Hi,
I’ve been watching the apartments in Docklands and SouthBank (Melbourne CBD in general) and I think the prices are about as low as they will reasonably go. The reason I say this is because, just like you said, there really is a minimum at which people will sell their apartments, that being more or less the same amount as their mortgage over them. That means really one could expect a 20%-40% lower price than originally sold for (banks offer only 60%LVR usually on these apartments). If it gets to the point that people can’t sell to cover their mortgage, the only reason they’d sell is because the bank is taking posession and forcing a sale. So simply the apartments will sit on the market or be taken off if they don’t sell.

I doubt rents will go up as there is a large supply of empty apartments and only so much people are willing to spend on any given quality of apartment. I for example put a limit of $350/week on my rent as at that point any extra luxury is not worth the extra dollar. I think I’m not too disimilar to other renters of this market. I’m keen to pick up a unit in the city I can live in for about the $250k mark, but I don’t think the prices will drop that far for 2 bedroom apartments in nice buildings.

That’s my disjointed and rambling assessment.

Surrey.

Hi,
Personally I’m not a big fan of putting my property up as security for other people. There is an old adage that says never lend to friends and family. I have ignored that in the past and it has only added friction to the relationship.

In my personal belief the first step to being an investor is being a saver. To be able to maintain the debt that forms a part of pretty much every investment one must first be able to produce enough spare income. So I’d say save up enough for the property. Besides, if you’ve got enough equity that they can use it to buy investments, why don’t you use it yourself to help with your own future?

That’s just my opinion based on my knowledge and experience. I have no idea of how your family works or how close you each are.

Hi Ron B.
While I don’t do it myself the theory is such that you can do it in any type of market. What counts is the amount of research you do beforehand and being able to create more value than you spend.

There is another strategy in the renovate game: Buy, renovate and hold. In this way you buy a place earning less rent than is typical for the location, bring it up to spec and increase the rent. This is useful where the sale price after renovation isn’t enough to cover purchase costs plus exit cost but is enough to service your loans and maybe produce +ve cashflow.

eg: East Melbourne 2 beroom apartments rent for say $320 /week. You buy a 2 bed apartment earning $250 /week. Renovate and rent for $320/week. Hopefully (in reality you had better plan for it and make sure it happens) the $70/week increase will produce cashflow or at least neutral gearing so you can take advantage of the equity created.

The above numbers were selected at random to illustrate a point. You’d obviously have to figure out the actual figures needed to turn a profit. But that’s the second buy and renovate strategy.

Hi,
The FHOG is available on a per household basis more than on a per person basis (in it’s spirit). As you are already engaged to get married I think the gov will view you as being a household and as such only able to get one FHOG. After all the grant is so you can buy your first “home” not so you can invest in property. Trust me, there is a lot of discretion open to the gov as regards eligibility; including retrospective denial. That means if you both claim the FHOG then get married and move into one house the gov can at some point decide you misused the grant and retract one or both grants and you’ll have to pay it back, possibly with penalty.

The question is: If the grant was actually being offered by a friend or family member to help you get your first home (not invest) would you feel comfy deceiving them into giving it to you? The grant is there to help people buy a home, use it, but use it to buy a home only and you will never have any trouble from the ATO.[buz2]

Hi,

Now: 30 (well 29 and 9 months, but close enough)
Retired: 35
Financially free: 45

Definitions:
Retired in my books = not working for “the man”. I’d still be doing things for money as at that point I would still need money, but it would be more on my terms.
Financially free = Doing things and if money results then so be it, but it wouldn’t be required. Also I’m being fairly conservative on the 45 bit. It is assuming I continue in a rut as I am now without making any more real deals or increasing my income (so unlikely).

As for comments re: never retired because it’s wasting your time. That is just a clarification on the word retired. I’m a computer nerd at the moment so I’d retire from that. In my retirement i”m going to continue on with my home workshop fabricating / restoring motorcycles and cars. I’d also do odd jobs for others in exchange for money and I’d sell my fabrications (and art). Does that mean I’m not retired? I think retired is a state of mind. Building a V-Twin engine from billet and home-cast componentry for sale in a fully custom one off artwork motorcycle would be retirement for me but work for another.

Oh, and I haven’t mentioned my ambitions to brewery ownership! [biggrin]

Hi,
My personal preference would be to skip this deal as I know I’d get a bit too passionate about justice and people trying to cheat other people and so on. I’d end up getting a survey done then knocking their fence down and building it on the real property line. If their house fell into my yard I’d write a nice little letter that told them to either:
1. Move their house off my land.
2. Pay rent for use of my land calculated as a per square metre as a percentage for usage at the market rent.
3. or if no other word is heard back in 60 days I’ll take a diamond saw and cut the offending section of house off and remove it myself.

