Forum Replies Created
Kate things will always pan out just be positive, when the going gets tough the tough go shopping. We always make a plan in our household and so will you.
Keep your chin up and dont fret the small stuff.Kate
Networking with like minded people is a wonderful thing everyone that has replied has given you and me some really good options to investigate. My beautiful wife and I are in a similar quandry to you. We bought a negatively geared property for 430K (4 months later still not tenanted) and a block of land hoping to develop. The vacant land intended building was knocked back by the shire because they deamed it not expensive enough for the area. Now my wifes company are not able to pay her the last three months wages. I was going to kick up my offshore work and completely devote all my time and energy into +CF properties, instead of taking the plunge I have decided to take a contract starting 1 Jan for 6 months away from home to maximise my income allowing my wife to follow her passion and find some work she is passionate about. In the last few weeks I have renovated as smartly as I could and now have the “reno” ready to rent out, and will be selling at the same time (hopefully tenanted) to any other investor. Even though the reno is in a great location with water views and natural bushland 15 mins from city I feel that the market sentiment is waning and it may be a drain for a few months still. Our current POR the rent has just increased again 2nd time in 6 months. The vacant block of land will be for sale again in Jan. It is a tough decision to make and when the numbers dont add up it is even more frustrating I know. I am happy that my wife and I have each other and as DD mentioned earlier just continue to think outside the square.One thought that keeps poping up for me to maximise my rental is possible wrap the deal on the reno. That may be an option on one of your properties too.
Take care
MilzyAt $95000 plus closing costs eg $10000 lets say worst case 8% interest, thus eg:20%dep plus the 10K closing costs: your min payment will be ball park $130 a week. Note students are a seaonal thing in some towns. So factor the average rental occupancy and not for a full 52 weeks. Then remember in many cases students can be the worst tenants, always penniless and sometimes even with a job still “just over broke” Vandalism or grafitti, noise pollution and parties. I was a student I know how terrible I was. I never paid the rent on time and if my landlord had 100 ways to catch me and ask for the rent I had a 101 of the best excuses why I was late or unable to pay that day.
Saying all this negative stuff, now I am a little older and an investor, I figured that I would investigate students as a potential for a lucrative gain. I know that in Singapore students have wealth greater than here in Aus especially when they are over here to study. I lived in Singapore for 5 years and I have friends that were students both here and there. Those Singaporean, Malaysian or Indonesian students that haver the opportunity to study overseas
are quite capable of paying a years rent upfront.It would be a good idea if you got their parents to stand garator for the rent and possibly to get them to pay well upfront because here in Aus the monthly rents are dirt cheap compared to rents there.
Your deal sounds great however make sure you have a good cash buffer for incase.
I hope this gives you a different perspective. Let us know how you go.
Cheers
MilzyHi guys
Compliments of the season to you all.
I wish to share some numbers to hear your comments on a commercial property deal I wish to purchase/make.200sqm Showroom/warehouse price $149k
Council Rates $975pa
Water Rates $905pa
Strata Fees $440paCondition of property: Structurally Sound brick and Mortar, aircon, Rear Access Roller Door, separate lunchroom and amenities, secured rear yard , plus security alarm
Light due dillegence conducted:
place been empty since April, spoke to last tenant asked why he left?
Reply he was being charged too much rent compared to everyone else in complex (ie)$1300 per month
I spoke to three other tenants of the complex (one the president of the body corporate) and enquired about the owner and what type of rents I could expect to pay “if I was the tenant” or if I was the “owner” of the unit etc.They all said rents are currently $1000 per month for those who dont own their own unit.
My offer is on the grounds of:
Terms:
1: 180 day settlement commencing from date of Sales Agreement
2: Deposit of $1000 to secure the deal
3: Price of $120 000
4: Early access to clean/renovate premises prior to settlement
5: I am also to be permitted to actively seek and secure at own expense a tenant. If tenant is found and wishes to take occupancy prior to settlement date then the owner to agree for me to arrange interim tri-party sub-lease with tenant in which case I will only to be liable to owner for all outgoings of Rates, Electricity and Water bills from date of occupancy by tenant and for me to retain lease income obtained from the occupant (if any) received prior to settlement.
6: In the unlikely event that my financing for the property is not be approved, the lease agreement (if applicable) with the tenant to be written such that it can either continue under the original owner or the original owner retains the right to cancel the tenant’s lease agreement.
I base my figure on the rental ‘worse case of $900 per month.
To me the math against my ofer is not correct and possibly I am offering too high for the property? I am looking to try and POS Cashflow the deal
Thus $13120 annual out goings
Percieved income $10800
Deposit 30% $36000
Closing costs $10 000
Loan Amount I/O $84000
I/O repayments $6720 per annumRates water Strata Fees $2320 per annum
Thus leaves me with $1000 +CF per annum
My COC return is 46000/10800=23% percieved
Any ideas how I could massage this deal would be greatly welcomed.
