Forum Replies Created
Hi Tuggerwaugh
I have a stack of properties in the NT. I don't use an accountant there but I can highly recommend a mortgage broker, Sam Crowley from Able Finance. His number is 08 8981 9188.
I now live in Adelaide and I used a mortgage broker here who was hopeless. Now I am back to using Sam for everything I do, whether or not it is in the NT. He has been in the game for years and knows exactly what to do. I will not be using anyone else.
He could probably help you out with an accountant referral if you want one, but as far as structuring your finances, he is the man.
Cheers
K
Crashy
"dont take this as negativity…………just realism"
It's not just realism. It's negativity. Jason and Flic have done a fantastic job and the results were better than they expected. They budgeted to make a profit (albeit small) and they made a very reasonable profit. It was their first reno. Their posting of their progress on this forum has been, I think, one of the most valuable posts I have read. Your comments that because they didn't make very many mistakes they didn't gain any experience (even though you have disguised is with the disclaimer "that's what they say" is inflammatory and uncalled for.
Of course it could have gone the other way. So could EVERY investment, whether it is in shares, property, even sitting in a bank. If there was no risk then everyone would be doing it. I think it is unneccessary to point that out.
Well done Jason and Flic on a job very well done and good luck with your future renos. I am doing a property investment course at the moment and just recently had a speaker who does renos for a living and she said that if she knew at the beginning what she knows now, her first few renos would have been even more profitable. I hope the same goes for you and that your work becomes even more profitable in the future.
Cheers
K
Hi Madproperty
What is your basis for thinking that the property is $60,000 overvalued?
I would just make an offer around where I think it is worth and tell the real estate agent why I think it is only worth that much. If you are right and the asking price is too much, chances are the real estate agent knows that and the vendor is just asking too much.
Good luck
K
Hi beaniemonster
You will have to look at your original retainment agreement with the property managers to see how much notice, if any, you need to give to terminate their services.
Cheers
K
Hi again Fiona
I just reread my post and it sounded very harsh. It is certainly not meant to be. I spent a couple of years in the NT and worked through exactly this issue with some friends. Your partner does not have to be your married partner or even de facto at the time you sign the documents. They just have to be considered by people who know you as your partner. The test is a bit more legal than that but that is the essence of it.
Cheers
K
Hi Fiona
Regardless of whether the loan is in your name or not, you are not eligible for the FHOG or the stamp duty concession. Neither of these concessions are available in the NT (and probably all of Australia) if EITHER you or your partner has ever owned their own home before, regardless of whether the FHOG was used. To state anything else on the forms would be fraudulent.
Just out of interest, where did you get the figures of 2 – 15 mill for other properties on that road?
Cheers
K
Hi beaniemonster
That is one of the problems with investing in a small town. We had the same problem when we invested in Mt Isa. There were only two property managers in town and the one we were with was terrible. I didn't want to complain and leave in case the other one was worse. In the end I just sold the property about 2 years ago. I could have made a lot more money if I had held onto it, but it just wasn't worth the hassle.
The small towns that are now booming haven't had to deal with all the business before so are probably not coping with all the work and also not used to having to meet the same standards as required in capital cities. I had to deal with issues like not getting the rent paid into my account and then being blamed because I hadn't given the correct bank details – despite having had the rent paid into that account for the previous few months. I had money spent on work I hadn't authorised and in the 4 weeks between when I sold the place and settlement, about $500 of my money spent on repairs that I hadn't been asked about.
I suggest that you put a post on the forum asking for recommendations for property managers in that town. If you get responses saying that one of the other managers is good then change – as soon as you can. If you don't, then try to resolve the problem with the current property managers.
One of the costs of the higher returns in the regional returns is the risk of poor property management. For this reason I will never again buy in an area where there is no real property managment competition. As lalibella says, a good property manager is gold.
Cheers
K
If you get 30% of the rise in price when you move out, can't you put that money towards a deposit?
