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L.A Aussie
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December 3, 2006 - 7:23 am
I hope you are typing with one hand on the keyboard, and the other on the chequebook!!
Cheers,
Marc.
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December 2, 2006 - 8:04 pm
Hi Beth_ Macleod,
I am from Melb, and I agree with glengyron; I am pretty sure you won’t find any decent rent returns in the nice Bayside suburbs. Plus, this is a high entry level area. Land value alone for a standard block is about $500k in the inner and bayside suburbs close to the city. This area is more for the cap growth. (read Monique Wakelin, Michael Yardney).
Satellite towns like Frankston and Dandenong (I live about 25 mins away from these two areas) and also Geelong, are historically low in purchase price etc, and the returns are better; but not that much.
Having said that, we own an I.P in Frankston (bought 2 yrs ago). We paid $156k for a 2 x 1 with a garage, and it returns $165 per week rent. Based on the whole purchase price, including costs, our return is approx 5.5% at the moment. That is not that good, but at the time it was all we could afford and we knew it would be neg geared, but we knew the area would boom soon. Ours is worth $175k now, based on recent sales, and we bought at the top of the Melb cycle apparently, so we have done o.k with it considering the market in Melb has stopped. On today’s value the rent return is only 4.9% approx.
You need to be able to add value somehow if you buy now as the rents haven’t moved much, but the purchase prices have gone up.
Frankston is a city that is going up, and has lots of infrastructure, schools, transport, proposed Marina and a new freeway extension into the city in progress. Worth a look.
Cheers,
Marc.
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December 2, 2006 - 7:31 pm
Yes you can do it for that.
I did a ‘basic’ bathroom reno on a unit I have for approx $600.
From memory, and guessing, the tiles & glue were about $150, new mirror $90, paint $50, IXLtastic fan $90, electrical work, $110, new blind $15, shower head $ curtain $30, new lino tiled floor cover $50.
I didn’t have to install AC sheeting for the tiles to go on as the whole building is concrete/brick walls and floor.
The bath and hand-basin were good enough to leave and it looked great at the end, and the vanity cupboards were already built in and didn’t need replacing.
This doesn’t include my labour. I guess if you add that in you are looking at around $2k at least for someone to do it for you.
Things to look out for –
1. everything takes twice as long as you think to complete.
2. make sure the paint used is the same as the paint already on the wall or it will probably peel. Or, better still; tile the WHOLE room and then there is no problem (it’s not that much more expensive than painting).
3. look for areas of rot, or water damage in the floor (if the floor is timber) around the bath and shower after removing the floor covering. In older properties this is highly likely and you may need to cut out the affected areas and replace. (it’s not too hard to do).
I had a lot of fun and had the time to do it. If time is a problem or if you are a high income earner, it may be more cost effective to get it done by a professional.
At a guess you are looking at approx $25 per hour for the tradesman plus materials. You may be able to get a quote for the whole job, but if you do, get it in writing or you may find some extra surprises in the bill at the end.
Cheers,
Marc.
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December 2, 2006 - 7:08 pm
I agree with duckster.
I think the average wage according to the govt is about $50K per year? I think this is a bit optimistic myself – there are many more people on low incomes than high incomes, and the fewer high incomes pump up the average I suspect. One CEO is worth about 200 check-out persons at Safeway.
So, based on those figures, anything above say, $60k would be considered ‘high income’ I suppose.
It may also be a good idea, if you have a high income, to save enough deposit to put down to make the property cashflow+ or positively geared from day one.
The problem may be though that the prop values will increase faster than you can save.
Although, for the short term I don’t think that will be an issue.
Either way you go, you are in a good situation as you can accelerate your investing with your income.
Personally, I don’t think it is a good reason to buy property to simply lower your tax bill. This should be the ‘icing on the cake’.
Cheers,
Marc.
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December 2, 2006 - 7:33 am
Hey Xenia,
how about XEN Properties.
Cheers,
Marc.
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December 2, 2006 - 4:01 am
No offense summersky; but isn’t that the herd menatality? – the property market dives so they all rush to shares.
A lot of smart property investors are getting out the chequebooks now, and a lot of shares investors are sitting on theirs.
I love Warren Buffett’s quote and I’ve mentioned it before on this forum – “I always buy my straw hats in the winter”.
Cheers,
Marc.
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December 2, 2006 - 1:37 am
Originally posted by celeste:
Hi Crashy
Reminds me of Perth 3mths ago.
Anyway, my mum and dad lived there redcliffe 10yrs ago about 4 houses from the water – left hand side of bridge over from the main land.
They were told it is being reclaimed by the sea, because of the higher water levels caused by melting ice caps or something, they predicted 50yrs or so to be all gone?.
