Forum Replies Created
You tend to get what you pay for.
With I.P loans, the interest rate is not the main concern as it is tax deductable, as are a lot of the set-up costs, so a lot of the cost is diminished.
What is very important is getting the right loan to allow you to continue borrowing in the future, and using a lender who is investor friendly.
This may cost a little more in the short term, but will potentially make you many more thousands over your lifetime.Cheers,
Marc.
[email protected]You could treat the property as your PPoR from settlement day and not claim any costs etc as tax deductions, then you will never be liable for cgt as this is only charged on income producing assets.
This also means you would probably have to pay tax on the rent, or not declare it – not a good idea.If you plan to keep this property for a long time, the cgt is going to be negligible as you will only pay cgt on the time it was used as an income producing property which will be less than 12 months.
Don’t forget – you will only be paying tax on half the gain, and that tax is applied to your overall tax position anyway, so in fact could be very small.
Also, by the time you sell down the track, the dollar will have depreciated some more, so your cgt will be relatively small in tomorrow’s dollars.May I suggest you set it up as an I.P from day one, claim all your costs as you would normally and forget about the cgt. You will only be paying it if and when you sell.
Of course, consult with your accountant ont this issue.
Cheers,
Marc.
[email protected]Originally posted by Sargeant:I am a licenced Real Estate Agent in South East Qld Brisbane.
To improve my service I thought I would ask you all as you all have had dealing with Real Estate agents as to what skills and qualites do you and don’t you desire in your Real Estate agents.You help will be appreciate [thumbsupanim]
Thanks
Aslam Sargeant
0408 730 295
http://www.randwmarsden.com.auDo the opposite of about 90% of all agents and you can’t go wrong.
But seriously;
1. Honesty.
2. Integrity.
3. Communication.
4. Putting the interests of your Vendor ahead of your own because it is the Vendor who is paying you.
5. Become Investment Property educated – very few agents are.Cheers,
Marc.
[email protected]I am not qualified to give advice, but I have some experience in this area.
I am in this situation at the moment. We have our PPoR in Australia rented out while we are in the U.S.A for 2.5 years. We never intended to use our house for this purpose when we bought it in 2000. There is no mortgage on it – only utilities, insurance, rates, maintenance and now management fees. We do have other I.P’s as well.But I asked my accountant what the status is on the house while we are away from the point of view of our house being used as an I.P, and he told me that as soon as the house is advertised for rent the property becomes an I.P and as such the outgoings are tax deductable. (yay!)
Like you, we don’t plan to move back into that house when we return. We intend to move back into the same neighborhood, but rent a cheaper house than ours. Thus we should be able to make a surplus on the rent. It is a purely non-emotional, financial decision.The I.P you move into to do the reno can be considered your PPoR if your original PPoR is being used as an I.P, as you have to live somewhere. Thus, your reno property would not incur cgt when you sell it. But you won’t be able to claim any costs from the reno as a tax deduction though – you can’t have your cake and eat it according to the A.T.O.
If you move into the I.P you have held for 3 years before selling it, the cgt is calculated on the time it was used as an I.P, up until you start to use it for your PPoR. Of course, all the tax deductions will end at this date as well.
Please consult your accountant for further advice on these matters.
Cheers,
Marc.
[email protected]Originally posted by wiseinvest:Dear
I have been advised by a so called financial advisor who has lost me millions since I took his advice. Does that answer your question. [email protected]
NB New email address.
I don’t understand this – if you had millions to lose, you must have done something right to begin with?
Why start taking advice after you’ve made a lot of money.
Was this advisor as successful as you at the time?
If not, how could he possibly help you?Cheers,
Marc.
[email protected]If this is your first I.P I wouldn’t be too concerned about buying a more expensive property. You can do that on the next one!
$200k is certainly enough to buy an I.P in many parts of Australia. You just need to re-adjust your idea of what you want to buy. Besides, cheaper properties quite often provide better rent returns which will help your cashflow.You can buy a well built, well positioned 2 x 1 free-standing or semi-detached villa unit in good condition (or bad condition if you feel inclined to be a renovator) for mid-high $100k’s all over the place. It may not be your ideal choice, but it’ll have a bit of land component, and if that’s all you can afford, then that’s all you can afford.
As a general guide, banks will only let you borrow upt 35% of your income for loan repayments (including any existing loans, c/cards and/or car loans).
