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I don't know what State you're in, but in Vic the standard procedure is the Vendor's solicitor asks the buyer (usually through their solicitor) if they would allow the deposit to be released early.
The early release of deposits is never part of the Contract of Sale, but can be requested separately after the deposit has been deposited and the contract is unconditional.
If the buyer agrees (and they are not obliged to), the release is done through a Section 17 (I think it is – from memory), and the cheque is drawn from the agent's or solicitor's trust fund – whoever is holding the deposit cheque.
The fact that the SOLICITOR is trying to force you to release the deposit seems very odd to me. Usually it is the agent trying to get to the funds to get their commission before settlement, or it may be by the seller who needs the cash to use on another project.
I would:-
1. Use the cash to fund a building on the land.
2. Then rent out the completed property to tenants.
3. Depreciation and other "on paper" deductions will be high for tax returns.
4. Rent a house for yourself.
5. Use equity in the I.P to fund other investments – business or another I.P.
6. Repeat.Sorry to say, but this method of calculating potential properties was relevant when Steve first started out back in Ballarat, but not now.
You have to look below the surface these day. Find "add value" properties and ones that have very high depreciation deductions. This means start with only looking at older properties that have been recently renovated, or have been built after 1987.
The problem with recently renovated homes is you won't usually get them cheaply. The vendor has spent good money and expects a good price.
Better to look for post 1987 houses that need a reno. You can add value, increase the rent, depreciate a great deal of the building and fittings. This might get you over the line with the 11 sec solution, but only if the rent return is pretty good as well to start with; say; around the same as the current finance rate or better.
Or, you could try wraps and stuff like that. I can't help you there, but there are some on this forum that do them.
Try Morrell and Koren. They have a website, and there work is top rate. I have watched David Morrell in action at an auction. Excellent.
They usually only operate at the top end of price range, but it won't hurt to ask.I have to agree with Duckster on this (sorry Michael);
We have an I.P in Central "Frangers", and my sister-in-law bought a house in "The Pines" (north Frankston) in 2002 and has doubled her money.
I believe that with the infrastructure there, plus with the Eastlink coming up, and the fact that houses are still very cheap even after the recent growth, North Frankston will have to go up.
I lived in Oakleigh for a time when I was young. It was a cheap, dirty hole, but because of the infrastructure and the transport to the city, it has become high-end. Of course, the period style houses there have played a part too.
Houses on decent sized blocks under $200k are a rarity within 1 hour of the city, but they are still there in Frangers and areas near there, and eventually home owners and investors will have to buy the as other areas become more expensive. The only problem is the rent returns are low.
Sorry Mat,
but in Aus you have to submit tax returns every year, and any sales of investments have to be declared, and you pay tax or get back some tax depending on your position.
You cannot defer tax through a broker.
In the USA they have what is called a "1031 Exchange", where you can keep deferring the tax owed on cap gains by reinvesting the profits into other investments after you sell. The tax eventually has to be paid, and it quite often falls on the beneficiaries of the estate that owned the investments after the investor dies.
We don't have that arrangement in Aus.
Some people put the top dollar price on their house and wait for a bunny to come along. These people don't need to sell, but will if someone pays what they ask.
If the agents had any business ethics they would tell that vendor they are being ridiculous and not take the listing.
Start to study the markets as of NOW,
Get educated,
Live off the smell of a dried out oily rag,
Save like Hell,
Be ready next year.Hey Richard,
which lenders consider 100% of the rent for servicability?
I'm with St.G and they do 80%. I'm happy with them, but it would be good to know the others for future attacks.Which reminds me; I've got a glass of chardonnay I need to attack right now.
My ideal property; is a combination of cashflow, cap growth and ability to add value. I look for these factors:
1. must be built after 1987 (for depreciation); you can also buy an older, renovated property which will still have dpereciation benefits, but I prefer newer, un-renoed for better purchase price.
2. purchase at or below market (not super critical to be below market as I buy and hold) and be less than area median and average (cheaper end), for easy resale and bigger tenant pool, and easier to finance.
3. must be in an under-valued or about to grow area for future cap growth.
4. must have high rent demand in area for low vacancy and better rent returns.
5. must be in an area with good employment infrastructure, and the potential for growth.
6. must be close to all amenities such as malls, schools, parks, transport, quiet streets etc.
7. must have add value potential for cap growth and rent increases; subdivision and/or smaller renos.
8. must have rent returns at least the same as existing finance rates.Properties with these factors usually out-perform the market, and are virtually correction proof. They are properties that are very affordable for the majority of people should I ever need to sell, and are very affordable for tenants, which means there is never a shortage of tenants. They are more in demand, so cap growth tends to be steady in all markets.
Research for the area can be done by internet, phoning council or agents, Residex do demographic and other reports for a fee, Australian Property Investor Magazine does market analysis reports each month state by state, study local newspapers for r/e sections to work out local values etc, and there is lots of info on the Aus Bureau of Stats site as well. Also use these forums as the word spreads around about what is going on in the market.
