Forum Replies Created
Reneeshen, the reason why we point out that you are going in the wrong direction is highlighted by the example below. Before you read it, how are you going to pay for (take advantage of) any negative gearing ie additional capital if you are only on benefits?
Wrapper – buys @ $80k, 8% interest, $1400 insurance/rates/o.g, rent = $80 pw ($4k) – this gives them a loss of $3k
You buy off the wrapper, $100k, 10% interest, $1400 ins/rates/og, rent = $4k. This creates a loss of $11.4k as you are responsible for all og. The wrapper gets $20k extra for the property, $2k for the additional interest as well as not paying outgoings.
Hopefully this might dissuade you.
I'm just giving my 2 c worth – being 'wrapped' isn't a technique being used by investors – there are better ways of financing and getting security.
Richard, what would you do with the losses which are retained within the Trust? I can't see the advantage of shifting this property at this stage as it is generating a considerable loss.
It pays to have health cover & visit the dentist bi-annually for a check up (or put the same amount into an investment). But ignoring that, I'd run with Trent and try to avoid breaking your current lower fixed rate loan, why pay more than you have to? If it is a lower rate fixed loan, discuss whether or not the bank will pay you to break the loan and move to a more expensive product, after all it is saving them money.
Pretty much as marc points out, pay IO on the IP (Perth), get a dep'n schedule for Perth (you won't need one for kalgoorlie until you start to rent it out). Consider moving into rental accommodation paying less than you will get from your PPOR.
Pay down as much of the principal as possible on the PPOR (Kalg) as this interest is non-deductible (or possibly use an offset account to maximise savings and get the benefit of the interest reduction without paying tax on interest/tying up the money).
It is probably time to take stock, build some equity by repaying some of your loan (reduce risk) and stabilise yourself for a little while.
Will the above equations change dramatically if you have kids (high mortgages and single income)? Will you be moving back to Perth/selling etc ie what is your exit strategy at this stage?
Domain – research. Then once you know what you are missing, contact the rea. Keep your eye on (& copies of) recent sales in the local & national newspapers & property sections. Otherwise data is generally 12 months rolling averages – not much more in the way of freebies. Due to the slow nature of real estate transactions this will be the most useful guide.
Predictions are just that (unless you can show your own trends through research of recent sales) – remember sales in large new developments may skew average/median prices when compared to aged stock.
Cheat a little, grab their rental list on a friday arvo/saturday morning, that will indicate current asking rents, numbers of properties, areas/streets with vacancies (issues).
touchingcloth wrote:thanks Jonchu,its just that trying to get a valuation on my own home will be difficult as I only have older houses as comparables (1-3years), and mine was completed 1 week ago!
Why? What do you consider a comparable? Next door/same side of the street/same design/same suburb? No two properties are identical only comparable.
Are you after a current market valuation (by valuer, just engage one) or an estimate of value/market appraisal (by a realtor, call a couple for an opinion).
Are you after a valuation for insurance purposes? Use a QS or valuer
Are you after a valuation for refinancing purposes? Use a valuer
You must need to understand the purpose for which you are seeking a valuation if it is actually a valuation that you require, then use the appropriately skilled professional.
Remember, cost does not necessarily equal value.
Reneeshen, why go into a wrap if it will be cheaper, less risky and more cost effective to do it on your own ie work/save a deposit then invest.
As a law student you should understand risk/reward. Wraps are high risk for no reward if you are at the pointy end of the stick. A wrap will not give you any tenure to borrow against, no recognised credit record only higher repayments (effectively rent). Why would you want the 'vendor to profit'? this is naive, you are in it to make money, not to be the vendor's benefactor. Obviously business studies was not one of your electives which gave you any useful insights.
I would recommend that you use your degree effectively, even if it is for only a couple of years to learn from successful businesses/partners. Many legal firms have inhouse mentors, law society has student networking groups all of which will work to your advantage.
You mustn't have learnt much in your degree/have high ambitions if you think all that a law degree will give you is the ability to do save yourself the minimal expense of conveyancing, structuring and the odd bit of clause drafting. Even Meritons, Multiplex, Westfield, Mirvac & Australand all use external lawyers for their legal work (most use inhouse lawyers for advice but not transactional), and I am sure that they may have seen a few more deals than yourself.
RM, median house prices in Chatswood are about $1M (slightly cheaper is Lane Cove but with better access to motorways). There are a few 1950's /60's brick houses in Lane Cove West in the $800's.