Based on your income of $74k p/a, you can only repay $498 p/w approx.
If you still owe $310k on your PPoR your commitment to that is most likely around $417p/w? and that is interest only (I assumed 7% interest). This doesn’t include any other debt. If my calculations are half correct then you probably are lucky to be able to borrow as much as the bank said.
I would say your house value is not your problem – your serviceability seems to be more the issue to me.Of course, the bank may also take into account the rent return on the property to help your serviceability on the loan. This can help you to borrow more. Ask your bank what % of the rent they factor into the lending equation. Many will only allow 70% of the rent, some are a bit more.
A low doc loan will get you a few more thousand in funds possibly, but there is usually a trade-off of slightly higher interest rates, probably mortgage insurance as well on the loan.
This adds more pressure to your repayment amount and adds to your risk exposure. Not a good idea if you don’t have to do it.Cheers,
Marc.
[email protected]Look on the Neil Jenman site for tips, stories and there are 2 books called:
“18 worst mistakes made by homesellers” and
“don’t sign anything”.There is also a contract you can download to use with your selling agent to protect yourself from their little games.
I have used it several times – agents don’t like it, but they sign it.
Also
I am an ex-r/e agent myself and can recommend it.Cheers,
Marc.
[email protected]I’m with bruham on this one condog.
I have never bought a services apartment, as I heard a while ago that you are at the mercy of the management company who have the management rights.
They can go broke or sell the management rights to someone else which can greatly affect your rent return.
Also, the outgoings on these investments can be quite high, so you would want to get a complete list of them first.
There is a very good section on managed apartments in one of Margaret Lomas’ books (can’t remember which one). She points out the pros and cons, and to me there were more cons.Cheers,
Marc.
[email protected]Well done for the savings plan.
Other books to read;
The rest of the Jan Somers range, Margaret Lomas, Monique Wakelin, Noel Whittaker, the rest of the Robert Kiyosaki range, Terry Rider, Neil Jenman, Peter Spann, “The Richest Man in Babylon”, “Think and Grow Rich” (Napoleon Hill), “The Millionaire Next Door” (Stanley & Danko), John Burley.
There are many others, but I can’t remember them off the top of my head.Before you think about a price range to buy in, get your financial statement together and go see the bank to establish a ball-park figure for how much you can borrow. The bank will assess this based on your incomes and your overall financial position.
Once you know these factors, you can start to look at properties within your price range, and do some research on where, what type, what’s good value etc.
Cheers,
Marc.
[email protected]Hi breakeven,
I agree with waynelad about the agents -they will try to ‘buy’ your listing by pumping up the sale price.
But the valuers are different. I know the valuer that works for my bank personally. He values my house every year for the bank so we can assess our equity position.
He only bases his valuations on recent sales that have been completed in the immediate area. He doesn’t look at what the houses are listed for (actually he does) but the decision is based on the actual sale. Because I also do the same thing, I am usually very close to his estimate with my own estimate.
Have a look at what similar properties have sold for in your immediate area in the last 2-3 months to give you a better idea.
If the figures support your assessment, collect some info on those sales to show to your independant valuer if you bring one in. It may help you.Cheers,
Marc.
[email protected]Originally posted by vyaw2003:Hello,
I am looking to perchase a new IP soon. Any tips on how to get it as cheap as possible from the real estate?
How much should i spend? is there a resonable % of my income that i should allow for the repayments after rent? Is there some kind of rule for this? eg repayments in total should cost 20% of income?Given that a lot of markets are sliding at the moment, it may be quite easy to get a property cheap in the near future.
You never know what offers a Vendor will accept, so you can offer as low as you think you can get away with, but you have to be realistic. For example, if you wanted $200k for your house, and someone offered you $150k how would you feel? I think if you are looking to low ball the Vendor you may need to make it a win-win. You may have to offer a very short settlement for example, and/or show good intention by handing over a sizeable deposit cheque when you sign.How much you spend is decided by your financial position.
Keep in mind that generally the cheaper properties are easier to rent, easier to sell and also have better rent returns. A cheaper property is one that is below the median for that particular neighborhood.Before heading to the bank, get your financial records in order – do a comprehensive financial statement as the bank will want the info anyway to work out how much they will lend you. Apart from that it is a good financial practice and good habits to be on top of your financials. If you are going to be successful in this caper you will need to be very financially literate (please don’t think I am trying to tell you how to suck eggs).
