Forum Replies Created
Hi Freedom,
Yes, you can use the equity ($20k???) for whatever you want but banks will calculate this loan amount as 80% of the property value minus any debt you have on the property.
You also have to be able to service that debt.I’m not sure how you’ve done your sums, but your equity ($20k???) is the value of the property minus the debt you owe on it.
A simple breakdown for you:
Purchase price = $90k
Deposit @ 10% = $9k
Loan ($81k) + 5% ($4.5k) for purchase costs = $85.5k
Sweat equity = $10k
Revaluation = $140k
Equity = $54.5k ($140k – $85.5k)
Amount bank will lend @ 80% valuation = $26.5kYou should also remember that the interest you pay on the amount you borrow may not be tax deductible depending on it’s purpose.
I’m not sure if you can rely on the pest/building inspector to inform you what the owner wants to get for it unless they are privy to this guarded information.
Also if there’s a lot of interest in the property, you’ll be lucky to get it for such a discount.Hope this helps explain some basic concepts for you.
Have a wonderful day.Well done Andrew, but please explain why it was not a 50/50 split?
It sounds like you’re ripping your partner off especially if he is putting up most of the money and receiving a much smaller return.
Perhaps you haven’t posted the full story and details?
You shouldn’t be so greedy – you know it’s one of the deadly sins? [
]Nathan i don’t do wraps, but i’d be wary of investing in a town with a population of less than 20,000 people; let alone a town with less than 500 people – that’s a joke.
I don’t think you could seriously consider the potential for capital gains in such a small environment that sounds like it’s dependent on the other “big” town of 15,000 people.
The figures on your property may look good for what you want initially, but i’d be wary of trying to get rid of it in the future as i doubt there will be much demand for a property in such a small town.
Hi Gerard,
I am also interested in SE Queensland and will be purchasing something there within the next 2-3 months. I hope to be more active in the area and was also thinking of subscribing to something like RP Data. From what resurrect says, it sounds like the most powerful and useful.
If you’re stil interested in sharing costs, e-mail me at [email protected] to discuss the specifics.
Cheers,
QuentinThere are better deals around, especially without the $300 pa fee which sounds way too expensive to me.
Your AAPR (true interest rate) would probably be more than the standard variable (6.57%) with the fees you are paying.
Always ask your broker for the AAPR on a loan to get a better indication of what you are paying.Don’t get excited about the bank adding the mortgage insurance onto the loan amount – this is standard practise as they’d rather lend it to you for the extra interest repayments.
Hi Essykay,
My advice is to continue with your overseas employment for the next 2-3 years and perhaps employ someone to look on your behalf – like Nathan suggests.As you’d know, the market on Australia’s east coast has pretty much peaked though is starting to flatten out a bit. Auction clearance rates are still pretty stable but have come down a bit from their highs of 80%+ which we were seeing 6-18 months ago. There also doesn’t seem to be as many bidders present at auctions, and the feeling of urgency has moderated. Brisbane property however still seems to be doing well with strong increases in median prices reported. People looking for cashflow +ive property seems to be popular now and there’s also a lot of seminars being touted these days.
I would continue to work o’seas and save those dollars, as well as gain valuable experience in your field of employment. Maybe think about dollar cost averaging your money sent home as it’s predicted the AUD$ may strengthen in the months ahead.
If you would like some specific advice about interested partners wanting to invest and that also do the leg work for you, please contact me at [email protected] and i’ll be able to advise you on something very suitable for your needs.
I’d prefer not to disclose this information on a public forum.All the best with it.
Cheers,
QuentinYes, S/D is a state tax and is therefore calculated differently throughout Australia.
Be aware that S/D is calculated differently in QLD for owner-occupiers and investment properties are subject to much higher rates.
It’s also worth noting that exemptions and concessions on S/D may also apply to first home buyers and pensioners in some states.
WA owner-occupiers may be eligible for concessions on S/D rates provided the property value doesn’t exceed $135,000.
I’m not sure about your distinction between a unit and an apartment, but you may also want to include townhouses on your list. These are also strata titled but are typically defined as being built over 2 levels and usually in smaller complexes than apartments/units.
Hi gazza17,
I would be very, very wary if i were you.
Firstly, buying off the plan is not recommended in the current market.
You could get away with this a few years ago due to the strong capital gains, but it’s highly unlikely the property will show any gain once it has been completed. When is the completion date?
You always pay a premium for a brand new property and it’s likely that you’ll have to hold this property for at least 2-3 years before it’s market value is the same as what you paid.What does your criteria of 30% growth refer to – population or median price? If it’s the latter, i strongly doubt you’ll come across anything providing such growth – it’s unrealistic if not impossible in the current market.
