Forum Replies Created
Is the property managed? If so, the agent should know the procedure to get them out.
If it isn’t managed, get a good one fast and let them handle it. They will issue a breach notice and if this isn’t honoured they can apply to the Tribunal in your State.Usually, an official piece of correspondance like this gets them into action, but you have to get onto it early and show them you won’t stand for any nonsense.
Also, ring the local Sherrif’s office and describe the situation and ask them for guidance.
Failing that, I know some big boys looking to earn a few extra dollars (just kidding).
The whole process can take a while, but there is not a lot more you can do. Managing the property yourself is quite often a false economy, plus the expense of a manager is tax deductable.
The other piece of leverage is to inform the tenant that if they don’t pay, or ‘do a runner’ they will go onto the National Tenant Database and will basically never be able to rent anywhere again.
By the way; have you got Landlord’s Insurance? If not, get some TODAY. It costs a couple of hundred per year (or less), and is tax deductable. You must have this.
This will cover any expenses, loss of rent, damage by tenants.
Try ‘Property One’, or your own Bank may offer it, or failing that ring my mate Doug at A.I.S Insurance Brokers (in Melb) – we have properties around Aus and he handles the lot. His number is: 03 8699 8888Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Can you tell us why your 2 properties are/will be doing well in McAllen? Is it because of growth, or cashflow, or both?
I noticed tha median house price is very low. Is it a small town?
The only problem I have with hearing about a great place to live via the Media, is it has either already boomed and we have missed the boat, or it is about to be flooded with investors who just heard about it and will buy up everything, inflate the price artificially and stuff up the rent returns.
I don’t mind hearing about these places via the forums (not the media) as there is only about .001 of the poulation reading this and we as a group can cash in.
Thanks for the heads up Chad, but how about telling us about a secret area that is good that no-one else knows about.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
sorry waynelad, can’t agree; agents are never working for the seller – they’re working for their hip pocket.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I am from Melb and live on the Mornington Peninsula (not at the moment) so I guess I can have a crack at the answer for you.
1. South of Parkdale is historically the holiday areas, a hundred years ago.
All the architecture and infrastructure was basic and the access to the City was limited due to only one main road – Nepean Highway. The prices therefore always lagged well behind the more desireable suburbs and houses closer to the CBD.
Another factor is schools and shopping.
The mentality still exists, and this is why the median house price is still behind the city. Parkdale is 30 mins from the city in good traffic.
But in the last 20 years everything has changed from Parkdale to Frankston, and even down to Dromana another 25 mins drive (where I live). From my house to the CBD is 50 mins.
The freeways are excellent and there are more being built, there are very good schools, the infrastructure is great, parks, newer housing estates etc, and the beaches are great. The whole area is now really part of the Melbourne Suburb Web.2. Right near that plant there are very few houses and never will be as far as I know. All around it there is development galore at the moment, and the boom has already happened I’m afraid.
3. Patterson Lakes was a big deal back in the 90’s. In my opinion it is very overpriced – a lot of people with too much money and no brains buy there. You are paying a premium for being near a canal that accesses the Bay. There are some very nice houses, but from an investment standpoint, I can’t see a plus – rent returns are average at best and the entry level is pretty high. The area is a bit “McMansion” – big houses on tiny blocks. It does have good access to the city. It has also had it’s boom, and it may be a good time to buy for cap growth in the long term, but the cashflow may be a problem.
4. Melbourne as a whole has just hit the bottom of the ‘correction’ according to many, so if you are a cap growth investor, then now is a good time to buy, but the rent returns all across Melb are generally around 4-5% historically. Sunshine has been a low socio-economic area for a long time, and used to be cheap, but it may have boomed over the last 5 years I suspect because of the proximity to the CBD and the low prices.
Coburg and Brunswick are very big Greek/italian/Turkish/Indian/Asian areas, and are closer to the city and never were all that cheap.
Generally, anything within 10 k’s of the CBD will be a good place to start looking for cap growth, but bad cashflow.
