Forum Replies Created
I will explain it to you like melbear did for me.
ok you owe 65k with the rent paying it off (neutrally geared)
say its now worth 100k, you refinance and get 80k (80%)
you pay out existing loan
80,000 – 65,000 = 15,000
now your property is neg geared you will have to pay the difference, throw 5,000 in an account to cover the difference (from the 15k) you are then left with 10k to play with. I wouldnt do this with every property, but i am doing it with one so as to be able to use the capital growth for deposits on other properties which are cf+
hope it helps.Personally, im just making adjustments to my team, and saving as much as possible. only one thing left to do, which is refinance an Ip in darwin june next year (capital growth 38% last 3 months).
Im also still running around learning everything i can…. waiting for the moment to strike. there may not be blood on the streets, but when the media get onto it, it will seem like it.
the moment friends and family tell me not to buy real estate. thats when i will take time off work (its great being a public servant) and those RE agents who arent talking to me today, will most definetly be interested in talking to me tomorrow.from my understanding this is how it works.
bought a IP for 100,000
deposit 20,000
you owe 80,000
in 6 or 12 months time capital growth goes up 10%
new value of property 110,000
refinance at 80% of loan give you 88,000
pay off original loan 88,000 – 80,000 give you 8000 dollars to use as deposit on next property.
things to look out for doing it this way.
entry and exit fees (if you dont know them it can be quite costly.. trust me on this)
thats the basics of it anyway.. the 8000 is tax free cause its a loan. and you may have to put some of that 8000 into an account to pay the difference in the (possibly) neg geared property.I went to the property direct intro night here in canberra a couple of weeks ago. not that i wanted anything, its just that my boss wanted to buy.
i took a couple of their phamplets with me and from what i could tell was this:
1. IP relied on neg gearing pos cashflow.
2. No strata management in place, ie those numbers were’nt added in.
3. They assured everyone that the 14 km around brissy was the place to buy due to demand.
I asked them where they got that information from and it was a “gut feeling” from being in the game.
(I dont know where they got that from but the RBA has said the only thing keeping the housing boom going is demand from investors.)
4. There was no rental guarantee, so in effect they were giving numbers that they thought were right.
5. They couldnt tell me how many developments were going up in that area, nor vacancy rates.
Of note, was when i turned up and gave a wrong phone number so i wouldnt have to put up with the “follow up call” the buggers got my home phone number anyway.
I’m not saying they are a bad deal, but i dont live in brissy, nor do i know the area. I’ve told my boss the same thing… so at least he’s starting to learn to think for himself and question everything “due diligence”.
I run off the theory, that no bugger is going to make me rich, i have to do it myself, believe nothing and double check everything.
in a rising market mistakes can be made and covered up due to capital growth. in a falling market those mistakes may eat you alive.darwin has already boomed, heres the web pages etc
http://www.news.com.au/common/story_page/0,4057,7830102%255E13569,00.html
and
http://www.personalinvestor.com.au/stories1/20031101/pdf/cities.pdf
this last one should give you an idea where to buy.This is my thoughts on it, and id appreciate anyone to correct me if i’m wrong.
replace the carpet, try and get some on the cheap (second hand places). basically fix up any problems, not to the extent that its in brilliant condition, but most definetly livable and rentable.
then get a depreciation schedule done. you will then be able to claim wear and tear on the fittings (schedule will cost around 400 dollars).
you will definetly have to talk to an accountant as you will be running a business here in australia, so you will have to pay tax.
not really sure how you would get around it, those that do it, will be able to help you out much better.I’m not buying now, but if a deal comes along, i will. i’m also a bit more selective in my choice and adding a bit of risk management into the plan. “just in case”
im going to the 2.5 hour seminar monday night here in canberra. my boss is interested in getting into property so ive conned him into coming along. from what ive read on this forum its only a repeat of whats in the book, but what the hell, i’ve never heard him before so it is worth it just for that. and maybe just maybe my boss wont be conned into all the hype alot of seminars are giving him about neg geared property. and it should open his eyes.
ive spent 2500 on a investment course (the richmastery one) i’m sorry that i spent that much on a course, but i’m not sorry for what i learnt. the course gave me a greater understanding of what is needed to invest in property. since doing the course ive found out alot of valuable information.
for example, i had a pos geared property 3 years ago and didnt even know because of lazy accountants who gave me the wrong information.
