Forum Replies Created
Did some quick numbers on James’ deal…
If you borrowed $198,000 (using equity in another property), if you could borrow at 7% it would cost you $266.54 to pay interest only.
Is the rent $390 for each unit?
If so, $390 – $266 – $160 outgoings comes to a loss of $36 pw. Does the outgoings include strata fees?
Of course, if you have a deposit the numbers would be somewhat better.As these are retirement units, can a tenant who is retired but does not own their own accommodation afford to pay $390pw rent?
Just asking a few genuine questions, may be good answers to all these questions.
quickchick
Hey Banker,
Agree that the market may go sideways or down during a reno job.
My aim for a reno would be that there was enough fat in the deal to be profitable in a flat market, and if the market goes up, even better! You have to buy a real bargain for it to be financially viable. But better to buy very well than be hoping to recoup stamp duty and holding costs. (And may I suggest that a mortgage on a $500K house is a lot to pay and count as rent.)
Doing a reno while living in it is great for say a couple with no kids, (If they are OK living in a mess). But no plan for a family.You have done very well with such great growth in Melbourne during the project, good on you!
quickchick
Hi Jeff,
I haven't done Dean and Elise's whole day, but have heard them both speak several times on renovation.
If it is a proven system with heaps of practical tips and real life recent examples including numbers, costs and pictures you are after, this is the one.
Pretty good value at the price, I'm sure you'll find.You could pay with 10 yrs to find it out yourself, as you said, or leverage off their experience and save some expensive mistakes!
Maybe you can even also arrange a day as an "apprentice" in their business. (not sure, but you could ask.)
quickchick
I have found that for properties with the same strategy (eg cashflow positive), the same trust is good for at least a few. (Ask your accountant how many it is useful to put together. Maybe $1mill or $2 mill max per trust?)
If you want to use a different strategy, it may be worth considering setting up another strategy.quickchick
Your REA may recommend they do it themselves, but many vendors wouldn't want the hassle.
Or want to pay, or wait to get it through council before they can settle on a sale.So prove him wrong! We're on your side!
quickchick
Partly agree with Scott.
You need to be able to buy at a discount (eg they need urgent sale, or so ugly no-one else wants to buy it. Or, you know the agent well, they know exactly what you're looking for, and so call you before it even hits the market.)
But if you're investing in Melbourne for example, stamp duty is more expensive.
You need to find an area where the improved price will be worth your effort.
At the moment, that may be in the "nicer" areas. (But hard to manage the entry price and holding costs!)If your property had another bonus, eg land to be subdivided off it, then it would be a winner!
quickchick
Expect to pay around $1000 for set up. And same each yr, fees due. but worth it if you're about to buy property in it. Only takes a week or so to set up.
And you don't have to keep anyone happy! We're all here to learn.
quickchick
But a good question nevertheless.
Accountant is the one to do it.
Auctions sometimes don't give much room to negotiate terms, they set them and that's that.
You can use a deposit bond for deposit, takes maybe 5 days to organise thru your bank. (If negotiations with agent not successful.) Will cost you several hundred dollars, but if not successful you can use it as a deposit on another property.
On the other hand, you can put in an offer before auction.Be wary opf paying more at auction than your finance will cover!
quickchick
We did a project near home (SW Sydney), bought ugly decorated house for bargain in 2003.
Did nearly all work ourselves (ie asaved $$ but spent our time). Back on market in 3 months. Made profit $60K.
Not sure if it would work in today's market.If you really are keen in this strategy, I strongly suggest you check out Dean and Elise Parker (via this website).
They have a system which adds every possible expense and gives you very strong chance of successful results, (Born of their own experience of doing multiple reno deals.)eg for cosmetic reno as above, they give guidelines on buying at a good price for the area, maximum amount (percentage of purchase) to spend on your reno, how to minimise your holding time (and interest costs), etc.
Comprehensive and system works in any state.
Much cheaper than finding you have bitten off more than you can chew with your reno!
quickchickI perceive that Carly is offering people the opportunity to learn her system of options, then find some options to sell to her company.
Not sure about Rick Otton.I suggest you try reading Steve McKnight's newest book. If you find its the sort of help you are looking for, then join his mentoring programme. It is the most comprehensive education and mentoring programme for property investors that I am aware of. (I have and its working well for us. And I have nothing to gain by recommending it to you.)
quickchick
You'll probably find a bank won't finance a 1 bed unit,. especially if the total area is less than 50 sq m. If you don't need bank finance by some good fortune, still your selling prospects will be limited for same reason.
2 beds or more far more viable.Do some armchair research (internet) into different areas. Use APi magazine (any newsagent) for suburbs with unit values in your price range. And compare rents, the better the rent the less you have to cough up yourself!
quickchick
I agree with Scott no mates.
Also, check council zoning. Your shops may not be allowed to spill on to residentially zoned land. Changing zoning will take a long time, may not be successful, and will be a headache.The question of how to get him to sell is a bit tricky… being a free country, he doesn't have to! Best incentive is to pay full asking price, or even more. But if you don't know whether you'll be allowed to do this even if you buy the land, check with council first. Maybe even ask a surveyor for an opinion on the viability of the project,
quickchick
Hi BP,
How will you know when you find the property you are looking for? ie, what is your goal and strategy in property investing. Worst thing to do is buy a property, then try to figure how to make it work for you.
eg Do you have extra income that you want to use to pay for the basic costs of your IP? What if your needs change, do you still want to be stuck paying of the interest bill?I strongly recommend you read the book, From 0-130 properties in 3.5 yrs (revised edition). Get some basis for your investing, rather than a gadget that can not make money for you. All the (basic) calculations are in the book, and you can do them with a calaculator and learn a lot about the financial viabillty of a property. Also, help you decide what you want to achieve in property investing.
quickchick
Have just seen this post now.