As a rule, banks will allow you to commit up to 35% of your income on loan repayments. This includes any existing loans and c/cards.
The bank will also take into consideration the rental return when they assess your loan serviceability, but this figure will vary from bank to bank. Some will only consider around 70% of the rent, others up to 80% or maybe higher – you will need to shop around on that. I know that St.George do 80% because I am with them.Cheers,
Marc.
[email protected]Originally posted by condog:In his “Guide to investing ” he covers all the basics and his principles are sound. Its a good first read but certainly not enough to trade or buy and hold from.
Just google value investing. You will get heaps of good sites
like
http://www.moneymanager.com.au/investing/index.htmland many others. Then use this knowledge plus a knowledge of where we are in current cylces to trade good fundamental shares.
Robert only skims the surface.
Sorry condog – I think you missed my question. I’ve read all his books so I know what they are all about. Thanks for your reply though.
What I want to hear is an opinion of that specific book – ‘Rich Dad’s Prophecy’.
In it he predicts (or rather; Rich Dad does) the ‘perfect storm’ for a stock market crash around 2012, and he gives a lot of reasons why.
When you read it it all makes sense, but does anyone else agree, or not agree?Cheers,
Marc.
[email protected]Without a regular and preferrably full-time income, and a deposit, it will be hard to buy a property.
Your parents can be a guarantor for a loan, but you still need a deposit.
Even if you go into this full-time, you will need an income to carry you until you sell and make profits, so don’t quit your day jobs just yet.Start saving, study the real estate markets and reading property investing books to improve your education – Margaret Lomas, Jan Somers, Noel Whittaker, Steve McNight, Robert Kiyosaki, Terry Ryder, Neil Jenman to name a few.
This will be the best money you ever spent.Cheers,
Marc.
[email protected]Finally back! Unexpected visitors on top of everything else.
I got the notion to become serious about investing in property in late 2000. I already owned my own home and was looking to do something with my now expendable cashflow to secure the rest of my future.
I started to do a bit of reading (Jan Somers) and shortly after came across an ad for Henry Kaye in the local newspaper.
$12,000 and 4 days later after the seminar up in Sydney I thought I was Donald Trump.
Even though he (H.K) was slagged in the media as a criminal who robbed thousands of people out of thousands of dollars, I found his course excellent (albeit a little overpriced) and I came away with a lot of useful information.
I selected an area to invest in – Mentone; a bayside eastern suburb of Melb.
It is close to good schools, 15 minutes to the city by train, close to Southland and the beach, and it was an ‘overflow’ suburb just near Brighton and Black Rock.
I spent 3 months driving 45 minutes every other day from my house to trawl the area, the r/e agents’ windows, ask them questions. Every saturday was spent pouring over the r/e section of The Age, followed by visiting all the auctions in the area in the afternoon.
Finally I found 2 properties that looked promising;
1. a brand new 3 x 2 townhouse in a block of 4 for $425k. which had been on the market for all of my research period. The rental appraisal was $450 p/w.
2. an older 2 x 1 semi-detached villa unit with a lock up garage in a block of 12, that needed renovating. It was asking $225k. It came on the market towards the end of my research, and was cheap for the area due to the condition and the vendor had died – it was vacant and was being sold by the kids. Rental appraisal of $250 p/w renovated. I had to move fast on this one.
I put in low offers on both; $390k on the townhouse and we settled on $405k, and $204k on the villa with access to the property immediately to commence renos, which was accepted.
Both offers were accepted the same day.
The reason why the offers were accepted was because I offered 30 day unconditional settlements (one of Henry’s strategies to get a low offer accepted) but I didn’t even have finance approved!! I had a ballpark figure in my head of what I would be able to borrow, but I hadn’t even talked to the bank yet.So I had signed for 2 properties on the one day, for $609k plus costs, using my PPoR equity as deposits. I actually used $5,000 from my credit card as a deposit on the villa as the equity loan was not available yet, and I used a deposit bond (another Henry strategy to not use your own funds) as a deposit on the townhouse.
I then applied for finance and remember thinking at the time; ‘you idiot – what if the finance isn’t approved?’ It was, but only just. My wife was about to give birth to our son and she was panicking.