Cheers
MilzyZen
I live around the corner from you. My wife and I are currently renting in Attadale, we bought an investment property in Alfred Cove. I believe what Steve says in his last book relating to the Perth / WA market showing no direct signs that the market is slowing down. However I do feel that the WA media are giving conflicting signals to the current market economic indicators.Whilst unemployment is low CPI is high the interst rates are still low Auction clearance rates are low(even though WA is not that big on auctions) The aussie dollar is still too high, Gov have altered the stamp duties to keep the consumer momentum going.There has been a terrible Sunami wave killing thousands just up the coast. Any negative Media snetiment will alter consumerism. In my opinion it is very important to keep in mind, that when the market turns heavily in NSW and Vic that the negative sentiment even though the WA market is “9%” upwards this side will feel that pressure from the east.I believe only those who are cashed up will benefit from any downturn and it will be difficult to get finance from banking institutions. That way Zen, if you purchase in Applecross a two bedroom house and have to sell your own comfort zone and still have to input another 200k; to me then your strategy is capital Gains and not pos cashflow. What is your worst case if interest rates start climbing?
If you have read Steves book it is very important that you know what you want prior to investing. What plan do you have or forsee??? What is the worst case scenario if interest rates go up and you decide to renovate and there are building problems because of builder availability? As you know there is a massive shgortage of skilled labour here.
Zen you could consider renting. I have a house which is vacant it has 3 bedrooms double carport and an extra office close to garden City shopping centre, close to schools and kindergartens and the freeway to the city. It is right next to wireless hill natural reserve and is 3 blocks from the river and parks. The house isnt brand new but it is definitely liveable. IDEA: you could cash up from your comfort zone and be ready to pounce the market and make a great buy when the market does turn ? If Applecross is where you want to live you will be right next door and be ready.
This is no sales pitch either. I have had the place vacant for 4 months whilst i have been doing renovations to it and having such fun. This is one of my pet projects but if you are stuck you could consider my proposition. My wife and I dont have children so I wouldnt know the pressure regarding space for them.
Your Wife and two kids are very important it is very unsettling to buy, relocate and build.
I am looking at purchasing pos cashflow commercial property in Maddington next as I know that there is less emotion in commercial real estate. Dont fall in love with Applecross, it is a beautiful place but I dont believe it is the right time to buy.
Anyone else feel differently please let me know as i am very keen to soak up advice from like minded individuals.
All the best mate
MilzyLizzy, If there has been a study conducted by RTA regarding the highway/freeway issue, usually there would be relatively good compensation granted and regarding the land issue / endangered species/wildlife…most times they are quite good at restoring the land around where they have excavated. You could contact your local environmentalist to see if they know of any dangers that could loom from the road works.
Once in South Africs a man who owned a garage was offered money by the state to purchase his land so that a highway could be built. He refused to sell…the price offered increased and increased..but he refused to sell. Later the state just built a bridge over the garage and needless to say he lost a fortune in business during construction and after as a result of the bridge. I hope mum is being well taken care of.
Best of Luck
MilzyHigh guys
Whilst reading what you have written I do agree that there are some conflicting results with regard to market indicators. The conflicting results in my opinion are mostly in the news papers and TV. Steves book is pretty clear, the book written by Olly Newland regarding the economic clock is very clear cut. There is the book called the “barefoot investor”- all are talking of market turning. The “rip” to me are those real estate agents playing the market down to investors who are new or inexperienced. The best gains will be clinched by those who are cashed up ready to make great purchases from the downturn. The market correction that is coming I believe will affect each state differently, NSW and Victoria being the hardest felt. WA has huge projects and industrial investments about to kick off and even though there will be a correction (my oppinion) I feel only those who have over extended themselves in borrowings will feel the pinch.I am not an expert , I wish I was. My research indicates some conflicting results regarding market indicators. However the nuts and bolts of it all I conclude that the market is turning and it will be to the benefit of those who are on top of the game to capitalise on this.
Take care
Milzy
ps-I am cashing up (probably should have 3 months ago already) and I will be reinvesting straight into POS Cashflow through Steve’s X by / strategy bearing in mind the interest rates and worst case scenarios.[cigar]Hi Peter and Terry
I have been debating very similar issues regarding partnerships and selling negative geared properties.Firstly – partnerships: As a safeguard I researched setting up something of this nature. In partnerships, you may start out being mates and being upfront however, as you know, life always has interesting turns and some turns affect others differently and when that occurs together with money, relationships are put to task – which is where you will need a safety net.
A trust fund with named beneficiaries and director and commitments on paper appears to be a great option especially when things are going good however if the plan doesn’t work out at least there are some safeguards in place where the trust can keep business separate from family matters. Best consult a good accountant/ CA / Lawyer.
Secondly: I have purchased a negative geared property, I have done minor renovations and will be looking to rent it out in Jan 05, then once tenanted I will be looking to sell asap for two reasons: firstly I wish to cash up as I feel, based on the books Steve McKnight has written and Olly Newland (looking at the Economic Clock and the current market indicators), that there is definately a turn on the way. I don’t believe it will be a soft landing and I think people are in for a little rude awakening. I intend to reinvest in commercial instead of residential as there is less emotion involved. Whilst residential is great, I find that buying a house I wouldn’t live in is very difficult for me. I tend to be a “tornado in reverse” and build everything in my path! I find it hard to ask for money for something I wouldn’t live in. How are you guys going with your investments?
