Forum Replies Created
As long as the wall is not load bearing and you are not adding onto the building I am fairly certain you wouldn’t need a council permit. Cost to remove wall would be a long way short of the cut-off for permits as well.
Same with the fence – it sounds like it is only a privacy fence?
You don’t need a council permit to put up a new boundary fence as far as I know.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Warnambool is another of those areas where people with too much income are ‘keeping up with the Jones’. A couple of cashed up people start the ball rolling a few years ago and everyone follows like sheep.
I have been there a few times; nice place, but it is a bloody long way to go for a weekend, it has crap weather and is near nothing. Go figure. Golf course is good though.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by blogs:Im trying to find a 2 bedroom appartment (or small stand alone reno) within 10ks of the Melb CBD, preferably Flemington/Ascot Vale/ Maribyrnong area for under $300k and cant find anything thats not complete rubish. Any help or is it just what you get for that price range?
forget it – they don’t exist.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
With the steady sprawl of Melb there is no question that D’nong – “Dandethong” as I call it, will continue to go up in value.
How much and how soon – no one knows, but it is cheaper than most areas.
The problem is; can you shoulder the burden of neg cashflow and the odd loser tenant until the growth occurs?With recent interest rate rises shutting out first home buyers even more, and current poor rent returns stopping investors from artificially pushing up the values, I can’t see a lot of cap growth happening there for a while.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Anyone who is willing to take the plunge and start investing and taking control of their future is doing the right thing.
However, you want to make sure you are maximising your investment returns wherever you can and minimise risk at all times.
I don’t know the area you are considering, and as I read there are several questions/concerns popping into my head:
1. Are these properties at or below the market price.
2. Is the rent estimate actual or just an estimate from the agent. (sales agents quite often don’t know or lie).
3. Is there a good rent history and demand in the area for your selected property type.
4. Is this the average rent return for the area or can you do better (to me these are not a very good rent returns – they may be ‘good for the area’.
5. Are both built after 1987 to maximise depreciation claims for tax (I noticed one was new, so it will have good depreciation).
6. Do you plan on using cash for a deposit or equity in your house. Using equity will make the I.P very cashflow negative and may affect your lifestyle considerably.
7. Have you talked to a good accountant about your purchase structure to maximise future investing and asset protection and which type of loan is the best for you to use.
8. Have you talked to a good mortgage broker about the same as point 7 – they often know the best lenders to maximise borrowing power.
9. Do you know a good insurance broker to help you with the all important coverage and landlord’s insurance.
10. Is there good prospects for cap growth in that area – to me, you would want very good cap growth to offset the poor rent return. (tip; if an agent says the rent return is good, ask them how many properties they own).
11. Can you add value to the property to accelerate it’s value and rent return.A lot of your decision making will be determined by whether you are a cashflow investor or cap growth investor.
With offers, generally the agent (and Vendor) will only take you seriously when you sign a contract of sale and put down a deposit (which can be as little as $1,000). Put yourself in the Vendor’s shoes and look at it from their perspective.
Never sign an offer without a ‘subject to finance’ clause, and it’s also a good idea to add pest and building inspection clauses as well.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
This is one of those situations where the fear of the unknown comes into play and cripples action.
Councils aren’t there to inhibit or prohibit you; they are there to help you do it right, and within the law.
Most of the time if you approach them with as much info about your project as possible, and the right attitude, you will be surprised how helpful the council will be.
I suggest you ring or go to the council and ask what is required to remove the old carport and construct a new one.
They may even help you with removal estimates, even the materials you will need to construct the new one!
You can also access plans and designs for carports online and even ‘how to’ instructions from places like Bunnings.
If you are half handy with a pencil, ruler and paper you can sketch out a rough plan and design and take it with you.
The more prepared you can be, the less obstructions you will encounter.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Rental yields are normally quoted on r/e sites as a percentage of the purchase price as advertised.
eg; Property is asking $200k. rent is $200 per week ($10,400 per year). This is a 5.2% yield. (yearly rent, divided by purchase price, multiply by 100).But, if you do a calculation including the purchase costs (usually 5-6% of purchase price) then the yield will be lower.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
A basic guide I use to work out the cashflow on a property is to allow for 20% of the rent to be eaten up each year in costs. This is an average, and some properties in some years will be way below or slightly above this figure.
Overall, my properties are below this figure.The costs I include are;
1. management fees
2. 4 weeks vacancy
3. rates, body corp
4. insurances
5. repairs/maintenanceIf the nett rent plus the tax deductions are more than the interest, then the property is pos cashflow after tax. I don’t have to worry about a blown up dishwashing machine or a/c as it is covered in the calculations before I buy.
Add to this some consistent debt reduction as you go, and re-invest any profits (tax returns) in to the Investment Loan, and you will be quite safe.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
You do need to pull the trigger and it is scary the first time, but you can take steps to protect yourself.
