Forum Replies Created
Great post Neilvs.
Although my head is getting shinier, it's not quite a crystal ball (yet)
. To be honest, I'm surprised by the sustained growth in property prices and am a loss to explain what's been happening in Melbourne for the past 5 or so months. Incredible.Still, while I was wrong on the price growth, I was right on the interest rates. If people don't manage their debt, then we could see a lot of heat go out of the market if and or when there are more forced sales.
I still recommend staying away from the cheaper end of the market and doing quick deals rather than hanging in for the long-term. There is a lot of uncertainty around at the moment, and this will make investing volatile. I'm sitting on a fair wack of cash and using it to buy good deals that don't require speculation to be profitable.
I'm interested in hearing how others are making money at the moment, and what deals are being left on the table because of the uncertainty.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
My vote is also to go and look for yourself in the first instance.
You can get no better feel for the area than investing time on the ground, but more importantly, you will need to locate and engage a team of locals to make life happen for you when you are not around. For example, you will most likely need a local solicitor, accountant, rental manager, etc. Doing this remotely is difficult.
Think carefully about investing overseas. My experience is that it is harder then investing where you live, and the extra complexity doesn't always equate to the higher returns.
For example, those who bought in the US when the dollar was at (say) 1AUD:US0.72 will be hurting badly now. Work through this…
A property was bought for US$70,000. Assuming this was fully financed from AUD, the equivalent amount needed in AUD to close (ignoring closing costs) would be AUD97,222.
Assume now that the exchange rate is 1AUD:US0.84.
To sell the same property (ignoring all costs) and get back your AUD97,222 you would need to get US$81,666. This is a 16% return needed to break even.
In summary, my point is that it is important to borrow in $FX, otherwise you run the risk of being a quasi FX trader rather than a property investor.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Well said Simon.
If you had a home and an investment property, you would be better of with the LOC being against your home, since the interest paid on a PPOR is non-deductible.
For example, let's say that you had three choices with your $5,000 monthly pay packet:
1. Put In The Bank
You could put it in an interest bearing account and draw it down. You would earn interest, but this interest would be assessable for tax purposes, so the exact amount of the return would be ($Interest * (1-tax rate)).For example, if you could earn 5% interest per annum, then assuming no drawdowns then you would earn $20.83 interest for the month. Assuming you paid 30% average income tax, your after tax return would be $14.58 (which then equates to an after tax return of 3.5%.
2. Pay Off Your Investment Property Loan
Assuming you had an outstanding loan of $100k and interest was at 8% per annum, paying the $5k off your IP loan would save you $33.33 per month (using simple interest calcs). Since this saving is not taxed, it could be seen as an effective way of maximising wealth, EXCEPT that the interest here is tax deductible.Had you paid the interest, then (say) 30% would have been deductible meaning that the tax shield would be $33.33 * 30%.
That is, the after tax effecive interest rate would be $23.33. This equates to an interest rate of 5.6%.
So, what seemed okay at first glance may not be so good afterall.
3. Pay Off Home Loan
Let's also imagine that you had a home loan of $100,000 with interest also at 8%. This interest is non-deductible as the loan is for a private purpose.If you pay off the $5,000 against the loan you still save $33.33 per month. However, now:
A. The saving is not taxible (unlike option 1 where the interest was earned (not saved) and hence was taxable; or
B. The interest is not deducible (unlike option 2).So, in order to earn $33.33 per month, you would need to gross $33.33 + (1- tax rate). That is, in pre-tax salary you would need to earn $47.61, so that once tax was taken out you would end up with $33.33.
Therefore, now the tax effective interest earned is 11.4% (($47.61 * 12 )/ $5000).
Summary
Therefore, looking at the three interest rates that have been notionally adjusted for the impact of tax:Option 1 yields 3.5%
Option 2 yields 5.6%
Option 3 yields 11.4%This rather simple maths model (with the assumptions herein) reveals why it is usually more advantageous to pay off non-deductible debt first, then deductible debt, and lastly invest the money in separate interest earning accounts.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi TB1,
My first suggestion would be to check with council. Some 'open' areas under houses (esp. in regional Qld) are that way because of flooding issues and cannot be 'occupied' as such.
