Forum Replies Created
- Originally posted by Mikey P:
Great love it!!!
L.A Aussie maybe he hasn’t got any rentals???
Maybe he makes ugly houses pretty and sells them time and time again and lives on the winnings??
Cheers
Mikey PI think you may be right. It is inspirational just the same.
Cheers,
Marc.
[email protected]Hi foundation,
you are right; the property journos do like to put more detail into the reports than our guys back home. There is no shortage of facts and figures on property over here. I just haven’t been reading a whole lot other than the obvious.
I think there is still more ‘correcting’ to come over here; especially if there is another rate rise. The xmas spending cycle might bring that on.
Now for the questions..
1.The current 30 year fixed rate is 6.125-6.250%
2.Don’t know the answer to the second one. Considering that the rates here have been low for a number of years, you would assume the ARMs would be still popular, but with 3 rate rises in a row maybe people are getting scared and are locking in.
The biggest business here from what I can tell is refinancing to Lines of Credit, but the average punter is using them to refinance consumer debt and then using the extra equity for more glorious spending, or maybe a reno on the PPoR. The average American now spends 120% of their income (mostly on doodads).
3. Don’t know the answer to no.3, but there are lots of spruikers and wealth creation experts on the tv and airwaves, so I guess there would be a good proportion of those types of investors around, helping to fuel the boom.
4. Auctions are not popular – maybe everyone has woken up to the scam here. I heard a story about a movie star who put his house up for sale, and each agent was allowed to bring through ONE perspective buyer. I must try that one day; all I need is a house expensive enough for that behavior!
5. Nigel from San Antonio is probably better qualified to anser no.5 From my limited perspective, it seems that a $200k house will cost about $5.5k in costs approx. In L.A $200k will get you a garage.
There are large number of expensive houses here. The mere fact that it is a house and not an apartment makes it so. However, my guess is that as in Aus, there will always be more sales in the lower end. The problem is, there is no low end.
6. It’s strange; it’s almost as if the young in L.A have the mindset that owning is beyond them, so they just accept renting, hope to make a fortune and then buy somewhere down the road. It doesn’t seem to be the ‘American Dream’ like it does in Aus. The younger gen are more interested in buying the most expensive/apperance car/handbag/shoes they can afford instead. There is a percentage that are angry, but it’s more the family types that are this way – people around the 35-45 year old age.
One thing that people are in tune with here moreso than Aussies is the cost of renting versus the cost of owning. Many people know it is cheaper to rent in L.A, so they do that and put their spare cash in the shocks and scares market. Mutual Funds are all the rage here and all the investment talk in the media/tv is the Stockmarket. They even televise the ‘opening bell’ at Wall st each morning for christ’s sake! You see these vampires in suits standing around applauding while one of their cronies rings the opening bell to start the days’ trading. how cheesy.
Anyway, I hope this answers a few more questions.Cheers,
Marc.
[email protected]Originally posted by ttman:I own 2 IPs in Invercargill NZ. Lately I was billed at least $200 repair every month. I may as well ask the tenant to deposit the rent to the tradespeople directly. Some of the repairs are of dubious nature and laughable if the money is not coming out of my pocket. Can anyone recommend trustworthy PM & tradies in Invercargill or they don’t exist down south.
Contact the agent and request that a copy of the invoices are attached to your rent statement each month (this should be standard procedure).
Also, tell the agent to go to the property and inspect the damage before a repair is done, and do a full property inspection while he/she is there.
Get the agent to tell the tenant that If the damages are caused by the tenant, the tenant is in breach of their lease and will pay for the repairs (before they are done). The agent then issues the tenant with a 14 day vacation notice on the spot for breaching the lease unless the repairs are completed and paid for by them.
I have had to do this twice, and we (the agent and I) acted very swiftly to issue the vacation notice. Amazingly, the tenants were better behaved after that.
It sounds as if your agent is at best slack and possibly negligent in their duty to represent you. It also sounds like you might need new tenants too.