+cashflow properties are harder to find since the recent boom. The rents haven’t caught up to the cap growth in many areas. But there are still some around; the problem is that in the present climate a lot of these will be ‘add value’ deals to increase the rent enough.
As to where you should look and what type of property you should buy, the criteria that you use can be endless, but basically; the smaller the town and the cheaper the properties are, the better the rent returns usually are. However, the problem is you may struggle to get a tenant, and a good tenant at that.
You can find out a lot of info on the state of the rental market in a particular area buy ringing the agents and asking the right questions.
For eg; you see a 3 x 2 house for sale with a tenant already in place. Find out what is the rent the tenant is paying for a start. If the return is good enough to satisfy you, then proceed to next step.
1. Ring an opposition r/e company and ask if they have any 3 x 2 houses for rent and how much the rent is. If they have a lot available, it could mean there is not a lot of demand for that type of property – maybe 2 x 1 units are more in demand.
2. Ask whow many rental properties they manage and how many are vacant. A vacancy rate of less than about 3% is a good sign.
3. Ring the agency that has the 3 x 2 for sale and ask them about a 2 x 1 unit for rent. if they say there are very few available, it could mean there is good demand for these, or maybe there is an under-supply in the area.
4. Ask how many properties they manage and the vacancy rate.This is just one small example of the research you must do to maximise the safety of your investment.
There is one school of thought that says you shouldn’t buy in a town smaller than 10,000 people. This is probably true in general. My mother lives in a town of 7,000 people and it is a good town, but the returns aren’t that good (5-6%) and the cap growth isn’t too flash historically and isn’t likely to change. So you wouldn’t do very well either for cashflow or cap growth in that town.
However, 45 mins drive away is another town – 9,000 people, and it is booming at the moment; cap growth is great if you bought 2 years ago, and still some more to come.
Anyone who researched the town would have found out that it was about to boom – improved access to Melb, council programmes to improve amenities etc. The indicators were there.There are many good books available to help you get the knowledge to start with safety, here are a few authors;
Margaret Lomas, Jan Somers, Noel Whittaker, Monique Wakelin, Michael Yardney, Steve McNight, Peter Spann, Ben Venuti, Neil Jenman, Terry Ryder.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
My concern with any of these types of sites is what the rent demand is like in the area they have a property for sale. I couldn’t find any stats on the abovementioned site regarding rental demand. They mention rental income as a criteria for a good investment, but that’s it. I suppose I can do some reswearch on the area to find this out, but if I’m doing that, I may as well find my own properties!
For example; I found several cfp properties in rural Vic 18 months ago, maybe could have bird-dogged them for a couple of gees each I guess, but you wouldn’t touch the area with a barge pole as the towns were all but dead. Good luck getting another tenant when the current one moves out, or at the same figure.
Add to that the fee they charge for finding the property for you and I feel these are packaged investments for the not too motivated to do it themselves (lazy), or the time challenged (too busy), and you pay a premium for that.
You give up control and this makes the deal more risky in my book.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I am from Melb.
Generally, it has just about hit the bottom of the cycle, interest rates have beeen moving up, so now is a good time to buy for c.g, as there aren’t a lot of buyers out there, and the rental demand is tight, so the rents are moving up.Generally, the rent return for Melb is going to be about 4-5%. Yuk.
Of course, if you can buy low and add value, and in some areas where the prices have dropped, the return will increase a little.Flats are good for entry level (cheaper), and the cap growth for them can be nearly as good as houses sometimes, depending on where they are, but generally the properties with land content perform better in the long run. Town houses and semi-detached villa units for example.
Read Monique Wakelin’s and Mike Yardney’s books to get a good idea about what type of property will do well in Inner City Melb. The only problem with their strategy is you are going for more period style, limited supply, older and in demand properties, so you won’t get them real cheap and the cashflow drain will be higher.
You won’t be able to buy many properties with this strategy I suspect, and a 2 bed apartment in somewhere like Caulfield and Hawthorn ( ‘leafy’ suburbs) will set you back around $300k or so (a bit of a guess, but last time Iooked there a few years ago that’s about what they were).
If possible, it might be better to locate an ‘overflow’ suburb with good amenities and infrastructure near a more expensive suburb. I wouldn’t be in too big a hurry; generally, I don’t think the prices in Melb will do a lot until at least the end of this year. There is a deal of the century every day.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Capital gains are great, but it’s no use if the neg cashflow is crippling you and your lifestyle is non existent. That’s why a lot of people start off investing then stop or get out after one property.
You have 2 neg geared properties already – that is better than most of the planet. If they are enjoying some cap growth, then it may be time to look for some good cashflow, to keep you going, and worry about the cap growth later. The more pos cashflow you get now, the sooner you can retire!!
