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I saw the show and a few things jumped out:
1. The Reno Kings said they would expect this reno would normally take 4 weeks.
2. They used a veritable army of apprentices from the local TAFE.
3. They took over the whole street with trucks everywhere and had to get all the neighbours permission (based on the fact the reno woudl take 12 hours).
4. Labour + materials cost $20k (approx)
5. They are not selling the property and are using the equity to further purchase.
6. They increased the rental by $110 / week which is IMO better than a $40k increase in value.
7. For the 12 hour make over they did 2 weeks full time planning months in advance (they said 72 hours of planning all up).
8. The sunt was more a publicity stunt to show off the Reno Kings and so they could show that it was technically possible. They did say (as above) they would normally take at least 4 weeks to perform this kind of reno.I thought it was a good show. It demonstrated to me that the success of execution is 80% planning and 20% luck not the other way around. 2 weeks full time planning for a 12 hour execution… struck home to me.
As a bit of reno advice:
Never use wallpaper, it’s dated within about 5 minutes of being applied and it sucks to get off.Also:
You may not need to remove it, you might be able to get away with just painting over it. If the paper is textured that may not work so well.Who thought wallpaper was good anyway?
Hi,
Welcome.
You can get some good ideas from this forum, though I must warn you it is an Australian based forum so much of the specific detail may not be relevant.But otherwise… where to start:
Read up on relevant law and process. There are good instructional type books to point you in the right direction.
Set goals. You need to know what you are trying to do in general and also on a specific property by property basis.
The goals will guide you in making decisions concerning how much and for how long.
When you don’t understand something ask. Then take that information and compare it to another independant source because you never know who is answering or if they know what they are talking about.Learn how to do cost / benefits analysis and how to use a spreadsheet. These will guide you and let you know when you are winning.
True enough, a $2M portfolio rising at an average 10% / annum can support a life on credit. After all, it isn’t too different from what I do anyway. Except the way I see it, I borrow the equity AND I work a regular job so I get $140k / year to live off and invest with. Now my annual living expense is pretty close to $20k (Yes I live cheap), so I get to re-invest $120k / year, which earning 10% return through capital growth begins to far outstrip my interest payments.
As you could imagine I’d only have to keep that up for so many years before I cash in, kill all debt and live on cashflow rather than equity. Lets face it with no real cashflow I can’t quite stomach the risk from living on credit.
What I like about developing though is you are value adding which means not only do you gain from a rise in the market, but you can design and plan your own capital increase. That (to get to teh topic of this discussion) is a benefit of development.
A safe bet would be between 4.5% and 5.5% gross yield. It may vary slightly depending on any reno improvements you’ve made since purchasing.
In general CBD 2+ bedroom apartments (in just about every CBD) come in at around 4.5% – 5.5% gross yield. The extreme ends (>5.5% or <4.5%) tend to be studio / 1 bedder or penthouse / furnished “executive” apartments.
At the moment it is quite cheap to rent in the docklands, however having said that the prices there are negotiable as well.
I inspected a property there. A nice 2 bedroom place. The owners had it on the market for a while and had dropped the price from $420k to $380k and said they needed to get $380k for it at the very least. I got the impression this was their mortgage payout figure.
With that in mind I imagine a number fo the sellers in Docklands are in a similar position and you may be able to negotiate a reasonable price. I think, considering the age and location of the docklands apartments that a reasonable 2 bedder could be had for around the $350k mark, though with some persistence you may get it a bit lower. On the other hand there are plenty of good 2 bedroom places deeper in the city going for less.
Docklands is about lifestyle and i think if you give it at least another 5 years it will be a hot place to live and own. At the moment it is a little remote from the traditional activity centres of the city and is right where all the industrial sites used to be. So there are cheap old houses, brothels, light industrial and so on all around that part of Melbourne. It will take a while to get more like East Melbourne, it may never make it. But it is nice enough I think (I live in East Melbourne, so I’m biased).
I hope this has helped.
As a broad general statement I’ve found that units and apartments have higher rental yields than do houses.
I’ve also noted there is a bit of a cycle with these properties; they have a high yield, high enough to be positive after mortgage payments so people buy them. As they are bought up and traded again the rental yield is squeezed down. (supply and demand). With low yields and high prices no one wants to buy them so the yields slowly come back up (either as a result of more cheap units on the market or just a matter of time) until a critical point where they are bought again and prices rise.
I remember 5 years ago looking at a unit well located in Canberra selling for $45,000. It’s rent was $95/week. I wasn’t very well educated in this department at the time or I would have bought it. But I looked last year and a unit just next door to that one was selling for $90,000 and renting for $100/week.