Prompt and maximum action in these matters is the way. It is your property; your business – the agent works for you.
Feel free to send this post to the agent.Cheers,
Marc.
[email protected]Originally posted by Mortgage Hunter:I agree with Dave but make the following points.
Period of occupancy to qualify to keep the FHOG is 6 months not 12. 12 months is a common misconception.
Another benefit of buying it as your first PPOR then renting is the CGT exemption you will enjoy.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Simon,
I heard somewhere that your PPoR if used as an I.P is eligible for capital gains tax for the period that you use it as an I.P? I don’t know how the calculation is done though.
This is pertinent to me as our PPor is an I.P while we are living in the USA for 2.5 years.
Any clues?Cheers,
Marc.
[email protected]Originally posted by Kuade:Thanks Bo,
So does that mean I can claim back 30% of 50% of the $13602 for my wife, and 42% of 50% of $13602? Alternatively 42% if it was entirely in my name and therefore get back $5712.84?
Sorry for all the questions. I just need to be sure that we can actually afford an IP.
Here’s a very simple guide to calculate if you can afford the property or not. I call it my one minute cashflow formula. It will give you a ball park figure on how negative (or maybe positive) your cashflow will be, before the tax returns are considered. If you are factoring in the tax return as part of your overall return then you are probably trying to buy the wrong property. The tax return is the icing on the cake as far as I’m concerned. Assume the property will be cashflow negative, but this formula will give you the degree of negative and you can decide if you can carry that drain on your funds each week/month.
Calculate per annum-
1. purchase price + 5-6% for purchase costs = total purchase price.
2. total interest on loan + 1/2% more for ‘surprises’. If you are using a p&i loan this figure will be higher. I work on interest only. % of finance for purchase will affect the figure also.
3. total amount of rent.
4. deduct 20% of rent for all outgoings such as repairs, management, rates insurance, vacancy. etc.
5. deduct total interest on loan from rent.
You are left with a net cashflow figure. For example:
$100k property purchase price.
+ 6% costs = $106k (will work in most areas of Aus).
interest on 100% finance of $106k = 6.5 % (+ .5%) = 7%.
total interest on loan = $7,420 p.a
total rent @ $120 p/w = $6,240 p.a
less 20% for outgoings = $1248 p.a
less interest on loan.
figure is:
rent: $6,240
– interest 7,420
– outgoings 1,248
nett cashflow = -$2,428 p.a ($46 per week)
These figures over-estimate the expenses, and don’t take into account depreciation.
Are you willing to shoulder a negative of $46 per week before tax return? This assumes 100% finance on purchase.
If you pay a 20% cash deposit, the nett figure is -$1028 p.a ($19 per week).
Even a conservative ball-park estimate of tax return of $1,040 ($20 per week) would assume this property is now cashflow positive with a 20% cash deposit. My guess is the tax return would be considerably higher.Cheers,
Marc.
[email protected]Originally posted by Bluemist:Hi,
I’m in Victoria- and I have a question regarding if you sell your property yourself (no agent involved) can the purchasers deposit be paid directly to the vendor.
Looking at the Sale of Land Act – it only talks about deposit moneys held by legal practitioner or estate agent to be held as stakeholder- does it HAVE TO BEEN DONE THIS WAY? ie. is it a legal requirement .Thanks,
Bluemist.Bluemist.
Hi Bluemist,
I am fairly certain that the money has to be given to an independant party – the ‘stakeholder’, such as an agent or solicitor, who must deposit the money into their designated trust account until settlement. Or, but I’m not 100% sure, the purchaser and the seller can open a joint account needing both signatures to make withdrawals. The money is deposited into this account until settlement. I don’t know of anyone who has ever done this though.
I would never give the money directly to the Vendor under any circumstances.Cheers,
Marc.
[email protected]Originally posted by Nigel Kibel:I am based in San Antonio in Texas. Unlike LA there is still strong growth here and plently of opportunities. It is still easy to buy positive cashflow properties here. However you need to be careful. I have been shown first hand terrible properties in the worst streets here that have been sold to Australian investors by Australians. Some of which I am told post on this site.
