Forum Replies Created
Derek has covered most of the reasons I wouldn’t consider it.
Before you go further, you should check if finance is possible and at what rate and LVR. Most places would start at about 40 sqm for a residential loan. Many won’t touch anything as small as 21 sqm on a residential loan.
Margaret Wilson
[email protected]Hi NetMart
I agree with the others re getting as much information as you can handle first. A good place to start if you don’t want to spend too much at this stage is your local library. Work your way through as many books you can on property investing.
There are many strategies to obtain a good profit and you should be investigating several at least in theory. Do your homework. One of Robert Kiyosaki’s maxims is that the riskiest deal is the one you know the least about. Risk can be reduced by education and some of the best education is learning from other people’s mistakes.
And, as you work through all this, write your goals down. Develop a plan and write it down. Check your plan with others who are successful for a reality check but it should be your plan.
Margaret Wilson
[email protected]Hi Pat
The way it works is that investors establish a line of credit secured against another property(s) which they then use to pay cash for properties they find. This gives them an advantage when negotiating.
Then, if they are keeping the property, they will find finance and pay this back into the line of credit. Or, if they bought for short term gains, they pay the sale monies into the line of credit. In both cases, they then have their funds available again to pay cash on the next property.
We do lines of credit as one of the options with our loans. It is important to get the structure of the loan correct to minimise costs and maximise profits. As Mad-Cat mentioned, some people have gone backwards with a 100% line of credit because their finances were not structured correctly.
Margaret WIlson
[email protected]Anna
You really need to structure your loan(s) so you can pay your personal debt off as fast as possible as this is not tax deductible. Debt for investing is tax deductible so it is usual to have this as interest only until the personal debt is paid off.
There are a number of ways to structure your finances for fast personal debt reduction and greater profit. Some are much better than others.
Margaret Wilson
[email protected]I too would recommend holding off selling. At least until you have done a lot of sums to work out what you want for the long term. Renting it for a year or so and selling then may be the way to go.
You are thinking of options, which is a good start. Here are some other things to consider:
When you say you love you first home, does this mean you would want to move back to Alice Springs in the future? Then renting it out to keep your lovely house should be seriously considered.
If you are not planning on going back to Alice Springs, then the decision should be based on logic, not emotion. Where do you get good rental returns? Will you get a good rental return in Alice Springs? Can you do better elsewhere? Do you have the time to investigate better deals elsewhere? Bear in mind the value of your time and that you already have a property that can generate an income.
High LVR loans are expensive. The interest rate may be the same, but the upfront costs especially mortgage insurance are very expensive. Get a broker that will tell you all the costs, or email me for how each of the costs varies with price and LVR. And for any restrictions there may be in your area. There can be a trade-off here between costs and profit. You need all the facts before you make your decisions.
Margaret Wilson
[email protected]I don’t specifically look for properties to renovate for profit on the renovation, but I do like to buy properties about 5-8 years old that have been used for rental properties from day 1. By this time, they are tired and badly in need of paint which the previous owner won’t do. So I get them cheaper as they don’t present well. And, they are less likely to require expensive work done to them. Although cheap hot water services or air conditioners sometimes need replacing, it is rare to need anything structural. And, if you are selling for profit rather than renting, then these items may not be an issue anyway.
These properties I will clean up and do up over the next 2-3 years between tenants (I often get a window of a week between tenants when the property looks scruffy) until it looks good and rents easily. That way I build rental income as my profit.
Hi Yack
To get the judgement marked as paid or the equivalent requires them to pay you, then for you to provide them with receipt and letter of discontinuance which can then be lodged with the court that issued the judgement in the first place. It will then be updated, not removed.
Judgements will be automatically removed at 5 years after the date of the judgement. They may be removed in certain circumstances before that but only after the matter has been discontinued (which includes them paying you in full including any interest allowed by the court and all fees and charges).
Margaret Wilson
[email protected]The reason for the 2 years in business rule is that most businesses fail in the first 2 years. As Steve says, there are lenders who will lend to someone who has had an ABN for less than 2 years but the maximum LVR is usually lower and the interest rate higher.
