Forum Replies Created
“Houses will fall 10%”
Which houses exactly? One property I own is in a suburb that was red hot three years ago when I bought it, and has now apparently (according to the experts) had dropping house prices. Recently for refinancing reasons I had the house valued while in the middle of a major renovation (the front half was gutted – no floors, no walls – and the garden has a trench for new sewerage/rainwater pipes, no livable condition)and the property was still valued at considerably more than we paid (when it was in a livable state). They also did a projection of the value they expect it to be worth once renovation is completed, and it is a healthy figure that can’t be purely from the renovation.
Of course, some people buying in the same suburb have lost money when trying to sell – because they paid too much in the first place (expecting to recoup the costs with continued high equity growth, which has since slowed to a more managable rate). If you choose to pay too much for something, when research says it is worth something less, then you can hardly turn around and complain that the ‘market fell’.
In the article it clearly states that it’s a matter of supply and demand. I agree. That’s why, if you invest in a property that will always be in demand, you are unlikely to suffer capital losses.
The property in the above scenario is 5kms from Sydney CBD, has plenty of public transport into the city (can also walk), close to shops, schools, parks, universities, is in a heritage listed area (so no high rise unit blocks popping up next door) and the property itself is a Victorian terrace (popular, and irreplaceable).
Sydney is a growing city, which means constant population growth is expected for at least the next 20 years (barring terrorism or natural disasters). While sprawl is happening on the outer limits – that is a good hour away by car (up to two hours in peak hour), and the transport to the outer suburbs is a mess – thus forcing people to live close to the CBD unless they want to spend hours commuting each day. It doesn’t matter how many McMansions they build in Kellyville or wherever, it is not going to affect the needs of the area that I have chosen to invest in.
And if the NSW govt does get their act together and provide adequate transport and roads to the satellite city/suburbs? The area I have invested in has a strong trendy/popular urban culture that cannot be replicated that easily. There are 3 arthouse cinemas within walking distance, numerous theatres and live performance/music venues, pubs, cafes and restuarants that people come from all over Sydney to visit… people don’t just live here because it’s convenient – they’re after a certain lifestyle that they can only get in a few inner city suburbs.
Also – if there is such an oversupply in housing, why is the NSW government considering the creation of a new satellite city to house the growing population that cannot fit into Sydney? They’ve been talking of up to 300,000 dwellings… but as all things with NSW govt it’s all talk for now. Which is bad news for the citizens of Sydney, but good news for smart property investors who can only profit from such a squeeze.
Never take a newspaper article seriously. They are looking for a good headline, a story today, while property investing is a long term investment.
I still remember the hype when the Sydney market began slowing. By began ‘slowing’, I mean there was still strong growth, just not the 30% growth high of the above suburb. There was an article in the Sydney Morning Herald (probably the most reputable of australian newpapers, barring perhaps the Financial Review) that claimed the market had fallen. As example, they listed four individual properties that had each been bought and sold twice within the last twelve months, sometimes only a couple months apart. Each had sold for a higher price than their previous sale, in one case $150k more “but if you take into consideration the expenses of stamp duty, tax, renovation costs, it is hardly profitable”.
So the properties, both renovated and unrenovated, had increased in value! But people trying to make a quick buck by buying and selling within a short time span got burned by the expenses that come with buying and selling in a short time frame. This obviously had nothing to do with the market “going down”, as the properties had done nothing of the sort.
Remember when the economists talk: a decline in the property growth rate is not the same thing as a decline in a property’s value.
If you purchase a $500,000 house in a year that there is a 30% growth rate, and the next year there is ‘only’ 15% growth, then your house will potentially be worth $575,000 despite a DECREASE in the growth rate. Headlines will scream “Property growth down” while your house value is still going up!
Do your own research on an area before you take anyone else at word value. Everyone thinks they’re an expert. Many of the wealthiest people in the world made their money in times that other’s complained were troubled times with no opportunities (depressions etc). It’s a matter of making informed decisions and creating your own opportunities where others only see risk.
Yeah, recruitment agencies are only any good for candidates who “tick all the boxes”. Thing is, they receive so many applications, they have to screen them quickly and efficiently. It’s easiest to immediately cull the 80% that don’t meet ‘requirements’ (as per what their client company has requested) straight up, and start narrowing down from there.
Life is cruel.
However, if you are looking for a management position in a large company, companies often source from within the company or their circle of colleagues before ever approaching an agent. And before an agent advertises the position, they will often have a think about who they already have in their books that meets the criteria. So, unless you’re in the inner loop, it will always be harder.
