Forum Replies Created
I'm with Marc here – if this was any sort of good deal then why on earth isn't it being marketed in Brisbane?
My daughter is a nurse, and they certainly don't earn enough to pay $1100 in rent unless about 8 of them can share.
For $420K you will be able to buy a decent house approx 12-15km from the city, with far better prospects of capital gains.
MargLook at the worst case scenario.
The motel/apartment operator goes bust. There goes your income and your rental guarantee.
Who can you rent to? Many motel rooms are simply a bedroom and a bathroom, and would not be suitable for anyone other than overnight guests. Some are more like studio apartments with cooking facilities etc, which are a little more flexible.
You will be paying for all the facilities, plus cleaning after every guest. Add in breakages and pilferage, commission and fees for the cable TV, gym etc and your return will be greatly diminished.
As this is a new venture, there are no actual figures to look at, simply "projections" which really amount to a wish list.
I would be very careful.
MargCheck out whether you are liable for council rates.
There was some publicity in Brisbane some time ago when car parks first became available for sale and the Council was charging full Council rates (including water and sewerage) on EACH car park. Clever cartoons showing carparks with loos and taps.
Many years ago, not sure of the situation today, but would be worth checking as $1500 or so a year in rates would impact on your return.
MargHi Max
Only way to tie up a property is to put it under contract. Maybe you can get a vendor to accept a longer finance clause.
For this reason we always arrange finance as the first step in buying a property, even before starting to look. Gives us precise information as to what we are prepared to pay, and the complete financial scenario for any property that may take our eye.
A real estate agent works for the vendor, and when we have sold property we are in constant contact with the agent, so any idea of "chucking it in a drawer" for even a day would be unacceptable, as well as totally unprofessional.
Good luck
MargOur PM remits payments twice monthly, once on the 15th and again at the end of the month. It was one of the reasons we chose them.
MargThat is a question no-one can answer for sure.
Everyone has an opinion, and each one is equally valid. For my part, I don't think we have seen the end of the interest rate rises. A lot will depend on events overseas completely out of our control.
MargIMHO the main difference between now and the 1990/94 recession is the percentage people can borrow. Not sure what the exact figures were in 1990, but when we built our first house in 1975 the bank would only lend 66% under savings bank rates, any more and higher interest rates were charged. 100% mortgages were unheard of, and even 80% was difficult.
I've lived through the 17% interest rates and the "negative equity" dramas (where people owed more than their house was worth, even though they only borrowed 75%-80% of the value initially).
People who have owned for some time and have been able to take advantage of price rises have an advantage in that their debt is a lower proportion of the value of the property, it is those who bought recently and borrowed heavily who are most vulnerable. There are also far more options these days than in 1990/94, i.e., interest only, renegotiating loans, more lenders etc.
Having "been there and done that" – ever since I have always ensured a substantial buffer in alternative liquid investments for if/when those times ever come again.
MargHi Duc
I can understand that you are feeling overwhelmed. Take a deep breath and sit down for a while!!
You are in a wonderful position and really can't go too far wrong. Even if you do absolutely nothing but maintain your present portfolio then you will have far more assets than you will ever need or want.
But it is great that you want to move forwards.
I would suggest that on each and every loan you calculate the payments for the next 12 months (not including any rent to be received) and put it in an offset against that loan. It may be lots of accounts, but I would put an offset account against each loan. That way your payments for the next 12 months are covered. Arrange for the rent from the property to be paid into the offset account attached to the loan on that property. The idea I am trying to get across is to set each property that has a mortgage up as a separate unit of "loan – offset – payment goes out of – rent goes into".
Hopefully there will be something left from the $600K, but if not you still have your salary + the income from the shops you own outright. This should quickly build up to enable you to undertake more investments. You may want to investigate properties outside the area in which you presently hold properties in order to spread your investments across other areas.
But I am no expert – it may pay to get professional advice.
Good luck!
MargI work in a large state school, and would suggest that you look for schools to suit your daughters' personalities and individual styles. For example, a quiet child may do better in a small school. Some schools specialise in students who excel in music, sport or performing etc.
