would be able to see what they can't see right in front of their eyes at this moment.
There was another one at Brighton – house & shop [you can't build those anymore because council won't allow you], only around $450000. Didn't get to the auction.
And the land at Selby St near the Central Market was auctioned last week.
The good buys are still there. I've quoted you only those that I was interested in. I didn't buy not because I didn't like the property or because I thought prices would crash. I didn't buy because I can't buy them all & I also can't buy a business, a car and a property all on the same day.
6 months from now, we at Adelaide will report to everyone what's happening here & then, we'll decide whether property prices will crash or not.
KYHi Ozboy, while Scamp has used some rather rude words to describe your 'plan', for once he's right.
Noticed that our property market is already very cautious all of a sudden? While prices haven't significantly dropped where I'm at, the slowing was dramatic, as in a very very hot market in December 07 and then in January, auctions were depressing.
Flipping relies on the prices moving up very fast by a margin of more than 10%. When you tack on costs, you need to have $60000 increase in price for your $500000 house. It's a very easy way to lose your shirt and more.
Shares are not speculative. Don't treat them as such.
You're already doing well with renos & small gains. Maybe some patience is needed.
Scamp, 'average' house prices aren't 3-4% of annual income. I was earning $13000 p.a. and houses were $100000 + in the capital city. I bought one @ $166200, my 1st house. That's 13 times my income. But you're right. Got me into tremendous stress. Still kept it for 11 years & sold it for $310000.
KY
Hi, a few more words to consider. What are the reasons for the tenant to ask for periodic tenancy? They might be young people waiting to move elsewhere. In which case, you're better off looking for new tenants. You have 3 weeks. Surely, the vacant period wouldn't be too long? Again, depends on how long it takes to re-tenant.
I once had a tenant asking to stay on month by month. My manager was very smart. He asked to increase the rent $25 a week. The rent was $300 & we hadn't put up the rent for 2 years. The tenant was building their own home & didn't know how long it'd take. They ended up staying another 6 months on $325 pw. The $600+ extra paid the cost of another tenant moving in. But then, my property was a very good one.
What you can do is probably increase the rent by $10 pw & ask for a bond + some kind of notice when they move. Otherwise, you might be better off looking for a new tenant. At least you know you have 2.5 weeks to find one.
Good luck,
KYHi, well said, Richard.
What would we not give to have the wisdom of age & the aspirations & visions of youth?
I'm settling on a small business next Friday so I have a licence to distribute food. The dumplings I make are going out faster than I intended. So the food licence will be good.
What do we do when we 'retire'? My sister stitched & knitted & found even then, you can only give away so many pairs of bootees so she started supplying a couple of shops. Incidentally, she's in Italy & she travelled business class too.
The above is not to brag about how much we have achieved, it's to illustrate that we need to 'do' something with our time. A couple of years ago, I decided to build some houses & now that's done, I find I still have too much time.
So everyone's right, we need to find 'meaning in life'.
Have a good week,
KYHi, I've been to one of their info evenings & they're marketing Newport Quays & home & land packages in Andrews Farm.
I declined on the Newport Quays apts. but was quite interested in the home + land packages. Because I source for properties myself, I didn't buy any through them. In hindsight, the Andrews Farm properties would have done quite well [roughly 20% increse in value after 1 year] but then, all Adelaide properties would have produced the same results.
My latest thought is that houses in the $350-380 thousand range would do well.
KY
Hi, it's tough, isn't it?
The target property has a high yield so to tell you not to do it is quite silly.
On the other hand, your -ve gearing on the 2 IPs amount to $40000 p.a. or thereabouts.
Serviceability doesn't seem to be an issue.
So, the questions that need to be answered are: 1) what is the rental condition of your IPs? i.e. any likelihood of vacancy?
2) Do you currently get any depreciation benefits from the 2 IPs?
In the worst case scenario of no tenants, can you support the interest payments or if you're on P+I, can you support the mortgages?
I'm sure these issues have crossed your mind already so as always, the decision rests with you yourself.
I've found that if I faithfully pay down the loan, [no easy job of course], I'm always OK. The 1st 2 years are tough & thereafter the mortgage doesn't even worry me.
