Forum Replies Created
Hey Mandy,
Welcome to the forum and thanks for your post.
Before answering – what is your investing purpose/goal for this property?
Depending on how you have leveraged, it is unlikly to be +ve cashflow (even with the attractive rent… unless you do things with depreciation).
In that case it will be a matter of capital gains – yes? if so, how much per annum do you need to achieve your goal?
In any event, I’m a bit worried about the 10.1% mngt fee as this seems a little hefty. I’m wondering… is this an ‘off the plan’ property of some sort? It may pay to shop around and see if you can get this down given you have a guaranteed tenant.
In the end though, it doesn’t matter what I or others think as it’s your investment. I’d encourage you by saying that the easy part is buying. The investing skill comes in managing and knowing when to sell.
Anyway, well done for getting in the game as what you learn will take on new meaning now that your money is on the line!
Warm 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
Hey,
The fatal flaw in your theory is that these are all things that you think might increase then rent.
Personally, I do it differently… before letting the property interview the prospects and offer them:
1. A base rent ($160 per week)
2. A list of improvements and the additional weekly rental cost.For example:
Weekly Rent (not negotiable): $160
+ Tick which combo offer you would like:
[ ] Movies at Home <Pay TV> (+12 per week)
[ ] Secure garage (+20 per week)
[ ] Breezy Comfort <Ceiling fans> (+$5 per week)
[ ] Speedy-Net <Boradband Internet> (+$10 per week)etc etc
That way you spend your money in a way that will increase the rent according to what the tenant (rather than you) wants!
Remember to sell the benefit rather than just the feature. E.g.
Be cool in summer <new air con> (+10 per week)
etc etc
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
Hi,
As I wrote in my first book, I would be ultra-careful buying in rural areas. It is very important to remember that demand drives prices, so it is wise to evaluate demand stimulants in the area where you are investing as well as the normal due diligence issues (i.e. numbers, property, people).
More lately, I have been making (rather than buying) my profit through two things:
1. Solving problems; and
2. Applying the new 11 Second SolutionBoth of these concepts are explained in my second book, but as a quick summary, buying deals has become harder since property prices went through the roof.
The investing technology of today is to look for problems (rather than solutions) and then solve those problems to earn a profit.
The New 11 Sec Solution takes the paragraph above and forces you to look at rent and yield to identify opportunities.
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
Hi,
This is quite a complex inquiry, so I will try to break it down into components. This is just my opinion – you would be well advised to seek proper legal and accounting help for this one!!!
Right then:
There is a house that would suit our needs as a PPR and as an IP due to the two self contained units attached.Okay – first point… be very careful when you combine an investing decision (property) with a lifestyle decision (home). The former needs to be based on fact whereas the latter is mainly opinion. Personally, I think you are on dangerous territory when you blend the two as you can end up with a hybrid result that is less than the best of either.
My query is, if my two children bought into the property with my husband and I, and occupied the units, paying their portion of the mortgage for the whole property, does the FHO grant apply to our daughter (eligible)…From my limited knowledge, your daughter’s name would need to be on the property’s title (as a co-purchaser) in order to qualify for the FHOG. I’m not sure what the rules are about co-ownership (in the case of flats and a main house), but the non-negotiable aspect is that she would need to live in one of the dwellings as her PPOR soon after buying.
While it would be wise to call the SRO, my instinct tells me that to qualify your daughter would have to be the only purchaser rather than being in joint-names (unless all the joint owners are eligible for the grant). Having the property solely in her name may cause some problems – mainly with the lenders, but this may potentially be overcome through guarantors.
…and would there be any tax deductions, given that we may be technically renting from each other?I would expect that, provided the transaction was at arm’s length, you would be able to claim the interest on the loan and other normal rental property deductions. On the flip side though, there would also be CGT when sold.
My husband and I would be living in the house. Maybe a family trust would be the way to go?It could be. Unfortunately, you will need to see your accountant for this one. Ultimately, you need to blend asset protection and tax planning with cost effectiveness.
