Forum Replies Created
You don’t have to accept any offer you are not happy with. Regardless of what the agent says.
Read through your contract with the agent and find out what is entailed in withdrawing it from the market. I am guessing it will just need a letter.
it happens all the time – don’t let him frighten you.
All the best
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Do you think the WA boom still has legs?
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by ctaing:Now you’re talking, Simon!!!
Agree 100% on self education; having little knowledge can be so dangerous.
Pity it’s a property forum…, I’d, and assuming most of us here, like more of this open discussions.
CT
Thank you.
I am no expert at this stuff. No doubt I am a few steps ahead of some folks but others are way ahead of me.
I am happy to keep the chat going if anyone wishes. We shouldn’t discuss specific shares and the ones I mentioned are just typical of Blue Chips – dont take any of the share names I mentioned as buying advice – if you do then you are a fool [blush2]
Please tear what I have said to shreds if you like but not with any generalisations mentioning HIH or the like [biggrin]
I really don’t believe that a good share portfolio has any more real risk than a good property one. The risk lies in the structuring of both and the management of both.
We hear of people who have done so well at property but don’t forget they have had the benefit of the biggest boom in history. I would like to be hearing from people who are doing well in property so far this year. My gut tells me that some have but not as many as in the few years previous.
I mentioned earlier that to deny shares or property as a bad investment is to rob yourself of 50% of the boom action each cycle.
Anyone care to discuss this?
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
You reckon you have a contact list of buyers, expertise in presenting a property, negotiation skills, exposure to buyers?
if yes then sell privately.
If not then pay someone good to do it for you.
Not all REAs are worth paying 2%. Some aren’t even worth feeding. The trick is to finding the best one available.
Might be false economy to sell outside of the mainstream. You might save the 2% but get 10% less than a top agent could get for you.
My daughter needed a tooth pulled recently – cost me $140. Reckon I could have done it myself and saved the money but my daughter dissuaded me from not using the professional …
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by L.A Aussie:Quote:Thanks for that Simon,
very informative. Don’t mention your good fortune to the Emron Yo uasked about my strategyshareholders though. And you supported my arguement – you have over $100k invested with no net. You are braver than I.
I didn’t say shares were bad – I have some also. I said there was more risk/reward with them compared to property, with the rewards from property still good and with less risk which is important to me.
I agree with you; more education (In shares) lessens the fear and improves the decisions and returns. I certainly need more education.
I don’t fear the shares – I fear the guys who ‘run’ the companies. It is a factor I can’t control. I guess I’m a control freak?
Did you use other equity or cash to make up the balance of your 50% LVR Margin Loan to buy your shares?
Do you leverage against the capital growth of the shares you quoted to buy more of them, or do you sell some off to free up the funds to buy more – what is your strategy there?
Do you have a ‘ceiling’ for any growth in your shares before you cash them in or do you look at them as ‘buy and hold’ indefinitely?
What is your philosophy?
I’m enjoying this! It’s good to find someone with some extensive knowledge on the subject. The only people I’ve met so far with knowledge are usually trying to get into my pocket.Cheers,
Marc.
[email protected]Marc,
My portfolio has grown over time. I started by buying $5000 worth of WOW when it floated. My wife was terrified – going to the races with $5000 wouldn’t have worried her more. But she is now happily aware of what I do. I may mention I have picked up $50K worth of X and she is happy but doesn’t want detail. Not to paint her as a fool – she is a Dr and finance isn’t a big interest to her.
I have traded in shares and make the following observation.
I thought I was a clever guy who bought NAB at $10 and sold a few months later at $15. Today it is more than double than that and has enjoyed a solid dividend history. It would certainly be worth the interest I spent had I held them instead.
So now I buy and hold – same with property. Is my strategy and it may not suit others at different phases of their development or with different goals.
