Forum Replies Created
Hi, depends what your buyer will take.
KYHi, present opportunity is more valuable than future possibility.
Unless your property is within 3km of CBD, it's highly unlikely to sub-divide in future. At present, duplex lot sizes are 250m2. Metro lot sizes can be under 200m2. so even the block 650m2 without easement is unlikely to sub-divide.
$15K is a significant saving. More especially if one is under stress. I thought $2K insignificant until I was 'financially embarrassed' then …
Easements are generally for services eg sewer or something like that. You can pave over it. I have a 3m easement that nobody bothers about. It's along one boundary so we built along the other boundary!
Of course, you need to check the details yourself.
good luck,
KYHi, X collaterisation works when you have no other choice. Until you need to split, it'd be cheaper to just roll with it. Look at the end result. If you can get a spread of 2%, it's worth it to refinance. Splits usually requires restructuring, which usually involves more fees.
I'd wait till I get an advantage from restructuring.
I'd always cross collaterised, not because I liked to but because it was the quickest & simplest way to secure the funding.
At one point, I had 4loans all linked but they were split, stand alone loans. When I sold, I didn't need to restructure. The set up fees for the stand alone facilities cost me $1000 more. That was 10 years ago.
So you do your own numbers & then decide. Good luck,
KYHi, your purchase isn't all that bad. It looks pretty normal to me. How much rent would you have to fork out if you don't live with your parents? Doesn't that answer your question already?
The 'not work another day' bit, that's what you need to concentrate on. Suppose your living costs = $30000 p.a., you'd need to have a net worth of $600000 not including your own home. If you have that, then you don't ever need to work again.
You only have $40000. That's a long way off.
Duckster is right. Look at his comments again.
I'm not trying to be facetious. I wanted to 'retire' at 40. Never happened. No matter how I twisted & turned the numbers, I still stared at $750000 to be financially independent.
Your best bet is to scrounge, beg, borrow or steal to pay down the principal. Every $ down = 8.9% immediately. Compounding in reverse. FYI, I moonlighted @ 2 jobs to pay down an 18% loan.
I regard a mortgage as "I gage till it morts". Gagner till mort. Pay till it dies.
Chin up. It's Ok to feel discouraged, specially when you work like a dog. Your position is OK, OK & OK
Hope you feel better,
KYHi, if you sell immediately or off plan, all profits are 'trade profits' on which you pay normal tax. Then you have to pay GST as well 10% minus what you paid out to others in the process of building. On a $300000 house, you roughly pay $13000 GST. [approximate only]
If you keep the houses for more than 1 year, you probably pay CGT (50% OF PROFIT) and you still have to pay GST.
GST doesn't apply after 5 years. So another option (probably the best) is to keep them as rentals for 5 years before selling. You can claim expenses, and depreciation generally wipe out any tax for 5 years. At the end of the period, the cumulative -ve gearing + depreciation usually mean you keep much more of the profit. You might also be lucky & get 5 years' growth on top of all that.
My experience is the longer we hold, the more the profit but reality is usually we have to sell for cashflow. I just sold 2 & pay tax as described. Trying to minimise with super strategies.
Good luck,
KYHi, nothing wrong with having money in the bank either! $1M still means $80K without having to work for it!
The good investment will turn up, no problem. Keep looking.
KY
Good advice from Terry.
KyHi, I'll like to emulate your style! How on earth do you get a tenant to absorb a 50% increase?
KYHi Dave, are you at the point where you are paving/driveway & crossover?
I hope you know about the crossover. The council took 3 weeks to give us a quote then I rushed to them to find out that the contractors were booked out to end Feb. (this was pre Xmas!)
I panicked, so stricken I looked the girls at the council reception rushed to help me. Boy, was I glad that she spoke personally to the guy actually doing the work. He was able to finish the job in 2 weeks. Had I used my own man, I'd have to get council approval & it'd cost me $2K more.
And don't forget letterbox (I got $10.95 ones – needed 4) and clotheslines & curtain tracks. I got real good looking curtains for a fraction of the cost of blinds [ready to hang @ Spotlight]. I made up the sheers/lace curtains for lounge & kitchen $2.99/m.
Even my manager said they look OK!
My current drama – tenants from hell occupying my devt site whom we'd have to evict.
Good luck,
KYHi, developing isn't as easy as it's made out to be. You make a lot of money if property prices escalate while you're developing.
Not all developers are out to offer low prices. With your kind of development, it's likely to be a small developer of the mum & dad variety, probably with some handyman skill.
I sold my project to another 'developer' who's going to live in the old house while the new one is being built. I can't do that myself.
If I build, which I can, I have to consider GST on sale, which means I need to consider holding on for 5 years, which means some form of funding. Selling now, I realise almost the same amount of gain. I calculated that even if I can make an extra 100K, it doesn't make a huge difference because I'd lose the velocity gained from the cashflow immediately generated.Having said that, I understand the what I lose MOST is the capital gain potential that I give up. This is the risk/reward for the developer. He carries the cost of present funding. he reaps the reward of future capital gain.