Any student can get a good OP in any school, an OP is earned by the work a student puts in. Even the "very best" private schools will graduate students at the lower end of the OP scores. But if that student graduates as a well-rounded happy person and achieved their potential, then they have succeeded no matter what the numbers say.
Once you decide where to live, use the "ripple in the pond" theory – i.e., investigate your closest schools first. Ask neighbours for recommendations. Tuckshop ladies know everything about the school they volunteer in. Check out any school that you are interested in, maybe attend a P & C (Parents and Citizens committee) meeting.
Only one or two schools in Brisbane are "zoned" in that where you live is a factor in gaining entry.
MargIt will be really hard to change the lease. The tenants will probably claim the dog is "visiting" or that they are "minding it for friends".
We had an issue with one of our IPs when we found out that instead of the 5 people listed on the lease there were actually 9 people living there. The tenants claimed they were "relatives" who were "visiting" for a few weeks. And grandma also came over every day "but went home at night" because she was helping mind the kids. So it was 10 in all. And to top it all off the place was a pigsty (and that is an insult to pigs). We had lengthy discussions with our PM who basically told us that if we took it to the tribunal we would almost certainly lose – tenants are allowed to have family visits. I would think your chances with the tribunal over a dog would be a waste of time.
Tenants were most annoyed when we refused to renew the lease.
I suggest you bring it to your PM's attention and get them to talk to the tenant, and be very particular with your inspections when these tenants move out.
MargHi Emma
If the vendors are living in the house, which I presume they are as they want to rent it back, then I would be very concerned about boarded up windows.
To me, it shows a lack of attention to maintenance, which may be evident throughout the rest of the house.
From looking at many properties over the years, the reason for a personal inspection is not to check out what you know, but to find out what is NOT shown in photos or pictures. Just a fortnight ago we drove past a house advertised on RE.com.au which looked great – it was a lowset and had obviously been photographed from a low angle because what was NOT shown in any of the many pictures was the huge McMansion behind, about 2 metres from the fence, which totally overlooked the backyard. As it was on the northern side, it would have completely blocked any sun in winter. We didn't bother to go inside. Other properties that have been very appealing from pictures have been metres from huge overhead power pylons, backing onto busy roads, opposite factories etc, all of which are not shown in any of the carefully angled pictures.
If you must buy sight unseen, then at least have an independent person inspect the property on your behalf, even if you have to pay.
Good luck!
MargHi Alex
It really does not matter who you sell to, you want the person who can pay the highest price. And you will only get the highest price by making your property attractive to the largest market possible.
If the unit is tenanted, then the purchaser must honour the lease, so that will limit your market. Obviously a good time to sell is near the end of the lease, then if an investor purchases there is a ready tenant who may be prepared to renew, but if an owner occupier wants to buy then you can offer vacant possession in the near future.
If you are selling the unit vacant or owner occupied, then I suggest you get a rental appraisal letter from a local agent (or two) to give an investor evidence of the rental likely to be received. This won't help you with an experienced investor, but there are beginners out there who may find written advice attractive.
MargHi Mat
You will need 100% agreement from owners.
Some points to consider:
From the layout of the unit block, will everyone gain exclusive use of the same area? If all areas are identical you have a better chance of agreement. If some units are gaining more, then some sort of monetary compensation will probably be necessary to get the agreement of units with the smaller areas – maybe the larger area units could pay for the fencing.We owned a unit in a complex of 80 units where the manager wanted to have electronic gates installed. Cost per unit was $500. He enlisted a local realestate agent to give written advice to the effect that electronic security gates would increase the value of the units by approximately $5,000. He was able to get 80 unit owners to agree, and impressive achievement.
You may have to check with council – some areas require a certain percentage of the land to be common areas.
Have your idea put on the agenda for the general meeting – you will get an idea of the level of support and also the issues that others may think of.
Good luck!
Marg
Hi Richard
I think we all beat up on ourselves looking for the "perfect" investment, but like life in general it just doesn't happen. If you have been reading and researching then it is hard to go too wrong so long as you intend to hold for at least 10 years.
