Forum Replies Created
Hi,
Interesting read.However it does seem to miss out a few points.
1. If everyone has stopped buying houses, where do they live? They must be renting = house value may have dropped (ie no-one buying) but rental yield goes up (everyone renting). Does that make it bad for investors?
2. If people are moving out of houses to go where there is more work (due to the rampant unemployment), to where are they moving? Again this will place demand on the places that have work = good for investors.
3. McMansions used as multi-family living? WTF? Are we living in post revolution Moscow? No. That’s rediculous. The rich don’t just suddenly keel over and stop living in lovely big houses just because they aren’t able to sell them (funny logic).This article really does reinforce the need to do your research before buying. Property in established cities with good prospects for employment and good transport infrastructure will always be in demand. Aparently more so in the author’s scenario (as the masses of unempoyed proletariate must exodus their mansions in the suburbs). What it’s really saying between the lines is that Australia has borrowed all it’s house equity and has to wait now for demand to catch up with out ambitions and spending. No surprise there.
15 years until the trough bottoms out? Gee, that’s a long time. Kids will be adults by then looking for their own place and I guess immigration stops in the meantime and all the people growing up just hold their breath? I’d say it’s more likely there will be structural shifts in industry and transport as more affordable community hubs fill up and become economically vaible for businesses to open.
15 years before the next big real estate push? Not unreasonable but I think the author’s scenario sounds a little economic halocaust to me.
Hi,
Mandurah has nothing to offer? WTF? Have you been there lately? I was skeptical too but visted last year in november (yes mediocre november here in Melbourne) and it was beautiful! 27 degree days, sunshine, blue sky, fresh air (no Mandurah stink like some claim), cheap lobsters. Wow, I had a blast it was one of the most beautiful places I’ve been. As more investment goes on I imagine the place will get better rather than worse.My fiance (who is from Mandurah so I might be biased) bought there before she met me and her property has doubled in value in just a couple years. We’ve since bought another property and the ones surrounding it have recently sold much higher (so I’m claiming growth of mine damn it!) I agree the ship has largely sailed. The papers only talk about a place AFTER it has done it’s star thing. Investing there now might be a tad late, though you can still find some gems. Look for the ripple effect. Surrounding areas still have a lot to offer.
I think there will be a little correction going on in the next couple of years though, until the train line actually reaches Mandurah and commute to Perth becomes readily available. But after that surely more sensible growth.
Surrey.
Hi,
I’ve been in a couple of partnerships and found the best way forward is the following process:
1. Recognise there is a disagreement that apparently offers no immediate resolution (ie one says black the other says white).
2. STOP. Don’t argue, don’t judge or be critical. Step back and take a breather before things get passionate.
3. Set a time when you will reconvene to discuss the dispute to come to a resolution.
4. Each partner write down their position with all the pro’s and con’s of it. Don’t include anything to do with the other partner’s position, only your own.
5. Meet again and swap paper. In turn (flip a coin if you need to) read the position out loud, including the pros and cons. Then in your own words describe the position (so you would read your partner’s paper and then summarise in your own words). Get agreement on that position as to what it means and what it is. Then do the same with the other position. At this point you may both find you come to an agreement (many times it is an agreement on a third option).
6. Assuming no agreement, look to the partnership mission and vision statments. Look to the partnership goals and plans. Try to match your partner’s position to those goals, plans and statments. If both seem to fit then work through the scenarios of both and work out the cost/benefits.
7. If still no progress, make another time to meet. Go apart and write down a different option, may be hard but the important thing is you are both on the same team and both are trying to achieve the same goals (as stated in your partnership plan).
8. Keep doing this, always remembering to stop before getting heated. Eventually you’ll either come to agreement or you’ll realise you don’t actually have the same goals and then a break in the partnership is probably for the best.In summary, the best thing I found to do is don’t “argue” but rather “discuss”. All the partners are on the same team, the opposition is outside the partnership not within it. It’s better to step back and write things down than end up arguing because at that point you stop listening to the other person’s ideas and concentrate on being right.
Surrey.