One week from settlement, the loan was not organised by the lender (not my normal bank) and I suspect that it was due to negligence by the loan officer handling the application. I’ll never know. I ended up not being able to settle on either of the properties for nearly 2 weeks, and paid penalty interest of about $5k I think from memory. Should I have sued?
Anyway, we got through settlement, then I found out that the rent on the townhouse was only going to be $350 p/w -$100 p/w less than the appraisal! I was furious at myself for not checking this properly beforehand. I had a written appraisal to give to the bank for finance, but that was all. We got a tenant after about 6 weeks – settlement was early December and no-one was moving anywhere.
The renos were going o.k on the villa, but it ended up taking 4 months to complete – I expected it to take 2 months. Cost was $18k. The rent appraisal on it was $250 p/w and the rent was actually $210 p/w. Not happy once again.
So between the two properties my rent shortfall from expectations was $140 p/w. OUCH!I did most of the reno work myself (other than electrical, plumbing carpet, polished boards, some plastering) and it looked great. We found a tenant 3 weeks later.
We were without income on over $700k worth of loans for 6 weeks, no income on the villa for 4 months, and they were heavily neg geared. The depreciation schedules softened the blow a lot in the tax returns.
My investing career began with a disaster, but both properties did well with growth, and those expensive mistakes taught me a lot.
Cheers,
Marc.
[email protected]Originally posted by elkam:“I am happy to go first. Here goes.”
Hello L.A. Aussie
Good idea but where is your story? [biggrin]
Sorry everyone, I was in the middle of composing the story and I got side-tracked and in the commotion managed to delete the whole thing.
Stay tuned.Cheers,
Marc.
[email protected][withstupid]Sorry for the ignorance, but what is a part 9 agreement?
Cheers,
Marc.
[email protected]I wish there was, but then it would be too easy for everybody.
Some people put the cost of the reports down to ‘cost of doing business’. They are happier to buy the info they need than to find it themselves. This can be due to time restraints, or lack of confidence in their own research, or simply can’t be bothered doing the leg-work etc.
There is another site (that charges) with reports called Hotspotting – by Terry Rider, a well respected property lawyer.
I have only recently found his website, and haven’t bought any reports, but this sort of site is much more informative in terms of current market information and a lot of it is free.
I have read all his books, however, and they are great.I think if you are committed to property investing and have the time to do the research, and keep your eyes and ears open and watch the market through the r/e results, various websites (like this), driving around looking at r/e windows, seeing how long houses are on the market etc, and to a lesser degree the media, then you won’t need to resort to the paid for reports.
I say ‘to a lesser degree’ because a lot of what the media feed us is ‘after the fact info’ which means that by the time we hear it in the media it has already happened. It’s a bit like hearing about a hot stock on the stock market report on the 6.00 news; by that time the stock has already been hot and most of the money has been made. If you were an avid stock market watcher you would probably already know about the stock.
Not only that, the real estate industry has an enormous vested interest in the papers through their advertising, and I often wonder how much spin is being applied to the info, and how much pressure the r/e industry is applying to the papers to pump up the figures.On a more micro scale; if you select an area that you want to invest in and watch it closely you will soon know what is good value, when the area is going up or down etc.
In answer to the ‘clock’ question; generally, across the market I would guess that the market is somewhere between 5 and 7.
Some people think there is worse to come, some think it is just starting to recover again.
However, If you were a property owner in Perth right now you might say it is between 11 and 1.Cheers,
Marc.
[email protected]To the regular share trader/investors out there; has anyone read Robert Kiyosaki’s ‘Rich Dad’s Prophecy’?
If yes, what is your opinion?Cheers,
Marc.
[email protected]sounds good!
Cheers,
Marc.
[email protected]These situations are always difficult to give an answer for. What are your goals for your investing?
Do you sell now and make a small profit, or do you keep and continue forking out cash every week in the hope of some cap growth? Everyone has a different view on this situation.
The long term view may be to hold on to them and wait for cap growth and improved conditions for renters.
The short term view may be to sell, take a profit and move on.
If you think that the tenant problem looks like continuing for some time, it may be better to sell if you can realise a profit, and put the money to use somewhere else.Personally, I don’t want to be a slave to a neg geared property in the hope it may go up in value. I want the cashflow now and take the growth if and when it happens.
I try to buy in an area that has good rent demand, good amenities and some good signs of future growth. Then I have few more bases covered.Cheers,
Marc.
[email protected]