I’d make sure the neighbour knew in no uncertain terms that one way or another I’d be getting full uniterrupted use of my land because it is mine and get to choose how it is used.

That is why I wouldn’t buy the land. As you could imagine it would start a war, one I would almost certainly “win” but only by the neighbour doing as I asked (or coming up with a better solution) or me burning their house down next time they are out on holidays. Heck maybe I’d burn the house down so they could claim insurance and I’d get my land back. [biggrin]

So what length would you go to? I know what I’d do so I’d not buy.

Hi,
Personally I think it is a different thing building your own home and building someone else’s home (IP). I’m getting an IP built by Devine and so far so good. The price is low and the quality for that price is fairly good (they build so many of the same design they’ve worked out most of the bugs). However I doubt I’d ever engage them to build my own PPOR as I have an appetite for good things. [biggrin]

The main thing you get from a large builder is bulk discount but that also means lack of personal choice. Smaller builders are considerably more expensive, but you get a chance to interact with them more closely (both a good thing and a bad one).

Personally when I build my own home I’m going to be using my wife (building designer) my brother-in-law (builder) and my father-in-law (project manager) and my own research and organisation skills (computer nerd, able to carry things) to get the home I want at a reasonable price. If you do it yourself there are a number of books all about the process so you can choose how much or how little you do and how much you contract out (obviously get a registered plumber and sparky)

Surrey.

The deposit has nothing (or at least very little) to do with compensation. The deposit is required to make a contract. Contracts must:
– State who is bound by the contract.
– What is being offered
– What the consideration is. (money in return usually)
– Clauses describing the delivery
– Clauses describing the commencment
– Clauses describing the end
– Clauses describing penalties
– Date of signing and signatures of all parties

So a part of that is the consideration, without consideration the contract can be argued in court to not have been commenced. So a deposit is used as an exchange of consideration to bring the contract into force. The deposit is held in trust until the contract has become unconditional (which may be immediate) and so doesn’t belong to the seller until it has been released (by an event such as settlment or all conditional clauses being met etc). So in the case that a contract has gone unconditional, that is all conditional clauses have been met (like inspections, finance and so on) then the contract is in full force and the deposit is now a part of the contract. That means if the buyer pulls out of the contract they have no claim over the deposit. So in that sense it is “compensation” but only so much as if I bought a product, paid for it, then refused to pick it up or take it.

I guess then a $1 deposit would be easy to walk away from but that doesn’t mean the deposit needs to be 10%. A $1,000 deposit would probably be sufficient committment for most property sales.

I’ve had a friend say with some scorn: “Well I guess we have very different ideas about money.” This after I demonstrated using a spreadsheet that he could buy his dream car in a couple of years and still have money left over for a holiday or plasma TV without debt rather than take out a $30,000 personal loan now. I was rather dumb-struck and couldn’t for the life of me figure out why he said what he did with such contempt.

Anyway, not wanting to sound snobby but poor is a state of mind and a way of thinking. The irrecoverably money deficient believe money happens by accident at best and through fraud and deceit at worst. The duality: “win lotto” or “rob the bank” and that is why they will stay struggling in their quagmire their whole life while others in the same financial position to start with will end up spending their days playing golf and lazing on the beach with their family.

What is wrong with being greedy anyway? Does greedy necessitate being harmful to others? Money is a representation of applied (or aplicable) resource, not of moral stature. If a factory worker is paid per widget assembled and one worker can assemble twice the widgets of another they will get paid twice as much. If you can buy and sell houses in a way that is more efficient (through matching buyers, renters and sellers) than doing nothing then you will be paid more.

I agree there is so often a strange belief that money = bad person when in reality bad people are just bad people and money is just money.

Hi,
I bought just recently in WA (a couple months ago). Being in VIC I hadn’t even seen the place in person and didn’t meet the REA involved. I used faxed documents to buy the land, no worries. Actually I made the offer over the phone and was given a verbal agreement (one I was made aware meant nothing until a signed contract was exchanged). So after the phone negotiation the REA faxed the contract over, I filled in my details and the offer amount. The offer was shown to the seller who signed, they faxed it bakc and I signed. I appointed a representative and left the rest to them.

You can always ring another agent, tell them the house you are interseted in and they may still be able to sell it to you and share the commision with the listing agent.