I run John Notzon Realty and are setting up an investment company. If anyone wants to invest here do your homework carefully and take the time to travel here. I will only to happy to show anyone around should they wish to come.Nigel Kibel
http://www.propertyknowhow.com.au
check out my new web siteAustralian and New Zealand The United States Property Researcher and education
Good to hear that there is some growth there Nigel;
what are the factors fuelling the growth?
Can you give us an example of the positive cashflow properties you mentioned. Are you an ex-pat or an American?Cheers,
Marc.
[email protected]Originally posted by foundation:Hey Marc,
I notice you’re ‘L.A.’ Aussie… how about starting a new thread with an on-the-ground account of how the REI world is doing over there?“Between June and September, the median home price, or midpoint of all home sales, had dropped by $20,000.”
OC Register ArticleF. [cowboy2]
No worries – go to new topic to see the thread.
o qualify my observations; I have been living in L.A for 14 months now. Will be here for 16 more then back to the best country in the world!!
I haven’t been buying property here, although I looked around a bit when I first arrived, but basically I don’t have a U.S.A credit rating ((will explain in the thread) and without that it is VERY difficult to get finance. I know there are the ‘non-traditional’ ways to get it, but that’s no interest to me.
Hence, I have only been keeping a half interested eye on things.
see you in the new topic. I’ll call it L.A Dreamin’.Cheers,
Marc.
[email protected]Originally posted by zen1:I have a question that I can’t get an answer so far.
How is the affordability level in Perth? Is it historically at a very high level or still have a bit to go?
I quess China can go bust but can also pick up. I feel the prices have gone stupid but that could be because I am not used to it. But then again probably it has gone stupid. Personally I don’t know too many people buying property at the moment.Hi zen1,
A few quotes for you:
Warren Buffet – “I always buy my straw hats in the winter”
Unknown – “follow the less travelled path”.
Rene Rivkin – ‘buy in gloom, sell in boom”.
You are right; most people are not buying property at the moment, but most people are not investors.The only people buying property at the moment are the experienced investors (and maybe some inexperienced one too).
The market is mainly flat or going backwards in most areas, and the interest rates are going up,up,up. YAY!!
Bargains to be had in those straw hats!Cheers,
Marc.
[email protected]Originally posted by as41:I understand your frustration. TOTALLY. Husband and I spend out 2’s drinking and partying (never thoughtou about investing until 2 years ago). Now we are early 30’s and I am the main income earner. My husband is on a very average wage and we would like to have kids. I am havng anxiety issues with wanting to have achild and wondering how to do this on one wage and pay rent and pay IP. Our IP is an older house (newly renovated) cost us 270K and rents for 285p.w (value $320K) but because we used equity from parent we have a large amount to pay out of our own pocket after rent (about $130p.w). SO: $130 for IP, our own rent and bills = all of husbands wage… HOW CAN I AFFORD TO GO ON MATERNITY LEAVE… And I’m not getting younger… How do people manage???[inlove]
Snowflake
I don’t think a lot of people do manage too well – they just pretend they do and surround themselves with doodads to give everyone the impression they are doing well and to make themselves feel better – for a while. It takes a lot of courage to go against the flow and not spend on crap, or to ‘downsize’ the car and/or house to free up a little extra cashflow.
here’s a few of my ‘anti-Keeping up with The Jones’ ” hard yards” tips;
1. sell both cars (I assume you have 2?)and buy a $5k ‘bomb’. After 5 years auction on ebay. repeat process. I do this now; it’s great fun! and you get back most of what you paid for it. True.
If you only have one car; repeat tip one.
Then you have only third party insurance instead of comprehensive, and half the fuel, insurance and rego.
Who cares what everyone else says/ thinks?
2. find the cheapest place to rent as close to your husband’s work (so he can walk) as you can that still gives you some space to live.
