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  • Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Andrew,

    I recognise that you are looking for an accountant to help you with wraps…

    However, I believe that nearly all the work can be easily and effectively done in-house using a mixture of software and some basic systems.

    I can help you further if you spell out the services that you are seeking as accountant to complete as a reply to this post.

    Cheers,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Clive,

    I’m not sure about the process for registering for Qld, but in Vic you need to fill in a form and lodge it (free).

    Don’t quote me, but I think that there is no registration required in NSW, but the contract needs to include certain parameters that meet the requirements of the Code.

    If you are serious about wraps then I’d recommend paying for specific advice from soliciotrs from each State. This may set you back a few grand, but it is an essential cost.

    Finally, it’s OK to have a plan like the one mentioned above, but if I were you I’d do a few wraps closer to home to get the feel for the system you will implement before trying to take over the world.

    Have you purchased my wrap library yet? If not, for $3k, you’ll find the answers to questions that you’ll come across. You can always reinvent the ‘wrap wheel’, but I’d recommend leveraging off my knowledge and save yourself time and money in doing so.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Ritchie,

    I think so. I saw on ‘The 7:30 Report’ tonight some discussion about the purpose of rising interest rates.

    Of course, the purpose behind increase i/rates is to dampen consumer demand and pour water on an over-heated property market.

    See my article in the ‘articles’ section ‘Making Cents of Statistics’ for more discussion about this.

    Bye,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Alf,

    Thanks for your feedback.

    You write:

    quote:


    how about a negative geared property with a positve cashflow?


    With respect, isn’t this an oxymoron, like ‘finding an honest policitian’ or ‘male intellect (so my wife implies [:(])’?

    Really, the ‘negative’ in ‘negative gearing’ implies a loss or outflow. In most cases this is cash – or at a minimum depreciation savings to offset other taxible income.

    With respect to the depreciation, it is possibile to have some cashflow up to the point when all your tax liability is wiped out. But if you want to replace your salary with passive income, then -vely geared property is not a strategy I’d suggest trying.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Eric,

    I haven’t read the book, BUT I do question the independence of the advice given.

    I mean, what else is someone who profits from selling finance going to say about potential competition?

    Finally, I sleep at night without moral issues with wrapping because I always seek to create win-win outcomes.

    Bye,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    SJ,

    I think that it would be a good idea to get some advice from a Qld solicitor re: latest changes to property investing rules in your State. There are new regulations in respect to the number of properties you are allowed to transact in a period without an appropriate licence.

    In fact, I’ll try to get a solicitor to make a post about this on the forum when I get back to Melbourne (I’m currently in Mackay until 15 June… what’s with this bad weather? [:)])

    In resepct to a few of the comments that you have sought help on, my feedback is as follows:

    Structures

    There is no right structure that fits best for everyone. However, unless there are unusual circumstances, I’d be very surprised if a unit trust was the best way to go.

    This is because a lot of the flexibility you can enjoy with a discretionary trust (such as a family trust) is lost with the fixed entitlement depending on issued units.

    As such, I strongly suggest that you receive another opinion on this matter and I’d make sure my adviser was either a tax lawyer, CPA or Chartered Accountant.

    Having said this, structuring is important, but it is just one of many issues that you will need to overcome as an investor. In fact, depending on your circumstance, you may find that you could do one or two deals in your own name before needing an expensive structure.

    The question is… what do you have to protect and how much are you prepared to pay to protect it?

    Advice

    For what it’s worth, my tips on structuring are more based to asset protection rather than tax minimisation. I’m happy to pay tax so long as I am earning cash profits. More so, I’m not interested in making a loss to try and wipe out my tax bill.

    Re: your adviser, from what you have written here I have to say I have one eyebrow raised. Not withstanding that I was not privy to your interview, the idea of one entity per property is quite perplexing!

    Perhaps you could encourage your adviser to post his/her thoughts about this on this forum?

    Finding an Adviser

    It might be wise to shop around for another opinion.

    I suggest you go to http://www.wealthtipsonline.com.au and download the free report that will help you find a good adviser.

    You can also post your general questions here and I will help where possible and within limits.

    I would also like to point out that the issue of structuring, include the exact structure that I use to protect assets and also legally keep my tax bill as low as possible is outlined in detail in my Wrap Library.

    For more information about the Library, visit:

    https://www.propertyinvesting.com/files/content.asp?cid=wrapintro

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Matthew,

    Why is there GST on your property acquisitions?

    Provided that the investment property is residential and built pre 30 June 2000, I’m unsure why there would be GST applicable.

    Do you have other advice?