Maybe you should have a think about who you would like to work for, and approach their HR department directly before they even advertise a position? Establish how much you want to work specifically with their organisation, and keep touching base every couple of months until something comes up. That way you are in the inner loop.
Good luck.
Regardless of the copyright issue…
Are you sure their house plans are applicable to your block? In addition to drawings, an architect will have considered council regulations pertinent to their property. And an engineer would not simply have looked at the architects plans, he would also have had to look at their property, and consider structural implications.
You may find that the ground under your house is different to that of theirs. May look the same to us, but from a structural pov you may be required to have a different type of footing, or use different materials, etc. There may be water running across your property beneath the upper soil structure, which you may have to build around or divert.
They also need to take into consideration if there are any underground pipes, and the placement of electricity, water, gas etc – which may well not be the same as the drawings.
Does their house face the same direction as your own? You might find that their sunny kitchen will be gloomy with your block’s positioning, etc.
How is the proximity to your neighbours? Council’s often have restrictions on placement of new works if it inhibits neighbours in any way, so the current placement of their houses will affect what you are and aren’t allowed to do. You may have to be set further back from the road, or allow additional space along the fence line. You may have to reconsider your roofline if it is going to cast a significant shadow beyond your own border – changing the side that a second story inhabits etc.
Good luck.
Your council should have information on how much they will charge you to lodge a subdivision application etc.
Surveyors cost several thousand dollars for even a tiny plot, so three decent sized blocks will probably cost quite a bit.
Biggest cost is probably time – as you will be purchasing with the bank’s money and have no income coming back until you sell.
I don’t know anything about the vacant land market, so I can’t tell you whether it’s a good purchase or a bad one. One thing to consider is: if the property can easily be subdivided for profit, why didn’t the current owner do so? Are you sure the land will easily sell for the price you want?
I’m not sure that I quite follow the details of your potential agreement – but I think the best thing is to talk to a solicitor and/or tax specialist about your options.
One problem I can see arising – if you are officially purchasing the property today, but will then hand the proceeds to her unofficially in ten years time – is the tax that you personally will have to pay on the sale (when your mother will actually be gaining the money). I think she will also be taxed on the money, as she will legally have to declare it as a form of income or ‘gift’ when filing a tax return. So the house sale will be double taxed in ten years, as well as you paying tax now when she ‘sells’ it to you today.
Instead, you could come to a legally binding written agreement where the house is not sold to you, but she allows you to use the equity in her house to secure investment properties. In exchange you pay off her debts, give her a living allowance, whatever… maybe secured against the house so that when the house is sold you recoop the payments you’ve made to her? I think an arangement like this would be a lot less expensive for both of you.
But – get professional advice. Business deals can get messy at the best of times – but especially when it’s a gentlman’s agreement amongst family. You need to take into consideration what happens if someone dies? If it were, say, your partner (her child) and you went on to remarry… or if she passed away, would other family members be upset about the deal? Or if you lose your job, and then default on the mortgage, and lose the house…? These might be dark topics, but they’re things you need to consider.
Be aware that the real estate agent doesn’t work for you, so their answers to any questions will be skewed to elicit a sale.
You need to be a master of you own destiny here, and do research on what type of ‘investment property’ you are looking for. The Gold Coast is full of smooth operators trying to sell shoddy apartments/houses to the uneducated and gulible – so make sure you don’t fall into this category.
It actually sounds to me like the real question for you to be asking isn’t “what should I ask agents” but “what is a good investment property”.
Seeing you’re looking on behalf of your parents, maybe you should ask them what they are looking for exactly. Is cash flow a priority or is it more about capital growth? Are they wanting a property that is already leased to a tenant? Do they want something that is slightly run down that they can add-value to? Are they interested in residential property, commercial property, or holiday letting?
The real issue when purchasing an investment property isn’t the cost, size or age of the property – it is how much of a return you will get on your money. Property is a long term investment, with a hefty upfront expense, so you want to make the right decsion for today and the future.
You can ask a real estate agent how much rent s/he thinks you will be able to get for a property, but they will give you an optomistic response. They may also fluff around with the vacancy rate in the area (and you may find yourself purchasing a property that sits empty half the year). They will quite possibly say vague things like ‘this is a popular area with professionals’ that will have no real grounding.
It is therefor up to you to know what you are looking for before going to an agent, so that you can spot the fictions from the facts.