Often, in older days when there was no air con, houses were built up to take advantage of the breeze to cool the house. You see this with the old queenslander style homes.
Aside from the council, in theory there shouldn't be an issue provided the cost makes it worthwhile relative to the extra rent, you gain the required permits (beware parking issues), and you carefully think through the issues of having people upstairs and downstairs and how that impacts on the liveability of the dwelling.
Please report back on your findings once you have been to council and/or a town planner.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
An interesting topic and one that I am often asked.
The first point to answering the question must be: what do you want from your investing, as it is the response there that should dictate the way you invest (property / shares / businesses) and also the method used (relative to $ and time).
Of course, there are pros and cons to investing in units. The advantages would be:
1. Generally more affordable due to less land content
2. Can be easier to rent, yet tenants can tend to be more transitory
3. Sometimes less maintenance as there is less to maintain
4. Yields are generally slightly higherOn the flip side though,
1. You often have to deal with body corporates where there is common property. This leads to a loss of control.
2. Unit price growth tends to underperform house price growth (in $ terms) over the long termIn my own opinion, I am reluctant to invest in units mainly due to the loss of control in having to deal with a body corporate. If I buy units then I try to buy the entire site, strata subdivide and sell them individually.
That's not to say you can't make healthy profits investing in units. You can. It's just not my niche.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Jade_C,
Thanks for your post and I'm sorry to hear that you are having troubles. Certainly, it sounds like it is time to find a new PM, and one good way to find a new one is to ring around and see who is happy to help you with your problem.
I am not an expert in NSW rental law, but some quick research here in Vic reveals that a tenant is liable for water useage. I would imagine then that most leases would be worded such that the rent is first applied against outstanding expenses and then applied to discharging the rental due.
If, upon termination of the lease, there is a shortfall on the rent collected or on expense reimbursement then I would try to recover that from the bond. Failing that you could try to sue the tenant, but the cost and stress of doing that is unlikely to be worth the hassle.
Keep looking for the solution though and don't allow things to pad out. Be pro-active.
Bye,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Arthur,
One of my first ever resources was a product that outlined how I wrote classified ads to attract vendor finance leads. I have a few spare copies in the office (I think). If you would like one then send me your address as a PM. I'm happy to send you a copy if I can find one. Please, I don't want 1,000 people PMing me – just Arthur.
As a general rule though, it's a good idea to sell the benefits in the ad, remembering that the ad will not sell or close the deal. It exists only to get the phone to ring. Therefore, a possible headline that could work is:
Who Else Wants To Buy A Family Home With No Deposit?
Hopefully you get the drift.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Terry,
Yikes! Sounds… itchy.
Perhaps a call to the local pest person would be wise. Perhaps s/he can give you some 'professional' bug advice.
Also, are you sure you bombed correctly?
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Scully,
You should be able to go through local council planning records. If that brings no joy then another option is to look at the title which will show when the land subdivison was done, and assume the house was built soon thereafter.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Chris,
I am asked a similar question quite a lot.
Personally, I prefer the idea of selling up and using equity to get started on the premise that you buy back in using pofits later.
With careful planning and the right training I am use that you could do well.
Indeed, the way I began was to rent and use the money that would otherwise have been eaten up in a home equity to invest with.
I hope it works as well for you as it has for me.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
I don't know about these guys but two Mackay accountants I do know are:
1. Connole Carlise (Wood St) – I used to work for them.
2. Noel Spilman & Assoc – My wife used to work for them! (Somewhere in the city heart).Of course, make sure they can help you in your area of need and tell them I say g'day!
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for your feedback guys.
I will chat to Goldie about the fuctionality on the home page re: mouseover. I will also chase up whether we can get the thread topic in the email.
I agree about the ads and the news items. I tend to do the news updates when time permits. I will try to get to it every other day.
We have a lot of work going on in the background for the site. There are some big, big improvements a few months away.