Who cares what everyone says/thinks?
3. give up smoking and drinking (another assumption). Your baby, your lungs, your liver and your wallet will thank you.
4. delay having child a few more years. if you are healthy it is not that big a risk. I have 2 friends that each gave birth to 1st child at 40.
5. have child and go back to work after 3 months. My wife did (otherwise she would have gone mad).
6. do not visit a shopping mall for a least a year or 5 (we don’t). If you do – don’t take your wallet. You will get bored after about 10 mins and you can go home and look for more I.P’s online.
7. spend about $10 on each person at xmas (we do). If they winge about that they weren’t even worth the ten. Even better – send a card.
8. only pay cash.
9. only pay cash.
I could go on forever.
If you find these tips too hard then you are sacrificing your future to please everyone else. If you have high self esteem you can do it.
All these are less than ideal choices, most of them tough, but how bad do you want it?
Cheers,
MarcOriginally posted by audrey123:Hey,
Dont hate now, but my fiancee is actually a lender for a big bank, and their valuers always go inside the property.
But that doesnt always help, i recently did exactly what you did, reno on my property, got the valuer round so i would have more finance, but she valued it only 20k more! And thats after 18monthsfrom the last val, so she has really only allowed for the growth in the area, not even taken into account whats on the land or what it looks like.
There have been so many recent sales in the street, i know what its worth and its so far off the mark, but how do i complain when we work there?!
How do i know what its worth? Im also a non-practising qualified real estate agent, and i have acess to the street sales, and she is about 50k off, and that is being realistic.
Maybe dazzling is right, maybe they only take into account the land – in that case, we should all be getting hotvaluer to value all our properties if she says she takes into account the improvements!
This isnt my only experience either. We bought a unit specifically to renovate, had it valued before we did it as it was a condition of finance, and it came back at 160k. we spent a few thousand doing it up, and it looked spectacular, but she came back and valued it at 160k again! What the? so this deal was no good to us at all, and were now selling it to make a loss [crying]
My point here is that if a low valuation can happen to us, it can happen to anyone! It has definately made me rethink the purpose of renovating, unless you bought at an extremely good price going in, and increased the value that way, i truly believe that valuers only take into account the land value,not even recent street sales, because our valuer sure didnt!Hi Audrey123,
I have heard similar to this numerous times. It seems to me as though renos to add value only work when the market is going up. I have read all those reno books; ‘reno kings’ , that guy called ‘Spann’ (can’t remember his first name – Gary or Greg I think), Ben Venuti (I think that’s how you spell it) and others, and they all quote deals they did that seem to have just happened during or just before the last boom – surprise, surprise.
I did a reno on my own place just before that boom and it worked well, but was a total fluke that I didn’t plan for. I have since done 2 other renos on my I.P’s during the boom and basically the value only increased by the cost of the work and fittings – not to mention my many hours of labour.
Having said that, I think that it can work, but you have to buy a real ‘clunker’ for much less than market value – basically the land value, then do the cheapest but good quality reno you can.
So you have to annoy r/e agents with ridiculous low-ball offers and hope for the best. What fun.
I think at the moment the main value out of a reno is going to be to increase the rent return on the property a few dollars.
By the way; why is everybody not naming these banks? Is it against the law or something?
Cheers
Marcsounds great;
what I want to know is how many properties this person has, how much debt they have and how much rent is coming in, how long it took before they started taking more in than goes out and how much of a surplus there was at the time of writing.
Cheers,
MarcOriginally posted by gal_rabbit:Hi, I’ve just joined Property Investing and am keen to get out and start buying property. However, I don’t really know where to start. I purchased my first home (principal residence) over 12 months ago and keep hearing about equity to purchase other investment properties. Could someone please explain (in layman’s terms) how I do this. The purchase price of my home was about $340k and my current debt is about $298k. Lately there has been a lot of articles about ‘single mums buying 18 houses in 18 months’ etc and I want to jump on the band wagon to secure my future. Please advise – sorry for the lengthy garble.