Some good buys around Epping, North or East Ryde but must be accessible to the new railway station (to open late 08-09 ish, like everything NSW it gets delayed, cut down & costs more). N/E Ryde being the cheapest alternatives (also close to Macquarie Uni – big student base, new medical training school & facilities/pvt hospital, a couple of well established hotels & high-tech industrial facilities).
Work generally involves using a floor grinder – both noisy & messy (lots of dust) and may also require 3 phase power.
There are plenty of epoxy floor finishes which can be applied over the polished concrete. Depending upon the type of wear properties required 'hydropoxy' is a less volatile/waterbased epoxy. All epoxy treatments are quite pricey (on top of the price of grinding).
Speak to bunnings/painting specialist supplier to determine the best surface application. If you don't apply a surface treatment the floor will become very dusty regardless of how often it is vacuumed.
James, there is no special requirements to set up TIC, it is simply a nomination on the contract of sale – speak to your solicitor BEFORE signing the contract of sale.
WRT determining land value – review all recent sales in the area (say within 1-1.5km radius), select the comparable results ie all 3 bedroom houses, then cull out the non-comparables eg full brick, semis/duplexes, off-market sales etc. This should narrow it down to 10-20 properties (hopefully less). Do a drive by each site, assess each one in comparison to your selected property – eg location, road, schools, shops, then compare land size, quality/depreciation state of building etc.
Now from the sale price deduct the cost of a similar newly built house (size, construction, no. bedrooms etc) source – Rawlinsons, improvements – garage, gardens, paths etc, add back the value of depreciation on the current improvements. This will give an approx land value – you can then calculate an appropriate range of rates/m2 for the land depending upon whether they are better or worse than your selected property.
Personally ZJ, I will be looking at areas which have suffered the greatest median price reductions over the past 2-3 years ie western suburbs. These areas will have the greatest rate of recovery (rebalancing/price relativity) compared to the more affluent areas which have been experiencing prices growth over the last few years.
Get a commercial property report , speak to the local agents, etc (all the usual suspects).
Do your research via RP Data etc – if it is a regional area with few comparable sales you may need to search other areas with similar characteristics/demographics to determine appropriate rents/caps etc.The ability to rent out a property is ALWAYS with mortgagor consent – I should have expressed it more clearly. Thx RT
POS it depends on the type of business – however it is worked on a multiple of profit. You will need your accountant to review a number of years of business records to determine whether the profits are realistic and sustainable, whether they are cooking the books or whether there are timebombs under the figures.
As for the freehold, you will need to determine what the building is worth (cap rate on market rent) as well as adjusted comparable sales (with either vacant possession or tenant in place – indicating yield).
If the business is not currently paying rent, you will need to take rent into account when determining the value of the business.
SNM
Having done a law degree, you will (most likely) have a substantial HECS debt, esp if you qualify for youth allowance. Why did you elect to do a law degree if you have already decided that you will not go into practice (whether it be public or private)? There are other avenues to utilise that legal mind in the corporate world however you must do the hard yards in a legal practice to become registered then you can apply your knowledge in industry. You don't know it all, just yet.
As an almost qualified solicitor, you should be able to see the down sides of being on the wrong end of a wrap – buying an overpriced property at an above-market interest rate without a registered interest on title and a greater than normal risk of losing the property should you be in default (even by one day). Having said that, there is no reason why you can't lease out the property, after all, you do own it.
Do you understand the CONcept of a wrap? How do you intend to make repayments if it is an overpriced property and you will recieve a market rent? Renters will not pay more just because of your financial arrangements.
Both yourself and your BF are in a good position to earn above average incomes, even as graduates. Why put your future earnings at risk before you even commence gainful employment?
SNM
What you might consider is a pre-payment of interest (in June) if you need to have an expense.
As Terry points out, you shouldn't leave the company in a position that it needs to borrow funds to pay the ATO (or pay late fees) – these are not deductible expenses.
There should be nothing stopping the company leasing the property to anyone it likes (at market rates). If it leases to a shareholder or director at below market, questions can be asked.
No such remedy – take it on the chin. Solicitor has to serve notice to complete after the vendor delays the settlement for 14 days then they have a further period of ?? days to complete the contract. You never know, the vendor may be waiting on vp of a 3 bedroom unit where the current tenant is waiting for settlement of their new house.
Depending upon the state that the property is in, you should be able to pick it up from the Newsagent.
It sounds like someone has been reading the Jenman website, Johchu. I'd agree, dodgy at best but may have been worthwhile if you were in WA or Qld over the past 5 or so years where there has been enormous capital growth.