I am looking for the most sensible way to combine a family home with lifestyle, and at the same time making this purchase part of our family’s wealth creation strategy.Getting back to my original point then, I’m wondering whether or not the two are compatible… if you want to help your daughter out then another option is to provide her with a low/no interest home loan as a help for a deposit. Remember, the FHOG is only $7k, and in the scheme of things is incidental to the transaction. That is, it’s better than nothing, but I wouldn’t especially do a deal to access it.
Incidentally, it’s a wonderful house and much more expensive than anything we have previously considered. The area is high capital growth and close to Sydney CBD.Hmmmm – watch out for emotion as this causes normally sensible people to pay too much. Be sure to do a thorough due diligence – especially on the numbers so you know whether or not you can afford the property should interest rates rise a couple of percent.
My final warning is a general ‘heads-up’ about mixing family and investing. It’s great when things turn out well, but it can be terrible in other situations when what started off as helping becomes a financial millstone for all involved.
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
Hi,
BuyerBeware will help you with analysing the deal, however it won’t be able to make the investing decision for you.
A good place to start is trying to work out what you want from your investment property from both a cap gains and cashflow perspective.
I recommend that you identify what % returns you desire, as doing this will help you to determine the liklihood of a prospective property achieving that goal (based on past history and the current market situation).
Should you use BuyerBeware then play around with the figures template at varying interest rates to see what the impact of rates rising +1 to +2% above what you can currently borrow at. I say this as it seems to me we are at the beginning of a new interest rate cycle and it is wise to be pro-active rather than reactive.
Have a great day!
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
Hi Geoff B,
Thanks for making your post.
So… if you can, would you (and others) like to share say up to three insights you have when it comes to investing in general?
Mine would be:
1. Luck is hoping to profit whereas skill is applying a known strategy with a specific outcome in mind, by a specific pre-determined time, prior to beginning
2. Speculators buy on opinion, investors buy on fact
3. Investing has at least three phases: The Buy, The Manage and The Sell.
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
Hi Noel,
Thanks for your post and I hope you enjoy the books that I have written.
From time to time I get over to Canada – when I do I always catch up with Don Campbell of http://www.albertarein.com
I have spoken to his real estate group in the past, and I hope to do so when next I manage to cross the pond.
As for the investing techniques – I know they work (including wraps) in Canada as there are other people who have used them profitably.
Still, I think that JackHu’s comments are very apt and accurate.
Be sure to visit regularly as we love contributors from afar.
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
Hi Francis,
The current and prior bills relate to the conveyancing costs associated with the purchase and sale of real estate. When you enter into a property transaction you need a legal representative to review the contract as well as deal with mortgage and title issues.
Exit strategies are the ways that you plan to realise your investment profit, or else exit the deal in a worst-case scenario.
For example, when you purchase a property on a buy-and-hold strategy the normal exist strategy is to sell it. However, more sophisticated investors develop this strategy by nominating a required return on investment and also a minimum purchase price (prior to buying) that they will accept should they need a quick sale.
Another example as an exit strategy for a B&H might be to wrap it, or offer more creative financing on sale such as offering a 2nd mortgage.
Hope this has helped.
Bye,
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
Hi,
Sorry for the delay in replying… I’ve been on holidays.
I don’t know about Amazon, but the books are for sale either in bookstores here in Aus or else from this website for those who can’t get a bookstore.
Both have been selling well – book #1 continues to be in strong demand whereas book #2 was recently #1 on the Dymocks business bestseller.
Have a great day!
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
Hi,
Well, looks like this month was the month. Interest rates up 0.25% this morning.
I have just posted this comment as a blog:
The Reserve Bank of Australia (RBA) today announced that its benchmark cash rate would rise 0.25% to 5.5%. The last increase was in December 2003 when it rose the same amount.As far as impact goes, someone with a mortgage of $200,000 and who is now 7% interest will be paying an extra $7.32 per week. This doesn’t sound like a whole lot at first glance… but it is!
First, for someone on the top marginal rate, $7.32 a week after tax equates to $14.21 a week before tax, which in turn is $739.05 of salary income sucked away in one small increase.
Second, home loan interest rates aren’t the only finance product that will rise – credit cards and personal loans will also rise too. That might cause a bigger problem because Australian’s are sitting on a record amount of debt at the moment at the same time as having negative savings.
