Forum Replies Created
Hi,
I recommend you take a few days off work and turn up to BH for a visit so you can see for yourself.
I’d still be an accountant if I listened to my friends who told me that I would be crazy to invest in the country.
It wasn’t until I drove and saw for myself that I realised there was opportunity where others saw doubt.
Conversely, I wouldn’t invest in an area that I hadn’t previously visited first hand.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi DanielKTan.
Thanks for your post. That site has been in the news for a long time since Kennett sold it off many years ago.
There is no doubt that the site is in an excellent location – clost to town, transport and parks.
If looking at the site for a residence, the key issues I can see are:
1. Affordability
2. Abiliity to borrow
3. Is it where you want to live for your lifestyleA common misconception is that a home is a property investment. It’s not. A home is a lifestyle choice, and so any financial gain is a bonus as opposed to an expectation.
That doesn’t mean you should be ignorant to the financial perks, just understand that a home needs to suit your lifestyle needs first.
Finally, remember that interest on a loan used to purchase a PPOR is non-deductible. Therefore, assuming you buy a $1m site, build a $500k house and finance the lot on an 80% loan at 8% interest, you would pay $96,000 a year in interest.
Assuming you paid an average of 35% income tax, in pre-tax dollars you would have to earn $147,700 just to meet the interest cost (and that’s before loan repayments).
Food for thought!
I look forward to seeing more of you on the forums.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Awesome answer Julie. Thanks for taking the time to make the post.
As I understand it, renos don’t carry warranty protection but anthing that requires a building permit probably does, particularly if it is structural.
In Vic, I’m told that renos greater than $5k require a building permit, and so I would imagine the builder would require insurance of some sort.
Clearly, any electical or plumbing work should be carried out by the appropriately qualified person and come with a certificate of compliance. In this case, they would have insurance to cover their work.
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Neville,
Thanks for your post. You ask a great question!
When weighing up whether to proceed or not, there are two questions I would consider:
1. How much of the cost will be recouped through a higher end sales price? That is, what is the price differential b/w selling ‘as is’ and ‘selling fixed’? Your real estate agent should be able to give you some advice here.
2. Will doing the work help to sell the property faster?
Although #1 is straight-forward, #2 can actually help by cutting down on the interest on any property loan since the property will hopefully sell quicker.
My gut feel would probably be to sell ‘as is’ but be happy to negotiate a discount on the asking price as a contribution to the works for the new owner. This way you don’t have the worry or cost, and the risk of the restumping causing other problems (cracks needing replastering etc.) is avoided.
Finally, you could always try to sell ‘as is’ now and if it doesn’t sell, do the works and remarket in a few months time at a higher price.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
There are some very good posts made here – particularly by LA Aussie.
Some further comments I would add:
1. Your accountant should be advising you on the financial consequences of various decisions rather than telling you how to invest. It is wise to get a second opinion, but be careful that you drive the outcome you desire.
2. Watch out for the GST considerations of selling your new dwelling. You may find that 10% of your profit gets swallowed up!
3. To really know what to do you need some kind of investing plan or vision. In truth, what you do here needs to be looked at from a global goal achievement perspective (macro) as well as a deal-by-deal (micro) perspective. The question to ask is: what course of action pushes me closer to my goals the quickest.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Ryan,
Interesting question.
I like to keep my home as debt-free as possible on the basis that if all my property investing turns pear-shaped, at least my home is debt-free (and in my wife’s name).
However, as a concept, you will be be ahead if the after-tax return achieved from your investing exceeds the interest payable on the portion of your home loan you have refinanced to invest in the first place.
Note: you should use after-tax, not pre-tax, returns.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Ben,
Thanks for your post and welcome to the forums. It’s great to see you here!
Building costs are quite subjective, with the final price varying substantially depending on:
1. The location and availability of trades
2. The type of construction
3. Size of dwelling
4. The ease of building
5. Weather conditions
6. Builder’s marginAs you would expect, large spec home builders have tradespeople employed and therefore are able to build faster and cheaper than abuilder who uses sub-contractors.
