Hi,

Thanks for your generous comments about the book.

Sadly, the days of going out and buying a positively geared property are now generally over. This is because prices have risen in excess of rents, and costs of owning property (in particular interest rates) have risen too.

Does this mean we should give up and look to other wealth creation opportunities? I don't think so, not yet.

The lesson here is that we need to evolve our investing as the market changes. My recommendation is that people now look to create positive cashflow rather than simply buy it. There are a number of means of making this happen. However, my preferred model, which will be fully outlined at the upcoming conference, is to take small sums of money, multiply them into an investing bank, and then use those funds to buy good quality commercial property that provides an income stream.

For example, in your case you could take that $15k and try to turn it into (say) $100k within two years (doing quick-turn deals), and then use that $100k to buy a $350,000 commercial property that will provide positive cashflow.

Well done on asking questions. Keep looking for answers!

Hi,

Welcome to the forum and thanks for you post.

You can certainly sell your right to the finished product, and this is an everyday transaction.  That is, you are not selling the property so much as the right to the property once it is finished.

Some things to be aware of though are:

* Is there a rental guarantee? If so, how much and what are the fineprint clauses?

* Leave the lowest deposit possible. 10% is not etched in stone and the less down the better as you are essentially getting a 0% return on that money in the meantime.

* Get some idea of what the body corp costs will be once finished – it may be more than you expect.

* Does it come furnished? If so, do you like the furniture and are you getting a good deal?

* How many carparks does it come with? My guess is only one, but find out. If you can get more than one then it may be worth the extra cost as they are scarce and will be a key selling feature when you decide to sell.

* I hope the capital gain eventuates. In years past it has not and people have been left disappointed.

* Be aware that the property may not be easy to sell before it is finished as there is a limited market of potential buyers. If many people try to sell then it is possible the value will drop below what you paid for it.

* Final point – some financiers are very particular about what they will and won't lend for in terms of inner city apartments. Do you research so you are sure you will get a loan – visit a bank or mortgage broker to check out your options.

Hope this has helped. Without wanting to sound opportunistic, you sound like the ideal sort of person who would benefit from coming to the upcoming 3 day conference. Check out the link below.

All the best,

Hi,

It certainly can – on at least two fronts. In answering I have assumed that it is an easement in favour of water/sewerage.

Generally, an easement is a right to access a property to the favour of another person. Common easements include access for power, water, sewerage, or for access to another property.

To answer your question then…

1. An water easement cannot usually have a permanent sturcture built on top of it. About the limit is a carport (as opposed to a garage) or a garden shed. If access is required then you will need to make it possible at your cost.

2. More of an issue though is that for subdivision to go ahead you will need to ensure there are services available to the property. Accordingly, you may need to chop up the block so that there access to the easement from both titles. This may mean that you extend the existing easement.

I recommend that you call or visit the local water authority and discuss this matter directly with them.

Some quick research revealed (albeit not from Qld).

Hope it goes well for you.

Hi,

This might be a tough ask!  International tax is a tricky area, and if you want UK expertise then perhaps your best bet is one of the larger accounting firms. You may pay a lot, but if it helps fill in the gaps then it will be worth it.

He's not in Perth, but my accountant Mark Unwin has knowledge of the tax law as it pertains to offshore investing (for Aussie tax residents). He has needed to become keenly aware of these issues from my own OS investing. His contact number is 03 9854 6317

Cheers,

Hi,

Hope it all goes well with Nick.

At the moment I don't get to make it up to the NT, only as far as Brisbane, which I know is still a long, long way away.

Cheers,

– Steve

Hi Ray83,

Welcome to the forum and thanks for making a post.

Before thinking about another property, I'd encourage you to get a better handle on how your apartment is travelling. That is, your ability to handle more property will depend on how well you management your money and investment, and it seems like that could be something you could sharpen a little.

For example, $260 p/w represents nearly 25% of your pre-tax salary. Could you afford another IP at the same negative return?

Specifically, I would:

1. Contact a r/e agent to get an appraisal of the value
2. Understand my loan repayment obligations. Perhaps you could refinance for a cheaper rate and save some money
3. Create a plan, and then relate your current property and also future purchases to it

In terms of a 2nd, 3rd etc IP, it seems you have a long-term growth asset, so now you may like to do a shorter term quick-cash deal or else look for an investment that delivers a cashflow return.

All the best,

Hi,

Welcome to the forum! You might be our youngest member… well done!

Some additional thoughts for you:

1. Play Kiyosaki's games: Cashflow & Cashflow For Kids

2. Read investment and money related books – become a regular at your local library. Kiyosaki's Rich Dad Poor Dad and Clason's Richest Man In Babylon are a great places to start.

3. Start understanding how money works, and the best way to do this is to get a part-time job and gain an appreciation of how hard it is to get ahead by working. That way you'll become hungry for what investing can do for you.

4. If you want to come to seminars, write to those running them explaining your age, enthusiasm and situation. You might be able to swing a free or cheap ticket. It's worth a try.

5. Keep asking questions! It's the best way to learn.

All the best,

Hi,

Remember that LMI is insurance for the bank against your repayment default. Even though you pay it, you don't get the benefit. My understanding is that even if you default and the bank claims on LMI, your credit rating will remain trashed.

There aren't too many mortgage insurers, and hence the market isn't very competitive. One of the ways the previous government looked at reducing loan costs was to contemplate opening up the LMI market to more players.  I haven't heard of any developments as to whether or not this ever progressed beyond being a draft policy.

Cheers,

Hi,

ROI is popular among accountants, but I feel it is less useful for property as it does not fully price in borrowing capacity.

For example, let's look at this example:

Purchase price $200k
Cash deposit: 20%
Closing costs: $5% of purchase price; paid in cash
Annual rent: $12,000
Annual cash costs: $15,200 (includes $2,000 of capital loan repayments)
Depreciation: $1,500

The ROI would be:

Rent: $12,000
– Cash costs: $15,200
+ Capital loan pmts: $2,000
– Depreciation: $1,500
= Loss: $2,700

Cost: $200,000
+ Closing costs: $10,000
=Total cost: $210,000

ROI= -2,700 / 210,000
ROI = -1.29%

However, a cash-on-cash return would be:

Rent: 12,000
– Cash costs: $15,200
= Cash loss: $3,200

Deposit Paid: $40,000
+ Closing costs: $10,000
= Cash Down: $50,000

CoCR= -3,200 / 50,000
CoCR= -6.4%

Do you see how ROI uses asset value (not taking into account % of cost borrowed), whereas CoCR does factor in the amount of cash contributed?

Having said that, if you contribute low cash then the CoCR can be skewed.

As I said, I prefer CoCR for property deals, particularly positive cashflow calcs.

If you have trouble crunching numbers then get along to the upcoming conference. There will be plenty of help on offer.

Cheers,

Hi,

The cash-on-cash return formula is as follows:

(cash received – cash paid) / cash down

where:

cash received: rental and other income
cash paid: all cash costs, including capital loan repayments and excluding depreciation
cash down: deposit paid + purchase costs + finance costs etc + initial repairs

A quick example for you to try:

$200,000 property bought with a 20% cash deposit.
Allow 5% for closing costs (paid cash)
Annual rent is $15,150.
Rental Management 7% of rent collected
Rates: $1,500
Interest: 8.5% interest only
Other cash costs: $2,500 per annum
Depreciation: $3,100 per annum

Based on the above, what would be the cash-on-cash return?

Also, if ROI is net profit / asset value, what would be the ROI based on above?

Cheers,