Margaret Wilson
[email protected]Hi hghaas21435
If your problem is cross collateralisation, the simplest way to fix the problem is to either change to a Lender who doesn’t cross collateralise (there are some, email me for info) or to spread your portfolio over at least 2 lenders.
Margaret Wilson
[email protected]11. Give everyone a free library card to your library of investment books. The majority won’t use it. For those who do, this is the last present you ever need to give them.
Hi Flop
I agree with Terry that you need to do your sums. How much equity have you got to release.
With a fully flexible loan, you should be able to do a partial discharge or security substitution when you sell you place and buy investment property.
I have also sent you a PM.
Transfer the townhouse into another name – a spouse or a trust. Take a 110% loan out against it and place the funds (after costs) into an offset account on your current PPOR.
There are stamp duty issues with this. Full stamp duty (at SA Govt exhorbitant rates) may be payable.Increasing loan on current place to buy another has issues re what is tax deductible and what is not. There are other streams covering this. Basically, the tax deductibility of interest depends on the purpose of the loan (or part of).
Different PMs have different regimes. Mine collects rent weekly, fortnightly or monthly depending on the arrangement he has negotiated with the tenant. I get paid on about 22nd of the month for all monies received up to 20th month. This is especially welcome in the months when I have to pay GST.
He seems to have no problems with the short time frame between rent received and payment to owners. Slow paying tenants don’t stay slow payers too long – they either catch up or are eased out at the end of the lease. Part of what I pay him is for ensuring good tenants who keep the properties clean and pay on time.
My indulgence list:
1 book per week = $1560
coffee with clients = $1300
coffee by myself = $1300
lunch = $1300
snacks when bored = $1000Hmm. Maybe I should be channelling the snacks into books. Wouldn’t go to waist then.
I’ve been using Gemini Management for nearly 10 years and have had good service in that time. Regular inspections and reports, both on what I need to do and what the tenant needs to do. All of the tenants requests are passed on but we discuss whether it is reasonable or not before I actually do it (and mostly I don’t unless it is normal maintenance). And, only once did they need to access the tribunal and we got everything asked for.
For me it has been worth paying a little extra to have very few hassles.
Mike is in Adelaide so a wrap is not possible.
I have discussed this deal with Mike and, since neither of us has ever done a lease/option and vendor financing is illegal in SA, we would both welcome any help here. Is there someone interested in doing this deal for him?
I would also like info on how to set up a lease/option or similar deal in SA so it doesn’t fall foul of the legisation that won’t allow vendor financing in SA. I’m not ready yet to do one of these but I want to know how and all the pitfalls before I consider doing it for myself.
Hi Shane
There are maisonettes in lots of areas in Adelaide, not necessarily in no-go zones and not always built by Housing Trust. Probably cheaper because there is less land. Also because the demand for them is less. And they tend to be smaller than stand alone houses in the same area.
For maisonettes, you would need to double check on the neighbours (as you would for a townhouse), and any requirements to keep the 2 properties similar in appearance, etc.
I prefer units in small blocks with strata or community title or townhouses with community or torrens title (decision is based on cash flow including maintenance and not on property type). Most lenders will lend against these types of titles. I wouldn’t touch company title as I can’t borrow against them easily.
What I look for in units is a block with mostly owner occupiers. This means the block will be looked after. Strata fees can be a killer, especially when they finally get around to some essential maintenance which has been let go because the group couldn’t agree. I have a unit in a block which will finally have the common areas painted this financial year some 6 years after it was first raised at the strata corporation AGM.
Hi YC
My understanding is that travelling to investigate the purchase of a property is only claimable if you are already established as a property investor.
However, once you have bought the property, then travelling to inspect and/or do repairs is claimable. You may have to apportion travelling and accomodation costs between the business part and personal/holiday part. ATO can get quite upset about people travelling interstate or overseas for what they consider is a working holiday.