Hi gal_rabbit,
Buy every Margaret Lomas, Noel Whittaker, and Jan Somers book and read them all. Every question will be answered and then some.
Regarding using equity, the banks will generally let you borrow up to 80% of your property value (after they value your property), less any outstanding loans.
Therefore, based on your figures; assuming no capital growth since you bought it, your debt is higher than your 80% of property value ($272k). You won’t be able to borrow anything right now.
Keep reducing your debt as hard as you can for another 12-18 months, the house will appreciate 5-10% (hopefully) and you will be ready to go. Use this time to learn, learn, learn. Read, study and do some market research (due diligence) for practice.
By the way; don’t believe everything you read – it’s probably a wealth creation ‘expert’. Steer clear of them.
There are other ways to get into the market with no money, but they are risky. Don’t go there.
The other option is to move out of your own house, use it as your investment property and rent somewhere else yourself. Every cost of your own house (including the loan interest) will then be tax deductible and can accelerate your equity position more quickly if done right.
Sorry to bring you down to earth; sorry for this lenghty garble.
Cheers,
MarcOriginally posted by Hotshot69:Does anyone have any positive or negative experiences about teh Investors Club?
Hi Hotshot69,
I too have read the Neil Jenman articles re investor clubs. Unfortunately too many of these clubs have a hidden agenda which is a developer/agent team looking to flog properties to their ‘friends’ in the club. It’s amazing that they only ever locate new properties and not existing, tried and proven ones. Beware.
My advice is form your own relationship for investing with someone you know who is like-minded, and you know and trust.
Cheers,
MarcOriginally posted by cathy_morrison:My husband and I are just starting off in property investing and are very keen to purchase our first investment property. We are looking at investing in the eastern states as prices are very high in WA and rent very low. Apart from searching the net for property, can anyone give some advice as to how to go about this. Especially trying to find an agent that you can trust and know is working for us and not the seller, or is it better to start off in our own state?
Cathy
WAHi Cathy,
welcome to the wonderful world of property investing. My advice is to read every Margaret Lomas, Monique Wakelin, Noel Whittaker book you can find for the ‘nuts and bolts’. Most of the others out there will be about more advanced investing – wraps, lease to buys, developing etc; unless you are totally fearless and ready to try anything from day one.
For your first property it is probably wise to buy in your own area as you will probably know the market? and start small for experience. Otherwise, the Internet is probably the only way to go at this point for you guys. Once you start making enquiries the agents will become helpful to a point, but they are always acting for themselves first, the vendor second and you third (or maybe 4th after themselves). It is a good idea to have every piece of criteria you are looking for ready to give the agent when you contact them so you don’t waste your time and theirs. For example; “I want only 2 bed houses, only brick, must have an attached garage, under $200k ” etc.
As far as eastern states; it’s a very big area, so you need to set yourself some parameters first; eg:
1.are you after capital growth, or cashflow? you probably won’t get the two together in many areas (if any) right now.
2. what is your budget? how much can you borrow? have you talked to your bank yet? Find banks that are investor friendly (St.George for one).
3. do you want to go for cities or regional areas or smaller country towns? the rent returns vary a lot between the three.
4. do the numbers. As a basic guide; over-estimate expenses and under-estimate income-
a)purchase price + 5-6% is about what your all up purchase costs will be anywhere you buy. If it’s less, then good.
b)allow 20% of the rent per year for all outgoings such as insurance, rate, repairs, body corp etc. If it’s less, then good.
c)allow at least 1/2 a percent over the interest rate of your loan to factor in other surprises.
d)when an agent quotes you an expected rent return; subtract 20% to be safe. they often tell investors best-case scenario to make you feel good.
5. never buy without a ‘subject to’ clause for a building inspection, bank valuation, pest inspection and lawyer to look at the contract. (part of the 6% purchase cost). and of course; these are independant which you arrange – don’t let the agent do it.