A good place to start is to read a book or two (or ten) on property investing in Australia so you get some idea of various property investing strategies. The magazine Property Investor makes for a good ongoing read. Check out http://www.businessmall.com.au if you want to subscribe (they also sell a heap of property books online – but check your library first).
The guy who runs this site, Steve McKnight, has written a couple of worthy books on the topic – but there are a mulititude of books by various authors that all follow their own strategies. It’s a good idea to read more than one author so that you can pick the strategy that feels best for you and your situation. Also be mindful of any books that are older than a couple of years, as the market has had a dramatic slow down recently so different tactics are required than when working in a hot market.
Originally posted by debtdogg:If you are prepared to do the work it is not the area but the actual property that will improve your position financially
Uhhh… While you can add capital value to the actual property, that won’t help much if: there’s DA approval for a McDonalds to go in next door; you buy in a monoindustry area that closes up shop; the council is development-happy and approves a 30 storey apartment building blocking out your ocean views…
Jewel, only you can do your due diligence and compare expected growth rates/rental returns in these two suburbs. Start by having a look at the infrastructure planned in the area in upcoming years, the population growth/decline, threats and opportunites to pop growth, etc. That will give you some indication of which suburb is best.
Debtdog is absolutely right that you can’t expect instant equity purely through market growth – and property is a long term purchase. You should be thinking about how these suburbs will pan out over the next 10+ years, because in the short term buying/selling expenses will be greater than equity growth.
Buy the book first, and see if the person doing the seminar is good at explaining his/her ‘knowledge’ (and if it sounds solid to you). As with any education course, some are good and reputable, and others are shonky snatch-and run-jobs.
If you attend any professional (psychology, astronomy, medical, business, etc) seminar/conferance you can expect to spend (or have your employer spend on your ticket) hundreds, possibly thousands of dollars depending on who the speakers are, where the event is held, quality of catering, if it is a sponsored/subsidised event etc.
Why should it be free?
There are three benefits of attending a good seminar. One, to gain knowledge, two to network, and three as a motivational boost.
We all have different personalities, so each of us may want/need these in different portions. For example, I can’t stand ‘motivational’ speakers, but some people get a real high out of them. Personally I get motivated when new information is presented to me in such a way that I know I can go out and apply it.
This doesn’t mean that I am unmotivated normally (I am a highly self-motivated individual), but sometimes it’s nice to mingle with others who share similar goals to ourselves, and have access to people who have already achieved those goals. We are social creatures after all, and it’s refreshing to meet like-minded types (away from the naysayers).
What would be a really great idea is if several of the pros got together for an ultimate conference, whereby they each talk through their own methods. The biggest danger of the one-speaker seminars is that new initiates might think that there is only one right way of doing things. A bit of diversity of opinions (such as other industry conferences offer) would be optimum. It would also prevent on-selling (which I find a dodgy practice to say the least).
As to whether you go on to use that information… how many university educated people end not using the degree they got? Quite a lot. Does that mean we should damn universities? The buck stops with the individual, and you either put your knowledge into practice or you go back to you normal life and complain that it was a waste of money.
However – nowdays there is an abundance of info available in the library/bookshop/internet and any which way you still have to find your own way – so don’t feel like you HAVE to go to a seminar. Certainly don’t become a seminar groupie (spending all your time and money on various seminars/masterclasses without actually applying the knowledge).
Good luck
You can value-add by offering them the use of something they want. I.e include a tv if they pay an extra $10 a week.
If it is a furnished property, you can agree that if they sign a long lease (5 years) they will own the furniture at the end of the lease. (Seeing you will depreciate most items over a 5 year period, on paper this will not cost you anything. For the security of 5 years, it may be worth it).
Offer to get a gardner in once a month to maintain the gardens/cut grass for an additional $7 a week (gardening is a resposibility of the tenant that they generally loath – young people rarely own a lawn mower and will have to hire one at their own expense anyway).
You’ve already paid $315K and stamp duty even though the project isn’t completed yet?
Usually the point of ‘buying’ off the plan is that you don’t pay out anything more than the desposit until final settlement, which occurs upon completion.
You put a clause in your contract that you may onsell the contract (or closed ‘option’) rather than personally purchase the property on settlement date (so it is an ‘option’ from your pov, but you provide security to the developer that SOMEONE will buy it on that date).