The news for property investors isn’t all bad though, unless you are relying on general market capital appreciation to drive your profits. Yes, some of the positive cashflow you were enjoying may now be swallowed up in extra interest, but in the same token there should be more opportunities for those who are cashed up.
If this rate rise has caught you unawares then don’t beat yourself up too much. You need to re-evaluate your portfolio and takes steps to eliminate personal debt as fast as possible.
All in all, we are in for some uncertain times ahead as the market first digests and then later reacts to today’s RBA announcement.
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
Hi,
Thanks for replying!
I’ll be in touch with you early next week.
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
Hi,
Thanks for those who posted and sent me a pm.
I’ll be in touch with you shortly.
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
No Jo.
Someone I know in the media would like to speak to them about a story that is unfolding.
Bye,
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
Hi,
I’m sorry if my personal declaration of faith has been misinterpreted.
The quote you mention is on the acknowledgement’s page as I wanted to give God the glory and to thank Jesus for saving me.
Nowhere in the bible does it say it is a sin to be wealthy. The parable of the rich young ruler says “if you want to be perfect…”.
Surely Jesus, knowing the heart of the person, would have known he’d be unable to do this, so two possible lessons that come out of it are:
> No one can be perfect before God in his/her own right. It is Jesus who intercedes for us and only through him can we been seen as ‘perfect’.
> Do not serve money – serve God!
Two other points to note:
* There are many references made in the gospel to people who fund Jesus’ ministry.
* Jesus came for one reason – to die for our sins. While we can try to be more like him, we cannot save ourselves through works.
A good passage, written by the Apostle Paul, that talks about the wealthy is 1 Timothy Ch 6:
17Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment. 18 Command them to do good, to be rich in good deeds, and to be generous and willing to share. 19 In this way they will lay up treasure for themselves as a firm foundation for the coming age, so that they may take hold of the life that is truly life.As a final comment, I do NOT believe in the prosperity doctrine.
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
The People Who Hate People Party? LOL. You crack me up!
You wanna moderate that forum Mr. Gatsby?
*Sigh*
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
We made an offer to rip up the contract so the vendor could sell to someone else at the higher price.
This called their bluff, and in the absence of another genuine buyer, the sale went through regardless.
One thing I did mention to the agency, which happened to be a Jenman agency, was that if they thought they did an inferior job in selling the property then perhaps they would like to discount their commission. History shows that they charged the full amount.
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
Hi Jenny1,
From the sounds of it you are talking about flipping the property – meaning that you will onsell the property prior to taking formal ownership of it.
In that case, you will still need to pay stamp duty, but your solicitor will organise a similtaneous settlement meaning your purchase and sale will happen on the one day.
You will therefore receive a cheque on settlement, being the profit less stamp duty, fees, charges and costs (as applicable).
Just do the sums to make sure you know what you will walk away with.
As far as tax goes, there would probably not be a CGT discount as you will have owned the property for less than 12 months.
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
Hi,
I’d say you had the basics pretty much figured out.
In time you’ll need a reason to invest, but for the moment all you need is a deal to get your teeth stuck into.
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
Hi,
Thanks for your post and welcome to the forum.
I guess the question you have to ask yourself is… ‘How much capital gain am I expecting this property to earn (both % and $).’
It would only make sense to buy if the expected inflation adjusted capital growth was more than any accumulated negative cashflow.
Perhaps post back listing what you feel are the unique benefits of this investment, and what the median capital growth for the region has been for the past few years.
As far as the numbers:
Rent: $9,360
Loan: $9,352 (80% LVR, 7% IO Loan)
Management: $750 (8ish%)
Body corp: $1,200
Rates: $1,400
Repairs: $500 (say)
Insurance $400 (say)
Misc: $500 (say)Negative cashflow: $4,742, which is 2.8% of your purchase price. If you add in bank interest on your money at 5% per annum, then your expected capital gains needs to be at least around the 15% per annum mark for this to seem attractive.
Hope this has been helpful.
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
Hi,
Why not ask him to help out here on the forum then? We need all the experts we can!
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