6. try to buy a property that you can ‘add value’ to to increase it’s rent return or capital value. eg; a house with no garage – you add a good carport, or turn 2 beds into 3, maybe a large block which you can later sub-divide and build on (more experienced investing I think).
Last but not least; it is my fortunate experience to find that a well priced, well located existing property in a good sized town/city will never fail. If possible, buy one built after 1987 (building depreciation).
As a suggestion for your first area to research; try the city of Frankston, Victoria. I live near it and have an investment property there. It is 45 mins from Melbourne, on the bay, good schools and Universities, shops, hospitals etc. It is still undervalued, has excellent infrastructure and transport and is at the end of the new Eastern freeway extension being constructed now. It has experienced steady growth even through the last 3 years decline in Melbourne, and there is plenty left to come. There is also a $1 billion marina planned for the near future. Naturally, there are good and bad areas there, but I don’t want to do all your work for you!
Good luck,
MarcOriginally posted by peterhutchy:TextText I’m 24 and just completed my university studies finally obtaining my Bachelor of Business (Accounting major).
I’m from Burekup WA (Just outside of Bunbury).
My question is as per the subject line “is the great Australian Dream finally dead for and a large part of my generation”
I just read a report that the median house price in Perth (where I come from its even more expensive) is $490K or over 12 times my gross income!!!!!!!!!!!!!!!!!
How are we ever meant to afford THAT!!!!!!
Traditionally (way back in the boomers day) it has usually been between 4 – 7 times the average annual gross income.
I’m on $40K as a Banking Officer at Elders which is ment to be quite good for someone fresh out of university.
The average wage in this country is around 50K.
Is it any wonder why kids of today “just don’t care”?
Part of the ethos of the country is the dream of owning your own home.
Now that appears for the most part taken away.
And all we seem to get for it in return is garbage:
– Back in my day……….
– You kids don’t have the drive…….
– When I was your age………….
– You don’t know how good you got it………WHAT A LOAD OF CRAP!!!!!The HECS Debts…….
The unaffordable housing……..
The attitude of the older generation…….We’re staying at home longer in order to try and save some money so we can make a life for ourselves, and all we get is more crap for that too. You move out of home early and all of a sudden you “have a bad attitude”
Is it any wonder why drugs are such a problem???? “There’s no point in working your ass off so you might aswell so smoke some dope, inject some ice etc” you may not be with it but hey i’m sure in your own little world you were having a good time sure you’ll screw your life up as you get older but who cares you haven’t got much to look forward to anyway.
Your going to have till your much loved parents pass away till you can make a life for yourself……………..hang on nowadays its trendy to spend all of the kids inheritence on yourself!!!!!!!!
Here we are generation X & Y everything the previous generation took for granted we have to work our butt’s off for and even then don’t stand much chance.
Houses are appreciating at a faster rate than peoples ability to save the deposit required.
WHATS THE POINT!!!!!!!!!!!!!!!!!!!!
WOW! That’s some anger!! Sit down, relax and have a beer mate.
First of all; CONGRATULATIONS for finding this forum! I wish I had found it when I was your age. (I’m 45)
In the words of ‘RICH DAD’ from Robert Kiyosaki’s book; ‘RICH DAD, POOR DAD’ – “your employer’s job is not to make you rich; his job is to give you a job”.
Can we qualify your anger and hopelessness first – are you from broken home? Were you emotionally/sexually abused as a child? Did you live in a poor neighborhood? Were you bullied at school?
Who wasn’t?
If so, and you are now a healthy adult with a good job who made it through Uni, then you should be tougher than this.
If not, and you had a nice upbringing, then you are spoilt and need your botty smacked.
Those are all excuses to stop trying. It sounds as though you’ve given up already Peter, and you have a great opportunity in front of you.
If you are on this forum then you are going to learn all you need to become wealthy if you WANT to.
We’ve all done it tough, and times always seem tough. The 90% of the population who have nothing give in to the tough times. It’s easier to give up, and you can give up anytime; so why not give up later?