Hi,
As a passionate motorbike rider I have to say it is a dreadful tragedy when a bike rider is lost. There is a great need in the community for increased driver and rider education. The government always errs on the side of more fines for fairly arbitrary threshold points and has no motivation to provide greater safety training. So when a private party offers to set up a charity for such a thing I think it important to the community as a whole that it goes ahead.Your neighbours may find a lot of help from members at http://www.netrider.net.au or http://www.mraa.org.au/
The first is a large group of riders connected through the internet. They organise rallies, charity drives, social events and so forth. The second link is the Motorcycle Riders Association of Australia. They lobby for bike riders interests and also help out with charity and fundraisers. If anyone would know how to set up a foundation for the benefit of road users (particularly bike riders) they would. There may also currently be a charity that suites your neighbour’s desires.
The best way to decrease the road toll and increase everyone’s enjoyment is through education and understanding. arbitrary penalties have shown to be ineffective (road toll this easter was double last years in Vic and here we have ZERO TOLERANCE for speeding, gee does it work? No, but the government enjoys a fat pay day that in turn is spent telling us how enforcing speed limits saves lives!)
Wishing all the best,
Surrey.Hi hmackay,
I did a quick skim over the site and this is what I saw:
1. Lots of people on the forum asking where their money was, but for some reason content not to get it.
2. Pips is in Malaysia (or Philipines)
3. All investments made by Pips appear to be in SE Asia.
4. High returns = high risk.
5. It could be a ponzi scam, but more likely not.
6. I wouldn’t give them any money. The site does not portray what I would consider a trustworthy company.
7. I couldn’t quite understand how much I had to invest and how I would receive a return let alone how much that return would be. That was just from a quick browse, but if they can’t tell me those two things straight up I avoid them.In all probably a legit company but an extremely risky one. The places they do business are difficult to take action (legal) in. Just try getting your money back from them! You’d have to apply to a Malaysian court and buggered if I know how to do that or even IF I can do that. An old adage: “if it looks too good to be true, it probably isn’t true”
Surrey.
Hi,
The simple answer to this is: No it isn’t legal. It would fall under the same heading as getting money through deception aka fraud. Especially if you fiddle the numbers so you aren’t paying extra tax on the rent earned (even though you are giving a kick back). Stick to market rent and disclose that the current tenents are your family and they are effectively paying $80/week rent. If you don’t do these things and you sell to a canny investor who discovers what’s doing on you might find yourself being chased for damages or worse: criminal proceding (fraud) ACK! (not to mention A Current Affair hounding you).Actually you ask why others don’t do it? Well they do. If you’ve every found a place advertised with a “rent guarentee” you’ve probably seen a unit with an inflated rent.
eg: actual value $100k $100/week
rent guarentee: $150/week for 12 months
asking price: $150k
So the seller gets $50k more than they should and only have to pay $50/week ($2,600) which = $47,400 extra they’ve milked from the buyer. Can be legal, but shady. Often done with off-the-plan units.If you like you could talk to a solicitor about selling with a rent guarentee to up your sale price, but… In this case “seller beware” [buz2]
I wouldn’t have thought of it as “charging mum rent” so much as having my mum as a flat mate and sharing the bills as family members who are supportive of each other do.
Living costs money and as a family it is advantagous to share those costs however may seem appropriate. Once I was working and living at home I paid rent, before then I helped out around the house where I could. It’s what family does.
Anyway the question at hand:
You’ve got two ways you can go.
1. “Charge mum rent” In this case you can claim a fair proportion of the interest costs as a tax deduction. IE if the renter has use of 50% of the porperty (as would be the case) then you could fairly claim 50% of the interest cost against tax. You could also claim 50% of the depreciation of those chattels used to maintain your property in rentable condition. You would need to get your mum to sign a lease and lodge bond so everything would be hunky-dorey with the ATO. The downside is that you would only be able to claim 50% as your PPOR when it comes time to sell as regards capital gains. However if you are not really planning to sell it doesn’t matter.2. Have mum help out with the cost of owning the property and keeping it in top shape. You wouldn’t be able to claim any costs against tax, but on the other hand you would get the benefit of not paying CGT.
In either case since it is your PPOR you could get the FHOG.