If it pays to sell, why not?
Good luck,
KYHi, I bought the Ed Chan book on super & while it's easy to read, it's a tad too general for my purposes. I would expect at least a couple of appendices on things like contributions tax. I'm still in the throes of a broadsheet to try & decide what savings I'd get from transferring commercial properties into a super fund at the same time offsetting the deducted contributions with the gains made from selling some devt properties.
KY
Hi Eddie, I've been to a meeting run by Iron Fish. They were marketing a couple of quite big projects in Adelaide. The Newport Quays & some houses at Andrews Farm. I have property near Newport Quays & while I'm glad they lift the area & add value to the peninsula as a whole, I don't think they make very good investment options at the moment.
I don't want to run them down as I hardly know anything about them but they gave me the impression that they're a marketing group.
You can't do very much until you're in a position to buy.
Good luck,
KYHi, you're in an enviable position as you can borrow at home loan terms.
Hypothetically, let's say you borrow $300000 and buy IP [doesn't really matter if it's residential or commercial except that you'll have to hunt high & low for a commercial property @ $300000]
At 5% yield, the income = $15000 p.a. Add $4000 outgoings i.e. $11000 -ve gearing of $16000
Tax deductions = $6000 approx Depreciation = $5000
You have a neutral gearing position that allows you pay down your homeloan to receive whatever interest benefit you can get. It's the best example of accelerated saving in a low risk environment.
The homes are out there. I was just told of 4 new 2-storey townhouses at Salisbury N selling at $280000.
I'm not the vendor, I've no interest in the sale. It's just that I'd find it hard to build a 2-storey house for that price.
Incidentally, there's also one in Sydney. It's on one of the threads. I just read it yesterday.
good luck with your research.
KYHi, you need to first check the zoning. What does the council allow you to do? There's a block in Blackwood 2600m2 of flat land & it could not be sub-divided because the council regards it as rural. this is 18km from the CBD in a hills area that's suburban & has hundreds of conventional houses & more than 20000 residents.
At $400K for the cost of land, if you can't sub-divide, you'll looking at building a country estate for $800K.
KYHi, a good conveyancer does a far better job than a cheap lawyer, mainly because the conveyancer knows all about conveyancing. I once took the option of peace of mind with a solicitor, cost me four and a half thousand, my conveyancer charged me $300. The solicitor didn't do a better job [she's my niece, a very smart girl by the way]. Since then, I've stuck with my conveyancer who provides me with all the support I can possibly need, right down to drawing up by-laws for community titles & etc.
KY
Hi, I once had the same issue. My PM didn't suggest I paid for the tenant's comfort. If he wants air con, he pays.
What we had before the tenant moved in was an evaporative air cooler [the water ones] that we placed at the open window & it'd draw the cool air throughtout the house. Was very effective. only needed it for 2 weeks a year anyway. Cost around $300.
If I were you, my comment would be 'it's hot in summer everywhere'. But of course, we wish to make it easier for good tenants to stay on. Why not spread the cost of the evaporative cooler over the term of the lease?
If the property is an expensive one, then install r/c air con may be an option. You might be able to write off the cost or depreciate it in time. My house was around $250K in 1999 & the rent was $300 p.w. Never did air con right up to the day I sold.
Hope this helps. [PMs always want us to spend more to make their job easier]
KY
Hi, been there, done that.
Share with you what I did. I plonked all my money down on a house, ran out of money & borrowed from a private lender. 2% more than the banks charged but it's fixed. The risk is the balloon repayment. LVR lower than normal. About 60%.
I was totally confident I could walk back into a high paying job, and did.
MOST IMPORTANTLY, the target property MUST be worth the pain. Please bear in mind that in Australia, we are already in the 10th year of increasing property prices. Are you sure that what you buy will continue going up?
some properties will show good appreciation still so I'm not suggesting that you don't invest just be aware that property can be flat for long periods & transaction costs & yields are low.
Good luck,
KYHi, your 'losses' accumulate till you have to pay tax.
So what's really happening is that you have no +ve Australian income & double taxation laws means you pay tax in the country you work. Please check this. Some countries may not have such agreements with Australia.
Therefore, you'll be supporting the -ve gearing with income earned overseas.
It can be tricky so you'll need to verify the details with a tax expert.
What I say here is based on my own experience overseas. I used to send money to cover shortfalls. The cost of telex & bank charges can be very high especially on small amounts. I used to leave a few thousand dollars in what I call a contingency fund with my property manager.
I didn't even submit a tax return for the 1st 5 years & then I did the whole lot in one go.
I paid quite low tax so it might be worthwhile for you do the same. Some countries [Singapore, HongKong, Malaysia, maybe even Japan have very LOW tax rates.] However, there's also usually a different rate for locals & expats.
Good luck,
KYHi, for perspective. I bought my 1st house on a salary of just under $14000 pa gross. Super contributions, tax etc was about $3500 pa. I bought a $166200 house in the national capital.
Stupid, I know now. But I survived.
KYHi, wonderful. I wish I'd gone to school with a council planner!
Well done.
KY