Generally, build costs are quoted either on a ‘sqaure’ or ‘square metre basis’. As a rule they do not include finishing costs (driveways, fencing, landscaping etc) or appliances.
Also, watch out for GST. A lot of builders quote on a + GST basis.
In the case of Dixon… I would want to do more research on what is and is not included. Often cheaper prices are quoted for base products but any variations or changes come at top dollar.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
In the past I have had success in finding potential vendor finance clients by running classified ads in local papers.
I’m not aware of anyone who ‘finds people’ for vendor finance, but if they exist I would want to make sure there was careful due diligence over the selection / qualification process.
In recent times, VF has come under rightful criticism from people who claim that there are some investors who only seek to capitalise and profit from hawking the Great Aussie Dream.
While I suspect only a minority, the reputation of VF was called into question.
I think the concept can still work well, but you MUST make sure it is a win for all parties involved, and the cornerstone to doing this is:
1. Full disclosure of how it all works; and
2. Making sure that the wrap client can comfortably afford the repaymentsJust like in bird-dogging, I would be very cautious about just buying a deal as when it comes to investing, more money is made during the management phase than the buying phase.
Happy Easter,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Zoning changes are rarely straight forward. It requires a length petition to council who must then contact neighbours and other affected parties.
It’s not impossible, but it can certainly take six months, or more, for it to go ahead assuming everything is okay.
As a rule, it can be a tougher ask to have something zoned from res to commercial as opposed to rural to rsidential. However, many councils are keep to protect so-called ‘green wedges’ and are reluctant to allow urbanisation of areas.
I did a quick search for you and came back with the following information:
Quote:Changing the zone of a property is a complicated process. Owners, occupants and neighbours must be notified and given the opportunity to raise an objection to the changes proposed. If these objections cannot be resolved, Council will request the Minister for Planning to appoint an Independent Panel. This Panel will hold an enquiry to determine whether the rezoning should be allowed to proceed and then present a Report to Council containing a recommendation on the proposed zoning.* Whether or not you are able to change the zoning of your property will depend on several things:
* What the current zoning is
* What the proposed zoning would be
* Whether there are any Council strategies or policies that support either the existing zone or the proposed change
* Whether there will be reasonable objections to the proposed zone by someone who feels they will be negatively affectedAs part of the rezoning, you may be required to pay quite heft fees and contributions to headworks (such as sewerage, roads, stormwater etc.)
My suggestion would be to visit a local town planner and pay for a prelim meeting to discuss what you are planning to do.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
G’day.
Great post!
My vote is for keep rather than replace. Property investing is about function over form, and presuming the property is a rental, I doubt you could get extra rent for the dwelling by changing the roof.
The essential question is, what is the return on investment for the dollars contributed.
Sure, asbestos is something you would rather not have, but provided it is in good condition, a paint should suffice.
I would be more alarmed (or alerted, perhaps) if it was inside (i.e. in a wall or ceiling panel) and you planned renos to demolish it. In that case I would be far more cautious and have others do the work in a managed environment.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Trusts are generally seen as an attractive way to control wealth without owning it.
However, since a trust is usually set up just prior to buying, it often lacks the necessary financial history to properly comfort a lender (such as 2+ years of financial statements).
Even if a relatively low LVR is sought, the bank will want some surety that the loan can be repaid – or that someone will repay it should the trust default.
That is wht lenders typically require a guarantee from the Trustee(s). In this case, the ability of the Trust to borrow money will depend on the ability of the Trustees to be seen as worthy guarantors.
Hence, the credit history, personal asset statement etc. all come into play for the individuals behind the loan – either as individual Trustees or as Director’s of the Trustee company.
More commonly these days, lenders are starting to become a little more suspicious of elaborate schemes involving multiple entities and / or ‘bare guarantors’ – those with little income or assets but with a lot of contingent liabilities in the form of guarantees.