Further, v8ghia is correct in that you can get a loan with only a 5% deposit. You will have to pay LMI but it will be a small amount in the scheme of things. I am a big fan of LMI. If I have 50,000 to use for a deposit, I can either put it towards a deposit on one $200,000 house (20% plus costs) or I can put down 10% on two $200,000 house and pay about $5000 LMI, which is added to the loan so I don't need to pay the LMI up front. A meagre 5% increase in value over one year will mean an increase of $10,000 PER house, as opposed to the $10,000 if I only bought one house. So the LMI more than pays for itself.
I suggest sitting down with a mortgage broker and finding out exactly what you can do. You would be surprised at what the banks will lend these days. Just last month my brother in law tried to buy a place and every mortgage broker he went to said that no bank would lend him money. He then called my mortgage broker who arranged a 106% loan which settled within 4 weeks.
One of the things that really propelled my investing forward was to change my thinking from "I can't do this" to "how can I do this?"
Cheers
K
My understanding is that banks don't like them very much and either will not lend against them or will only give a low LVR of 50 – 60%.
Mortgage brokers, feel free to correct me if I am wrong.
Cheers
K
Hi Richard
It looks like you have had some excellent advice in this posting but I thought I would throw in my two cents' worth.
Take all the information you have heard and strip it back to basics.
1. Do you want to buy +cashflow or -cashflow? +cashflow will put money in your pocket (apart from the inital outlay) but are not so easy to find these days. They are usually in small towns which carry their own risk or require work such as value adding. Negative cashflow will cost you money for the first few years, but if you can wear the costs early on, you will increase your equity. In general, property doubles in value every 7 years.
2. What is your risk profile? You wil find quizzes on the internet. If you prefer low risk then you will be better off sticking to areas with proven growth and using the "buy and hold" strategy. YOu will probably also be better off in an area close to you so you can keep an eye on your investment. If you are not risk averse, you can branch out to areas you think will show good growth in the future (read API every month to get an idea of what is going on around the country).
3. Once you have found an area you like the look of, research, research research. Again, read the Australian Property Investor. I will probably get a caning for this but I think companies like the Investors Club are not a bad idea if you are just starting out. Clubs like these research areas that have good potential and they try to get as close to positive cashflow as possible. If you do decide to use a club like this I would also advise:
– don't use their recommended accountants or mortgage brokers. Always get independant help– ALWAYS get an independent valuation. In fact, do this with any property you buy. For $500 you could save thousands.
4. Once you have an idea of what you want, just do it. Whatever you buy will be worth twice as much as you have paid for it in 7 – 10 years. You will look back and think that it was a bargain.
5. If you are suffering from information overload, stop taking in information for a while. I think that education is a very important part of property investing, but if you are getting confused, step back, let what you have learned sink in, buy some property and then start learning more.
Cheers
K
Hi Bronte
This is going to sound glib but you should speak to an accountant about this.
From what you have said a company sounds pretty good (easy to draw a wage) but is not cheap to set up and there will be ongoing costs like tax returns, PAYG etc.
Consider it a business, which is what it will be, and get good advice before you start out. If you tell the forum what state you are in, I expect you will get a few referrals to reputable accountants/financial advisers.
Cheers
K
Hi LA Aussie
Just did a search on the forum and found the "history". Fair comment to you …
Rowester. If there is a will, there is a way. I have done it relatively tough over the last three years including:
– renovating with a 5 month old baby – in Darwin – with no airconditioning – during the wet season
– working fulltime to set up deals when Her Majesty sent my husband overseas for three months (baby was 8 months old)
– sacrificing just about every weekend for nearly two years to look for property, buy, sell, renovate, etc.But the hard work has paid off. We are now financially independent, live in our dream house and are raising our kids on the land (we have just had baby goats) and giving them all the attention that we weren't able to give them when we were setting ourselves up.
The reason I am telling you this is because it is possible to get ahead IF you are prepared to make some sacrifices. You just need to get started. I go to many seminars/investor groups and I am constantly astounded at the amount of people who spend so much money on all these courses and they are still saying "I'm just about to get started …"
The scariest thing for us was to buy that first property 3 1/2 years ago.
Good luck
Cheers
K
I thought crashy's response was entirely appropriate. Rowester can't claim the property as his PPOR until the date he settles on it. It is illegal for him to claim FHOG on a property that isn't his.