If it’s population growth, it sounds like the area is semi-rural or on the outskirts in a new housing estate area; both of which are bad for long term capital gains and low vacancy rates.If it’s your first foray into property investing, i would play it safe and use the tried and tested method of buying something within 5-10km of the CBD. You will get nil/minimal vacancies and good growth. If you want to invest for capital gains, the best option is to buy an older property and add value to it (sweat equity). You are also more likely to get something like this for a fairer price from a motivated seller.
To put it bluntly, i think you’re being taken for a ride by your “financial advisor” and will regret this decision if you go ahead with it.
It always sounds good when they say it will cost $x a week right down to the dollar.
If there is a rent guarantee, you can be certain that you are paying too much for it as this is built into the property price. The rents are also not usually a reflection of the market and you’ll find that once you have to let it out yourself, you’ll have to reduce the rent which will impact on your cashflow.BE VERY CAREFUL.
I imagine the agent thinks you’re just shooting the breeze and will show you his/her stock when you actually prove you’re a serious buyer by coming to his town.
No reason for alarm bells to start ringing – i’ve heard this statement said by many agents over the years – what they are basically saying is that you should come and visit them, and then they will show you any stock that fits your criteria.
Just make sure that you’re not feeling pressured into making a written offer on the first day. Have a look at what’s available, do the sums, have a sleep and then consider submitting a written offer.I personally don’t like the idea of investing in rural areas where high unemployment and a high turnover of tenants is common.
However most of these rural areas do show more +ive cashflow properties but at the cost of minimal/nil capital growth.
You have to remember that tenants will typically rent a particular property because they work in the area – i believe that cities are always the best areas for this.
I’m sure that there are areas that show both a decent yield and good growth but finding them can prove difficult, especially in the current market. It’s like trying to pick the next hot suburb by ripple effect.I guess you have to ask yourself what is the main reason you are investing for – yield or capital growth?
Someone who is nearing retirement would typically prefer a high yield as they are after income and cannot capitalise any capital gains in the future if they are dead!
Conversely if you are younger, location is much more important with the higher possibility of capital gains.
I personally prefer the latter and invest in inner city areas which have a lot of infrastructure and proximity to public transport, shops etc. This minimises vacancy rates and also ensures good growth. Capital growth is also the basis of wealth creation and should be the main purpose.
As they say, 80% of something is better than 100% of nothing.Hi Sandi,
Sorry to hear about your situation but it’s true that the agent is acting on the vendor’s behalf and should be getting the best possible price for his/her client.It sounds like your offer was very fair, though you don’t mention what the easking price was. I guess it would make a difference if the property was listed at $70,000 or $420,000.
I’ve felt the market here (inner Melbourne) is flattening out a bit and wouldn’t say it’s a sellers market like it was 12-18 months ago.
If the agent is saying that the $5k less offer won’t cut it, ask him what will. Perhaps $4k less?
If you really think this property stands on it’s own with the figures and makes a good investment, perhaps a higher offer is worthwhile?Can you please tell us which area you are talking about and what the asking price of the property is, as it may enable some forumites to provide you with a better reply. Some figures on rent return may also help us to provide a better reply.
I have never heard of this approach as agents will usually do this as a service in the hope you do list with them – but never for a fee!
Perhaps the country town is so small that there is not really much competition and they think they can get away with it?
Do they claim that for $150 you will be provided with a written valuation, or is it merely an opinion of someone working in the sales office?
I can’t believe an agent would even mention that they would also charge $150 for an appraisal without even inspecting the property if they are familiar it!It definitely sounds dodgy, and i’d avoid doing business with them – i’m surprised they are still in business.
If you are serious about selling it, i’d find another agent.Hi dosser,
Sounds like you’r negatively geared and are having difficulty meeting your repayment obligations.You’ll probably get a lot of people recommending you go out and buy something cashflow +ive to balance the equation – nothing wrong with this strategy but it doesn’t sound like an ideal time to be doing it now.
Ae your loans I.O or P&I?
If they are P&I, i’d think about refinancing to I.O to help your cashflow, and also perhaps locking in a 3 year fixed rate while you’re at it to give you some certainty for future budgeting.You have to think about your future goals and what is the best decision to make to help you move closer to those goals. Will selling or holding these properties bring you closer or further away to these goals?
If you intend to continue with property investment, i would hang in there if i could – if you’re able to manage on one salary. Perhaps think about selling one of the new properties to help reduce debt, and/or to reinvest in something cashflow +ive. Rent out the other property and ensure you get a depreciation report done to maximise your deductions.
Maybe you could also review your rent on all propertiesd and see if a small increase will make much difference and bring some relief.
Some may be able to provide more specific and better advice if you supplied us with some figures on your rental, loan repayments and values.