i also now understand what a trust is, and i am also more financially literate. was the course worth two and a half grand, i could have gotten it cheaper. i have saved myself the money a couple of times over already by not walking blindly into a deal. if i could do it again i would probably do a course alot cheaper.
just my thoughts.sounds like you’re in a bind!
here is a web page by the self proclaimed only honest real estate agent “if you dont do it my way it must me wrong” jenman.
he talks about the property escalator
http://www.jenman.com/NewsQuestions1.php?id=65
i know its not much, but it is food for thoughti’ve found their numbers are not quite correct. ie they only put down one weeks vacancy a year, so you would have to check that. also legal fees.
i havent bought from them, but i do have their software and my numbers come out a bit lower than theirs. also they are neg geared positive cashflow. if you have the software you can do it yourself.there is a fence around it, its just that the pool isnt on the plans. rang the council about it but they dont know anything about there being a pool there.
try this mob
http://www.rentcover.com.au/interimapply.html
give them a call, i’ve found them pretty good.
for 306 dollars i’m fully covered
enjoy
shaunlazy buggers,
alright… i will run off half a dozen copies today, for anyone that might want a copy and is turning up saturday.I agree, get yourself financially literate, keep reading this web site, ask questions if you dont understand what someone is saying, and read, read books ALOT. if you dont understand what they are saying in the book ask questions. alot of people here would have read the book and can answer your questions.
dont jump in, ie if you refinance, do you know your setup and exit costs?, how much are you going to make after you’ve paid off the mortgage on the investment property PLUS the mortgage on your house, how do you get a depreciation schedule?… can you answer these questions right now, if not dont jump into anything, we are about to go into a market slum. and from what i understand is, in a booming market mistakes can be made, you will be saved by capital growth. if the “bubble burst’s” mistakes wont get you out of trouble and it may take years before you recoup your money.
I dont mean to scare you, but at the same time i would hate for you to rush into anything without fully understanding what you were doing.
tread softly…..softly and when the time is right, carry a bloody big stick.k
you are absolutely correct. i have a friend who was going to buy his mothers house (she’s on a pension) as she couldnt afford the repayments.
the agreement was he would own the house but she would live in it till she died. they went off the the pension mob, who told them that she would lose 60 dollars a fortnight, not sure why, something to do with assets.Kay,
I absolutely agree with what you said about being in different places in our life, you said it correctly in a nutshell. (wish i’d said it)
i guess you cant help anyone until they want to help themselves.
i remembered the correct saying too.
if you always do, what you’ve always done
you will always get, what you’ve always got.Yet again, ive learnt another important lesson. ring the mobile number! wish i’d know about this web site, 12 months ago, would have save me a world of greaf (is that how you spell it?)
i have a problem with body corp, my own bloody fault.
found out body corp, council rates etc.
as i had bought in darwin, hired a conveyancer rather than a solicitor to check everything for me. i rang local council etc to double check what council rates were etc, but left it to the conveyancer to check body corp.
any way the stupid cow didnt tell at all, the following till after i had bought
rates were 265 per quarter (as i was informed)
wasnt told there was no money in the float so we all had to fork out an extra 40 per quarter till june next year to get a float up and running.
i also didnt get told that the pool in the complex was not council approved, i should have offered lower right there.
still turned out an all right deal, just very annoying to find out i’m paying more than i budgeted/accounted for.I have an example of choice for you,
i am dating a 30 yr old lady with a 6 yr old son. and i love them both dearly, my girlfriend (kylie) comes from a working class back ground (as do most of us i assume) any way she has 20 k in the bank and wants to buy an IP. she is in no way financially literate. i mean she is really hopeless. any way ive given her rich dad poor dad, we’ve played the game. and she sort of understands that she needs to learn but couldnt be bothered.
the scenario, last night having a glass of red.
she tells me she want to buy an IP but only something she would want to live in, in a couple of years. I explain to her that the numbers have to add up first to make it effective. i explained neg geared, pos geared etc. i also explained about reducing tax through depreciation. her reply was thats too hard and she just wanted someone to pay off the mortgage for a couple of years. did not want to listen at all. in the end we ended up in a fight over it. boy talk about someone who just doesnt want to listen.
I guess what i’m saying is,
there will always be people out there, although they dont choose to be poor, they dont know how to change, and as ive heard
“if you always do, what you’ve always done
you will always get, what you’ve done”
(or something like that)