Many of the emerging growth corridors will be good for growth also, particularly northwest of Melb, but same deal with cashflow.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I just did a very quick number crunch, based on dividing the yearly rent by the purchase price and purchase costs, then multiply by 100 = 7.49% rent return. Considering that the cost of finance is 7.5%, this isn’t that great.
I then did a slightly more in-depth, but still basic cashflow projection:-
Assuming you have to pay $120k + GST ($12,000).
Purchase Price= $132,000.
Add 5% purchase costs = $6,000 on $120k. ( I normally allow 6% to be safe).
TOTAL PURCHASE PRICE = $138,000.Yearly interest @ 7.5% (this is approx current rate and doesn’t allow for any future rate rises – which I think there will be).
TOTAL INTEREST PER YEAR = $10,350 (not including bank fees).My bank fees are $168 per year.
Assuming the Tenant pays all outgoings which is standard for Commercial Property, there are no other expenses I will have to cover.
TOTAL CASHFLOW IS: NEGATIVE $172.37per year.
It may be positive cashflow after the tax return. This is not that great a deal in my view I’m sorry to say. But keep trying.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Points to consider;
RULE 1: THE DEVELOPER WILL PHRASE THE CONTRACT TO SUIT HIM; NOT YOU.
1. Find a property lawyer before you sign anything. If you don’t like the contract try to change it.
2. You save on stamp duty, but quite often the finished product is above market value anyway. It’s an old marketing trick to suck you in.
3. The contract will be worded such that the builder can exit the contract whenever he wants, but you can’t.
4. If there is a rental guarantee involved, you will be funding the rent via the purchase price you have agreed to. Ask for the guarantee to be removed and the value of the rent to be deducted from the purchase price.
5. Quite often, the developer will substitute fixtures and fittings (without telling you) that you have agreed to in the contract with inferior products, or at best, different from what you were promised (or maybe this wasn’t even in the contract). On this note, get a complete list of brands and models of the fixtures and fittings with the contract, along with photos, and have all of them written into the contract with no substitutes without your approval. The developer will try to avoid this.
6. Don’t buy now – wait 3 months, then go back and see if the development has sold out. If it hasn’t, offer a 20% discount to buy the unit. The developer will be anxious to sell then as he needs the cash to move on to the next project, or may need another sale before he can approach the Lenders for the construction funds. A lot of Lenders won’t approve finance for the developers until they have achieved about 50% pre-sales. The deal of the century comes along every day.
7. If you are planning to be an owner-occupier, remember that a lot of the units may be bought by investors who will rent them out. You may cop noise and ugliness from your neighbors.
8. If you are buying as an investor, remember that your unit’s value is only worth what the others sell for. If one unit is sold by a distressed Vendor at a discount, then your unit is worth that.
9. If a vendor takes a big discount on the rent to get a tenant, that’s all the rent you can expect to get too.I hope I haven’t scared you off, but you are entering a shark infested ocean and you need protection. As long as you know the pitfalls, it is relatively safe.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by elkam:EH??????????
Since when did 1/3 or 1/4 become more greedy than 1/2 ……..or am I missing the joke here ? [confused2]
It is academic- asking for any amount above what he offers is being greedy (in his eyes).
I think Bridgebuff meant to say 2/3 and 3/4?
Hey HookhamC – I know; youre right! I have to slap myself and say get a life sometimes. I’m a bit bored.
By the way, haven’t heard from my old mate barrywire for a few days. I think I upset him.
I got another one today – straight to the trash can.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
It may be adviseable to start with a trip to the local council and ask the pertinent questions regarding zoning etc, then talk to your accountant and then talk to a couple of builders about costs.
You only need to strata title if you intend to sell, and even then you don’t need to, but it is a good way to add more value to the property for resale.
If you live in it and rent out the other unit, I am fairly sure it would be treated as a standard I.P arrangement whereby the costs and depreciation are all tax deductable against your personl income tax. The accountant will help you on this.
It all sounds very do-able; the hidden costs may be in the costruction, plumbing and fit-out etc. You may need to provide separate driveways, carports etc.