See if you can check it out – water line 10yrs ago until now.
Be interesting to see if the level has increased
Celeste
I’ve been living on the shores of Port Phillip Bay for 45 years and the water level hasn’t moved a millimetre.
Sometimes a storm throws water up over the top of the beach and takes a chunk of sand with it, but it’s back there next year.
L.A Aussie
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December 2, 2006 - 1:20 am
we had guessed
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Marc.
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December 1, 2006 - 10:25 pm
I have bought 2 properties without looking at them. Actually, I have seen them in photos which I requested from the agent as part of my ‘subject to’ clauses.
I did extensive research on the area via internet and phone calls to the local agents and council before-hand to become familiar with the area, rents, values, most rentable properties, best areas to buy.
Getting the correct info from the agents was tricky – I found they like to tell you what you want to hear. The selling agents rarely know the rents, and will often over-inflate the returns. Look at the properties for rent on their websites if they have one, or on real estate.com.au, or ring other agents and ask what a 2 bed unit costs to rent etc.
I included detailed ‘subject to’ clauses for the finance, building inspection and pest control. As the buildings were newer they came up o.k. The offers were lower than asking, but with short settlements so were accepted easily.
Watch out for restricted access to property for building inspector – tenants can make this difficult, but if the ‘subject to’ clauses are worded correctly you won’t run out of time.
I found the experience not as scary as I thought it would be.
Cheers,
Marc.
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December 1, 2006 - 7:02 am
my 2 cents worth – it’s a bit like mezzanine finance where the shortfall that the banks won’t lend are made up with the funds you are looking at providing. Good returns, but if the s*** hits the fan you will be 2nd, 3rd in line to get paid. If you can afford to speculate $25k then that’s fine.
Very dicey.
Cheers,
Marc.
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December 1, 2006 - 6:55 am
Originally posted by ScottyTav:
We have to spend 4-500,000. We need to buy a place to live in near the city for a while unfortunately…
sorry, I mis-understood. I thought the unit you were looking to buy was an I.P.
Even so, it must be very good to spend that much on it. That’s a lot of money for anyone to spend on their first property – especially a unit with limited land value.
You’re braver, richer, or more spendthrift than I.
good luck.
Cheers,
Marc.
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December 1, 2006 - 2:41 am
further to Dr.X’s comment, I would say that other than ‘now is the right time to buy’, it actually is a good time to buy now, or soon, as the markets are mostly flat and/or experiencing a ‘correction’. Some isolated areas are experiencing booms (Perth, Darwin), but generally, get into it if you can.
Cheers,
Marc.
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December 1, 2006 - 2:30 am
Not much you can do right now. You are still in good shape having a property.
Time for a lot of debt reduction and waiting around until the property goes up in value I think.
Cheers,
Marc.
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December 1, 2006 - 2:05 am
Originally posted by vyaw2003:
I have only ever bought sales through offers not auction.
How does it work do i need to go around on Saturdays with a $40k cheque to bid?
How can i bid if i dont know that the bank will give me the money for the house?
obviously i would have to be preapproved.
Can someone just run over what i need to do in order to buy at auction.
Also does anyone have a rule for how much dept/income (job)?
I dont want to get in too deep.
Thanks[hmmm]
Go to about 30 auctions and watch what they do. I did. Bored me to tears watching the agents strutting around like peacocks. sheesh! But you need to do it to get experience and how to spot the dummy bidders.
Also, read the ‘Neil Jenman’ and ‘Morrell and Koren’ websites for more insight into the games the agents try to play at auctions.
As a guide, you don’t want to commit any more that 30-35% of your gross income to All loans in repayments.This includes c/cards, car, furniture etc. More than this is risking hardship and possible defaults.
Cheers,
Marc.
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December 1, 2006 - 1:56 am
Originally posted by Bez:
Thanks for the reply Marc
Another thing i keep on thinking is…
Say u have a propery that after loan payments you make a positive $10 a week…
You put down $10,000 deposit on the property to begin with, wouldnt it take you 20years just to get your deposit back befor you “realy” start making any money on it…
I need to keep looking but im finding it very hard to find anything that actualy gives a positive cashflow, let alone a decent one..
You’re talking about a ‘cash-on-cash’ return; my favourite investment factor.
If you put down $10k deposit, and the property netts you +$10 per week, then that is $520 per year.
That is a cash-on-cash return of 5.2%. Compared to a bank term deposit this is not all that good, but when you factor in capital growth, and re-investing the $10 back into the property as debt reduction, the overall return looks much better.
As I said in my first reply, a well positioned house etc, etc will always go up in value. Historically this at a rate of doubling every 7-10 years, so this is roughly 10% minimum.
