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it depends on your strategy going forward. you are still not in a bad situation.
your monthly outgoing is $600. you haven’t stated the situation on your principle residence – is it rented, owned, has a mortgage etc. the state of this has an affect on what to do.
if you fully own your PPOR then i would say keep the properties. remember, your outgoing here is $600 per month, so a total of $7200 but if you can afford that, and assuming average incomes and no PPOR debt you should be able to budget that in, then in 20 years you are going to own $230k (in todays terms) outright and it will be generating revenue for you with low outgoings. at current interest rates this investment is costing you 7200 per annum. so, even if you had to keep payig 7200 per annum for 30 years your outgoing would be 216000 and your propertywould be 230000. and remember, income will generally go up every year and the value of 7200 becomes less of a burden on your property.
i don’t think sell all and start again is the correct solution in this case. you haven’t been clear on the invesment on margin lending as you have this outgoing in your 600 per month but we don’t know what positive income or growth you are receiving from this.
yes you don’t fit the positive cashflow rules however many millionaires have been made from alternative means!
depends what the market is like. is it a family home?
pools are a hassle to have. and if something goes wrong, they are expensive to fix.
i had a property with a tenant in it and i had a high rental price on it with pool maintenance included. they took the house and decided to maintain it themselves for a lower price. i did include a automatic cleaner for them though.
i would say better to have a IP without a pool than with one. they are just another annoying thing to maintain.
the worst part of all this is that we have done all of the right things. I do have all paperwork etc and my property manager will defend us in that they have been bad tenants – have never once paid the rent on the date due, but I am getting married in 7 weeks and have renovations to do which require a lot of hours from our end – painting and have to pull out the current bathrooms and have them re-tiled. We wanted to have it all done before moving in, but this trouble probably means they will ruin it for us.
Another thing is these people have applied for properties through my current property manager and have being declined because the manager doesn’t want to deal with them anymore. so i am stuck with them.
I don’t think it will take much to bring me to tears in the tribunal the way things are going!
yes. they have been pretty good. but that didn’t stop the tenants from staying!
Okay, in doing the revluation do I need to go through who my existing mortgage is with??
Or can I go to another lender, which is really what I would prefer to do as I don’t want to have both with the same lender?
The property in question is in the eastern suburbs of Melbourne and I know of one other property in the street that has sold and another on the market now, noth of which are smaller in size, similar vintage and have sold for a price that I would be happy to take valuation at 10% or so less than. Your responses have been great.
Please elaborate Qld’s 007. I do not understand your point entirely.
Thanks for the feedback. Luckily I watch the market in surrounding streets to that property and there has been one recent sale and another currently on the market. That should put me in good stead for the valuation to be a bit closer to market value.
I know somebody that lives in Innisfail.
They are also investing in property, but focussing on other areas of the country, not Innisfail itself. Because I know the financial situation of this person and what they have achieved through property investment, I know they are smart and I would not purchase there purely because I know that this particular person is not touching their own backyard!!
My two cents anyway, but do your own research.
It’s great to see other people my age here. I am 22, bought my first house nearly a year ago and am currently trying to be comfortable with my risk exposure and figure out how I will finance a second.
Rural towns can be great for property purchases because the rental yield is often higher than in the big cities and therefore the repayments are covered by the rent. However, my first property in in Melbourne, and most likely I will purchase in Melbourne again for the second. The first rule of investing is to do what is right for your situation and your long term strategy. I find this forum to be a fantastic resource to be around others that share the same interest, however you should not live and die by Steve’s rules. You need to figure out for yourself how to approach it and make the right decisions.
I admit that my property is negatively geared, however within the last 10 months the value of my property has increased by 20%. This equity growth on a Melbourne priced property means I can put down deposits on a number of rural properties if I chose to do so (or just one Melbourne one!) to develop my strategy further.
Where are you guys all based? As you can probably guess, I am in Melbourne.
although you should avoid mortgage insurance where possible, because you are a first home buyer that may not be possible. I bought my first property in Melbourne at 21, and unfortunately due to my finances only had a minimal deposit. So, I had to pay the ridiculous amount of mortgage insurance on top of the stamp duty etc. BUT, because i bought then, rather than waiting until I had 20% plus the costs (which would’ve required me to have around $70k in cash, which I was far off from having) the property value has grown substantially which means I can use that equity as a 20% deposit on my next property to avoid the mortgage insurance!
when i applied for a loan i asked the lender if they needed the details of my HECS payment because I pay about $60 a week through my wages and he said that they didn’t need that info because as far as they were concerned i’ve had that debt since working full time and I’ve still been able to show a history of savings and building up a deposit.
Why don’t you get a valuation done on the property? You may be suprised at what it is valued at. That could be a start in the decision making process.
Also, if you do sell what are you going to invest in. Maybe if you tell us what your alternative plans are we could give some advice.
