Are you from Victoria? I’m guessing not.

I live in Dromana on the Mornington Peninsula; we have about 50 or so along our beach. There are some more up the Bay in Mt. Martha, some south down around Portsea, and some up near the city at St.Kilda.

Our neighbor owns one and we spend many days there with them over summer (not right now as we are in L.A). They are a great thing if you love the beach as we do.

They are selling for between $70-$90k in our area depending on how good they are, how big and where they are positioned. In Portsea they go for over $100k sometimes.

You cannot insure them against loss as far as I know; if you could, it would be prohibitive as they are prone to vandalism.

You cannot stay in them overnight, or rent them out.

Maybe you could rent them privately, as I’ve never seen them advertised thru the agencies in our township. You would have to arrange your own agreement with a prospective renter, but you’ll find it will only be for a few weeks a year (xmas – Feb).

They are purely a lifestyle choice, but they do eventually go up in value as they are in short supply. The only problem is paying the loan. Our neighbor will sell you hers for $80k I reckon.

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”

The aim of Investing is to make money. Obvious statement, but many investors don’t.

Neg gearing means you lose money every week. If the property is going up in value at a greater rate than the neg gearing figure, then this is acceptable to some people. No one can predict cap growth however, so the philosophy of neg gearing is flawed and requires an element of gambling and hope (in my opinion).

Why not buy properties that return a pos cashflow, AND go up in value as well?

In the current market many investors have had to alter their thinking and look for “add value” properties – subdivisions and renos, wraps and lease options etc. to create a pos cashflow.

You can, however, buy properties which are initially neg geared, but after you receive your tax return will tip the cashflow back to the positive, and because it is a tax RETURN, there is no tax to be paid.

This is the only type of property I buy. They all go up in value – some more than others, but my primary goal is to get a pos cashflow first, cap growth second.

Here’s a basic breakdown of how to select them;
1. built after 1987 for maximum depreciation benefits for tax return.
2. land content (preferably for subdivision) for cap growth.
3. proximity to all amenities such as malls, schools, parks, transport, beaches, hospitals etc for cap growth.
4. usually need a minor reno – ability to add value and increase rent return for cap growth and cashflow.
5. good rent return already (above existing finance level).
6. priced below median/average for area as there are more renters/buyers in this price bracket (less vacancy and easier to sell).
6. in good rent demand area. less vacancy.
9. interest only loans for extra cashflow.
10. select an area with good prospects for cap growth – look at local govt plans for development, new infrastructure improvements, population and jobs growth etc.

This is my basic criteria and allows me to maximize every aspect of the investment.

With careful selection, you can build a portfolio of properties that cost you nothing, pay you and keep going up in value.

These types of properties exist everywhere, but aren’t as easy to find as they were a few years ago due to the rising property prices and decreasing rent returns. I like this as the harder they are to find, the less people want to work to find them. Less competition.

Read all of Margaret Lomas’ books on this subject. Excellent.

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”

Now that’s ‘labouring the point’!! Good work F.

“Well, yes, but only if this level of debt-growth is sustainable. If private debt is growing faster than private incomes, this is unsustainable. If total debt is growing faster than GDP, this is unsustainable. If debt-growth is unsustainable, then it must at some point slow, and the areas that are being boosted must contract. Remember, this is completely independent of the previously mentioned impact of debt servicing on economic performance. The problem is, the two are likely to occur simultaneously. Furthermore, one must wonder whether our economy has really been growing in a productive manner over the last decade, and how much of GDP growth has been boosted by borrowing?”

As an add on to that, I read an article about the U.S economy (remember – Aus is the 53rd State).

Basically, it said that the economy, whilst flying along nicely, had not really grown as the consumption was under-pinned largely through spending from home equity borrowings and credit cards; not savings or actual cash. The average savings of Americans is now negative and the average c/c debt is up to about $8k per person and climbing every year.

So you have a situation where the economy is further in debt and being secured by property.

The liabilities are higher than the assets, and no paying down of debt is occurring. I’m not an economist or finance wizz, but even I know that this is not good.

The Fed can’t put up rates too high as this will kill spending and investing. No spending means recession, but if they keep rates down, spending (on credit) continues, thus widening the gap between Assets and Liabilities even more.

With any hope the next gen of Aussies and Yanks will learn to manage money and save even just a little bit.

The unfortunate plus side is that cashed up investors will pick up bargains when the inevitable recession occurs, there will be even more renters as the volume of bankruptcies increase.

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”

I haven’t ever heard a good report about hotel suite investments. A few things to consider:
1. If they are smaller than 50sq/m Banks won’t lend on them.
2. High management/maintenance fees for cleaners, pools, elevators etc. Look very carefully at this.
3. limited possibility for cap growth apparently (don’t know why).
4. Management company of can change abruptly.
5. Rental guarantees are provided by management, but it is not guaranteed against anything – quite often a $2 shelf company, They go broke and you are out of income.

Get a copy of the financial report for the complex to see what the management fees/running costs are and the rental income etc.
Do a background check on the management company; not the owners of the building.

Look at past re-sale records to check cap growth.

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”

chopper = liability
I.P = asset.

Reinvest the profits (tax benefits) into the I.P, get rich, buy 10 choppers.

But seriously; you can arrange with the A.T.O to have your tax return paid to you each week/month (I think it is a form 1515). Basically, your employer will withhold less tax. The only catch is that if you over estimate your return, you owe the A.T.O money at the end of the year. See your accountant about this.

If you have the discipline, take the extra money in the pay packet and pay it off the bike/car.

Me – I put it into the I.P’s (re-invested profits).

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”

Sorry no-one has responded by now Anzac.

I’ll have a go, but without more figures it’s a bit hard to really say.
Anyway, based on your post, it sounds as though you are struggling to make ends meet? Been there done that many times – asset rich, cash poor they call it.

Options-
1. Both get part-time work; you could maybe take on extra baby-sitting work seeing as how you are stuck at home. My mum did this for many years. (hard yards there, but ya gotta do what ya gotta do).
2. Sell QLD (only if you are getting really tight).
3. As above for Melb.
4. After either 2 or 3, find somewhere close to Hubby’s work to rent for a while until things improve.
5. Keep both houses, really suck it up hard and do it tough – spend nothing for a year (you’re probably doing that now?)

There are 3 mortgage brokers on this site who I know of – Terry, Richard, Simon. Maybe they can help.

I don’t think moving out and renting Melb will help you as the neg cashflow will make your situation worse.

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”

I haven’t seen an 11 sec rule property for a few years. It’s a great theory, but not in today’s Aus market.

I don’t think you will find an ‘off the shelf’ pos geared property anywhere (unless you look at small remote rural towns, but I wouldn’t recommend that) – you will have to create one.

Buy a run -down property that can be subdivided and needs a reno. Do up old joint and either rent or sell, build new house/unit on subdivided block and keep as renter. The Depreciation deductions will be great on the new building, along with the profit from sale of old house or the increased rent on it plus the rent from the newie.

That’s about it I’m afraid unless you want to get into wraps and lease options. Not my cup o’ tea.

Finally, commercial property – potentially good returns and cap growth, but unless you go bigger is more risky. Smaller businesses are more likely to move on as they grow or they often go broke, and getting new tenants can be harder if economic times get tight.

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”

Values in many parts of Aus haven’t gone up much in the last 2 years.
I wouldn’t sell yet – you bought at near the end of the recent boom.
L.M is a fantastic location and you are right near the water etc.
If you can hold it it may be worth while.

Cheers,
Marc.
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“we get sent lemons; it’s up to us to make lemonade”