If this was the case, then when a purchaser approached you, you could ‘sell’ the unit to them without paying stamp duty etc because you have never actually bought the property. You are in fact selling to them permission to buy the property that was previously reserved for you.
You would still have to pay tax on this amount, but I imagine it would come under regular income tax. (check with tax specialist). Pretty good in theory, because you have doubled or tripled your initial investment (deposit) in a couple of years.
But I guess this is not much use to you now, if you have already paid money to the developer and tax office prior to completion.
As mentioned by others, write up a list of expenses you have paid out, plus a margin for your hard time and the passage of time (when you could have had your money invested elsewhere), and make sure their offer is significantly higher than this amount.
Consider how long it will take you to make a similar profit if you a)hold onto the property, or b) take their money and invest it elsewhere.
Good luck.
Yep, invested in some residex data when purchasing my first investment property.
There’s a lot of info floating around both for free and for a price, and you’ll find that it at time contradicts. Different data companies collate their info in different ways – which explains the differences.
I think Australian Property Monitors only analyse auction results. Seeing as only about 20% of property is sold at auction, this is limited.
Residex actually compares each sold property (regardless of auction, private, etc) with the price they last sold for, and divides the number of years etc to determine the growth rate. Personally I believe that this is a much more acurate way to determine growth, because it irons out different trends in home sizes etc (ie. going by the more generalised data – if a whole heap of studio units were built in the suburb you are studying, suddenly the medium unit price would drop because prior to this most units were three bedroom). In a nutshell, Residex compares like with like.
Though nothing is perfect – it can’t take into consideration whether the property has had value added since it last sold (renovated).
They do have a “top 100 prediction” list you can buy for either metropolitan or rural areas in the state of your choice. As Wake mentioned, this is primarily determined by the trends they see in their statistics – and is certainly no substitute for due diligence.
Depending on which reports you buy, they do include analysis of data – not ONLY stats. These guys have been studying the trends for years, and like all good statisticians they try to explain why things have happened and predict where it may lead. They may not go down to each and every council to check plans, but they do consider political, taxation and inflation factors – and in the case of well known infrastructure (such as new motorways etc) they read the papers like the rest of us.
Listening to the guy who set up Residex at the recent Sydney property/investment show – he said his recommendation for Sydney was to pick the growing satellite city/suburbs such as Hornsby etc that currently haven’t had much in the way of units built, but will probably follow the trend as set by Parrammatta, Chatswood etc. Very much recommends the “buy in high density areas with guarenteed population growth” mindset.
Originally posted by LKGK-88:There are lots of books or seminar that educate +ve cashflow but then the example they are using is all based of property $50k-$100k, which hardly can be found in qld I am not sure other state. As I said on my previous forum, I have been searching for so many properties with realestate and hardly can find one. I might be wrong but then I really not sure why I still can’t find one.
If you can’t find ANY QLD properties in the $50k-$100k range, then you aren’t looking hard enough. Whether or not you want one to buy one of these properties (that are more likely to be cf+) is not without its risks – generally you’ll find them in areas with greater risk to capital value (ie, nowhere near a metropolitan centre, small population with a monoindustry, heavily aging population etc).
Obviously cash-flow positive properties are particularly difficult to find in the current Sydney market (where most people look for capital gains rather than good rental return) but if you look good and hard one will turn up… eventually.
Looking in cheaper areas of Sydney (or outside Sydney) – where the property itself is less expensive is a start. Also find areas where people either earn a lower pay packet (so they can’t afford to buy and must rent) or work primarily in casual/contract employment (in which case they may earn a fair amount but are unable to get financing). Of course – cheaper housing/tenants may mean you find yourself with greater repair expenses… gotta weight it up for yourself.
Now is probably a good time to buy slightly run down places that a slap of paint etc will fix – whereby you can quickly increase the value of the property to tenants. When the market was hotter these places were always snapped up by builders who did a quick reno and on sold a couple months later – obviously with the slower market they cannot afford to do this anymore. This is not recommended if you have no experience in fixing places up, as costs can quickly blow out.
You could also consider a vendor finance/wrap option for immediate positive cash flow. I haven’t tried this, but obviously Steve has to great success.
Also – regarding your research – best properties in Sydney often get snapped up prior to internet listing. Better to develop a relationship with agents so that you’re on the inner circle – or think creative and start popping your details into the letter boxes of houses you think might be of interest to you. Offer a fair price that is a bit less than the open market but more than they would get if they went through a real estate agent (who takes a commission).
Good luck