All the best with it,
QuentinHi Monstango_2010,
Sounds interesting. I’d like to express an interest in testing your software.
I can also recommend a good web site where it can be available for downloading by other like-minded people.
If you’re interested, please e-mail me at [email protected]
All the best with it,
Quentin~ better to die on your feet than to live on your knees ~
You may have to reduce the rent a bit to compensate them for the reduced size of their backyard.
If they are on a lease, you may want to take $5 pw off their current rent, until the end of the lease. From the tenant’s point of view, they are paying the same rent for something different to what they moved into.
I think it’s very important to keep your tenants happy and do the right thing by them.
I’m sure this will be more than compensated for by the rent you will be receiving from the new property.~ better to die on your feet than to live on your knees ~
I really liked “Illusions” by Richard Bach – another fictional story that motivates.
Kiyosaki’s books are good for motivation but little else. The content of Kiyosaki’s books could be summed up in a couple of paragraphs, but obviously the royalties would not be there.
Kiyosaki has made a lot of money from his ability to motivate and impress the masses; and milks every dollar he can from books, boardgames, tapes and seminars.As a lot of people have mentioned, they needed someone like Kiyosaki to motivate themselves – nothing wrong with that, as long as they got motivated and realised that the “rat race” thing is not for them.
~ better to die on your feet than to live on your knees ~
It’s true that Reed hasn’t got a lot of good things to say about many people but at least he states them openly without hiding behind a pseudonym, and also gives some evidence to his claims.
However, I really agree with what he has to say about Kiyosaki. Why? Because he backs up his claims with evidence. He doesn’t just rant on about how Kiyosaki is a dodgy conman, but makes valid points and gives evidence to back up his claims. I would really like to see Kiyosaki try and defend himself by disputing any of Reed’s claims, as many facts seem to be lacking and his credibilty suffers.Kiyosaki’s books are good for motivation but little else. As matt has mentioned, he needed something like Kiyosaki to motivate himself.
Kiyosaki has made a lot of money from his ability to motivate, impress the masses and milk every dollar he can from books and boardgames.The content of Kiyosaki’s books could be summed up in a couple of paragraphs, but obviously the royalties would not be there.
~ better to die on your feet than to live on your knees ~
What isn’t realistic, is the notion of becoming financially independant within 12mths of investing in property, particularly if you consider yourself “at the embryonic stage of your property investing career, and realise how much you need to learn”.
I’m not saying it’s impossible, but there’s a lot of learning and foot work to be done if that’s your goal.
Hope this hasn’t put you off but you really need to be realistic about a time frame.However, you are on the right track by gathering information and preparing a plan to achieve your goal. Do lots of research and then do a bit more…and then do some more.
Visit other forums besides this one and ask lots of questions as well as using the search function – i’ve noticed that a few people on here are also members of the main PI forums i’ve come across, namely: http://www.somersoft.com/forums/index.php?s=
and
http://groups.msn.com/PropertyInvestment/messageboard.msnw
These forums (especially Jan Somers) has a wealth of information with many experienced investors on board.
All the best.
Cheerio,
QuentinIf you know what the rent is, divide this amount by the yield and this will give you the “purchase price”.
Example:
Rent is $200pw = $10,400 p.a.
$10,400 / 4% = $260,000
$10,400 / 5% = $208,000
$10,400 / 6% = $173,333
$10,400 / 7% = $148,571
Of course you will have to decide on a yield factor (depending on location and type of building), but it will give you an indication of what the property should be worth ballpark.If you know the rent and the price, divide the rent by the price to figure out the yield.
Example:
Rent is $175 pw ($9,100 p.a.), asking price is $120,000.
$9,100 / $120,000 = 7.6%Hope some of this helps.
~ better to die on your feet than to live on your knees ~
Hi Hurricane,
Yes, CGT exemptions end on the family home (PPOR) when it is let out.
However, you will only be charged CGT on your PPOR from the date you let it out from, i.e June 2002 and not for the time you lived in it (when it was considered your PPOR). This is the date from when you purchased it and from the date you let it out.
Ideally, you should have had your PPOR valued for as much as you could have got away with so that the difference between this amount and your selling price is minimal. This difference would then be what CGT is calculated on.Conversely, if you buy an IP and then live in at as your PPOR at a later date, the valuation should be as low as you can get it from the date you move in.
Changes to CGT now mean you if you buy an investment from 1 October 1999, you only pay tax on half your capital gains if you hold it for more than 12 months. In effect, this means if you are on the top tax rate of 48.5 per cent, you will only pay 24.25 per cent tax on any capital gain you make on an investment.
Ciao,
Quentin~ better to die on your feet than to live on your knees ~
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