I don’t need income. My wife and I love what we do and hope to do it for the next 20 years. CG is my objective. Sometimes I think I just enjoy the game and the money is how I score how well I do. Certainly we are comfortable with what we have now.
I can see your argument re risk reward and trusting the abilities of others being outside your comfort zone. What do you think of this statement:
Choosing and managing all your investments leaves your results at the mercy of your ability – all eggs in one basket. A good company run by a senior executive with an incredible track record or a managed fund with a good management record is diversifying away from just your single ability and area of interest.
In general the risk/reward level for shares is higher than property. But this is a generalisation. Buying shares in CBA is possibly a much more stable and secure investment than buying IPs in a small coal town in Western Qld as many folks are doing atm. Or Mt Isa or Broken Hill ……
Sure a share price will change – but this is purely due to them enjoying a very liquid market. Pretend for a moment that every day you get an offer on your IP. Would it make sense that some days will be better than others based on market sentiment at the time?
Aren’t we just taking comfort from the relative ignorance of the daily value of an IP? I paid $100K for my IP – it must be worth a bit more cos the mean value has gone up 7% in the last year so mine is now worth $107K. This figure bears little relationship to what you may actually get if sold well. I am guessing that a window of $95-115K might be more approriate but noone knows until a contract is offered what it is worth.
So what do we have with the ASX? At every minute we know what the offers are. For the person that checks prices daily (and I do so monthly at best) then they will ride a rollercoaster. Wow – up $5000 today I am a share master, oh no – down $5000 I am a fool. We are protected from this in property so it “seems” safer. Makes sense?
You asked after my strategy.
I have a margin account and they have security over my shares and managed funds. All my divvies and distributions are reinvested so the overall value rises by both yield reinvested and capital growth. When feel like buying something that I have researched I do so using the margin loan (or LOC against my portfolio). I can easily spend $50K and make a small impact on my LVR. When it drifts too far from my 50% LVR I make a contribution but this is very rare. This thing is snowballing on it’s own very easily thanks to shares like Rinker etc. I usually buy $100K each year and lately have been doing so using managed funds. But I have my eyes on a few shares right now for my next purchase.
I feel that using a managed funds diversifies decision making – the point I tried to make above. Hope it made sense. A sucessful fund manager buying and selling stocks should complement my choices.
Selling is probably more vital than buying. I think using a ceiling is the worst idea. You end up selling your rising shares and keeping the dogs. Mine are bought for a hold portfolio and chosen for dividend yield first and potential growth second. I am not concerned at making frequent changes. property is good in that buying and selling is a big deal so we don’t chop and change much. But the danger with shares is micromanaging and trading too often – or churning as the brokers call it. Usually the only winner is the broker …
But if I was after growth then I would be using a trailing stop. A stop is a sell order placed below your current price. An example might be that a $1 share has a stop at 90c. So if the price dips to this then the sell is automatically done at or close to 90c. A trailing stop is one that moves. So your 90c stop might be moved up to $1 if the share price moves to $1.10. Then adjusted up again when you need it. So you lock in profits but leave the upside open.
The problem with a stop is that a share may naturally dip before resuming it’s upward path and you get stopped out. ie a share dips to 90c and races to $1.60. But cos you were cautios you got stopped out for a loss while everyone else made 60% profit. Best not to have them too close – it at all. I think they are used more by traders than buy and hold guys like me.
I could go on forever but this isn’t a share forum. My point was just to voice my opinion that to blindly dismiss shares as dangerous may cost you more than you know [blush2]
If you want to chat more then please email me directly. I have an article that I wrote that I can forward to you – it pretty well describes my start in shares.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by L.A Aussie:Hi Simon.
Fair enough I suppose. My post was a bit oversimplified, but would you buy $100k of shares without insurance though?
Also, have you ever bought $100k of shares with no money down? I haven’t – I’m not brave enough, but I will do it all day long with property.
The main point of my comparison is the relevent risk/reward factor between the two, based on a more tradition form of purchase structure i.e; standard bank loan (not the more sophisticated strategies such as warrants etc).