Thanks again!
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks Elka.
We’ll get these happening for you.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Coming soon… but not a forum but an entire new section.
Stay tuned.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
The speed should be red hot now…
I suggest you clear your cache.
Please let me know if you are havingn further issues.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi C2,
Thanks for your input.
For what it is worth, we upgraded the server, but the problem was not at that end – it was the database functionality on the site, and especially the forums. Snitz, for all its good points, was simply not designed for the amount of use we were generating on it.
I agree about the testing, which is why the current site is being developed behind the scenes.
Finally, I have probably answered more of the same questions as anyone else in Australian real estate education. However, while it can be testing from time to time, I’m here to help and I always am mindful that while I may have answered the question many times before, the person asking for help may be doing so for the first time.
This site is not designed to be an exclusive. I for one would like to help anyone interested in learning how real estate can fast track returns.
On that note – if anyone would like to be on the beta testing team for the new site then please send me a PM.
Thanks,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Just on my previous post…
The sermon at church this morning was interesting as it drew a distinction between unity and uniformity.
Uniformity means sameness.
Unity is oneness.On this forum, the aim is to have unity – being united behind a common vision in what property investing – rather than uniformity which would mean that we were all the same.
I’ll be the first to admit we are not perfect, but everything done at the site here is done with the goal of improving the community.
I appreciate the feedback, but it would be more helpful if suggestions for improvement could be added rather than simply stating opinions.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Thanks for the feedback.
There are a number of points to be made, and I’ll attempt to make a few of them here:
1. Forum functionality.
The simple fact is that this site has far more users than any other, so many in fact, that we recently had to completely reengineer the site in response to the speed becoming so slow.
An executive decision was made to leave Snitz – the forum software that we had used for many years in favour of another version that could facilitate multiple users easily.
We can do all that was previously done with Snitz – and more – however it takes time to customise the new software to our exact needs.
2. Major redevelopment
Furthermore, another decision was made that involves some degree of short term pain. Back in January I commissioned a major revision to the site that will mean that much of the site as it is now will change.
The outworkings of this are that the look / feel / functionality of these forums is temporary – a step if you like in a new direction but much less than the finished product.
3. Workflow
It’s a shame that what you see does not reflect at this point the extensive amount of work done behind the scenes. Nevertheless, rather than just tarting up the site, we made the decision to fix it once and for all (nearly there) and then make cosmetic upgrades (starting soon).
4. Sign In
I was frustrated with the need to sign in everytime I came back to the site too. This has been fixed so that when you log in now, you should not need to log back in again unless you don’t visit the site for (I think) it is 8 days or so.
5. Always Upgrading
Despite what I have written above, in response to the feedback I have asked David (Goldie) to go back and take a look at the Snitz forum and replicate the Active Topics functionality that it seems so many people were used to.
6. Number of Users
These figures can be misleading because the science to count the number of people on the site is inaccurate. This is not my area of expertise, but when I quizzed Goldie about it he mentioned something about session times. I will find out more and get back to you.
Once again though, at least in the short term, the decision was made to improve the speed first, and to add increased functionality over time.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
My contribution is to suggest that before you ever submit an offer it is wise to try and find out the vendors reason for selling.
Experience has taught me that matching your offer with the vendor’s need for selling helps to get a deal done quickly.
Another question to ask is ‘is the price negotiable?’. Almost always tha answer is ‘yes’ and this gives you the opportunity to submit a lower than full asking price offer.
What other questions do people ask?
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for the post. Your comment about people talking you out of deals is well made.
Investing is about taking a calculated risk. The risk part comes down to a worst case scenario financial loss, the calculated part pertains to your investing skill and expertise.
There is no certainty in investing. People will rarely tell you it is a good deal but will be quick to point out why it won’t make money. Of course, comments made are usually an extension of emotion rather than speaking from experience.
Well done.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
. To be honest, I'm surprised by the sustained growth in property prices and am a loss to explain what's been happening in Melbourne for the past 5 or so months. Incredible.
