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February 20, 2003 - 10:53 am
Thanks Steve,
Would there be any depreciation recover tax relevant when the option is excercised, or does that not apply to Australia?
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February 20, 2003 - 10:03 am
Hi Steve,
Just quickly, thanks for fixing my little login problem earlier []
In regards to a lease option, as it is actually being rented with an option to buy, is it possible and/or advisable to depreciate the property in this circumstance (assuming it is of an age that allows depreciation)? What are the benefits/drawbacks from this situation?
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February 20, 2003 - 4:44 am
Hi there.
I agree with BDM, there is more questions that need to be asked. Firstly let me say that you need to distinguish between whether you want a home to live in or an investment property. They are both very different, chalk and cheese infact. A home that you live in is not an investment, sure it has the potential of capital gain but what do you do then? If you sell and take the gain you will be faced with the problem that you sold at a high point in the market and are now trying to buy back in at a high point. You’re bargaining power is limited since you need a place to live and unless you want to take a life style cut and downgrade your next home purchase you are financially the same as you are now. I hope that makes sense. You should never consider the home you live in to be an asset, not even when the mortgage is paid off. Why is this you might ask, well while the mortgage might be paid off, it still costs you money to live in the home, there are rates and bills that need to be paid, meaning that money is leaving your pocket.
It’s a tough situation because most people like to have a place that they call home. Whatever you do just remember that an asset puts money into your pocket while a liability takes money out. On the basis of this definition your home is not an asset till you sell it for more than you paid plus opening and closing costs. Then you are left with the problem of what now?
My 2 cents.
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February 20, 2003 - 12:45 am
Hi Bruce,
That sounds like an easier way of achieving the same result and even better with the lenders approval. Do you mind if I ask what lender? Did this option come because you are already doing business with them?
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February 20, 2003 - 12:35 am
quote:
Good bye
Finally something Tails has said that everyone can agree with.
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February 19, 2003 - 2:07 pm
Depends what you want to achieve. I have bought both North and South and have achieved differing returns from differing IP’s. Love investing in Perth![]
Look at Rockingham Beach, Palm Beach, Coolongup, Warnbro (Near Beach) in the South and Balga, Girrawheen, Greenwood, Hammersley, Warwick in the North.
Balga probably has passed the +ive stage now. I bought 3×1 on duplex block in 1995 for $65,000 and it rents for $135pw now. As you know they have more than doubled in $$ since then. Look at the surrounding suburbs around here (ie. 10km from city). Huge government and private investment in the south near the water. New Ramada hotel, possible new marina, 2 luxury apartment Hi rises, a monorail linking the University, Beach Front and Train Station in Rockingham Beach/Palm Beach area all in the next 3-4 years is hard to look past.
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February 19, 2003 - 7:37 am
Hi there RC,
I would have to definitely recommend ‘BUYER BEWARE’. I think this product is essential no matter what your strategy is (WRAPS etc) in regards to property. It is even worthwhile getting it if you are purchasing your first home to live in. The book has a number of templates that guide you through all stages of property investing. It even gives you ‘subject clauses’ to put into your offer when buying.
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February 19, 2003 - 6:50 am
Steve’s ‘BUYER BEWARE’ book goes into contract clauses. I have found it very useful as it contains contract templates which you yourself can use. For $59 i think it is a worthwhile investment in itself.
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February 19, 2003 - 6:45 am
i hear u MR hedge!!
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February 19, 2003 - 6:38 am
My 2 cents.
One of the main reasons behind why we invest and look for positive cash flow properties is because it creates a passive income stream. That means we get paid whether we get out of bed or not. Saying that it is only $10 per week is missing the big picture, our aim is to establish a platform where we are no longer dependant upon our employment positions. The main advatage, and putting it into the most simplistic manner is that it is an investment which puts money into our pockets.
The problem i feel with depending solely on a capital gain is what do you do with the money once you have sold out and collected your gain? This isn’t exactly a strategy for building a strong foundation for financial freedom, it is more a get rich now philosphy, where as the aim should be to build your passive income stream. Negative gearing and capital growth solely, won’t do this.
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February 19, 2003 - 5:45 am
I think you’re absoloutely right Steve, 50 properties sounds like a lot until you get out there and do it. “The journey of a thousand miles starts with a single step”.
I definitely agree that you need to have a plan/system in place and most importantly you need to TAKE ACTION!!! Once you get in the game it is amazing how much you pick up and learn along the way.
I like the quote that is mentioned in Rich Dad Poor Dad “The reason so many talented people are poor is because they focus on building a better hamburger and know little to nothing about business systems”
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February 19, 2003 - 5:01 am
quote:
I think the idea of rebating closing costs sounds promising, so long as it was included in the contract.
