Forum Replies Created
Rabbitohs, I take on board your conservative stance and have calculated the loan as P+I. (just check my numbers here)
Additional loan – $240k+6% (ie 106% of cost) = $254.4k @ say 8.5% P+I = monthly repayment of $2,050 pcm (approx).
Existing loan – refinance or take repayments down to the minimum/a figure you would be comfortable with repaying.Annual rent – $15600 + $8000 = $23000 vs IO loan $22,865 approx (+ rates, taxes, mgmnt fees, ins etc)
As your additional repayments for the new loan, on 106% borrowed funds, combined with your existing minimum repayment are less than what you are well able to repay, I'd seriously consider purchasing and (if loans were on an IO basis with an offset then the investments would only require minimal payment from your pocket).
I'm with you Jon. All agents who are engaged by the vendor work for the vendor and are by definition 'sellers agents'. Any attempt to make out that this is something new is just clever marketing by someone who would otherwise be just another consultant.
Stupid as it may sound, why isn't the agent charging 4 and 5 week months? ie $800 and $1000 that way you will make up your precious $26. You scored a 5%+ review, why complain about peanuts? Maybe you can educate your PM for the next tenant.
Terryw wrote:you may need a realestate agents licence to charge a fee for the introduction of a propertyIs that the same for selling through a wrap contract?
Terry, if onselling a property via an option would require a DFT licence (buyers agent) why wouldn't selling a wrap?
Milly wrote:"Can't pay this week cos teh dog has vet bills". er so you can afford a dog but cant afford to pay for the roof over your head.Can you still get "companion animals allowance" when you are on benefits?
Sorry Richard, I didn't realise that a wrap contract permitted the registration of a caveat – as I did not believe the documenation created an equitable interest in the land (this lifting wraps a little above where I hold them, still not very high though).
JM – a valuer is not always concerned about the amount that a building is worth – eg you may be more interested in replacement cost if it is a val for insurance purposes hence you are only considering the improvements not the land but generally when using summation you are considering 'the sum of the parts' which includes the building & other improvements in their current state. (PS it is land + depr value of improvements).
In all cases valuations are prepared on the basis of the instructions recieved from the client (hence different types of valuations may appear for the same property with varying results reflecting the instructions eg mortgage security, insurable value, replacement cost etc). The VG generally uses bulk valuation methodologies to prepare statutory valuation notices. It was proven in Maurici v Chief Commissioner of State Revenue that factors such as 'scarcity of vacant land' must be taken into consideration when determining the UCV of a property for the purposes of preparing a val for the VG that is a vacant block of land in the CBD or inner suburbs will be worth more than a similar block which requires clearing of the rundown 'improvements' .
The Maurici case, (earth shattering impact) caused a rewrite in the way that bulk valuation methodology was undertaken so in response to your question "Are you suggesting it may be a slightly inflated value due to the fact that it would generate more tax?" yes and no – Yes if the figure is incorrectly high then it will generate more tax but no in that UCV does not represent 'open market value' due to the difference in methodology used.
As the purpose of the VG's valuation is for statutory purposes the instructions are clearly different from those used for valuation for 'open market' and should not be used even as a yardstick as you are not aware of the complete circumstances of the properties analysed or adjustments made to determine the valuation provided. Pay a couple of hundred dollars to a CPV and get the real deal.
As the property is going to be an 'IP', you may need mortgagee consent to let the premises which generally means they will have to view & approve the 'lease'. As there is no lease and no caveat with a wrap, you could always try to run under the bank's radar by not seeking mortagee consent.
RP Data has a NZ site and provides the same service (at a price).
Unfortunately all too many talk the talk of diversification, spreading risks etc however cannot see past offering 'products' from their baskets eg managed funds, LPTs and exposure to the stockmarket including a mix of local/OS stocks, even conservative funds which are supposedly low risk but have still taken a hammering over the past few months.
Very few will agree that as an investment strategy you should have more than 15-20% of your assets in property incl your PPOR and will aim for a conservative 'mix of funds' or a more aggressive mix. If we were after a purely growth portfolio we would be pumping up our super and letting it sit there. However, I don't beleive that most on the forum are seeking a fund manager or a mix of fund managers we are seeking our own investments with risks that we either understand or have some degree of control over.
All depends upon how much the property is worth & what they are throwing into the deal eg marketing, exclusivity etc.
JM 'worth' and 'cost' are two different issues – worth equates to the present value of an improvement whereas cost is a known quantity derived from expenditure (actual or estimated). Quite rightly, you point out that it is possible to overcapitalise on a development/improvement – you will need to be aware of the local market and its ability to pay for the development.