My best friend has 2 very nice, very expensive “blue chip” I.P’s. He will be working until he is 70 to get a pos cashflow from them as the yields are terrible. He is a slave to his real estate. Do you want that, and be asset rich and cash poor?
You are only 24, think with your brain not your emotions and invest with safety, not greed or impatience.
Another neg cashflow property now may cause too much financial hardship and force you into maybe a sale that you don’t want to make, or worse.
Traditionally, property bought within 10k’s of CBD appreciate well, but this is an average. There are areas everywhere that outperform the average; you just need to do research to find them.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
There are calculators on numerous websites such as realestate.com.au, and some of the banks that will allow you to play around with the figures and see how it affects your loan repayments etc. Even google search “loan calculators”.
As for paying down debt on an I.P, there are different schools of thought;
1. never pay down the Investment debt as it is tax deductable, and over time as the properties appreciate the loan becomes relatively small compared to the property value.
2. paydown your Personal Debt first then start paying down the Investment debt as you are able.
3. treat the I.P as you would your PPoR and use a standard P&I loan with a standard deposit set-up and keep paying both Principle and Interest. This way is nice and safe (supposedly) but limits your ability to keep buying to a degree.My 2c worth; I subscribe to point no.2.
This will allow you to improve your cashflow (yield) as the debt decreases and the profit increases, along with your equity in the property.
I would treat the big payrise as money you wouldn’t have got, and slam the whole amount onto your house, or put some in your super, maybe some more shares – as long as it is going into some assets and not doodads.It would be a good idea to talk to a good financial planner; there are a few very good ones on this site who should come forward and make a comment.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I think what B.B means is that you will find that experienced investors won’t buy house and land packages.
Average people, first home buyers who are owner occupiers usually buy them.
Sometimes an experienced investor will buy a package, but it is usually at a good discount and they know the likely cap growth for the area will be good. the tax benefits are good too.The advantage of buying a 5 year old house over a package is that usually the 5 year old house is in amongst other houses that have been bought and sold within that period, thus there is a genuine price/value attached to it via past sales.
There is also still 35 years worth of building depreciation on the 5 year old house, so the tax advantages are nearly as good as the brand new package, but the price is as per the market forces, not the developer’s profit.
Stamp duty is usually charged on the completed product, thus you pay more for a completed package. If you buy “off the plan” you can save some stamp duty as the building is not there yet, so the S.D is calculated on the land value only.
But quite often the property is overpriced anyway, so you don’t really save any money “off the plan”.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
It is not a competition. It is not a race, or “how many properties have you got?”
Everyone has their own goals and preferences. Find yours, have fun, and above all – make money!!Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I enquired at the local council about a vacant block near us a few years ago (I wanted to offer to buy like you).
The council said they couldn’t give out the owner’s details, but would contact the owner on my behalf.
They did so, and the owner contacted me by phone a few weeks later.
If you get no response from the letter on the bin (or door) you could try this method.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
nevertheless, it could be ligitimate? More likely dodgy.
I don’t like the sound of ‘outside the square strategies’ though.
I like to sleep at night.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
A few assumptions there;
1. the vendor will accept lower than $120k (the price range is $120-130k, which indirectly says they probably won’t go below $120k). No harm in asking of course.
2. the purchaser will put in 30% cash deposit. Many investors (like me) use equity from other properties as deposits, thus the deal would be 100% financed with a loan.
Almost any deal can be pos cashflow with a decent cash deposit.
3. you are assuming there will be no interest rate rises this year.
4. you assume there will be no tax paid on the profit.
At 26% personal tax rates (I think that’s the lowest income tax rate these days?), the nett profit is $3039.92 (7.55%). Still not bad C.O.C. if you are on the lowest rate.We can only do calcs on the figures presented. Everyone has a different criteria for assessing what they consider a good deal.
I do deals that are pos cashflow without any personal funds, and with a safety factor of 1% interest higher than current. A positive after tax return with no funds in is a C.O.C return of infinity. That’s what I look for. I don’t do as many deals, but the ones I do are not too bad.
I haven’t even started on cap growth yet.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Absolutely. I know of 2 guys who both bought identical apartments in the same building, then moved into each other’s apartments and rented from each other and were able to claim all the expenses etc. Good one!
By the way; there is absolutely no where in Aus that is like L.A (thank god).
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
If the ants are bull ants or jumping jacks, tell the P.M to tell the tenants to go to Hardware House or Mitre 10 and buy a tube of ANTEX and sprinkle this around the nest. Job done. Costs about $5.00.
It may or may not be your responsibility, but COME ON, it’s only ants.
They sound like the ‘victim mentality’ tenants to me, who can’t make a decision for anything in their lives and want everyone else to take responsibilty for their lack of effort.By the way; you are not reponsible for the possum unless it is living in your roof.
Sounds like a hefty rent increase at the next lease signing is in order.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