So at the moment I would tend to agree that it is harder to find the pot of gold unit. But! that is only taking into account a beginner with only starting knowledge and resources.
For example: If a person had enough money to back them initially they could: buy a large lot. Build 4 units, sell 2 to pay for the other 2 and voila! You have 2 very much cashflow positive properties in your portfolio. (there are other things you could do as well).
But in my position I don’t have any cashflow positive property. I have some very good CG earners though and shortly I’ll be doing the above which will have a ripple effect on my other properties. That is once the above one is complete and I’m no longer paying it’s mortgage and receiving income from it I can afford to develop a block of land near the beach I’m holding onto, sell it and pay out a nice family home so that one is positive. Then I’ve got 3 properties, all cashflow positive (very, not just a little) and with lots of equity to rinse and repeat. Buy another 3 properties, develope (or reno) one, sell it to pay for the others and so on.
That is just my strategy and it is working so far (and looks good on paper). There are other strategies people use, like relocatable homes on cheap holiday location lots, student group houses, backpacker accomodation, commercial development and so on.
It’s a big field and takes some effort (that’s why it’s worth money to do, if it was obvious and easy it wouldn’t make much money).
I don’t quite understand… Depreciation is a matter of assets reducing in value due to fair wear and tear. To my knowledge it isn’t related to the income they may or may not produce.
For example:
Carpet laid in an investment property is depreciated over (I think) 10 years. That is to say that at the end of 10 years the carpet no longer holds commercial value and needs to be replaced to maintain value. Thus each year you can claim 10% of the value of the carpet as depreciation and this in turn reduces your taxable income (even below $0). The assumption is that you will need to pay the full replacement cost at the end of 10 years to put in new carpet.You can carry tax losses over from one year to the next. Depending on your exact set up I believe you can also carry your trust loss over to your own income, though this is something a tax accountant / lawyer would need to be involved in.
Yeah salesmen always say buy. Not too surprising. I’ve also never taken, nor bothered asking the advice of a salesman in regards to what they are selling. That’s just common sense.
I used to work in a patissierie and would find it funny when people would point at a cake and ask if it is nice. I always wanted to respond with “oh, no sir/madam, we only stock unpleasant cakes made from cow dung.” Asking a salesman if their product is worth buying is not seeking advice so much as hearing what you want to hear.
So with that in mind I can say I’ve never heard anyone tell me “now is the time to buy”.
And in 5 years time we will be past the slow down and in another speed up. Then there will be another slow down and the sky will fall, then there will be a speed up.
I can’t say I’ve lived all that long, but certainly long enough to know that what goes down must go up just as surely as what goes up must come down.
However it is important to note that house prices are higher now than ever have been. I recon in another 5 or so years house prices will also be higher than they ever have been. To my mind economic slow down or not if the equation (investment equation) works then it works.
Economic slowdown is based off a national aggregate of results, not off my results. There will be many who don’t go anywhere, some who drop a little, a few who drop lots. At the other end of the scale there will be some who go up and a few who go up lots. I think whether the economy is slowing or growing it is roughly the same people in any case. I don’t believe (wrongly or rightly) that I’m in the group that go down.
My net worth has steadily risen throughout my life without any significant set backs through boom times and through bust times.
The market is never right for buying according to popular opinion. And if by chance apparent popular opinion is that it is the right time to buy, you had better not. [biggrin]
I think a better question is: if now is not the time to buy, when is?
Do your numbers and if they are solid then buy. If you come up with something better to do with your money then do it.
I have never had a time when someone has told me “now is the time to buy”. It’s always: “Oh the market is at it’s peak now, you should wait.” Or “The market is still going down now, you should wait.” But you know what? Those people never own any property (or other real investments for that matter) because they are always waiting.
A couple I know keep telling me I’m crazing for investing in this or that, but even though their income is much higher than mine, I’m the one with all the assets (no cash mind you[blush2]) and they are always waiting for the “right time”.
I would perform a cost benefit analysis.
Do this by getting a bit of paper (or better yet a spreadsheet on computer) and on one side right down all the benefits of keeping it (dollar values). eg: rental income, capital gains, tax benefit of depreciation. and on the other side of the page write down all the costs. eg: interest, rates, body corporate, land tax, stamp duty (that you’ve already paid) and legal fees.
Then add up all the benefits and subtract all the costs. This is the net outcome of the first part of the analysis.Now on a new sheet do the same for selling the property. Eg: benefits include capital gains (well that’s pretty much it) and the costs: legal fees, stamp duty, interest… blah blah.
Add up the benefits and subtract the costs.Now you should have 2 figures. One is the outcome from keeping the property and the other is the outcome from selling. The one that is most positive is the one you should do.