Time works its magic and your investment becomes more valuable with the passing years. We have lived in our PPOR for 28 years – cost $49,500, now worth approx $500K. Even if we had paid $60,000 (which we could NEVER have afforded) it would still have proved to be a good deal.
In the end, "just do it". Find a good property, in a good area, that you can afford without stretching too far (always keep money or borrowing power in reserve for the "what ifs"). Absorb the upfront costs, over the years do any improvements that are cost effective, attend to maintenance and you can't go too far wrong.
Otherwise you will still be asking the same questions in 5 years time when everything is so much more expensive.
MargIt's quite simple Swifteagle.
To be absolutely correct, you must bring the rental back to per day.
If the rental quoted is weekly, divide by 7 (to give a daily figure) multiply by 365 (to give yearly, let's forget leap years) then divide by 12 to bring it the monthly equivalent. This evens out the bumps in the days of the months.
The reverse happens to convert montly to weekly. Take the monthly rent, multiply by 12 (to bring it to yearly), divide by 365 (to give daily rent) then multiply by 7.
Simple calculations, quickly done.
MargCan't help out either. We have only 1 CC, use it for all bills etc then pay it off every month. Used properly (i.e., don't pay interest) it is the best thing since sliced bread.
MargDon't stress, Angelwings.
We have owned rental properties on the Gold Coast and your rates will NOT be much higher – I think that rate rises are capped to the rate of inflation for owner occupiers. But once the property is sold the rates reset at the going rate. What you will get is an account for about $40 for registering a rental property. This allegedly covers the cost of inspectors to check that rentals are not over-crowded. And the $40 is tax deductible.
IMHO, it never pays to lie to authorities, they have a knack of finding out and the penalties usually far exceed any monies saved.
MargI must agree Jon.
Interesting story in this morning's Courier Mail about housing affordability, featuring a young woman who had just bought her first home, a $320K unit at Wavell Heights, (an "in" suburb about 7-8km from the Brisbane city centre). She said that she could have bought a cheaper property, but it would have been further out, and the extra travelling time would have meant that she had no time for a social life. Article also mentioned that she would be paying more than 50% of her income in payments……..
As a somewhat ageing baby boomer (who bought our first home in 1974 when a 33% deposit was required), I just shuddered.
Is it really an affordability issue, or is it a case of "kids" wanting to start out where their "parents" finished?
Cheers
Marg
Many rental guarantees are financed by inflating the price of the property, i.e., you pay extra for the guarantee.
The guarantee is only as good as the company that guarantees it – often a $2 company that is only interested until all the houses/units/townhouses are sold. If they go broke then your guarantee is worthless.
The guarantee is often an inflated figure that you have no chance of matching once the guarantee runs out.
Check the price carefully to ensure you are not paying extra for the guarantee. Check also that the guaranteed rental is realistic, i.e., market rental.
There have been cases in Queensland of properties sold with a rental guarantee being left vacant for the entire period of the guarantee. Yes, the owner gets his/her rent, but it is merely a refund of the overinflated price paid initially.
Would you buy the property for the same price without the guarantee? Will the vendor reduce the price if you forego the guarantee?
And run a mile from “cold calls from interstate”. If the deal was any good then there would be plenty of local buyers snapping them up.
We have seen it all here in SE Qld – it is called two-tier pricing – one price for locals and $20K-#30K dearer for interstate buyers. I still see suburbs that are far from desirable being flogged interstate, with rental figures that no local would believe.
Be very wary – the phrase “don’t touch it with a bargepole” springs to mind.
MargHi Cherry
There have been lots in the same position as you.
You may be a bit young to remember the scandal of the “two tier” marketing in south east Queensland in the early 1990s where interstate investors were sold properties $20K-$30K over their value, i.e. $120,000 townhouses were being sold for $145,000.
Much gnashing of teeth, endless articles in the papers and even court cases. Some people sold out and made big losses. I remember newspaper articles headed “Sell your Gold Coast Property now, there is too much building and you will never make any money”.
Some people held on, and those townhouses would now be worth at least $250K.
In 10 years time when your unit in Hornsby is worth around $800K-$900K these days will be a distant memory.
I would suggest you hang on and let time work its magic.
Cheers
Marg