Personally to keep matters simple (personally and financially) I’d take option 2 and just come to an arrangement with mum to help out with the costs of keeping the place. That would mean no hassle from the ATO, no leases or bonds, no extra tax time paper-work and no future arguments concerning leases and so on if you mum decides to move out into her own “mum-pad” in the city [biggrin]
Unfortunately you can’t really go off what the real estate agent says because they are not duty bound to know the exact measurements of the place. If you were asking a surveyor who was looking after the house and they gave you a certificate of inspection that said the frontage was 15m you could do something.
Part of due dilligence is to do a land and title search. You need to do this to check for easements, encumberances, land dimensions, sewage and water connection etc… It is also important to check for any caveats and make sure the house has been built on a permit (otherwise council can make you knock it down). Very important to do these checks, especially if you intend to redevelop. Though I’d have thought the archtect would done a property search to do up his plans…
I agree with Ian in principle. My parents bought a house at the beginning of the 90’s. They sold in 95-96 for the same price they bought it. That’s 0% gain in 5 years (shouldn’t it be up 50%? if it doubles every 10 years) BUT that same house went up for sale in 2000 at about 80% growth. So in 10 years the house almost doubled in value (it wasn’t that well situated and had small land content) but the actual real growth didn’t happen until the last 5 years, probably the last 2.
My fiance bought a house in 2001, in 2003 she had it revalued and it had almost doubled in value! But for the previous 10 years… nothing.
So it may well be that house prices sit around doing next to nothing until 2015, but then there may well be a sudden appreciation in value. So much has to do with location and sentiment. There are still houses in Sydney that are growing in value! Shock, gasp! Though in general the overall sentiment is that houses in Sydney are not growing.
10 years is a long time. Anything could happen in that time.
I would think:
The equity in the house is your parent’s. As such it is important they are educated on what that means (like you said it is resource they could be applying to improve their lives). Also if it is a business you want to buy your parents would become a business partner and should be paid a share of the income.You will need to research your chosen franchise carefully to work out how much of your own time will be required to run it. If you are buying a job you may find it unrewarding. If you buy a business you will be hiring a manager to run it for you and you will need enough profit left over for your parents to pay off the loan AND for both you and your parents to receive income.
Remember that in mortgaging their house, your parents are being put in a risky position in that if the business fails they could lose their house. At the moment they own the house and don’t have to worry about being kicked out. make sure you get professional advice and guidance when making such big decisions.
Surrey.
PS: I don’t know of any books about franchises, but do a search on amazon and I’m sure you’ll turn something up.
Hi awfish,
Thanks for that reply. I’m very much swayed by it.You are absolutely correct about the project built houses. They are built “well enough” and designed to be “appealing enough” for basic consumption. I’ve certainly had a look through several project houses and not once was I moved to thinking they would be suitable for me to live in and own. They were perfectly suited to renting out and putting on generic blocks of land.
What I’m seeing from this discussion is that:
1. Project houses are inexpensive due to their mass-production quality and profit through volume production.
2. Town houses, due to thier compact nature, require more design work than what a project builder will do. This means extra must be paid for design, approval and labour. Though I take it with less materials costs.
3. Town houses, to be profitable as a development, need land that will produce profit from subdivision. In general large blocks of expensive land where lots of people want to live but no individual is willing to pay for the large block to live on.So, a large block in a regional / rural town is much less likely to be profitable with town houses while scarce large blocks in metro / coastal areas are more likely.
Of course, these are generalisations but they give me a good indication of what to look out for.
If they were my parents (and they aren’t) I would recommend they go to Canada as part of the SKI club (Spend the Kids Inheritance).
Let’s face it, at that age they’ve only got probably another 10 years left in them, maybe 20 if they are good and healthy. Sitting on the property for equity gains doesn’t help them in the slightest if they don’t have the income to service a mortgage (now or then).
They could either:
Sell the house and move somewhere smaller.
Sell the house with a lease condition stating they would lease the house back (popular these days) eg: sell for $300,000 lease back for $280/week. Put the resultant funds minus $50k (for their trip) in an interest bearing amortising annuity (like a cashbond, I’m sure a financial advisor could come up with a good one). That would last them a good 4-5 years (or longer if they got pension on top) before reverting to just the pension again.Or a “reverse mortgage”. You can get lots of info on reverse mortgages on the net if you do a simple search. Essentially it’s a mortgage with limited recourse built in (the heirs don’t have to pay out the debt, the house covers it). Talk to a financial planner / advisor about it.
