Forum Replies Created
I agree with Terry.
You've said you will share "the profit" but what if you need to sell at a time where the value has got down? Accept to share the loss?
Even if it is the other couple who want to sell, and you don't?What happens eg if one of them dies? Do you keep paying 1/4's and the other remining partner has to pay 1/2? Could they afford that? Do they have life insurance to coevr that? (And do you?)
How long can you live together before there is a problem? What would you do then?
Having said all that, it may work well for you all. Just think through all the possible complications in advance.
quickchick
Sounds like you're having problems Nic.
We had problems with our bank, we had an 8 wk settlement and they were still 2 wks late! (few yrs ago).
Keep a good record of all you emails, phone calls etc.
We were charged interest (10%pa) on the weeks overdue. This doesn't always happen, but at discretion of vendor and their solicitor, can be done.
Our bank eventually (without a court case!) agreed to pay the overdue fee, as it was entirely their fault. ie we had worked with them from the day of contract signing, returned all applications etc promptly and they were disorganised.I would be mentioning that they need to hurry up! In your case though, you have been part of the problem I perceive, as you are still not committed to a particular bank.
Don't wait for this to work out!
Talk to your solicitor about the problem, get the first bank to tell you what day then can settle and get it all happening asap.Good luck!
quickchick
I have stumbled across this post rather late…
Those who are happy to pay a group to help them buy, no problems.
Many of us would like to buy independently and not pay commission before we've even made any cash from the deal!If you want to buy thru a group, as the post says, first check the licence.
Then research the area buy and sell prices before you sign, so you know how much they are making from your purchase.
I recommend financing independently (cynical but realistic! Your bank won't fund it if the buy price is too high.)And always have a good conveyancer or solicitor check the contract BEFORE you sign. Their contract does not have to be the one you sign!
As always, buyer beware. Do your own due diligence and then, buy if you are still happy to.
quickchick
Hi knownothing,
we all started where you are now!
Got to start somewhere.From my understanding (which is not complete!), the only way NOT to cross-collateralise, as you say, is to withdraw equity and make your first IP loan independent.
This could mean that eg you leave 20% equity in PPOR loan and take 20% deposit for IP out of home loan.
Hang on a minute, that is not a great position.
Costs from your PPOR are non tax-deductable, but IP costs are.
So if your 1st IP is cashflow positive, then you theoretically make more profit from it and will pay more tax, by having some of your PPOR home equity propping it up.
Having less equity in your home is NOT helping you get ahead most efficiently.If your 1st IP is negatively geared, (which is not such a good idea depending on your strategy) then you will probably get less benefit from negatively gearing, by having a good deposit from your PPOR invested in this IP.
I fully agree that the first aim of investing in property has to be, to make money (ie implies tax will have to be paid!), but why pay more than we need to!!
I see no problem with buying your IP with the same bank at this stage. As you move ahead, eg by 4th IP, you will probably need to re-address this, but it shouldn't be a problem for a while yet.
Something else to look at, is which structure to own your IP's in. Your own name may be fine for now, but not the best down the track. You should talk to your accountant about Family Trusts and the above info.
If he doesn't know much about it, consider changing accountants!
Once you have bought in one name and find you'd be better to transfer to a Family Trust, you'll have to pay stamp duty all over again to do so. So do your research first!I recommend reading Steve's revised copy of 0-130 pproperties in 130 years, as it will be a great help.
quickchick
Hi Rob,
Buying through Park Trent (or any other packaged product) just means that you are paying a premium price for the product that they are developing….
Get a clear idea of current prices in the area of similar properties. Don't rely on their advice, which is part of their marketing.
Don't sign anything on the spot, regardless of incentives, but go away and do your own homework.
And read the fine print on any documents you are signing, before signing!quickchick
Our 3 bed highset house in Dysart has now rented (been empty since April) for $700pw. ( best rent yet.)
I wouldn't go for a house with a pool, as we found the pool to be a big problem (companies didn't want one). We had it filled in!