Wezwaz, age of the building is taken care of by factoring in depreciation – the depreciation of a 30 year old building would bring the value of the building down by 75% of the new cost (plus/minus any refurbishment/maintenance which would extend its life) whereas a new building would have only depreciated by 5-10% on its replacement value. Some older buildings may also have other aspects to be considered eg heritage/streetscape thus costing much more to replace like for like than a contemporary building.
At the end of the day, a valuer does determine the value of land in an area but it is determined by an analysis of comparable sales in the area or in a (justified) similar area (if sales data is scarce). The value of the improvements are then added back to finalise the valuation. Remember you are generally not just buying the land it is more often land with improvements unless it is a development site and the improvements are a cost to demolish not an asset. In some cases, demolition costs will reduce the cost of the land by a large proportion eg contaminated sites eg petrol stations, heavy industry, etc.
The VG land value cannot be used as a guide for purposes other than the rating of land (the intention of the valuation) – you are not privy to the directions given to the valuer and cannot rely on this for any other purpose. This is done by the VG on a 3 or 4 year cycle generally (councils then adjust for inflation).
Some issues for you to consider: is the conversion of the warehouse into single dwelling or numerous dwellings, zoning (what is permitted – may allow mixed use, commercial only etc), consideration of the loss of 'existing use rights', what is the 'highest and best use', amenity of the area (is it the remnant of an industrial area which is now predominantly residential or just another factory in a line of operational factories).
Something to watch out for is past uses and the likelihood of contamination/suitability for residential use – rehabilitation costs can be quite high if on-site rehabilitation is required compared to removal or encapsulation. (Asbestos/fibro is also classified as contamination – usually found in factory roofs, insulation around heating pipes, switchboards, vinyl flooring etc).
Dang, another licence fee! It'll be a while before I get 6 a year though.
Terry, would that be the case? There is generally no requirement for being buyers agent (I believe this is an unregulated market still but will/may have changed) however there is nothing preventing you selling 'your' property privately – all you need is to meet the requirements to transact the property or to assign the option.
There are no problems with turning the first property into an IP, the current loan would most likely be tax deductible ($200k).
As you have not specified whether you have paid IO or PI on the first loan, I will assume that it was PI and you have built up equity in this property through loan repayments and capital growth. If you borrowed against this property for another IP the new loan would be tax deductible as well.
As you have borrowed for a PPOR the new borrowings would not be deductible (unless the funds came from an offset account not from equity on the first property).
You may financially be better off staying in the apartment and using the house as your IP if the deductions are going to be greater (and you can still live in this unit).
An option is a contract to puchase something (property or shares) for an agreed value at some time in the future with the person taking out the option paying the owner an 'option fee'. Eg a developer will pay an option fee to the property owners subject to recieving development approval or rezoning within 6 months. The developer will outlay say 2-5% of the agreed price of the house as the option fee for the exclusive right to achieve a DA etc within a set time period. He further agrees that he will buy the property at the agreed price prior to the expiry of the option period, if he doesn't proceed ie fails to achieve the DA/Rezoning he will withdraw from the sale and forfeit the money paid for the option. The vendor must see that there is value in it for him not to sell at present but wait the option period (money is an incentive, so is the opportunity to lease back a property on a long-term basis freeing up their cash).
You would need to talk to your solicitor about creating the option, period, option fee, creating the caveat and framing the offer, etc. If you take an option you will need to secure your position on the title of the property by way of a caveat restricting the owner dealing with anyone else/selling the property.
The beauty of an option is that you do not buy the property (although you can), you on-sell the option to someone else who will exercise the option. Your outlay is the option fee & costs. You will have to find someone willing to purchase the property prior to the expiry of the option otherwise you will lose your 'deposit'. As you haven't bought the property, you do not pay stampduty on the transfer of the property (only on the transfer of the option).
The concept varies from a 'flip' where you buy a property off the plan (under construction) and try to offload it for a capital gain (flip it) before completion however the principle of having a small outlay/deposit then trying to find a buyer is the same. Unfortunately with flips, you may end up having to buy the property if you haven't offloaded it (found a buyer) before settlement.
Getting back to your original question, does the occupancy time run to contract date of the sale (like CGT) or to the setttlement date?
Even with the standard 6 week settlement period, the either party can delay and the other party will have to serve a Notice to complete.
Negotiate a price, put an option on it (with assignable rights) then seek a buyer. That way, you will pay a small premium (which will form part of the purchase price or be surrendered), have an exclusive dealing period and be able to sell what you have yet to buy at a decent profit. Even if you have a $10k option and you make $20k on the deal you have risked very little for a 200% profit.
