Hi again C2 and Neil,

Human nature can be amazing. This thread started from your question Neil. I’m not even looking at DHA props myself, but do you realise where this has lead us? Info is valuable, and I’m sure that you see that no-one here wants to see anyone else make a mistake. Fantastic, proactive and success oriented.

I’m still amazed that we can be conversing with you C2 in Japan, for the benefit of locals. Thanks for your thoughts here.

Regards, Phil

C2 and Neil,

Thanks for the clarification on DHA homes C2.

I was unaware of the break clauses. My suggestion was to ask DHA of their requirements, then buy and modify a prop to suit. I’m aware that DHA own and release their rentals for sale. But I’m talking about buying your own privately to avoid an over-inflated DHA reserve price.

I’d be interested to know how they determine when “undesirable neighbours” appear. How could they execute a cessation of the lease based on that?

I mentioned DHA, as I figure that you Neil are looking for security of tenure. Fair enough too. It’s smart too look at diminishing your risk. Yet it’s difficult to balance that with a maximum return.

Kind regards, Phil

Hi Skeeta, welcome to the forum! Renting vs buying must always be a personal choice, depending on how much you value the feeling of owning the place you live in, and being able to hang whaterver you want wherever you want. My wife would certainly never have it any other way, but I wouldn’t care if I were renting my home. I would take comfort in knowing that I didn’t have to worry too much if termites started munching the walls (as they have done here!). It will usually be much cheaper to rent a house in SE Qld than it will be to buy it, but you don’t get any capital gain by renting your home. You would probably be better off financially in the long run, by renting and investing into IP as early as possible. (Will and Del sold their own home to do this, which is a big commitment).
You would need to stay cash flow positive as much as possible, as negative gearing for tax benefits are far less attractive on an average wage.

As for commercial property, I assume the ratio reflects the bank’s perception of the saleability of CP, ie with a more limited market.

Just a few thoughts on this Sunday morning when we both should be staying in bed a bit longer.
Jim.

Thanks Steve, I thought it should be something like that, but it’s certainly not ovious in their info sheet. I had a loan with Tonto (via Qld State Home Loans) a while ago, and it had a $700 exit fee if I refinanced it within 3 years. I refinanced them after 3 years and one month, because I found them incredibly amateurish. Their internet access never seemed to agree with the written statement, and they couldn’t handle interest in advance without st***ing up all the maths. Their written statements were a real mess as well. Their initial establishment fee was $300 but they neglected to tell me that I had to pay for their solicitor as well, which was a further $600. Westpac charges me zero.

I see that the 7.74% part of this Tonto loan is IO with no principal recuction allowed. The maximum amount of the 3.99% part is 50% of the 7.74% part, which means that the average interest rate (if you max out the 3.99% part) is 6.49%. The only way that this loan could be viable is for us to keep the 3.99% part maxed out for the duration of the loan, ie never to pay out the PPoR part. This would still be feasible, because it’s just a tad over inflation, but in my opinion this loan is borderline value compared to a normal combination. I’ll have to do a more accurate analysis, but I’m pretty sure the benefit wouldn’t be worth the risk of upsetting the ATO.

Azif was depressed with his living conditions. He took the mountain trek to visit the local guru. “I have 6 screaming kids, an unhappy wife, a shack measuring no more than 3 cubits and only one goat. The chickens have died and my calf was stolen. Guru, please advise me”.

Guru: Move your goat into the house for 2 weeks, then come back and talk with me.

Azif did as instructed, then reported back to the Guru. The house stinks, the wife is more upset, the kids can’t sleep, life is even worse since your advice.

Guru: Now remove the goat from the house and come talk with me in two weeks time.

Azif abided by the instruction and reported back:

Thank you Master .. the home is clean, my wife is happy, my children sleep soundly .. life is great!

Regards, Phil

Hi Mike,

Anything but carpet.

Hard surfaces wear, look and feel better. Scatter rugs can be used by the tenant if they want.

I live in a complex of 12 townhouses. Had dinner with neighbours a few weeks back. Same house, their’s is the original carpet. Mine has large tiles and a floating timber section excepting the formal lounge and upstairs. Appearance is spaciousness. This does one of two things. It may not improve the value of your prop should you decide to sell, but it will make it more saleable. Also, given the choice, a tenant will opt for ease of maintenance which works for you also.

You will find that tiles are comparable to the m2 cost of carpet anyway.

Regards, Phil

Hi Dingo,

Great question. You have me thinking. Circumstances aside, prior to buying my current PPOR I had considered this:

Buy a house and flat. Live in the flat, rent out the house, with gardening done by me. I’d want it done anyway, I could do it during the week to provide the tenant with quiet enjoyment rights on weekends.

This could apply to your own portfolio of rental props if local and if prepared to put in the effort yourself. If so, make them low maintenance .. lots of paving .. and purchase God’s own invention “The Whipper Snipper” and a blower vac.

Bill mentioned 9 months a year. But, find an excuse to keep an eye on the place during winter. A quick clean is enough of an excuse. Property inspections should not be a big deal for the tenant this way. Just ask for a cup of coffee to get your head in the door.

Another thought: this may have come from one of the books, but expand on it. A “rent holiday” you mentioned. Like Steve says, reward the tenant. Provided rent is on time and the prop is in good condition, how about a week’s free rent well into the future, say the 9th month. Better still, the 14th month to encourage them to continue the lease for a second year.

If you are prepared to spend energy on your own rentals properly, presumably you will manage them yourself. You have just saved yourself the standard 10% agents fee.

Having said all that, there is the other side of the coin. An agent’s fee of say $25 a week on a rental of $250 can save a lot of headaches, confrontations and Saturday night calls.

In reality, Ben Deros has the best answer. A good long term tenant with no vacancy is what all landlords desire. There may be no need to jazz up the deal at a cost to you. Keeping it simple may be best.

Whatever you do to add value, consider the perceived value. That is, an expensive chandelier will not entice a tenant to pay higher rent. Time, comfort and effort have a value. The tenants perceived value of gardening might be worth $40 a week to them. But it might only cost you $10 to do it. Provided you charge a premium between the two figures, you are in front. Put value on your own time though.

Also make it easy for the tenant to pay the rent and easy for you to get it. Insist on electronic transfer of funds. That way, no excuses, it’s automatic.

Regards, Phil