Your overall return on your money is 15.2% per year. Not too bad.
But, if you leverage from that first property using the increasing equity and buy others with ‘no money down’ the return increases almost exponentially. I love it!
If you can manage to do a deal where you only put in $5k of your own money and the return is still $10 per week, then you’re doing very well.
You’re right about the +cashflow properties; they are harder to find at the moment. But keep looking.
Cheers,
Marc.
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November 30, 2006 - 6:49 pm
For your first property It may be best to look at a ‘standard’ purchase that you may be able to add value to and improve your returns.
A good quality, existing house in a good location, and bought at the right price is the SAFEST way to go. It will go up in value over the mid-long term.
This would probably be negatively geared, but a property built after 1987 will yield the most tax benefits (building write-off), which may bring the property closer to cashflow neutral or even cashflow positive. This is different to ‘positively geared’.
Steve’s 11 second rule is a good starting point to narrow down the search a bit, but you may be hard pressed to find something in a decent area that will fit (or come close to) that quick test.
Once you have one or two properties under your belt and you have more experience then try some more sophisticated strategies such as wraps, lease options etc.
Cheers,
Marc.
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November 30, 2006 - 8:21 am
Originally posted by crashy:
Ive had similar responses lately. Put in offers & flat no without counter-offer. I find it rude. If they are not prepared to negotiate I walk away. If they were smart they would counter offer $1k below asking price.
http://www.posigear.8k.com
Positive Geared Share Investing
I think a flat ‘no’ is the counter-offer. Now it’s your turn. They are trying to keep the upper hand I suspect.
I agree with DLPP though; don’t waste too much energy on one property with an inflexible Vendor. Move on to the next one who may be more flexible. There are plenty more to buy.
Cheers,
Marc.
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November 30, 2006 - 8:11 am
I think if you have limited experience in buying a property a buyer’s agent could be worth the money – especially at auctions. If you are buying something cheap they may not be good value for what they may save.
Check out the ‘Morrell and Koren’ website as well. They are well known in the Melbourne market.
Cheers,
Marc.
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November 30, 2006 - 4:17 am
Try the St.George Portfolio LOC. Good product. I’ve had it for a few years now.
My deal is 1/2 % under stand.var loan for the life of the loan.
Current stand.var is 8.07%.
I pay 7.57%.
I think that is about the going rate around the traps.
From experience I’ve found that the cheaper the loan is, the more restrictive it is. You seem to get what you pay for.
Cheers,
Marc.
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November 30, 2006 - 3:16 am
Originally posted by Bez:
Hey guys, im looking to start investing in property soon and im just trying to learn as much as I can first..
I have a few general questions which should be pretty easy for you guys to answer..
#1 – Is the idea to buy a property that brings in enough money from weekly rent to pay off the loan ?
#2 – Do people with say 20 properties have a HUGE debt ?
They might be bringing in more money than they are paying out but on paper do they owe like $1,000,000’s
#3 – If you buy a property that breaks even with rent recived and loan payments is it still a good investmant ?
So its like a house/unit/etc for free, and just hope you can sell it for more than you payed ?
Any help would be great!
Thanks…
Welcome to our world!
answers to questions:
1. That is the idea, but not that easy to do. Some people are happy to have a ‘negatively geared’ property. They treat is a forced saving towards an investment that will go up in value over time. I have a friend who has this mind-set. It’s a bit like putting $50 a week into your superannuation. If you have a neg-geared property you need good capital growth from it offset the cashflow drain. Other investors won’t buy an investment unless they make money from day 1.
2. In the beginning, the amount of debt you accumulate is overwhelming. But keep in mind that it is tax-deductible debt, and it is being applied to an investment that (hopefully) will go up in value over time. It is not like ‘consumer debt’ that is applied against useless ‘stuff’ that everyone buys and is worth nothing after a few years. You will become very comfortable and actually quite proud of how much investment debt you have! It all relative. I am sure there are posters here with at least 2 mill in debt, but the rent income and tax benefits will cover it.
3. A well priced, well positioned house/unit will always go up in value. If it breaks even with the expenses/rent that is also very good – as I said; some people lose $50 per week and don’t mind. This is ok, but how many properties can you afford if they all lose $50 per week? I want properties that make money every week. Then I can buy lots of them.
And on the subject of selling for more than you paid; if it is making money every week, why sell it? That is investing for long term and ‘passive income’. That’s what I do – I don’t want to work, so I buy investments that provide me with an income.
I think what you may be thinking of doing is ‘trading’ or ‘flipping’ in the short-term for a profit. This is a totally different mind-set and different strategies. You also need a booming market for it to work well.
Cheers,
Marc.
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