Send me a private message if you like.
quickchick
So what strategy do you use? How's it going? Share with the forum your knowledge, for free!
By the way, I'm not into seminars that are just there to sell their properties, just ones which are imparting knowledge on investing, and leaving the buying to us.
You're knocking low-brow seminars? You started this forum bagging them all!
And still no detail of your own investing….
quickchick
Hey badger,
Alani asked you how much property you own on July 17th's post.
You then engaged in some banter on measuring sizes as though it was irrelevant how much property you own.
I think, considering your strong statement calling many of us 'mugs', you should be prepared to declare your own independent successes. Maybe you have done very well with multiple good investments, and picked all your knowledge up alone.
I am also interested in what your investment strategy is… ie buy and hold, short term or long term, negatively or positively geared. Or do you improve your properites, and what would be your knowledge base eg maybe trade/handyman background. (Please note: I am not knocking these very useful skills.)
Perhaps you would not benefit from the literal wealth of knowledge I have gained at seminars and the like, because you already know it all.
But for those of us "mugs" who are still doing well in our investments in economic downturns, we are still very happy with the money we spent on our education!
Many skills will cost money to obtain, including textbooks and lectures. The financial rewards of the study speak for themselves. It can cost much more to make a single mistake in property investing, than to go to a seminar!Very keen to hear of your self-learnt success!
quickchick
Whoa, aaabbbccc…..
You're a bit mixed up!
A family trust is a structure in which to hold assets.
Your own income is taxed as personal income. No matter if you have a family trust, you can't put any income into it.
The only income a family trust will ever have, is the income from any assets owned in that structure.It may be possible IF you work as a subcontractor, to have them pay the FT (ask your acct).
Most investors have their residence (PPOR) completely separate to an investment, as it gets a bit more complicated.
But to start, it may be OK for you.
If you buy this property under a FT, you will have land tax plus annual FT fee to pay.
You will have NO INCOME from this property.
Therefore, no advantage, plus a definite disadvantage when you are living there.Later, you plan to rent it out.
To hold it in a FT, you need to have it positively geared for you to have any benefit.
ie You could then claim your losses from when you lived there, against earnings.What does positively geared/cashflow positive mean? That your mortgage is totally covered by the rental income, plus
rates, FT expenses if help in FT, plus calculate at least 1% rise in interest as rates are unlikely to stay this low for very long.
You have to have cash left over from the rent, after the above expenses, to make this positively geared.If you plan to hold this property for quite a while eg ,maybe 10+ yrs, as Richard says, it will become CF+ (unless you draw equity from it for your second home).
That's a long time to wait for any benefit from your FT, which has cost you $$ every year that you may not want to afford when your wife is not working.
A FT is a great structure for CF+ property, and as GOM says, for legal protection. But for your first property, especially personal residence initially, I think it is not in your best interests.Ask your acct and financial advisor, to explain how a FT works, what are the benefits and costs.
Then explain your strategy (include how long you expect to hold this property) and ask them if a FT is advisable as a structure to hold this property in. For you and your wife, in your situation.
If they can't do the above, interview another acct and if they can help, change acct's!quickchick
I understand Shales' frustration. 10 yrs ago with 2 primary aged boys, my divorced friend on pension with 3 boys (and a financially responsible ex) had money to shop in Myer when I struggled to buy a coffee and muffin on hubby's not great wage and my part time one.
Different stage of life, different frustration.
22yo son just started Uni, been living out of home for 4 yrs. Can get $249pw from Govt, but if he earns more than $120pw, he starts to lose $$. Rent $250pw(Cheapest available), fuel, books, internet, oh, and he still has to eat.
Similarly, 20yo son started apprenticeship recently, living at home. Struggling to pay off ute on $350pw, but happy to do what he wants. Fair enough, he works most Saturdays to pay his bills and allow a bit over.