Well done Yossarian and Milly;
I thought it was just me that was being harsh, and thinking the whole thing is a scam.
It has that "Amway" or "born again" feel about it I believe. Makes you wanna run a mile.
Is Anthony Robbins hiding in the wings somewhere? sheesh!
I don't think Neil has his hand on it; you might say he is unusual; and that goes hand in hand with the fact that he is the only real estate agent out there trying to warn the public about the shonky agents' practices – which other agent would do that?
I follow Neil's website regularly. I am a fan, but of course; like everyone; he has his agenda too – he wants to get known and make some money along the way.
But his desire to get known is greater than his desire to make money – he has plenty of dough; he want's to get known so that he can reach more victims before they happen, and put the "spruikers" and two-tier marketers and the dodgy agents out of business.
When someone tries to sue him for his remarks; he puts the solicitor's letters on the site. He dares them to take him to court, and he goes into bat for many victims who have been scammed. Who else does that?
At least with Neil he is totally up front and honest about his intentions and tries to help people.
Good luck to him if he upsets those who are dodgy, and good luck to him if he gets very rich along the way.
I'm not sure what your question is Mark;
are you wondering if the market is flat, or experiencing a correction etc, or are you asking why you can't borrow more than $300k?The answer to the first part is ; it depends where you look. There are several places around Aus that are booming, despite what the media says.
The answer to the second part may lie in the fact that you are recently self-employed and have a short history in that work. Banks are a bit nervous of these scenarios, especially on the tails of what has happened over here in the USA, so the Aus banks may be a little nervous about their exposure due to many borderline qualifiers for loans over recent years. They don't want to have the same finance industry implosion like is happening here. Based on this, I am sure the Aus Banks will adjust their lending policies a bit, making it harder for people without long finance histories to get lots of finance.
$300k is more than enough to get started with an I.P – how much do you want to spend? Where are you looking? If this is your first I.P you may want to consider starting off a bit smaller anyway. Keep in mind that higher priced properties (most properties over the average and median price) struggle to get decent rent returns. Cheaper properties quite often out-perform more expensive ones for rent returns and cap growth (in percentage terms).
There are various ways and means that you can borrow more, but once you move outside the "traditional" loan methods, you are exposing yourself to higher risk in my opinion. There is nothing wrong with this, but the returns need to much higher to offset this risk.
The banks don't lend people more money usually because they perceive the investment to be too high exposure for THEM FIRST, and you second; so you have to ask yourself; if they say no, maybe I should be cautious.
If you are looking to buy a PPoR, then you may need to look for a cheaper neighborhood, wait a bit longer and save like hell, or look at one of those No Doc or Lo Doc loans.
An interest free loan.
No such thing – especially from a bank. Their business is money – making it and they are very good at it.
Hey Richard;
is that 18 posts, 18 business ads?But hang on; if I follow your advice… how can I keep up with the Joneses??
That's more important – give me the $300k house; I need the double garage to park the Merc 4wd's in.As usual, a great post F; thankyou for the stats, although the figures baffle us at times.
You need to get a life I'm thinking.
I think the 7-10 year cycle that you refuted is not the PEAKS of the cycle, but how long the average price of an average home takes in TIME to double.
Can you reach into your stats bag and drag out what the average price of a 3×1 in Melb was in 1901, and what it was in 2001 and tell us how many years it took, on average, to double in price during that 100 years.
This is the stat that all the real estate spruikers trot out at seminars I'm guessing.
I do agree with you about the continuing slump, despite what the industry pundits keep saying. It all comes back to affordability – it is very low right now. I think the only reason the correction has been so slow this time is because of the innovation in loan products and the relaxing in the finance industry of qualification for loans, combined with the relatively cheap finance money today.
It will be interesting to see what happens if interest rates hit double figures in the next few years. I don't think it will happen, and the govt and finance industry can't afford for this to occur, so they will try to prevent it at all costs.
Don't worry Richard;
we are on to him/her/them and I'm sure the other forumites are as well, and will tread warily.The profit is based purely on the sell price and the buy price. What you do in between finance wise is not a factor.
If you bought the property for $200k and were to sell for $300k, your cap gain tax would be on $100k – you pay tax on 50% of the gain at your marginal tax rate if you sell after holding it for 12 months, or 100% if you sell within 12 months, and is applied to any other personal income that you have.
Please consult with your accountant about this and how it will affect your financial position.
The good thing about property cycles is they move rather slowly compared to stocks and shares.
If you are studying the market all the time as professional investors do, you will be able to spot when the cycles are turning.
Of course; every neighborhood has it's own cycle as well, so you need to look on a macro scale as well as micro.I know some investors who only invest in one neighborhood and sit around waiting for years for the bargain to turn up; much like a spider waiting in a web for a meal to come along once in a while. You can do very well like this, but it is only one strategy.
If you don't keep studying the market you won't know when the cycles are or when the bargains turn up. Looking at past data doesn't tell you much other than past performance of an area. It won't tell you the future.
I like Warren Buffet's quote: "I buy my straw hats in the winter". He watches the seasons.