Yes, both investment vehicles can be bought with no money down, but only property can be insured against catastophic loss (not capital loss) whereas shares can’t as far as I know.
This is often overlooked by people when comparing the performances of the two. Many people say shares outperform property and vice versa, and I own both vehicles of investment, but prefer the comparative safety of property while still getting excellent returns (sometimes).
I’m afraid I like my sleep too much.
Speaking of buying shares with no money down; would you like to share a few of the strategies for the rest of the gang here?
Cheers,
MarcI have well over $100K worth of shares and managed funds with no insurances in place.
I have been in shares for 15 years now and have never experienced an event such as HIH or ENRON in any of my companies. Likening those events to all Bluechip shares is like saying you wouldn’t buy proeprty because of the tidal waves in Indonesia or the Earthquake in Newcastle.
Just as an example of a 100% leveraged exposure to shares with 100% capital guarantee look at this page.
http://www.macquarie.com.au/emg/mq/comets/comets_home.htm?source=fsg-adviser
It is no recommendation – just an example to open your eyes to what might be available. It is just one of many sophisticated vehicles open to everyone.
I personally use a 50% LVR Margin Loan to buy and hold shares. As a result of owning CSR I was given RINKER shares at a nominal value of $5. They certainly cost me less than this as the CSR shares recovered the $5 drop pretty fast. The RINKER shares are now worth $18 and were as high as $22.
They cost me no purchase costs, no stamp duty, no maintenance, no tenants, no PM, no neighbours etc etc.
Using my nominal purchase price I am being paid
Lets extrapolate this one share out to similar ratio as an IP.
I bought this “IP” for $50K a few years back. I paid no buying costs or borrowing costs. I pay 8.5% interest on the loan if I had borrowed 100% then this loan would be $50K – $4250pa interest.
I have not spent a single cent on it since.
I have a very liquid market that I can sell this IP into. Today I have an offer to buy this property for $184,700 and can sell it in a matter of minutes for a very low fee. Well under $1000 I think. No negotiating or agent needed. No legal fees or inspections to worry about.
I am earning $7800 pa in “rent” for this property. This “rent” comes with Franking Credits meaning that some company tax has been paid on the rent so I get a tax credit on it.
Now obviously this was just an exercise to prove my point and not all companies behave in this manner.
But nearly all the Blue Chip Shares I have did. CBA floated for about $6 and is now trading in the high $30. Woolworths floated for $2+ and is now around $20 per share.
Tell me which IPs have grown by a factor of ten in about ten years?
The aim of this little exercise was to perhaps change the view that Shares are dangerous gambling as opposed to the “safe as houses” mentality that so many of us have.
I found out whilst I was in the Army that most fear is based on ignorance. Once you have some training, education or experience then confidence builds and much of the fear evaporates. Jumping out of a plane is less terrifying to a qualified parachutist than it is to someone who have never tried it.
So if you fear shares then you may conquer that fear by learning a bit more about how it all works. Once you know a lot then make an informed decision.
But to blindly say shares are bad ie HIH and Enron is naive at best and denies you a lot of opportunities. Some believe that a sharemarket boom follows a property boom (as is the case now) so why halve the amount of booms you can invest in?
All the best,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by L.A Aussie:Originally posted by APerry:Asset Loan are a public company, go to their web site and get a copy of their annual report and you can make your own mind up re their stability. They are a short term aset lender, as suggested by their name, with ratesstarting from around 3% per month. They don’t lend at high LVR’s, I think 70% is their max.
Regards
AlistairNot only that, I can buy 100k of property with no money (other equity), can’t do that with shares, bonds etc.
Cheers,
Marc.
[email protected]Do you really believe that?
You can buy shares using equity with no money down. You can even buy 100% shares with no equity using no money down.
This is a widely touted generalisation that is commonly accepted but not true.