Incidentally, i used to be a school teacher on a $14000 p.a. salary & then $50000 p.a. after 20 years. For more comparison, my LVR was only 67% then the lender increased it to 75% without me asking.
Your LVR is very high. You need to bring it down to 75% asap. You can't do that if all your income is used to pay interest.
Hope things work out for you,
KYHi, James, look at Dazzling's dazzling analysis. Wonderful application of numbers.
However, your 2003 purchase should have gone up 30% already. If you're worried sick, maybe sell one.
The numbers you quote [around $5000] per property are VERY NORMAL. Even way back in 1998, I needed about $4ooo to support each house until the last one I bought, the cheapest, that's slightly +ve gearing.
No growth in 2003-2008 means the original purchase was not fantastic. BUT MOST OF US MAKE HORRIBLE 1st purchases.
I myself am living walking proof of that. We learn & improve.Good luck,
KYHi, unfortunately you're in NSW. Can you look for a house that you'd like to purchase & then submit the details?
Suppose your pension is $450 pw. Look for something in the $200-250000 range, preferably something in the lower range but in a location you like & then do up around $30000 worth.
I'll be interested to look at your case & you may be surprised many other investors might too.
Regards,
KYHi, I vote we bar Scamp from this forum until he says he's walked around the suburbs for a month at least. Otherwise, garbage should remain where he is.
I know these people. Vera & husband have son Justin aged 35 who should have his own home but procrastinated & had just recently moved back into parents' home. Daughter C is 24 & still living at home.
Cathy & husband have 2 sons, older one bought own unit, younger one [28] still renting.
Martina & husband built own house in Morphett Vale 3 years ago, 2 sons then 14 & 11.
Mihael Loh's 3 children [40s] have all their own homes + 8 growing teenagers, the oldest is 17.
Let's fast forward 7 years. We have 3 couples from 52 – 70, ALL living in their own homes. Then we have 6 aged 35-42 and 8 aged 18-30 approx.
We need 14 houses just for this small group of people I know.
If I offer you $50K for your house, does it mean your house is worth $50K? Nonsense!
Scamp, I'm a fool responding to your nonsense but I will PAY you ten thousand if you can get a 60% discount on the asking price.
KY
Hi, I remembered your post after the 1 month challenge. Well done on coming so far so quickly. Must have been a sacrifice.
Like others, a lot of us have been there, done that. A friend of mine is currently under a mountain of credit card debt & to help out, I started supplying 2 items to a shop this week.
Good luck to you in your continuing endeavours & I hope that this time next year, you have a stash to start your wealth accumulation.
KY
Hi, I did that & sold immediately to an investor. You need to offer terms that make sense to an investor.
Eg the rent is much higher cos it's pegged to the price. Say I want $335000. The usual rental is about $290-300 pw. I offered $350 pw paid monthly interbank.
I look like a fool paying $350 to live in my own house & taking $280 from my tenants. I built 4 new houses you see.
But the opposite picture is this. I borrow $225000 from the bank to live in my own house. I'd be paying 9% x $225K + I'd have to do the curtains etc + I'd have to pay rates + insurance [non tax deductible]
The buyer doen't need to pay mgt fees & I'm absolutely dependable when it comes to paying the rent on time.
The quick transaction gave me time & confidence because I didn't have to force sell the other properties.
A yield of around 5.4% with depreciable fitouts will make sense.
Good luck,
Kum YinHi, interesting & in fact, I'd be interested to know more.
I like Horsham. Sounds like a one horse town but it's a place I really like. Know it only from stops driving between Adelaide & Melbourne.
Anyone else knows anything?
KYHi investor Eddie, I actually 'retired' @ 42 i.e. stopped working .
I couldn't retire because I didn't plan. I just vaguely thought I'd like to retire @ 40. Maybe thought a knight on a white horse would appear!
I discovered $250K wasn't quite enough to retire on. When I went back to work, I caught up with a vengeance.
I didn't have to SAVE half a million to make up that $750K for financial independence because my 4 houses did that for me. I did eventually have that half million from my business but by then the 7 figure beckons.
Through all of this, the most important is the self confidence & belief that I can achieve. I now enjoy myself trying not to be facetious & daily giving thanks to a higher being that gave me the chance to enjoy life!
KY