Rowester, if you are serious about getting into property investment and this is the only way you can afford it, then consider getting a quick settlement, move into it, renovate it when you are living in it (difficult, I know, with two kids but not impossible) and then rent it out after six months.
Doing a reno on a place before settlement is common practice, but if for some reason things go horribly wrong and settlement falls through, you won't get back any of the money you have spent on renovating.
The Government is cracking down on misuse of the FHOG so beware of doing anything fraudulently with regard to the FHOG.
CHeers
K
Hey BennyK
I will preface my answers by saying that these are just my opinions and experience but you should get independent legal/financial advice.
Having gotten that out the way, my understanding is that you can't avoid CGT by either gifting or donating the property (although I like your lateral thinking).
If I were you I would just start putting any new properties in the trust and keep the current one in your name. If you decide to sell it, sell it in a year when your income is low, ie, if you take a year off or have some kind of unpaid leave. Again, your accountant will give you better advice.
Cheers
K
Hi Millions
Yes, although as I said earlier, I used to be a solicitor. The main reason I use trusts is for the income splitting benefits, rather than the legal protection trusts afford. When we first started buying properties my husband worked and I just had baby number 1 so most of the income was given to me. Now my husband has quit work, we split it between us.
BennyK
You will lose half your income in the expenses, but each year your rental income will increase and as you buy more properties, that cost will be spread amongst those properties.
When you transfer properties from your own name into a trust it is exactly the same as if you are selling that property to a trust so as millions says, you will have to pay stamp duty on the purchase as well as conveyancing costs and other miscellaneous costs and you will have to pay CGT on any capital gain you have made. Given that you have had the property for 4 years, I expect that there will be a significant capital gain. You can't just sell it to the trust at the same price you bought it. The tax office will want to see a valuation at the time it is transferred into the trust.
When I set up my trusts, I just started with a small deposit of about $10. Then I bought properties in the name of the trust.
As for books, have a look in the Shopping Mall seciton of the API. There will be a few books on trusts recommended in there. Trusts are complex creatures. I don't really understand them myself. But that's what I pay my accountant for.
Cheers
K
Hi Stella
Any solicitor who deals in trusts should be able to set this up and they will know the best type of trust for you.
BennyK, the answer is it depends on what you plan to do long term. If you are only ever planning to buy one property it is probably not worth it. It costs about $1000 to set up (less if you do it yourself, but I wouldn't recommend doing this as it can become complicated. I used to be a lawyer and I didn't set up my own). Tax returns cost about $1000 per year.
If you are planning to buy more, even if it is only 2 – 3 in your lifetime, then it is worthwhile setting it up right from the beginning.
For us it was a big up front expense but it has saved us THOUSANDS and THOUSANDS in tax.
Cheers
K
I was looking at a block of 15 units a couple of years ago and negotiated ANZ bank up to a 75% LVR. In the end the deal fell through because the vendor got a bit silly, but the whole experience was a very valuable lesson in negotiating with banks. The phrase that kept floating around in my head was one of Steve's: "money follows management".
Cheers
K
What do you mean "private funds"? Where would I source that?
K
That is not the case in the NT either. Certainly if they are all on one title then one lot of stamp duty is paid. If they are all on separate titles then the LTO will look at them to decide if they were all one transaction. Things they will look at are, whether the vendor and the purchaser are the same for each unit, whether there was a discount for buying them all together etc. If the LTO thinks they may be all one transaction they will then send you a requisition letter where you have to answer all the questions and get supporting statements from the RE agent, vendor etc.
Cheers
LINAR
Hi Adam
I think it is an excellent idea.
Darwin is going through a fantastic boom period and there doesn’t seem to be too many other places around that are booming. I’m sure there will be plenty of people looking for a buyer’s agent in Darwin.
We have been buying in Darwin for about the last 3 years and one of the problems we have found in Darwin is that a really lovely property can be next door to a housing trust place or a run down block of flats with dubious tenants. For people who don’t live there, it would be fantastic to get advice from someone who knows the area well and can tell purchasers all the things that a real estate agent wouldn’t tell them.
I say go for it!
Cheers
K