Like many things in the lending market, there is the lender’s formal policy and then there are the advantages that come from having a relationship with a senior lender who can cut to the chase and make things happen.
I am not suggesting anything illegal is done, only that these banker understand structures more than the standars loan officer at a branch level.
As you can see, there is a little more to this question than a simple answer. Terry is right to say that it shouldn’t make much difference, but often getting the bank to approve the loan is a matter of taking away all the reasons for them to say no as much as it is getting them to say yes.
All the best,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
We’ll see what we can do to restore the history.
I’ll check the unread posts Terry.
We had to make this move as the site had expired its life on the old platform.
There is another look and feel happening – a major, major upgrade – that is about 3 to 4 months away from going live.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
True enough, but who would go into a contract with a contingency such as this where you only had a downside?
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
G’day Chief,
I hope you enjoy the book!
CGT is really only applicable if no other tax already catches the profit.
In this case, because the profit will be taxed as income (i.e. a trading profit), CGT does not apply and therefore there is no discount. Hence the entire profit must be included as assessable income.
I hope this is a little clearer. I will write an information alert on it in the New Year.
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Supagirl75,
Thanks for your post. Welcome to the forum.
By ‘owner occupied’ I assume you mean live in…?
In that case what you are doing is making a lifestyle decision while trying to maximise the financial outcome.
I say this as it is important to make this observation as many people mistake their home for an out-and-out investment.
That is, the question that you need to ask yourself is: ‘First and foremost, is this property a home or investment’
Your answer will dictate what sort of property you acquire, and your timeframe for ownership.
Again assuming that you are looking for a home, select somewhere that has appealing features that will become more scarce (and therefore more valued) over time.
Examples include access to ammenities, land size, proximity to landmarks etc.
If you are looking for an investment that you can also live in then you have a choice of doing a ‘buy-reno-sell’ or ‘buy-reno-keep’ (with or without subdivision and development). This option sees you living a less glamourous lifestyle but potentially making tax-free profits while also having a place to live.
Food for thought.
Keep us posted on your progress.
– Steve McKnight
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
G’day,
Thanks for your post. In the early days it can be quite tough if you have limited time and money.
Therefore, the biggest constraint to your early success is time because a good deal will always attract money.
My suggestion is to go and find a property that has a problem you can solve and look to ‘trade’ few a few early deals to build a bank of cash to fund bigger projects and/or a longer term investments.
While it’s a shamless plug, my latest book contains some ideas about how to accrue fast profits without relying on general market gains. There are also some case studies and stories that will help guide you as to how other investors are making a profit in today’s market.
It won’t be easy, which is why a lot more make a start than actually succeed in achieving thier goals.
I say ‘go for it’!
All the best,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
It is likely that the ATO will view your activities as a business given your intention to ‘trade’ properties.
That is, your choice of investment structure (that is, the entity) will not be able to get around the tax treatment of the transaction.
For example, it doesn’t matter if you use a coy or a trust, the profit will be taxed and not subject to CGT.
However, from an asset protection point of view, a trust may be better as it allows you to split income while also securing assets.
It would be wise to have an accountant look over your situation and provide an opinion.
All the best,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks for your post.
There are a few informal groups that have started up from those attending my seminars. Check out the ‘Heads Up’ forum board and see if there are any group meetings near your area.
Happy New Year,
– Steve
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Yep – Dave and I have shaken hands, thanked each other for the memories, and decided to part ways.
There is no gossip or hidden agenda. We had simply reached a point in our business relationship where we wanted different things.
Rather than compromise and end up with a lose-lose outcome, we respected each other enough to end on a high.
No doubt our friendship will continue and we’ll be able to bouce and support each other in our new businesses.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
GR,
It may seem strange, but on reflection I would agree with you in respect to the ads. If I was posting information on a site, or my opinion, then I would not want the words in my post to be seen as endorsing someone’s good or service without my express opinion.
I plan to disable the feature in the near future. There are more effective and less invasive ways to market.
I respect your opinion and thank you for it.
Regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