You may have to do some “what if” analysis on this too. That is, if you don’t know how much you can / should sell for you can work out everything else and you should then see what you’d have to sell for to make it worth your while to sell. Likewise you should be able to figure out how much rent you’d need to make it worth keeping.
Numbers are you friend and spreadsheets are the pub you hang out with them at [biggrin]
Remember there are two things that are unavoidable: Death and taxes. Don’t be afraid of either as they are the outcomes of life.[buz2]
If you are paying tax it means you are making profit.Hi,
I’m curretly selling a property myself. I’m using http://www.DIYSell.com.au and odly enough eBay.com.auWithin a couple of hours of listing on eBay I got 2 enquiries. I’ve now sent out a number of contracts (and section 32) to interested parties. Contracts are going to people who enquired through DIYSell and eBay. DIYSell costs $100 and eBay costs I think $70 (or there abouts).
The eBay auction doesn’t form a contract of sale, it’s just a form of advertising, but it’s a handy place to go.
I’m actually in the process of putting together a web application you can use to list property, include inspection reports, titles, permits and so on. Also photo’s and links to other gov sites and stuff so you can list your house and provide electronic copies of allt he required doco. I’ve spent so much money in title searches, print and mail I just think it could be cheaper.
Hi,
My friends kept telling me no with all of my choices in the share market. They are respectable, intelligent investors themselves so it was hard to ignore them. But This past 2 years (good market) I’ve made 60%/year on my cash whereas they made 15%. I did my homework, like what I saw (including the risk) and ignored the negative nellies. It was just that the people telling me no had a lower appetite for risk and had personal opinions based on lack of knowledge that made them say no. There was no greater ability represented.You really have to be confident in your own ability, after all it’s your money and future, not theirs.
Surrey.
Hi,
There’s nothing in the seminars that you can’t learn on your own. The way I see it is that if you can’t learn it on your own you probably not the sort of person who will put the info in the seminar into practice.Money is a representation of resource, of applicable ability to solve problems if you will. Sitting on your bum solves only the problem of sore feet and is so easy it is not really worth considering a resource and thus no one pays for you to sit on your bum. You could for example work a job and use the money to buy food and shelter etc… or you could equally work to grow crops, build a shelter and so on with no money at all. They both amount to the same thing and both can be substituted for one another.
So to think you can throw a bunch of money at someone and think it will magically mean you get money is non-sensical. It doesn’t and can’t work. Money = applyable resource. You can expend brain power (resource) to learn stuff and you can spend money for someone to teach you, but you can’t spend money to make money. You can only convert between money and resource (effort).
Are seminars scams? Only the ones that claim you WILL get rich by attending are scams. The ones that claim the knowedge imparted can be used (effort, resource) to get rich are honest.
Steve’s seminars are quite good value for money in the grand scheme of seminars (less than $1000) and the claim is only that you will be pointed in a correct direction.
The bottom line is you have to generate resource to convert to money.
Surrey.
Hi,
Regarding the laundry link I posted: That was just the result of a five minute search on realestate.com.au for the purpose of an example rather than a recommendation. If I was looking for only 5 minutes and found this then after 5 months I imagine there must be opportunities to be had.
As Buzwells said, I think networking leads to the best opportunities.
You have to work to get cashflow positive. No such thing as money for nothing, if that was the case we’d all be millionaires.Personally I’m not that crash hot on cashflow positive property. I look for it and try to get it, but ultimately I see more long term wealth in CG trading in to make more CG. At the end of the haul trade in enough big growth properties to pay for the rest and then you have passive income to live on. Well, it’s a theory at least. [biggrin]
Hi,
Subdivision has little or nothing to do with houses themselves. It’s the land that is subdivided and it’s the land that is owned and has a title registered with the government.What you put on the land may influence the approval of a subdivision, but ultimately is a temporary development. If you wanted to cut a block directly in half and it had a big house that covered the entire block you would have to include in the plan of subdivision what happens to the house in order for the plan to be considered (like you’ll knock it down). But the house itself is not being sudvided, only the land under it.
If that clears things up.
Hi,
What it largely comes down to is two concepts:
1. Leverage
2. Liquidity
3. Ease of entry(ok 3 concepts and probably more, but hey!)
1. Leverage
Property being, as you say, perceived as more tangible generally inspires confidence in lenders to lend on higher LVR (up to 106% in some cases). What this means is that for $10,000 (excluding closing costs, see point 3 below) I can buy an asset worth $50,000 (LVR 80) and earn rent and CG off that. I can also better take advantage of discrepancies in market values; eg renovate at low cost for high return. Shares generally allow only up to 70% LVR (sometimes 75) so that same $10,000 would only get me $33,000 asset and there is greater risk (due to market forces acting more rapidly).2. Liquidity.