The bottom line is that sales incentives can be created, but if you are doing it to deceive (as opposed to fully disclosing) then you are in dangerous territory.
Steve,
I agree 100% with full disclosure. I believe there are enough ways to be creative with real estate without having to be dodgy or decietful.
I guess the bottom line is you don’t know until you try and if one idea doesn’t work, find one that does.
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February 19, 2003 - 4:38 am
Hi Andy,
Thanks for the info, I will do some research and look into it.
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February 18, 2003 - 11:58 pm
Hi Bruce,
Thanks for the info on your experiences. Another option I had been thinking of and wondered if people had done it, was to ask for the closing costs to be rebated instead of the deposit.
As the goal is to decrease my money in the deal, this seems logical to me as:
1. I have reduced my capital invested
2. I still have my 10% equity in the property.
Anyone have any thoughts on this one?
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February 18, 2003 - 3:51 pm
Steve you said this the other day.
quote:
The property market has certainly seen significant capital growth since I began investing in 1999.
However it’s important to remember that I invest for cashflow and not capital gains.
Since 1999 the average house in australia has more than doubled in most areas. Now your saying that you are not interested in this kind off growth and you would rather travel the country side and look for a property that is going to provide limited capital gain but is going to return you $10 incom p/w after all out goings.
Are you crazy? By looking for a house based on a cash positive income you are limiting your self to 55k dumps in the middle of no where with little or no capital gains because i cant see some one paying 500 rent pw for a house valued at 250k in the country.
Good luck.

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February 18, 2003 - 3:21 pm
Mitch you said this in your last post.
quote:
The way in which you put down any form of property investment as foolishness(my interpretation of your attitude via your posts)is brilliant.It has made me sit down and take a good hard look.
Mate at no stage did i say that any form of property investment was foolish (where did you get that from). What i said was the property market is overheated at the moment and it was time to transfer to a safe area (fixed interest) and i have sold all of my properties.
Out of all the posts i have read i agree with your investment tatics the most, buy quality, look for capital growth and debt reduction, but the difference between you and me is you buy and hold while i turn my paper capital gain in to cash to take advantage in other areas. Take for instance the stock market now, its at about 2750 points a year and half ago it was at 3500 points, which means with my capital growth that i have made in the housing sector (no longer paper profit) i am able to put in fix interest at call and wait for any down turn ( the war to start) and buy quality stocks at a reduced rate. My tactic is to keep my money working at all times it might be shares, property, or fixed interest.
Now in two years when the property market is still in a stagnant mood i will return to the property industry (with capital from the share market). I liken it to when you go down to the beach. A wave is building out the back, its nice and solid, one person gets on it followed by more and more, now people near the waters edge can see that their are many people on this wave so the also deside to catch the wave, at this point the person who first caught the wave pulls outs because he has a good ride and wants to catch another wave out the back, he also knows that the closer he goes to the sand the more likly he is to being dumped. I am the one who swims out the back and has a good ride but always pulls out before i get dumped, because i know that their is always going to be another wave out the back that is bigger and better. DONT BE THE PERSON PLAYING AT THE END OF THE WAVE WHO GETS DUMPED.
PS you dont have to love me just listen to me.
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February 18, 2003 - 2:46 pm
hey there,
i have found some properties that comply with 11 sec rule in cannonvale. $80,000 that are renting for 170 a week. But i would really like to know why the owners are selling… there has to be an explaination!! U know anything that might make them do this?
It sounds too good to be true!!
Cheers
8>)
“Make your profits when u buy not when u sell”
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February 18, 2003 - 2:08 pm
quote:
i have just built 2 houses in Karatha for 270000 ea they are both rented to the Govt employees housing ass for 550 pw with long leases with annual revues
Hi Mr Hedge,
How did you come across the GEHA and is there a division in NSW that I can approach to do the same as yourself?
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Matt []
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February 18, 2003 - 1:53 pm
Hi Leigh,
I have heard of this mentioned a number of times in books by John Burley, Robert Kiyosaki and Dolf DeRoos and it is done quite regularly.
I am not sure how the bank would see it, I guess it may depend on what relationship you have with them and what their lending criteria is, i.e. how you came up with the deposit.
My personal opinion is that if the seller and both solicitors are happy with the arrangement of no actual deposit and the property values to what the contract price says, then there is a good chance the lender will do it.
Another way you can do it which works well is to pay the deposit of 10% and write a clause in the contract asking for it to be rebated at settlement. Same principle but different approach with the same result of you not putting in a deposit from your own pocket.
Cheers,
Matt. []
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February 18, 2003 - 5:27 am
Hi all. It must be a good area because Steve Mc Knight has some properties there. After reading that he had property there i checked out the prices in the area and it is definetly cheap in comparison to surrounding suburbs. I have been meaning to look up growth rates in the area but haven’t had a chance.
Cheers