I think people who blindly believe that property or shares are best and exclude the other are doing themselves a huge disservice.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Consolidating is a tool – not a solution.
He should close the accounts and try for a personal loan at around 60% of what he is paying now.
But if his behaviour doesn’t change it can be a disaster.
I have seen people do this and 12 months later be in a worse position with maxed out cards and a huge personal loan.
He needs a financial goal and a plan. Paying off the debt is not enough.
Buying a property is a better goal. Paying off his debts will happen as part of it. Building a share portfolio or starting a business are other examples.
But aiming to tread water is no goal in my eyes.
I suggest he find a financial planner who can turn his situation around.
He needs to face up to his situation and make changes. If he doesn’t change first then nothing else will.
IF YOU WANT ANYTHING TO CHANGE THEN FIRST YOU MUST CHANGE.
Pin that to his shaving mirror [blush2]
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I have five bedrooms which I get $540pw. So mine is more. Really depends on supply and demand. $100 – $120 pw for a room in my area is reasonable. there are cheaper but not in as nice a house. There are higher and I guess they get more. Some have a fridge per room and extra bathrooms etc. Mine seems to fill well and everyone is happy.
re electricity, I have three years bill history and my agreement with the tenants is that if it jumps higher than the same usage in previous years then they split the difference.
Same with water. Though it embarrasses me to admit that my wife and two daughters (and me) use more water than five teenagers … [blush2] They don’t water a garden though
Only once has this been an issue was when one guy started using a portable aircon. He agreed to pay the difference in electricity when I showed him the bills so it was no big issue.
Telephone was a nightmare. I did put it on and pay the rent with them paying call costs. I was always out of pocket $20-30 as they never agreed on who made what call so I told them the phone was their problem. That has worked fine since.
Any more questions?
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by L.A Aussie:Originally posted by swiftos:Hi
My opinion is to look at why you are investing in the first place. If your aim is cash flow and you dont mind not getting capital growth then regional areas are great in that they will either cover your costs or cover them and give you some left over,or positive cash flow.
I have properties from 1000 people towns up to 10,000 and have had only minor problems. My keys are to make sure that there is an agent in town who can manage the property, be wary of properties where the agent says I wont manage it!! Stay away from them.
also be aware of properties where the agent does multiple jobs as their interests could be somewhat biased or miscued.
I think tenant problems are perceived (incorrectly) to be more likely in lower priced, lower class, and maybe rural areas. Not so.
I once had a brand new, gorgeous townhouse in a high rent area (good cap growth area too). The first tenant was a working mum with 2 kids. Always paid the rent, but they were nightmares and upset everyone in the complex. Glad to be rid of her.Cheers,
Marc.
[email protected]Of course that perception is a generalisation and with all generalisations you can find examples to disprove it as an absolute rule.
My main concern is that repairs cost more in the country. Travel time and shipping of material is higher although labour costs can be lower. Too small a town may not have a resident electrician or plumber or if it does then he lknows you have limited choices and charges accordingly.
More importantly is that the same repair (even at the same cost) is a higher % of the yield on a cheapie. ie a $1000 HWS may not be too big a deal if the rent is $400pw but if it is $110 pw then it will hurt a bit more and may even make that pos geared beauty into a neg geared dog with no capital growth.
Of course this is a generalisation and I bet someone has an example that is the opposite [biggrin]
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
It will affect your borrowing – although you still have options.
If you were my client I would be discussing getting as large a LOC against all property investments as you can. Leave it undrawn and it will cost no interest.
But it will be there to use when you need it without an application showing the casual employment.
Any additional finance needed from then may well be LODOC or NODOC loans unless the casual is permanent enough and the LVR low enough ……
Please discuss this with your broker or accountant – DO NOT discuss it with your banker [blush2]
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Based on the info I believe it would be deductible.
but you shouldn’t act on a stranger’s advice …
speak to your accountant.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
What are your plans for this property?