The other consideration is how much rent will you get on the other unit? A few phone calls to the local agents will give you a ballpark figure.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
If you are handy, have a lot of tools and the time, you could do most of this yourself.
I have done 3 renos, and did everything except the compliance stuff – plumbing, gas, electricity. I got the plastering done as I can’t do that (yet).
Allow about 50% more time than you think and more dollars than you expect to get the job done.If you are a high income earner with time constraints then get the builder to handle it. He will co-ordinate the tradesman (it’s a bit like training cats) and the cost will be part of the quote.
The kitchen may need to be done professionally as this is a critical aspect to the sale.
Look at lots of display centres/homes to see what the current trends/colours are as well.
On final thing; in many areas the market is a buyer’s market.
Valuers tend to not take into account the cost of fixtures/fittings when they value, so be careful you don’t end up spending money that will make your house more sellable, but not more valuable.In this current climate there is a big possibility that you will only increase the house value by what you’ve spent.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Good question; no – we put a new pier next to the old one, about a foot or so away. Too hard to remove the old one.
There are still a number of the original piers, as well as our new ones. By the way; we went overboard a bit to make sure the job was A1.
Reserve a weekend, grab a good mate, a slab of Vic Bitter, plenty of snags and chops for the barby, tool box and overalls and get into it. If I was back in Aus I’d come and help!!
You will probably use close to 1 x 20kg bag of quickset concrete per pier (from memory).
I just had a thought – get some miner’s lights with the elastic strap to put on your head. Much better than a flood light, but have that as well.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Originally posted by Dazlaine:I am extremely new at this, and I have not purchased my first property yet. I have only had my mind opened to investing in the last few months and wish to act on this in the next few months.
I wish to buy interstate and I have found a few positive investment properties. I cannot get to these properties my self to check out, so what would be the best way to handle this? Or is this a bad move?Margaret Lomas in her latest book has a list of “20 questions you must ask” if you are trying to buy ‘sight unseen’.
See her website Destiny Financial Solutions to order the book. It will take all the guess work out of the process.
Having said that; by taking a (tax deductable) trip there yourself, you will learn a great deal for not a lot of money, and get a mini-holiday at the same time.
I did a road trip into Central Victoria a few years back to look at areas that were cfp – $50k houses with $110 p/w rent. I was away for 5 days, didn’t buy anything as the towns were all dying, but the experience was invaluable.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hawthorn is a good area for long term growth, but I would doubt if you will ever get a decent rent return – very neg geared.
Are you after cashflow or growth?
If you are a growth investor, read up on Michael Yardney and Monique Wakelin. They favour cap growth properties, and will tell you what to look for in areas such as Camberwell, Hawthorn, Glen Iris etc – the ‘leafy suburbs’.
I would also be researching the demand on 1 or 2 bed units in that area.
1 bedders may be hard to rent, thus there may be a lot on the market right now.
One final note on space – you always end up needing more space thank you think you need.
Ring up a few agents in the area and ask if they have any 1 bedders for rent. In this tight rental market, they shouldn’t have many, and if they have it could be a bad sign.
Also, 1 bedders would be attractive to students – are there any Uni’s close by?
The cap growth is dependent on a number of factors, not the least of which is demand. There is usually more demand for 2 bedders over 1 bedders, thus they tend to appreciate more, but there is always an exception to the rule somewhere.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hey, I don’t want to appear too greedy – he might get upset. Can’t have that.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Further to the closing costs issue, a good rule of thumb to use for how much you will pay in closing costs is to allow 6% of the purchase price.
This is usually a little high, but it means you won’t get a nasty surprise close to settlement day.
Another rule of thumb in relation to rent – allow for 20% of it to be gobbled up in expenses per year. This also allows for 1 month vacancy.
Again, it is a little high (sometimes a lot high), but if you do your numbers with these two equations in mind, you will be in good stead with your cashflows.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
I did a floor level and re-stump on my PPoR a few years ago with my brother-in-law. Some places were 1.5 foot clearance – not nice, but very do-able. The house was 75 years old, so a lot of the old concrete piers had crumbled. The floors were like trampolines!