The 10% keep on plowing forward. Which group are you gonna live with?
I don’t want to add to the “Back in my Day” crap; I copped that too from my old, poor and pensioned parents (who I love dearly), but when I was 18 years old I moved away from home to follow my chosen career. I vowed to never end up like them in retirement.
When I began work I was earning $70 per week and my living expenses were $65. Then the motor in my car blew up- $1,000 for a new motor. I had to get a second job doing barwork to pay off the repairs. For the next year or so I lived on Cornflakes and tinned spaghetti and never went out. That was a tough time, but it didn’t last and now I’m 45, married, one beautiful boy and 5 properties under my belt; looking for another – I started late.
Was it easy? Not in the slightest – but there are always good times and I always look at the big picture. Everyone of us can tell you a sob-story like mine. We tell them so YOU might not feel so bad about your lot.
Come on Pete! Get into life man!
If you can’t afford to buy, and you can’t live at home with the folks (god knows I couldn’t) then try ‘boarding’ at someone’s house. It’s cheaper than renting, not always ideal, but you are free to come and go and you can start saving towards that 1st investment property. On a salary of $50k you could have a deposit in 12 months (maybe 18 months if you don’t want to sacrifice eveything in life).
You’re still so young; if you follow our paths on this forum and do what we do you WILL be financially free at 40!!
Do 1-2 years of hard yards now, keep learning about investing and stay positive, and you will have a long, easy life later.
Cheers,
MarcOriginally posted by arrowsmith:I am renting. My partner & I have good incomes & no dependents and I am 30 years old.
We have a very good combined disposable income. We are just starting to build savings after a long trip overseas.
Our rent is cheap (1/7 of our income) but the place is very old and run down. At this stage the only incentive to buy is emotional.
Stamp duty in Vic is ridiculous. We are looking to buy around 400 – 450k and at that price stamp duty will be $22,660. If we don’t have 20% of the value we will end up paying LMI also which could be as much as $14,000.
That’s a straight up dead cost of $36,660 for nothing.
I just can’t make it add up.
Say the capital gain on an average Melbourne property is around 7% (annual), and that’s if you’re doing well, we’ll be ahead of the game if we just continue to save and put our cash in managed funds or a high interest bank account (on which returns will increase as the official interest rate increases).
It will take us a year to save 90,000k to sink into an investment that is VERY average ie. property.
Why do people do it? Am I missing something obvious here?
If someone told you it would cost $36,000 to get into a $450,000 investment (that you don’t own) that MIGHT earn 7% and that you would have to pay 7% (and increasing) would you do it?
It sounds like a dud to me, but I may have it all wrong.
Hi Arrowsmith,
The comparison between property and shares is usually made with the exclusion of one very important factor – how much of your own money do you put in AT THE START. This is then the basis of your CASH-ON-CASH RETURN. In otherwords; how much do you get back on what you have put in?
You can buy a $100k of property with around $10k of your own money.
With shares you cannot. You may be able to get an unsecured personal loan for them, but the risk is very high – if the shares collapse where is your security? Can you insure your shares? I doubt it.
With a property you may have a correction (not if you buy well located and correct price – none of my properties have gone down in value since the 2003 ‘crash’ ), but there is still the house as security; and it’s fully insured.
Any cash account in a bank is only going to return you roughly the rate of inflation or less, then after you pay tax your net return is usually not worth the bank statements’ paper. Also, it is ALL your own money that is deposited.
I have bought 4 properties over the last 5 years using only the rising equity in my nown home. My own money was never used for any of these purchases and as I said; they have all gone up in value. So my C-O-C return is infinity.
After I add debt redution to the loan, the return is even better. Now that’s good!
One last thing; if you think Melbournians are getting ripped off with stamp duty then check out L.A.
The cheapest ‘fixer upper’ house in greater L.A is around $800k. The agents get around 5-6% commission, and the yearly LAND TAX is 1.1% of the property VALUE. At the moment there are people having to sell their houses because they can’t afford the tax anymore! Rent returns on houses are around 1-2%, but there are people still buying!
