Forum Replies Created
Hi Stuart,
I have read a few of your articles, and they were great!!I even contacted you on two separate occasions to get some further clarification on them. Both times you contacted me back straight away, much appreciated. Thanks again.
So I feel compelled to come up with some ideas. How about,
– I personally would love to know how to calculate the effect that a potential investment has on my borrowing power. This would allow me to more accurately understand the effect of various investment ideas or opportunities.
It’s easy to say “if I do this investment then I will increase or decrease my cash flow by this amount” But what is my borrowing position at that point. How do I work that out? I suppose its sort of like borrowing capacity really, which you have done. Maybe there is something in there.
– What about, refinancing after renovation/improvements. Areas such as,
Should you employ a valuer from the panel of the banks valuers. What is the relationship between valuers and banks? What goes on under the covers?This one might be the best at of them all.
– How do banks react in a cooling market? What can happen? Areas such as,
– Is it possible for a lender to perform something like a “margin call” if the security (property) falls in price radically? (I actually had a discussion about this with a broker on a forum he said it does, and can, not happen, I maintain that it can). Can it? That is very relevant to investors in this market. If a margin call can happen, and supposing it did happen, then what are the investor’s options?
– Do banks change strategies in a cooling market? Like try to hold on to customers as apposed to seeking more customers? If so does this mean the banks are more flexible? If so how?I really like the idea about the approval and process stages as well. That sounds interesting.
Hope that is of some help,
Regards,
MarkyMark
Hi all,
I have not really been on this forum for that long and I agree that many of the posts often end up in some sort of argument. On the positive side this forum has been a great source of information and I have made some great contacts.One thing that I have noticed is that on Jan Sommers forum allot of the messages within a topic are quite long, where as this forum seems to be smaller posts. Dont know why?
Steves book gives the impression that anyone can just go out and buy a shite load of +CF properties in a very short time. I think people who do not know much about property read this and go “hey yeah that looks easy” that’s what I’m going to do.
So they come here, then they start to learn about things like finding money for “deposits” and “closing costs” etc etc etc etc. It does not take long to realise that if you don’t have strong cash flow or heaps of equity already and considering the current market it can be tougher than 1 positive cashflow property every 8 days (I think that’s Steve average).
I not saying that it cant be done. I’m just saying that I think some people loose interest after a short time.
I used to teach people how to play guitar, you see it all the time. They came in and they want to play like Eddie Van Halen. That’s great, you need someone to aspire to. And it can be achieved, but its alot of work. Some people are just not up for it.
I would suggest that property investing is very similar and coupled with the heat going out of the whole market, forum numbers decline.
MarkyMark
I am the trustee of the trust at this point, and I really think that keeping the money totally separate is the best thing to do. I want to keep it simple.
I dint see why I would need to be audited every year. But I would like to be able to welcome an audit if it did come.
Macquarie Bank have a cash management Trust account. There is a management fee which is 1.16% of earnings attached to this account.
Does this sound ok. The idea of a % of earnings has a bad ring to it.
MarkyMark
Hi Connie,
Make sure you do your research on this unit that you are talking about. The term “nice unit” seems to have allot of emotion involved with it.I have heard experienced investors say don’t buy on emotion, buy on the numbers. When I first read that I thought “yeah no worries easy” but then I soon realised how strong the emotion thing is.
I think that some risks are more prominent when your starting out and then there are other risks that are more prominent when you get established. For a newbie I personally think that the emotion one, is a big one.
MarkyMark
Hi Rob,
Yes, my terminology is not correct. I did mean “Margin” call, not “option”. Thanks for picking that up. But the concept is still intact.As far as I am aware I am correct with this and it is in fact possible. If the asset (house and land) that the financial institution has secured against drops in value beyond an acceptable ratio then the financial institution CAN ask you to bring the loan back to a specified LVR.
I first heard about this from Steve at his seminar. He also warned us that it does happen.
As I understand it, in the case of one of these “margin” type calls, the equity has to come from your pocket, or I imagine “other” acceptable security to reduce the LVR.
Steve also said that they will give you a certain amount of time to come up with the additional security. I don’t think it was long though, but I suppose that has allot to do with the particular bank policy.
MarkyMark
Hi Karl and Rita,
Concerning your deal, as mentioned if you follow what Steve teaches, I think that one would not take that deal as it stands.I am finding that there are 2 sorts of CF+ deals those you find and those you create. If this property is in a good area, with good population and easily rentable, I think with a yield of 8.84 you may find that there are buyers around that will jump on this. So offering a real low price may result in your loosing the deal.
Depending on the area and the property etc maybe there is the potential to buy it at a little bit of a higher price and then doing some work on it and thus renting it at a higher return possibly pushing the property into a +CV status.
In addition, again depending on the market and your timing you may be able to re-value and access some equity as well, or not access the equity but bring your LVR down(I’m not sure what your LVR is for this deal).