We used a car jack to raise the floor. We put it under the beams, resting on a sheet of steel 1″ thick. After jacking the floor and running a spirit level over it to check, we then dug a 2 foot deep hole under each beam using small spades, long screw-drivers and small crow bars. The width of the holes was about 1 foot diameter. It was slow and awkward, but we had lots of time, lots of beers and a good flood light.
Directly in the middle of each hole we attached a length of treated pine poles (ants don’t eat them) like they use for fences etc to the beam using house frame strapping and self tapping screws – all made of non-rusting steel.
We cut the poles to a length that left a space of minimum 4″ between the bottom of the treated pine pole and the bottom of the dug out hole after they were attached to the beams.Then we poured quick-set cement into the holes, making sure to get a good amount under the treated pine poles, put the hose in and mixed the cement and water very thoroughly until it started to ‘go off’.
After 24 hours we removed the jack and job was done. Then repeat. We had 4 car jacks.
There were a couple of spots where the clearance was too low, so we cut the floor boards out and did it from inside the house. We were covering with carpet so we replaced the floor with yellow tongue particle board.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
ask for a reduction in the purchase price or terminate the contract.
a basic guide to the price reduction may be the size of the extension x the construction cost per square metre, plus any repair work required after the removal.
I think basic construction costs start at around $5k per ‘square’. A builder could tell you the going rates.
A ‘square’ is 100 square feet (I’m an old bastard so I think in imperial measurements), which is approx 10 square metres.There will be another fantastic deal to find this afternoon, or tomorrow.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
To Dr. X – agree entirely. Mindset is everything. “Think and Grow Rich” – Napoleon Hill is a great example.
To Elkam – another great book by John Burley – “Money Secrets of The Rich” is actually a nuts and bolts guide to wealth for the non-rich.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
A few ‘house-keeping’ tips for your list of things to know;
1. Get your finances in order and improve your financial knowledge. Do some financial statements on both yourself and a few future hypothetical properties to gain some experience on running the numbers.
This will help you to recognise a potential property more quickly when you crunch the numbers, and is very important if you are going to be a long-term property investor. Update them every 3 months.
Lenders like to deal with financially literate people, and not only that you will have more control and input into any finacial decision made on your behalf by others.
2. Find a good property accountant and Mortgage Broker if you are not close to the Bank Manager.
3. Always over-estimate expenses and under-estimate income (rents). 20% of rent will go in expenses.
4. Always get Landlord’s Insurance and $20mill public liability insurance as well as building/contents, building and pest inspections.
4. Never rely on opinions (especially from r/e agents) – research the facts.
5. Beware of rental guarantees – you are normally funding them yourself.
6. Be prepared to walk away from any deal. Never get emotional about a property. The deal of the century comes along every day.Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Banks as a rule will only let you use 80% of the equity in your home, less any outstanding loans. Some banks will let you use more, but personally I think that is pushing the safety factor pretty high – not the banks; yours. Personally, I won’t go over 60% LVR (Loan to Value Ratio).
To answer the first question; you can set up your loan in two ways;
a) A line of credit on your own home, which is used as the deposits for the I.P’s, and the balance is from separate loans for each property either with the same lender, or someone else.
The deposit amount will vary from lender to lender, but is usually 20% which you provide from your L.O.C on your own home. The less deposit you provide, the more LMI (Loan Mortgage Insurance) the lender who is providing the second loan will ask for. It is a cost you should avoid if you can.b) A line of credit on your own home, which is extended to incorporate the loan on the new I.P property/ies as you buy them. All properties are secured by one loan, which keeps increasing as you purchase more properties.
There are many arguments about which way to go with this. Some people advocate startegy a), some advocate strategy b).
Of course, in either strategy, you have properties which are 100% or more financed, which makes it very hard to obtain a +cashflow property.Do more research on each one and talk to an accountant who is knowledgeable on property investing, then make your own choice.
To answer question 2;
My .002 worth – I have done both, and am using b) now. It is a lot easier and cheaper on fees, and with the right property tracking software, is easy to sort out at tax time.