My advice; buy the best property you can afford in the area of your choice RIGHT NOW while the market is still relatively ‘flat’. Then, put as much of your considerable disposeable income into debt reduction over the next 2 years and assuming the market recovers by then, you will have enough equity to buy another great performing property for free! You’ve gotta love it!
I wish I had your money and knowledge when I was 30; I started late at 40 but am making up for lost time. Get into it.
Cheers,
MarcOriginally posted by DLPP:In Melbourne Rental is about 3% in a lot of nice areas, so you are getting somewhere cheap to live.hi life x (or anyone else in melbourne) – genunie question –what type of areas (suburbs) i am trying to learn about the melbourne market – homes that are realistic drive to cbd – would you rent in if you were in had the choice.
cheers
http://www.cashflowproperties.co.nz
Hi cfpc.co.nz,
I am originally from Melb but living in L.A at present. Most of my investing/research/learning has been in Melb.
Basically; you won’t get a good rent return near the cbd (within 10 miles). So you must look for capital growth in this area.
So, given that, you must look for scarce designs, maybe period style, very well located properties with land content for max growth.
Thus, entry level will be high and out of pocket will be high also.
Best option is an old clunker to do up and add value, but as many of these props are auctioned it is hard to get a bargain – many builders are in the same game and even though the market is flat these props are still getting good prices as the experienced investors and the builders know the potential.For lower entry level and still good growth you need to look at areas emerging – near transport systems that are being extended/upgraded, new shopping centres and schools etc.
But within an hour drive of cbd. rent return will still be low, but that is Melb.
Finally, you may still be able to locate some distressed deluxe apartment sales in cbd after the oversupply of a couple of years ago. According to local papers (which probably means if they know then the party is already over) the oversupply has been absorbed and the prices are on the rise again.
Cheers,
MarcThanks Guys for those answers. I have learned another new thing!
Cheers,
MarcOriginally posted by vyaw2003:Hello,
I have had a block of land for sale for over a year now, it is with a few agents, and they dont seems to be doing anything to sell it. Any ideas on selling, i have advertised it in a few different papers and no luck.
Any ideas, or how how do i gee up my agencies to hurry up and sell it?Hi vyaw2003,
Without being insulting and stating the obvious;
First, get rid of the non-performing agents and select one who shows a bit of interest. Normally when a property is listed with multiple agents the agents are only half interested as they usually have to split commission with the other agents.
Second, if the property has been on the market for a while, they treat it as a ‘stale’ listing and move on to something more promising. Or, they are probably using your block to sell off. eg; “look at this block (yours) for $X, we have another up the road for less; it’s great value compared to this one (yours).”
Third, the prospective buyers do trawl the agents’ windows and will see your listings all over town. They will take this as a signal that you are a bit desperate to sell and will try and low-ball you to death.
Fourth, get the block valued (if you haven’t already done so) by a registered valuer (your bank may give you their list of valuers). Or you can do a google search to find one in your area, or even the phone book. Whatever he/she says will be fairly accurate, and usually a bit conservative.
Then advertise the block for a little less than the valuer’s figure. You can even ditch the agent if the price is cheap as everyone loves a bargain. At this point the agent will not have to do any work to sell it, so you would be paying him for nothing.
You should sell it in about one day, unless you are holding out for top dollar, or the block is a shocker?
Lastly; why are you selling it? If you need the money for other investing, then you are costing yourself opportunities that may make you a lot more money in the long term than a small price reduction will cost in the short term. Every day you keep the block to hold out for a few more grand you are paying interest (I assume) on a loan so it’s a false economy to hold on. Even worse; the interest (and all outgoings) is not tax deductible as the block does not produce income, but your capital gain (if you make one when you sell) is taxable! That’s a double loss.
Lastly, if you do sell at a loss; that is unfortunate, but you can offset the loss against a future gain.
Cheers,
Marc