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    SJ,

    I need a little more information before I can provide a meaningful reply…

    1. What are the professional qualifications and background of your adviser?

    2. What State do you live in?

    3. When you went to see your adviser, were you seeking advice about asset protection or tax minimisation?

    4. Precisely what do you get for your $800?

    5. Any idea why a unit trust was suggested?

    Based on your answers I may be able to help your further.

    Bye,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Fergus,

    In response to your questions, my thoughts are:

    Qn 1: As much as you can get, bearing in mind your wealth strategy and also the relationship you have with your lender. In our case, we knew that paying off debt increases our cashflow and as such we were happy with a 20% deposit. This does detract from the available cash though.

    Qn 2: As Darren has indicated, I believe that you should insure the building for the cost of building a replacement dwelling. Be sure to allow for GST too.

    Qn 3: Get the deposit at the point of signing a contract – or earlier if it is held in trust by a solicitor for the purpose of a deposit. Well, that’s my opinion anyway.

    Best of luck,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Mark,

    Re: the long settlement… we asked for it!

    We will be doing an 80% lend on this deal, which is our standard finance terms that allows us to continue to borrow money.

    In this case, the lender that we are using is the NAB.

    Can I ask who you have sourced at 80%?

    Thanks,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Tara,

    Three comments:

    1. Know the difference between fact and opinion. Fact: interest rates are at 30 years lows. Opinion – how long they will stay there.

    2. Good deals exist in all markets. Rising interest rates will kill some deals, but you can still buy today and lock in rates for five to ten years.

    3. Accept the market will never be perfect. Having said this I expect that in 5 years time people will kick themsleves that they didn’t invest in property when i/rates were so low. Alas… they missed the boat through inaction or buying poorly and capping the # of deals they could lock up.

    Taking action leads to a reaction and a spot in the game… but taking no action leads to a seat on the substitution bench.

    Don’t rush your investment decision, but avoid being spooked by natural market forces where the investment risk can be mitigated by sensible property management.

    Bye

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    When I worte this post I did so as a case study.

    Prior to starting the post I had signed a contract to buy it for $50,000 on a six month settlement, subject to (a) finance and (b) a builder’s report to my satisfaction.

    Well, finance wasn’t a problem, however as the case study mentioned the building report came back with a problem with the roof. Some of the older sections were rusting and it owuld cost about $2,000 to fix. There were also some other general maintenance issues which would need repair in the medium to long-term.

    I went back to the agent and said that I would be happy to buy, but only if the owner:

    (a) repaired the roof OR
    (b) dropped the sales price for the roof AND also some of the other issues (drop of $4,000)

    The agent took a few days to come back to me and then said the vendor wasn’t happy to do either.

    So I canned the deal and moved on.

    This underpins the lesson that you don’t need to buy every property that you come across and that not all deals are equal.

    My business partner David has a good saying… “It’s our investing game, we make the rules and we always win”.

    If someone doesn’t want to play our game then we move onwards and upwards and find vendors and agents who will.

    Bye,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    You ask:

    if u currently have a mortgage and wrap it to someone else…do u find it hard to get financing for another property and another seeing as that the banks will think u are exteding too far wont they ? and want u too pay put the loans first b4 getting the second and third ??

    There is a problem if you buy it in your own name as you will eventually max out at the 30% debt service ratios that most lenders impose.

    This is why I buy in a company / trust structure and then reproduce the entities when I max out. This allows me to go on into perpetuity, although it can be expensive in accounting fees to keep running.

    The bigger issue about wraps and finance is finding someone who is happy to disclose to lenders that you are actually wrapping… see posts on this forum for more about this.

    My thoughts on property investing is that it is as hard or as easy as you make it.

    Regards,

    Steve McKnight

    P.S. As you start looking for properties, apply the 11 Sec. solution to give yourself a guide as to what deals you should be focusing on to find +ve cashflow deals.

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Rob,

    Vic & NSW: immediate
    Tas. & Qld: After 12 months
    SA: Wraps illegal
    WA:?????

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    Under a wrap you can get the FHOG:

    * Day 1 in Vic. and NSW
    * After 1 year in Tas. and Qld

    Under a lease option you have to wait until there is a contract for sale, which you rightly point out, will be when they exercise their option.

    Bye,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    Of the 40 or so wraps that we did 3 three years ago, 50% have now terminated as either moving out (and we have resold, re-wraped) or they have cashed us out.

    This large atrition rate is primarily due to our poor classification and qualifying techniques over potential clients – something that took time to fix but which is working better today!

    Funnily enough, the remaining 50% seems to have been our best clients.

    Investing is a learning process… and there is no doubt that I’m still learnig today. I don’t pretent to know everything and I’ve now doubts that in ten years from now I’ll look back and shake my head and the mistakes I’ve / I’ll make.

    Oh well, sometimes the best lessons have to be experienced first hand.