If your folks are 75 now, in 5-10 years when the house is worth more they’ll be 80-85 years old and may have trouble getting Canada regardless how much equity they have in their house.
They should (imo) live it up and enjoy themselves as much as they can before they shuffle off this mortal coil. They can’t take the house with them.
I think Mortgage Hunter is correct in that shares can generally only be used as security for a margin loan.
Margin loans carry a higher interest rate and then there’s the margin calls…
If I was going to take a margin loan on the shares I’d use the proceeds to buy more shares (high yield) just for the sake of diversifying my portfolio and earning a bit more. Wait a couple of years for the share and or property to go up then re-finance the family out of the equation.
Being guarantor is not so bad (I’m one myself) as all being said and done property is a fairly secure asset and if you can’t keep up the payments (and hence indebt your family) you certainly couldn’t keep up the payments on the margin loan.
Of course you can take out lender’s mortgage insurance and refinance up to 100% (or less if you have the spare money) and the cost may well be covered by any dividends your shares pay.
Make sure you have insurance and burn the place down (with no one in it of course). They can’t live there if it isn’t habitable. As a bonus you get a demolished and leveled block all ready for re-development.
You could just wait outside until they leave and smash a bottle over their head every day until they move out.
You could also ring up all the local real-estate agents and inform them that the tenents don’t pay and are bad tenents. It won’t get them out quicker, but they wont be able to curse some other poor landlord.
The law is there to protect genuine honest people who may have come upon hard times or through no fault of their own are having trouble. Unfortunately it also protects the bad eggs (dog eggs?) who feel everyone owes them.
Hey, you could also plant some illegal substances on the property and call the police. You are allowed to evict based on the tenents undertaking illegal activities there. A couple of bags of marjiuana must be cheaper than the 2+ months of legal wrangling.
Seriously though if you seek to get rid of bad tenents by “alternate negotiations” make sure you are actually at worst only being a bit on the shady side and not actually breaking the law. If you break the law and something goes wrong there’ll be hell to pay and you’d end up wishing you’d stuck to the legal methods.
[buz2]
I should add that I’m not a professional accountant or tax lawyer so I’m only offering advice based on my personal knowledge. You should always seek a primary source of information (the ATO for example) to back up what people on the net tell you.
Hi,
You can borrow for any purpose a bank will agree to. A bank will pretty much always agree to lend you money to improve your PPOR so long as you have sufficient income to service the debt.Tax implications: Interest paid on money for income earning (even future income) assets is tax deductible (in general). It is the purpose to which the money is put that counts, not the security against which it is borrowed. Thus if you borrow against an IP to pay for reno on your PPOR the interest on that portion of the loan is not deductible (you don’t pay CGT though so it sort of works out for the best).
Yeah 5% is pretty generous. In Mandurah WA gross yields are about the 3.5% – 4.5%.
Still 5% is a nice place to start if you are looking for a place to start.
At this point I’d go ahead and fix the fence. I’d inform the neighbour that I’m going to fix the fence in 28 days. The letter would tell them who is doing it, when they are doing it and what materials etc they are using. If they want to vary any of the details please contact me ASAP to discuss.
Then I’d just go ahead and get the fence fixed. It wouldn’t cost too much surely and the neighbours may well agree to pay some of it. If they don’t get in touch I’d have the fence replaced in what ever way advatages me the most. Eg: the fence posts facing the neighbours yard and the planks facing mine (better asthetics).
Surrey.
When another company brings up IFHL (as will certainly happen) I will, like everyone else, eagerly go to their web site and try to find out what the real deal is. To do that they’d have to at least provide some info on how it works.
Pretty diagrams with colours are good[biggrin].
All in all it sounds like a hard sell. Using a “something for nothing” sales pitch always raises suspicion.
I’d imagine also that consumer spending would increase in general as more people (ie current land owners) found themselves with accessible equity. They could consolidate car loans, buy farm improvements, fund businesses etc…
Essentially I think by adopting a mortgage system an economy is creating wealth through increased ability to leverage existing resources. Like if the government here in Aus suddenly allowed us to mortgage our super funds. We’d all suddenly become wealthier (effectively) because we’d have greater access to existing wealth against which to leverage.