Thankfully, we are able to help them out. What about the ones who can't afford a new pair of work boots, for TAFE?My Mum was 64, not as strong as she had been, but couldn't afford to go to part time work as she'd only ever get her super as a part-timer. (Despite full time work for many yrs.)
I would like to see more incentive for people to help themselves… ie income more than $369 when living independently before being penalised. Obviously, time is important so he doesn't lose too much study time, but couldn't he work 16hrs/wk or about %320 pw?
My Mum's situation was similar (in economic climate 10 yrs ago with low unemployment) that she had only 2 choices, retire or full time. Why not encourage people to keep working longer, part time, especially in areas of skill shortage?
Anyone who knows Mr Rudd, please tell him my opinion!
quickchick
They may not care about your financial obligations, but may be more motivated by their own legal obligations!
Hope it works!!
quickchick
First tine I've seen this post…
Badger, you never replied to how much you've made in property… did you forget the question?
And if you were making money from property, you could use educational seminars as a tax deduction, not have to pay from your own pocket.
Thanks to books, seminars and mentoring, we make more in property p.a. than from either of our day jobs. Before we did the above, we only knew how to negatively gear (ie lose money and get a tax concession for it).
Happy to be a mug if that's the case.
quickchick
Hi aaabbbccc,
I'd see your accountant, ours set up our Family Trust.
If you don't have one, or if yours doesn't know enough to advise you (that happened to us)…..time to get a new accountant!
I agree with Richard, don't go for hybrid FT.
From my (limited) knowledge, holding negatively geared property in a FT is no advantage, as you pay a fee each yr, and need a separate tax return for the FT (ie it will cost you on-going$)
The benefit of a FT is that you can distribute income from it BEFORE tax eg 45% to you, 45% to partner, 10% to charity. Or when wife is not working, 100% of the income to her. Which she will pay tax on as if it was her earned income from a day job.
When I say income, that is PROFIT. So if your property is negatively geared, it makes a LOSS and the only possible advantage of holding it in a family trust is if you are pretty sure it will be positive within a couple of years, can afford the maybe $1000 pa of expenses in the meantime, and will then be able to write of previous yrs losses against current cashflow, ie not have to pay tax on the income created.MY suggestion, especially for first property, is buy in your name if you expect to take equity out of it and have it negatively geared in future ie you'll be the main tax payer, so get most benefit of tax benefit.
If expect positively geared when you rent, then buy in your wife's name, so she pays less tax on property income as she'll have no job then (lower wage bracket).Not sure you'll have benefit from FT now.
But when you come to next investment property, certainly worth it!quickchick
(Based on my understanding but please note that investmt experience is the only basis for my advice, I'm not an accountant, financial advisor etc!)
Sounds like you've had bad luck, after doing your due diligence well.
I have heard of agents who will give a good reference just so late payers will find somewhere else, and get off their books!
Maybe ring referee agent back to clarify… even if they don't give you any further info, they may realise they should give honest references!We had a Qld residential property (self-managed too) that the company always paid late by at least a few days, sometimes needing reminder.. (done by computer banking)
My hubby wrote them a letter explaining that it was their legal responsibility to honour the lease, and that we had a substantial mortgage on the property that had to be paid on time. Therefore we would need to charge them interest if late, starting the first day they were late, charged eg 10% p.a. Reminded them the pay should be in our account on date due.
Being a company, they understood the logic (not sure of our legal stance!).
Never late again.Could suggest again that a direct debit would save them the inconvenience.
Good luck! Keep nagging them by all legal means, and they may (should) get their act together. Nag them from the first day overdue. Put the letter in writing, and mention on it that you are keeping a record of your communications in case required for legal purposes. (ie a veiled threat.)
Don't give them any reason to think you'll put up with their lateness!
quickchick
Just ask your conveyancer/solicitor for the vendor's permission for access, if before settlement.
For future properties, I'd do all this during the due diligence time (ie at least before cooling off finishes, but best before you even make an offer.
