Forum Replies Created
Limted Recourse- I agree with you. I also feel that a home is a liability as it is not income producing. Even though it does increase in value over time (hopefully!!!), it does not put cash in your pocket while at the same time draining your hip pocket with mortgage repayments. But lets not argue on semantics.
In regards to the original question/comment about banks, then the bank has a good point in this instance. There is no opoint in revaluing if you are not borrowing more money. It is also in their interests to keep the LMI attached to the propoerty in case values plummet so they can sue you to recoup costs in the event of a default.
Remember that banks exist to protect the interests of their shareholders and customers are just a tool in order to achieve this. If you are not happy, then switch banks and find one that can give you a better deal.
Cheers,
LukeHow about starting/acquiring another Lotto shop if the one you currently have is doing really well?? Why settle for only an extyra $250 per week??
Cheers,
LukeI would also like to know how people have gone purchasing tax leins and/or deeds. I have just recently finished watching the Tax Lein and Deed Workshop vidoes and would like to know if anyone is making anything from it!!!
I am very keen to have a crack at this from the beginning of next year, it seems like a fantastic opportunity.
Cheers,
LukeThere are a lot of companies selling foreclosure homes from the USA to Australian investors. To be successful I think that you need to either be on the ground in the USA or have a business partner on the ground in the USA. Without being there and sourcing the deals yourself then it is hard to see how you could provide deals that people would be interested in.
The USA property market is totally different to the Australian market and the foreclosure process is different to anything that happens here so Australian based training would not be that relevent to the USA in my opinion.
Cheers,
LukeJust realised that my number add up to $410k for the total costs- I am still dubious of whether this will be able to make enough of a profit though.
Cheers,
LukeI doubt that this property will be suitable for a buy, renovate and resell strategy.
It sounds like the rough numbers on this property are:
Purchase Price: $330k
Stamp Duty/Legals: $12k-$15k
Renovation Costs: $35k (based on suggested 10% of purchase price- this may be a bit light though)
Holding Costs for 6 months at 7%: $12k (I have included 100% of purchase price plus a little bit for legals as you need to count oppurtunity cost of having your deposit invested in in an alternative investment)
Closing costs at 5% of selling price of $425k: $21k
Total Costs: $421kAssuming you sell for $425k whicj is in the middle of where you said that similar houses are selling for then this does not leave you with any profit. It is suggested by many people (Steve McKnight, Elise Parker) that you need to increase the property value by 135% in order to make 10% on a cosmetic renovation, and the numbers you have mentioned will not be able to acheive this.
If however you think you could sell for $450k, or if you could get the property cheaper (maybe for $300k – $310k) then it may be worthwhile. Make sure you do your numbers though and be certain about all the costs and the sales price as mistakes can be expensive.
Look forward to hearing how this project goes if you go ahead with it.
Regards,
LukeIf you are going to make your current PPOR an investment property in the future, then do not pay off this loan. You are better off switching this loan to an interest only loan and then put all of your money into an offset account attached to the loan for your new PPOR to minimise non tax deductable debt.
What else you do depends on the value of your current PPOR. You may be able to use a LOC secured against this property to fund the deposit on a new IP and pay costs and legals with cash from your inheritance. This will enable you to put most of your inheritance into your new PPOR (or preferably an offset account attached to your new PPOR) to minimise the level of debt attached to your PPOR as the interest for this loan will not be tax deductable.
Cheers,
LukeMiniman,
Just wondering why you purchased negatively geared property in the USA? is it possible to negatively gear an investment loss from the USA against an Australian income? Did you purchase your US propery in an LLC or in your own name? And did you borrow money locally in the USA or borrow money from an Australian lender?
Sorry, I am not really up speed on USA property investing as I have only just started research.
Cheers,
LukeYou will need an accountant to clarify this as it depends on your trust structure. I believe that discretionary trusts are entitled to 50% GCT discount if held for 12 months or more.
Cheers,
LukeHi House Call,
You could get a solicitor to write a letter I suppose like GOM has suggested but I imagine that this will cost you another several hundred dollars. Maybe if it isn't a huge cost to clean then just treat this as a property lesson and make sure you inspect the property a few days before settlement next time around.