A higher value and thus lower LVR can protect you if prices come down and the bank says ” hey this security is not worth what we originally thought it was” and thus hitting you up for more security to bring into line. (like an option call)
Concerning buying a property site unseen, I personally would never do this. Simply because I don’t think I have the experience to be confident to buy using this method.
I understand that some investors do this successfully. Buying though a buyers agents brings my personal fear of this down a little bit. But I sort of think, I need to make sure every investment decision will make money, I cant tick that box if I have not seen the place. That’s my personal thing.
Anyway, hope that helps a bit.
One other thing, you may want to make sure your rent calculations include a period of no rent (like while your trying to get a tenant etc) . This will effect you cash flow.
Just wanted to mention that this is not advice just my opinions and speculations. My suggestion is to get professional advice on these sorts of matters.
Cheers,
MarkyMark
Just on this comment by 1HotValuer.
eg. Value the property as if it has already been renovated/extended at the date of inspection, therefore your value will be higher automatically without any works commenced of which you can borrow money off
I am not following.
– I understand that I can get a valuer in to provide a figure on what the value would be if my proposed renovations were done, However,– You seem to be saying that I can then borrow against the post renovated value of the house before the house has been renovated.
I am missing something here.
Ok I agree with that.
But lets just look at it from a general higher-level overall market view. If interest rates are moving up and affordability is peaking (generally speaking), and there are more sellers in the market than buyers then this would indicate the opening of a buyers market.So to refine the question a little to what extent will a valuer look at the current market condition or possible market condition?
To my knowledge a valuer will value an asset at its worth at a particular point in time. But to what extent does the position of the cycle have on the valuer’s decision?
Hi all,
Thanks heaps for the comments, I really appreciate and value the various comments.I have been doing some more research on it. So far, I don’t have much to report but I have about 2 full pages of questions and subject areas to look into.
I have quickly realised that there is a considerable number of things to be careful of and to research. It seems to me to be a higher risk type investment and there are some management issues that will require some creative thinking.
Thanks again.
Markymark
The way I have learnt so far is,
Read heaps of books, read everything on this forum and the others that are around, like reno kings, Jan Sommers etc. Ask tones of questions. Get a broker and communicate with them, they are a wealth of knowledge (i can recommend one if you want) or ask others on the forum.Forums I think are the best there is a tremendous amount of information on this forum and Jan Sommers forum in particular.
MarkyMark
Hi Kylie,
I agree with what Derek says but have some other points as well.I think nerves are natural, letting them stop you from what you want/need to do is not natural. I found that the more I learnt about property investment the more my nerves dissipated until I had reduced my nerves/fears down to a natural level.
I suppose in some ways I have been fortunate because I did not have the money to jump in when I wanted so I had time to get educated. I still read everything I can on property and I feel/know that I have heaps and heaps more to learn.
Your probably more comfortable with stocks because you understand them better.
The other key area is what’s you plan? You sound to me like you need one. I have found that the plan sort of directs you to some extent. Is it passive income streams that you want? if so how much? by when. Do you want to build capital for some other reason etc etc.
I think the term “investment vehicle ” is a great term, because that’s what it is, a vehicle to get you somewhere. You need to determine where you want to go, and to some extent that will help you determine what vehicle you need. (You can’t go to the moon on a pushbike). However, If you don’t have a plan you might die trying.
MarkyMark
Hi depreciator,
Thanks for the response. I think that maybe I should have used the word ‘Technique’ rather than ‘trick’. There’s way too much to lose by doing things that are illegal.You have raised some things to think about.
The property already has a tenant, but no lease currently exists. The tenant is paying well below the going rate for rent (as it is a family member of the vendor) but has agreed to a rent increase. Offcourse I will secure him with lease etc if he is suitable.
– The work that I mentioned could definitely be viewed as repair work. Basically, these are items that have been pointed out in the building inspection. For example one of the gutters is rusted through and paint is needed (as apposed to “that would be nice”)
You said:
the place would need to be tenanted for a while before you can legitimately claim for any repairs.Because there is a tenant does that satisfy this requirement?
One other thing,
Can you suggest any really good resources for these sorts of issues? I will do a search myself anyway.Thanks again.
Thanks for the reply.
hmmmm…I’m not sure about that.
If a condition of a contract is not met then I cant see how the contract can still be inforced. If it can be, then why have conditions. If the contract falls over because a condition is not met then it would be reasonable to expect the ability to re-negotiate. Like I said I am not sure though.
I know what your saying Sonja. I think its best to rely on what you do know for sure and that is your research. It does not matter what the asking price is, what the agent says, or any of the other stuff.
Because if you rely on your research and do the deal based on what you know and the deal is right for your plan. Then it is irrelevant what the agent says. I think the goal is to get the property at a price that you are happy with and meet your goals.
The good thing about this approach also is that it forces you to rely on your research. So if you screw up its your mistake giving you the opportunity to learn from it.