    Cheers,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
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    Tara,

    My advice is to check the council zoning for the property as a guide to what lenders will use as the basis for classification.

    I know that anything zoned rural comes with alarm bells from a financiers point of view.

    As a general rule:

    Residential: 80% LVR (higher with mortgage ins. or other security)
    Commercial: 80% – 70% LVR
    Industrial 60% – 70% LVR
    Rural: 60% – 70% LVR

    As far as mortgage insurance goes… the magic figure seems to be 14,000 people or more in a location, although this varies from lender to lender.

    Cheers,

    Steve McKnight
    (holidaying in the Sunshine State where is was cloudy all day – the sunshine business looks like a marketing sham to me [:P])

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
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    Hi Dianne,

    Firstly, I think that the information provided by the replies you have received all contain good advice.

    To be honest, it is difficult for me to comment on your deal beyond very basic indicators. But sometimes these are best because they tend to cut through all the hype and emotion associated with the ‘sell’.

    If you haven’t already done so, I suggest you get and read my free newsletters and work through my laws of success.

    The first thing I do on any potential deal is the 11 Second Solution. In your case, $2,433 pcm works out at $561 per week. Hmmm, this seems very high.

    In any event, $561/2 = $280.50. Then *1,000 gives $280,500 – this is still much less than $365k.

    I also get nervous buying an expensive property because:

    a. If the property is vacant then the negative cashflow may be extensive. I realise there is a guarantee… just be careful about the clauses that write this up as legalise.

    b. You could buy one property for $365 k, or 7 * $50,000 properties. More properties reduces both your interest rate risk and also your vacancies as you spread your exposure over 7 properties rather than one. Ie. all 7 properties would have to be vacant to have the same exposure as one $365k property being vacant.

    c. I’d compute how far interest rates have to move before your ‘budgeted’ +ve cashflow is eaten up. 5.65% sounds a little optimistic given the change in interest rate landscape. If you buy on a 60 day settlement, then the rate may be closer to 6.5%. Watch out!

    As for other questions – make sure you do your ‘due diligence’. If you have purchased ‘Property Secrets Revealed’, then use then PATTERN Templates included therein and also the negotiating strategies to try and get the price down a bit further.

    Bottom line… this isn’t a deal that I’d do as a buy & hold. Too expensive and the risk is isolated across one deal. Even capital gains are now uncertain given the change in interest rate climate.

    But my opinion is clouded because my niche is smaller regional properties – not CBD stuff.

    Do your numbers very carefully and be sure to factor in ‘buying’ and ‘selling’ costs to get a realistic idea of how much you will make for how much you are risking.

    Bye,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Eric,

    Thanks for your excellent post and for your helpful comments.

    You raise the point about properties in the La Trobe valley and I thought that I share my experience about this area since this is where a number of our investment properties are too.

    Dave and I began investing in the La Trobe valley in early 2000 – just before the FHOG came in. I remember on trip down in about March and putting in offers on every property we looked at. It was amazing. Houses listed for $40,000 and our offers of high 20’s and low 30’s were being accepted!

    Today two things have changed:

    1. The way that we invest. In the early days it was solely about finding properties whereas nowdays we try to focus on having an exit strategy before we buy. This means that we need to focus on finding someone to ‘use’ the property before we buy.

    2. The market. A lor of investors have snapped up houses in the Valley under a very simple rule – you couldn’t build a house for anywhere near $40,000 – so a house + land must be a good deal.

    To a large extent this is true, but many investors buy these kinds of property feeling they can’t lose… that is until they get a tenant from hell!

    Rental management runs at about 8% in the La Trobe valley – and there are a lot of problem tenants. Despite this, vacancy rates are low at about 5%.

    My experience the winning way to invest in the La Trobe valley is to not let your greed gland run too rampant. Remember that your cashflow depends on the quality of the person you attract to the property (ie. wrap, lease-option, buy & hold strategies) or alternatively your ability to buy high and sell higher (flip, reno strategy).

    Good deals can still be done done there. Wtach out for financiers who will only lend <80% in Moe and Morwell. Traralgon seems to be a much better area and there is certainly infrastructure growing (Officeworks opened in September 2001 and there is a Harvey Norman too).

    Finally – good on you for suggesting ‘bird-dogging’. I hope your iniative works out.

    Bye

    Steve McKnight
    (on holiday in Mackay)

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    One of the many things outlined in my Wrap Library is the treatment of Land Tax (in Vic.)

    Basically, if you know what you are doing you can avoid having to pay it at all. The solution has nothing to do with asset structuring – just about knowing the SRO system and how to use it to your advantage.

    Regards,

    Steve McKnight

    Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
    https://www.propertyinvesting.com

    Success comes from doing things differently

Viewing 20 posts - 1,661 through 1,680 (of 1,702 total)