Cheers,
LukeSorry forgot to add, the website for the Australia Bureau of Statistics is http://www.abs.gov.au
And I spelled "Bureau" correctly this time
Cheers,
LukeYou can also try the Australian Bereau of Statistics for a more in depth analysis. The latest data is from the 2006 census.
Do you know how old the data on this website is?
Cheers,
LukeAgree with Catalyst- stop paying priciple and convert to IO with extra money going into an offset account. Then use money from the offset account to pay stamp dury and legals and a LOC secured against your PPOR to pay the deposit on a new IP.
Your accountant and broker will be able to advise the best way forward (assuming you have a good accountant and broker of course!!)
Cheers,
LukeI think you should at least consider either renting your PPOR out and renting a house for a lower rent somewhere else, or selling your PPOR. Even if you do not want to go down this path it is worthwhile considering it and seeing what your options are- remember that any debt on a PPOR is considered 'Bad Debt" by many as it does not generate any income, in much the same way as a car loan.
Also I would definitely follow the advice of Patriot Soldier and pay down your credit card debt. However whatever you do do not redraw money from your PPOR loan or your IP loan to do this. Either set up a LOC to pay the credit card debt down (you will be paying a lower interest rate on a LOC compared to a credit card) or use money from savings or an offset account to do this. If you redraw money from a loan you will be contaminating the tax deductability of the interest and you will never be able to fix it for as long as you have the loan- you will regret it if you do!!!!
Also I would suggest setting financial goals and then work backwards to determine the best way of investing in order to meet those goals. Simply investing in property for the sake of investing in property will likely leave you lacking direction and goals will help you gain clarity in what you want your investment to acheive and help you make better investment decisions.
Cheers,
LukeAPI magazine has a data section at the back- it also includes a summary of where they thing the market is at in each of the capital cities.
Be careful though- no one has a crystal ball and so these things can be wrong. Also there are markets within markets, so there may be a part of a particular city where property prices are stagnant and other regions where property prices are falling.
Cheers,
LukeYou need to remember to factor in selling costs when deciding whether you want to sell your current PPOR. If you have selling costs of 5% (which based on a $440k sale price is $22k), you will only end up with a net of $418k. This doesn not leave you with much money left over after the sale once you take into account your current debt of $412k!!!!
Cheers,
LukeIf you choose to find a tenant yoruself it may take much longer than if you used a property manager. Property managers (I am talking of good property managers here, not average ones as we all know we avoid those) have a database of propsective tenants and have a good advertsing system designed to find tenants quickly.
If you choose to find a tenant yourslef, you may end up having the property untenanted for a week or maybe two weeks longer than if you engaged the services of a good property manager. If you are renting a place for $400 per week and it is untenanted for 2 weeks, that is a cost of $800 that you have incurred as a result of not using a good property manager.
Even though you may save yourself a few dollars per week in management fees, the real saving is much less due to the reduced rent you recieve as a result of a longer vacancy.
Cheers,
Luke
P.S. I am not a property manager and never want to be one!!!Hi Ruth,
Visit the local councils website and look for a future development plan for the area. There are documents on most (if not all) of the councils websites that will detail the minimum block sizes for subdivisions including minimum sizes for battleaxe blocks. These documents will also have other requirements for the blocks such as access and open space requirements. If you study this and ring or visit the council and speak to a planning officer then you should be pretty certain if a particular block can be subdivided before you submit an offer.
Which council are you looking for information for?
Cheers,
LukeHi Kelly,
Please correct me if I am worng.
I just had a quick look at your numbers you quoted and they do not seem to make much sense.
A summary of the deal that has been proposed:
Costs
Land and original house: $450k (this is the price you have said you can sell it for so has to be taken into account)
Cost to build two duplexes at $250k each: $500k
Subdivision costs/Other costs: $30k (this is probably a bit light but you might be able to get away with this)
Holding Costs: $40k approx (again probably a bit light)Revenue:
Sell two houses at $450k each: $900kTotal Costs: $1.02m
Total Revenue: $900k
Result: $120k lossThese figures are very rough and based on the info you have mentioned. Am I missing something?
Cheers,
LukeIn IO loan with an offset is a better option due to increased flexibility. This will also help you repay your personal loan faster (which I assume will have a higher interest rate than your mortgage).
I would suggest speaking to a good broker as they will be able to help you find a suitable loan. If NAB can not offer IO and an offset account then they are probably not the best lender for you to deal with.
Cheers,
Luke