Simplistic advice says that if you are buying it to hold forever and it is pos geared then the lower income earner is best. This would also be the case if you wish to realise a capital gain.
But things are never simple and you probably need to speak to your accountant.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Most of these are exposed to LMI regardless of the LVR. This may mean an extra premium and also means that your borrowing limit may be hit earlier – most finance rejections are due to LMi and you will have more loans under LMI.
Also check for early repayment penalties – they can be pretty high if refinanced/sold in the first 3-5 years.
They are a niche and can fill a need well. I prefer not to go that way unless choices are limited for some reason.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Sounds like someone’s website needs to be made simpler to understand.
A FULLDOC loan is a standard loan that most people get.
The website must mean it is either:
1. Suitable for a normal loan with conventional interest rate, rather than a loan set up for unconventional lending situations or
2. Not suitable for any LOWDOC or NODOC loans where LMI is involved at any LVR.
Even I am not sure what he means!
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by L.A Aussie:Originally posted by Mortgage Hunter:I agree with Dave but make the following points.
Period of occupancy to qualify to keep the FHOG is 6 months not 12. 12 months is a common misconception.
Another benefit of buying it as your first PPOR then renting is the CGT exemption you will enjoy.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Simon,
I heard somewhere that your PPoR if used as an I.P is eligible for capital gains tax for the period that you use it as an I.P? I don’t know how the calculation is done though.
This is pertinent to me as our PPor is an I.P while we are living in the USA for 2.5 years.
Any clues?Cheers,
Marc.
[email protected]One more point. You must establish it as a PPOR and then rent it to qualify for the exemption.
If you move into an IP then you owe CGT for that period prior. If you then move to the US and rent it then it will be exempt for the first 6 years. If you move back in at 5.5 years then move out again the 6 years starts anew.
It can be useful and I am told the legislation was changed to accomodate the pollies on foreign service …
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
You can rent your PPOR for up to 6 years without any CGT impact.
If you buy another PPOR then this ceases. You can only hold one PPOR at a time for CGT exemption. The exception is if you are selling the first ppor then you can overlap them by 6 months.
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I agree with Dave but make the following points.
Period of occupancy to qualify to keep the FHOG is 6 months not 12. 12 months is a common misconception.
Another benefit of buying it as your first PPOR then renting is the CGT exemption you will enjoy.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by Dougiejg:Mortgage Hunter
What do you think the disadvantages might be?I can see a risk of disagreement between members down the track.
This could damage friendships.
Always a risk of losing money, but that is in any investing.
Certainly there is a great deal for us to learn, and that is scary in a way, but not really a disadvantage.I am trying to think of the downside, but that is all I have so far. That is why I put this post up – to get a dose of reality check to mix with my enthusiasm. So please tell me the negatives that you can think of.
APerry
I tried that link, but it says page not available. Thanks for your email as well.He is no fool who gives what he cannot keep to gain what he cannot lose. – Jim Elliot
Glad you are looking at both sides.
One area, and it was mentioned, is borrowing. If you all go on the loan together then you will all be responsible for the whole debt individually. An example might help here.
If five people borrow $500K for an IP.
Then you go to buy a home. Your lender will see you as already having a $500K debt. Not your $100K share but the whole debt. If all your four mates are unemployed then you will have to meet the repayments.
Please see a cluey accountant and look at more sophisticated ownership vehilcles. Will be more expensive but if something goes wrong it may save you a fortune.
I am personally not a fan of syndicates. I think a club where you pooled info but bought individually would be safer for you all.
Sorry to be a wet blanket [blush2]
Cheers,
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by Dougiejg:Hi all
As we see it, the advantages would be:
– Working as group gets more work done than as individuals
– Motivation is increased
– Pooling resources can allow us to acquire more properties quickly.
– It will help us to become more businesslike in our approach to investing.What do you think the disadvantages might be?
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