It will be my 3rd Mega Conference in a row, too.
I am sure there will be a degree of selling, but you don't have to buy. There will be so much to learn there ie in the 3 days, that everyone will benefit.I am from Sydney too, find it worth the journey and accomodation.
In 2003 I went to the Gold Coast to hear Robert Kiyosaki. It was inspirational, very challenging and I was a novice.
Covered property, shares, business. Learnt heaps, but not all info related to Aussie investors.
Cost? $6000. Plus airfares and accom at Jupiter's where it was held. And it has paid dividends in our investing.
Mega Conf is a bargain, way cheaper! And aimed at Aussie investors. And will pay dividends into your investing.Content at Mega Conf is similar to Kiyosaki, ie covers various fields of investing, it's about financial education in general.
If you don't go away with lots of practical content which helps you move forward, then I will be astonished.quickchick
Sorry Richard, I misunderstood you. Thought you meant 10% private investor or 20% vendor finance, but you meant both.
If Dave has servicability for his PPOR mortgage plus his new bank loan, which it sounds like he doesn't.Dave, the trade-off for a private investor usually would be that he provides much of the funding, while you contribute the time. But I still think the private investor would want you to have a demonstrable track record especially in a sizeable deal. Or else, he's put money up which he could lose, and you haven't. (And don't want your house up for collateral.)
Other things to consider in your costings is water, sewage, electricity costs. DA fees for council. Land surveyor, town planning costs. Plus extensive driveways, fencing etc will not be included in building. Stamp duty and conveyancing to buy, conveyancing and agents costs to sell. Maybe more I can't think of now.
How certain are your minimum sales prices? Are similar properties selling at $450K off the plan, now? (Maybe, just be sure you're not being too optimistic.)
Please don't get me wrong, I'm not saying not to go for your dreams. Just make sure that it is do-able and finish-able on your financing, that you can complete.
You are right in saying banks are cautious about loaning to self employed people, even with good books and plenty of work expected ahead.
The more deals you look at (in detail), the more you learn. And you'll be able to assess costs etc more readily. All good research. Keep knocking on every door of opportunity!
quickchick
Hi Dave,
I think that to attract a private investor to your project, you would have to have a track record of success.
If your strategy is buy and hold, the capital gains may not be fast enough to pay the investor (at 15%pa I would expect) and still make a profit yourself. The private investor would want to know a timeframe of when he gets his funds back!I don't see how Richard's advice can work for you, as even with 10% deposit from an investor, or 20% vendor financing, I doubt you could get a mortgage for the rest of the purchase unless you have great wages coming in!
(In which case, why don't you start a budget, save some money in your mortgage, and buy your IP funded by the bank?)
That's my recommendation!Or if you're super-keen, consider selling your PPOR to buy an IP sooner as your mortgage probably costs more than the rent on a similar house would be. And you can save more quickly then. But that is a personal choice, not for everyone I agree.
quickchick
On a basic calculator, even the one on your mobile.
purchase price % interest rate
eg $350,000 x 7%
= $350,000 x .07
= $24,500.Unless you have a cash deposit to put in, in which case subtract deposit from purchase price, then x .07.
I always figure that if my deposit is from a line of credit, equity in another property, etc, that I'm figuratively borrowing the whol;e amount.Sorry if this sounds too basic, but my maths skills are basic too, and I would need it spelt out very plainly too!
As v8ghia says, that's for interest only. (Better to make any other repayments on non-investment property as you can claim IP repayments as an expense.)quickchick
Sounds great, Sasha!
Sound like you are also investing the time to make sure things go ahead as planned. I'm realising more and more, the money is in the management. eg the time wasted if you're no actively moving it along adds to the cost of holding while it is negatively geared.
Are you doing the same for The Tas prop subdivision?
You can always cost the difference in building, or just subdividing and selling. If the profit is not much different, go the easy way and you'll do a lot less work for your money.Contrary to the suggestion of the last 2 posts, most of the time cashflow property is made, not bought as a package.
Just make sure you have all the costings (ask your subdivision company; includes water, power and gas supply costs to new block: don't forget to add the cost of negative gearing during the project. Council costs, land tax if applicable, rates etc.)
quickchick
Hi Sean,
– other costs, ie managing real estate agent, council rates, water rates.
Get your solicitor/conveyancer to enquire about how much the Body Corp has in its account, what expenses it has paid in last 2 years.– "one bed studio" bit confusing… a studio usually means bed is in the only living room.
either way, under 50 m area, you may well have trouble getting a loan. Check with a broker!
(Easier to get loan for 2 or more bed unit or house.)Do your research.. is $10294 ie $198pw the going rent for that building, that area?
Likewise, is $79,000 about the right cost to purchase a similar one bed unit there?
If either figure is too much, an artificially high rent will leave you with an under-performing property when "guarantee" runs out. But if that is the going rate for both, fair enough. (If you think that the area will continue to be sought after by tenants and investors in next few years.(This may not be an exhaustive list, just what comes to mind right now.)
quickchick