I live in Melbourne. To buy +ve geared proeperties, I have to go either interstate or rural. My choices are to buy 3 properties in some little rural town somewhere for $100k each or one place in Melbourne for $300k. The rural town will probably return $450-$500 per week. The Melbourne property will return maybe $260 per week. That is a big difference in revenues. But supply and demand dictates that the propertyin Melbourne is likely to grow at a faster % rate than the rural property. Yes I am foregoing revenue now in rental, but in the rural area I have to try and keep three tenants happy, in melbourne I will only have one tenant. In the rural property I am more likely to have vacancy more often. Population in Melbourne means I can lower my rent to $250 and am likely to fill it fast.
+ve and -ve gearing are following different strategies. I am still very much a supporter of -ve gearing because I’m getting extremely good capital growth in the big city whilst still getting a nice cheque back from the tax man. The tax benefits are exactly that, just a benefit. You do not buy -ve geared property purely for a tax deduction. It’s because you are thinking of your long term strategy.
i wouldn’t live and die by the 11 sec advice. It sounds like you are headed in the right direction. If you want to stay in metro Melbourne for IP’s it’s virutally impossible to get an 11 sec property unless you are looking at commercial properties.
If you can get $290 a week on a property that you paid $280k for it’s better than what a lot of other investors are getting in returns in Melbourne. And Berwick been a growth area may soon mean your property grows in equity which can then finance your next purcahse.
I find that the 11 sec rule is more about earnings than capital growth. It depends what your strategy is, but I wouldn’t buy an 11 sec property in an area that I didn’thought was stalling in price. I would go for the non-11 sec property in a growth area. But then my strategy is long term growth in capital using the revenue to subsidise the mortgage, not so much about cash in my pocket today. however, my age and earnings position allows me to take this position.
We will all have different views on this. And no matter how many property books you read, the authors will have different views too.
I would be worrying more about funding your retirement than funding the kids university fees. There is always HECS. Although you get a discount for upfront payment, it is very easy to pay off the debt later through the tax system. It’s what I am doing right now!
Instead of paying my uni fees upfront I saved my money and bought a property instead. Now I pay my HECs through the tax system each week, but my house has gone up in value since I bought it by $50k (less than 12 months ago), plus I am getting the tenant to help pay the mortgage.
If I had worked to pay my uni fees and then bought property, I’m pretty sure i still wouldn’t own a house and it would be even harder for me to enter the Melbourne property market.
your kids will only learn to save if you teach them how. They should get part time jobs after school definately. It helps them to become mroe independent.
Although financial freedom is my goal so that I can go walking on the beach when I want to, see my partner more often and not be responsible to somebody else who has their own motivations in life, another reason I am here is because I love property. I find inspections exciting, finding that place that you actually think is worth your money being invested in is an achievement. And seeing the value of it grow feels successful. I enjoy reading the weekly for sale ads and surfing online to see what the latest is that is available.
Plus, I want to be able to give my kids (if I ever have them) a secure start in life and leave a lot behind for them one day too.
I actually like my job, but manage to get on and check the boards a few times a day. Though I am more of a lurker and don’t post that much.
Still, hardly a day goes by that I don’t come on by to have a look at what exciting events have been occurring on these boards. [
]it is so true that it’s what you save, not what you earn.
My partner and I are both 22. I earn in the mid-$50’s and he earns in the low $20’s. But, he managed to put down half the deposit on our first house in a major city, and although doesn’t contribute as much as me on the mortgage, his savings are around 70% of mine. you would think considering that he earns much less, he couldn’t save that much, but he does.
I’ve noticed males are better at refraining from spending than females. I have 35 pairs of shoes in my cupboard, he has probably 5. Just a good comparison to use.
My spending has gone up as my income has, but since I bought a house my savings have been extremely good for what I think they should be on my income.
Sorry, $150k each would get you large townhouses. Even double storey.
For low quality and maybe 10sq each, then you could probably do it for around the $100k mark. But, it would depend on where the house is in terms of suburb. In the suburb will people pay $300k for a low quality 2BR place? If in Sydney, then likely yes.
If we could all get finance that easily wouldn’t we all be doing it!! I don’t like your friends chances here.
An option would be to say sell the block for X amount with the rights to a particular one of the properties of certain size, fixtures etc at a set price. Though, this deal would only find a developer if it was a good deal for them.
Is the pensioners aim to build these and hold them long term as an income, or to sell the two others and pocket a bit of cash?
When you consider it they own the property i assume. that’s $250k in savings esentially. To build 3 units would require around $450k in finance. Plus you don’t know what problems will occur in the subdivision. Sometimes the costs can blow out. You also have the demolition costs to factor in. So, it’s $700k minimum in costs if this pensioner knows what they’re doing and how to coordinate the building (more if they give it to a Simmonds or AV jennings to do). Then they will sell for 300k each say. So, two of those is $600k sale. It means that the property they live in has cost the pensioner $100k to have it.
sounds like a good idea, but the $$ will be the problem.
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