The agent you're buying from may give an indication, but they'll be insales, not rental, so may not have much info to share.
quickchick
As always, interesting and informative discussion.
We hold property in the Bowen Basin, for 1 1/2 yrs and 3 yrs respectively. At half the current rentals, we would still be in positive cashflow so can't complain! (How does this make it "too early" to invest in property here!?)
I agree that growth in China and India have slowed, but growth is still expected. ie they need the same amount of product they needed last year, plus mayeb 6-8%. (Not an extra 10-12% as previously.)
China is obviously interested in our resources, as they are looking to buy into Rio Tinto and Fortescue Mining currently.So in my opinion, it is not a time to panic.
I agree prices are coming down somewhat, but I believe that this is related to confidence decline of investors, not necessarily of locals at all. The rental "decline" is only a perception; our year-long lease due April will be for at least $400pw more rent!! Maybe the top layer of icing has just melted a little from excesses just prior to the economic problems.
Still don't know of a better place for rental returns in Australia!
And as rents are way ahead of prices which have come off a bit, the rental yields are better than ever before.quickchick
Hey Chiz.
I agree with Richard…. and disagree!
Our taxation, superannuation, and many other laws bear little relation to those in the USA. So there's info in this book that does not apply to us as Aussies in Australia, buying and selling real estate.
HOWEVER there is a whole host of mindsets and concepts that are absolutely relevant. I have read many of Kiyosaki's books, and learned heaps!
In my reading, by "trading up" he is talking about someone who sells maybe a basic 2 bed 1 bathroom house, and then buys a 3 bed, 2 bathroom house. Or maybe goes from buying a house, to buying a duplex pair, or even small block of flats. ie real estate that is a better investment in dollar terms, ie return on investment.
Further, I paid good money to go to a seminar he did in Australia about 5 yrs ago, and he included a couple of (Aussie) speakers to talk about legal and accounting matters in Australia. HE KNOWS that such info is different overseas too! But I learned enough just about holding property in family trusts, to pay for my course many times over. The only way it wasn't a good investment, is if I didn't act on the info when investing in property!
Regards,
quickchick
I have been to a seminar from Cashflow Capital.My feeling is, they use a range of services eg financial advisors, property managers, buyers agents, etc. who all get a commission. Which is fair if they have provided a service, and you know up-front what the cost is.However, if you invest in your own education, you can learn thses skills yourself, and re-use them multiple times without the commission expenses, to grow your property portfolio much more effectively. Buyer's agents are for time-poor people who don't have the energy to go out and do it for themselves. Very useful if you have more money than time.Often they are able to negotiate a better price than an inexperienced investor. But check the numbers yourself. If they say the return is 8%, then do your own numbers (including the buyer's agents costs)and make sure the return is what it is supposed to be. And make sure you can use the agent of your choice to manage tem, or that you are paying a market rate for agent's commission, not eg10% management fee per week.quickchick
I wouldn't stress too much about what you can't change, but think of solutions..
(What is your time-frame for building? Or is your plan to hold, then sell undeveloped…. a risky scenario in my view.)
If you'll be building, strongly consider planting something down that border….
non-clumping bamboo (not the spreading sort!) for a quick-growing screen
or maybe lillypillies as you have a larger block.This will provide a visual screen so that a 2 storey building doesn't overlook your house, and the lillypillies will also provide some noise barriers. They both grow reasonably quickly. Trick is, the timing of planting. You don't want to sell with small trees, and no garden privacy if the buildings next door are already under construction.
quickchick
Another thought in these tighter economic times…
I am not really voicing an opinion, just a thought which may be way off centre.
I wonder if the government, needing to tighten up financially, will spend less on defence, ie less members employed and needing housing? If so, existing leases would of course need to be honoured anyway.
My feeling is that areas will always be the key to defence housing. If someone owns a house and a new army base s established in the area, it would have to be good for your rental. On the other hand, sometimes babses are moved to another location, so the reverse is always possible, too.
quickchick