Some might say this is cross-collaterlising, but I don’t make any risky purchases and don’t intend to sell, so I am not worried about the prospect of having my home taken away.
I have sold a property under this strategy, and the lender simply reduced the loan amount, refunded the difference in the mortgage stamp duty and we continued on.If the equity in your girlfriend’s house is $240k, then technically she could use this as deposits on 6 x $200k properties ($40k deposit on each), but in reality, you have to also allow for purchase and finance costs, so it is probably only 4 or 5 properties. Or, you could buy 1 property worth $1.2 mill !! (I wouldn’t recommend that).
The other issue which will come into the equation is the servicability of the loan. This may run our before the equity does if the properties are not +cashflow, thus you cannot keep buying.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Basically, they pretend they have access to an unclaimed deceased estate of several million dollars. They tell you that you can become a part recipient of it if you agree to help them access the estate, and of course, you will need to provide details and open a bank account to have the money sent to you.
Usually they offer you about 50% of the money, they get the rest.
Once you agree, they ask for money for ‘expenses’ to get the ball rolling – usually a few thousand dollars.
Then, later on, there will be a problem, whereby you need to send a bit more money to rectify this problem (quite often a bribe to an official, they will tell you).
Very gullible people will keep sending the extra money to fix the problems, and will never see the money again. Their greed catches them out.
Now that you know the scam, do as I do; have some fun at their expense for a while until they wise up to you and stop answering your emails.They will usually take the form of an email with a name you’ve never heard of, with a message which goes something like; “your most urgent reply”, or as below, this one arrived just today, which simply said; “hello”;
“Hello.
You will be surprised to read from me, but please consider this letter as a genuine request from a family in dire need of your humble assistance.I am Benson Dime. A Citizen of Zimbabwe,I am now seeking political assylum. I got your contact through the Information Exchange Online.
I am the only son of Collins Dime, a wealthy black farmer and senior politician with the opposition political party in my country, Movement for Democratic Change (MDC). Our wicked President Robert Mugabe murdered my father, before I ran way from my country because I have become his next target to eliminate. My father was a fighter for Justice and a moving force in The MDC, a party wanting to end the several years of brutal Dictatorship government of President Robert Mugabe. You will read more stories about President Mugabe’s brutal acts by visiting this web site:http://www.rte.ie/news/2000/0418/zimbabwe.html
My father was accused of assisting the White farmers in fighting the government. Few weeks after his arrest, he was reported dead. The government claimed he died of heart attack and his body was never seen for proper autopsy, they buried him in the government cemetery. My father’s associate Mr. Martin Olds a White farmer from Britain assisted me in fighting my father’s death through the Court and media.
The Government saw us as a big threat to them and decided to eliminate us. Mr. Olds was attacked and murdered in his House, but fortunately, before they came looking for me, I received the news and I left the country through the border to save my life.
Here is my reason for contacting you. Before the death of my father, he deposited the sum of Ten Million US Dollars (US$10,000,000.00) with a security company,The money was deposited as a gem/precious stone in a metal trunk box to avoid seizure and much demurrage from the security company organization. This money was earmarked for the purchase of new machinery and chemicals for the farms and the establishment of new farms in Lesotho and Swaziland.The government seized my father’s farms and bank account before his arrest and Murder. He told me everything concerning the funds while he was still in detention. This is why I need your assistance in securing the funds there in your Country, so that I can arrange on how to come over to your country for the investment of the fund, I am willing to offer you 25% of the total fund for your assistance.as you may know that the financial law and regulations of the government does not give we assylum seekers financial rights to such huge sum of money. In view of this, The monetary policy/law does not allow such investment by an asylum seeker or refugee. Please, let me know if you can assist me, so that I can give you more details on how we shall proceed.
As I wait for your urgent Responsepls contact me with this email ([email protected]), please treat this information as top secret.
Yours truly,
Collins Dime.”I will have a bit of fun with good ol’ Benson for a while. Should I ask him for 60% of the money?
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