Shares are vastly more liquid than property. This has great bearing on purpose and effort of investing. That is to say, in building a retirement nest egg the price stability of property (due to low liquidity and government backing of ownership rights and so on) makes it attractive for long term investment with low interaction cost. Shares are very liquid so lend themselves to use as temporary or only medium term investments (people, please I’m generalsing here). They are more volatile and require more attention (which costs).3. Ease of entry. (and tax benefits)
Property is something everyone has at least a basic grasp on if only because it’s where we live. Since each of us individually represents some portion of the market we usually feel more able to evaluate property. Also, we usually feel we should own our own home at some point so most people will sooner or later make at least one property purchase. This makes the education requirement and evaluation requirement easy for entry to property. That’s not to say it’s easy to be successful! There is a huge industry built up around getting warm bodies in houses. this industry has made lots of services available that turns the process into simply signing on the dotted line and voila a huge asset. However shares have much much lower closing costs. I personally pay $25 to make a trade and the land I just bought I paid $3,000 to make the trade. So shares are monetarily cheap to buy but require more perceived brain work. To generalise I’d say most people see brain work as being more expensive than money (I don’t see it that way, but I’ve always been wierd).In summary:
People like property because:
1. it is perceived as real and attracts a good LVR so small amounts invested are leveraged against a relativley large asset.
2. Low liquidity of houses generally equals price stability. This makes people feel comfortable and also implies less personal involvment with the investment.
3. We are lead throughout our life toward the belief we must each own a house. We each also live in houses (or units or whatever) so it is easier for us to understand them (or think we do) and the associated market. This leads lots of people into property investing as they don’t feel they need any additional education to do it.Anyway, that’s my take on the situation and why property investing is seen as good.
Ironically it is because of the masses of people blindly buying houses without education that makes houses such a good investment for people who do have the education. If everyone was equally well informed and involved in property investing the market would be a very different place indeed![worried]
Hi,
Essentially:
At some point crown land (land ownded by the government and not by a private individual) is released for sale through some governemnt apointed company or department. That appointed company cuts the land into useable chunks and probably puts in roads or plans for roads and sewer and so on (or not if its rural). The chunks are given a title and private people buy them, you for example.
So you have a chunk of land. You can build a house on it or, if the council approves (they’ve got stacks of rules on this) you can further cut your chunk of land into smaller chunks. In other words:
You can take your division and further divide it, ei sub-divide the land (division).
So if you had and acre sized division of land you might choose to subdivide it into 4 1/4 acre blocks each with their own title. You would then own 4 blocks of land the sum of which would equal your original 1 block. Since you have 4 separate titles you can sell them individually (theoretically for profit).How does it work? Well you need to contact the local council and find out how to submit a plan of subdivision. You will need to get a planner / surveryor to draw up a plan for council approval. If it gets approved then you fill in stacks of paper work and get new titles for each fo the new blocks of land.
How does it affect the property? Well there are a couple of different ways you can subdivide but basically you either produce new blocks that stand alone (like the one you originally bought) or you create common property and thus must also craete a body corporate to look after it (like common driveways or front lawn or pools and such).
How can you make one happen? Talk to the council then hire someone to draw up plans and submit them.
Hi,
I’m not quite sure what you mean, but I think you may be confusing claiming interest on a split loan against tax with using rent to pay down a split loan.I’ll try to clear this up (if that’s what’s happened)
1. A split loan is where you refinance your mortgage for your primary place of residence(PPOR) to purchase an investment property.
2. You then apply all the interest from the whole mortgage against the investment portion of the loan and leave the PPOR principal to reduce as payments are made.In this way the rent from the investment property is paying down your PPOR mortgage giving you more equity in your home (which upon sale is CGT free). This also means you then claim the interest for both portions of the split loan as interest on the investment property effectivley making it a tax deduction.
Unfortuanately this doesn’t fool the ATO. They really aren’t as thick as we’d like to think and they have made a ruling that says you can’t do this. You can only claim the proportion of interest attributable to the investment property as a tax deduction, the rest you have to suck up. You can of course apply rent to anything you like, it’s just income like any other. The only difference in the eyes of the tax department is expense.
The basic premise is that expenses incurred to gain income can be deducted from the taxable amount of income declared. Interest on a mortgage for your PPOR is not an expense to gain income. Interest on a mortgage on an investment property is expense to gain income so you can deduct it from your taxable income (effectively paying for the expense with pre-tax dollars). Dont’ mix the two up or the ATO will hunt you down and skin you alive! [eek]