MarkyMark
Hi all,
Thanks for the comments. I did intend to buy a place, but I did not intend to buy them all. Just the best one. What happened was that I put in an offer on one property and I put in a sunset clause in the offer. While I was waiting to hear back I found this other deal that looked good as well. But I did not put in an offer because I already had one in. But if the offer that I had put in had not been accepted I would have missed out totally due to time constraints.I must admit that I did not think of the moral issue that putting multiple offers in might have. But after reading comments from others I think I agree with Derek if your upfront and not hiding anything then I can’t see a problem. By being upfront you’re giving others the chance to act in their own best interests. On the other hand this could make it difficult for other investors as deals are being held up. hmmm….
Thanks for the interesting comments.
Hi WallFlower
On your question on point number 5. It so happened that I was interested in that property. So what I did was I did a full inspection on it and totally sused it out. Then i walked out with the agent and said I will offer you 190K and I put it in writing for him. I was by no means low balling as I knew from my research that this property was well and truly not worth the asking price. In my mind I was prepared to pay 195K (5K more than I offered).They came back at 195K and when the agent told me over the phone that that’s what the vendor wanted the agent said again “and you know they’ve already knocked back an offer of 195K” Obviously implying that they wont go lower. I knew that counter offer was coming so it didn’t matter at that point.
There is a great thing I read somewhere, I think it was on this forum. Basically it talked about allowing the ‘other side’ of any negotiation to have a win. If I had said “my offer is 195k and not a cent over then the other side did not have the chance to win as well and it all may not have worked.
Kay henry
I agree that country people do ask where are you from as a form of courtesy. One agent in particular that I was dealing with asked me and I could tell that it was simply courtesy and also I think to assist my understanding of the area, which she did. The area that I went to I had researched really well. I found that if an agent is going to use what ever technique then your chances of seeing to the core of what is meant is to really know your stuff about the area.I came to the conclusion after my trip away that the way to win is to not compete against the external influences. I was there for a very specific reason I knew how much I could spend, I knew the area and dynamics, I knew how to look at deals and see if they fitted into my plan and if they were profitable.
These were all things under my control. Anything outside this (good or bad real-estate agents comment etc ) either assists you or does not. When I found that I was getting confused (and I did get confused about what I should do and what I was being led to believe by what people were saying) I went back and asked myself “why am I here, what do I want and what do I know is true (i.e. my research)”.
This put me straight back to where I was coming from. I found that cleared things up well for me.
An example of this is the offer that I was describing above. I was in a dilemma, I was walking around that house trying to justify 210K (the knocked back offer) The area was great and I thought that that might have brought the place up a little. To make things worse I had past sales data on every area accept that one (my fault), also there are some emotions going on inside me about low balling.
I then thought what do I know is true about this area, it was then that the confusion vanished and I offered 30K below the asking price and the thought of low balling did not even enter into my mind. It was clear to me that this property was over priced and if they had had an offer of 210k then that investor, had, in my opinion, offered too much.
Hi JaRRN,
Not sure what MortgageHunter has got (probably the same). If you buy an Investment property and then at a later date want to buy a principal place of residence. Then you are still eligible for the FHOG.Section 14 (4) of the Act provides that an applicant is eligible for the grant if the applicant or the applicant’s spouse has, on or after 01 July2000, held a relevant interest in residential property in Australia, which was not used at any time as the residence of the applicant or the applicant’s spouse.
Offcourse you still need to be eligible for the grant under the ruling.
By the way this is not advice I would recommend that you check this for your self and not act on my advice.
Cheers,
MarkyMark
Thanks for your comments everyone.
Regards,
MarkyMarksnowkiwi,
What a great quote:
“100% of the shots I don’t make don’t go in – Wayne Gretzky”Thanks all for the details.
Do you think that the course put you in a vastly better position to do improvements and reno’s than if you did not do it. Did you feel by the end of the course that you could confidently go and do a reno?
The information that they glossed over. Was it deliberately hidden information or do you think it was more of a “heres this bit of information, its relevant but we don’t have time to go into it”
Sorry for all the questions, just trying to get a really good idea of it.
Hi Guys,
Thanks. The thing is this,
– I have found a good area that I like the economics of
– If I look hard I can find deals that are CV+ only when geared at 80% LVR (which is where I want my portfolio to sit if possible anyway). So as you can imagine they are not winning any awards with regards to Cash on Cash return (i.e. The opportunity cost is that I can get a marginally better return in a completely safe investment).– Historically the capital gain for this area is not too impressive either (but it has always gone up), the past 12 months cap growth has been very good (but I’m not really counting the past 12 months as that is an anomaly rather than the rule). And this is not a capital gain strategy that I am employing.
– So my dilemma is this. If I am not getting a good cash return AND I cannot rely on Cap gains then why buy?
My only temptation is that, there MIGHT be good cap growth, rent MIGHT go up in the future.I think I should take the position of,
– If I cant find one that is cash pos at a minimum of 8 – 10% minimum C on C return then forget it.Play hardball with myself [
!]. What do you guys think?
!]. What do you guys think?
