Forum Replies Created
Hi,
My advice would be to talk with local real estate agents who manage rental properties in the area. Also do some research into town planning or strategic growth plans of the council.For good or for bad perception is reality and house prices reflect that perception. That means for prices to rise, perception of value must rise and on a macro scale one investor is unlikely to do that. So if after talking with people on the ground you feel that the general perception is one where investment properties fair poorly then move your attention elsewhere.
The town next door might offer better opporunities, you never know…
Hi,
The only real passive income I have is a small storage unit in Melbourne. It came with a great huge 6*6 year lease with full management. I paid cash up front (so no debt) and it faithfully deposits $50 each month into my bank account. I’ve got a stack of shares geared up with a margin loan and they return dividends enough to pay the loan rate + a small amount extra but I still don’t think they are that passive. I have to watch them and trade them in at times and they are heavily geared so that I have to be fairly active to keep them performing.So passive income also tends to be low income. After all risk = return, the greater than chance for a negative outcome, generally speaking hte greater the positive outcome (like playing roulette gets you 36-1).
Surrey.
Body corporates must be set up in any situation where there is common property such that no one owner clearly has sole responsiblity and ownership rights.
Generally this covers driveways, nature strips and shared gardens or carparks. I would image this would be the case in the situation where the duplex shares teh one roof and joining wall. This that case no one owner clearly has responsiblity for the upkeep of the roof or that wall. I suppose the issue arises when the roof is damaged and needs repair. Damage on one person’s side may still affect the other person (vermin, security, structural damage from water etc…) So I would have thought a body corporate would be required.
However, and someone should check, since there is no land involved in co-ownership (just a roof line) then a body corporate may not be created? It would be messy if the roof was damaged and the person whose side fo the roof was damaged refused to get it repaired. Could you sue them for possible damage to you property?
What you say, Minimogul, is true. It is possible to get CF+pve property that rises sharply in value. However traditionally chashflow rich places are exactly that becasue they have historically shown low or no growth.
Regional centres have for many years suffered from the young’uns up and moving into the city. Only recently has there been a significant interest in regional centres. However I think in time it will ebb and flow like a tide and the big gains in value in the country will stagnate while the city continues forward until such time as the cashflow and price is right in the country and boom it happens again.
What we can get from this is that like all things, if you do the right research and with a little luch you can get the goose that lays the golden egg (statistically 9 times out of 10 [biggrin])
An example from my life:
In mid 2000 I was umming and ahhing about buying a flat in Canberra. $45k getting $100 / week rent. I looked at the past 10 years sales and while the flat and other had been sold a couple of times the price was flat (actually retreated one year). I didn’t know muchat the time so I put my money elsewhere. 3 years later and the same flat is being sold for over $100k but still renting at about $100 / week. Oh well.Surrey.
In general land appreciates and building depreciate. I think (also in general) people want houses that are nice to live in. This usually means new houses but an old house with character and charm that has been renovated so it is not smelly or impractical is just as good as a new house.
All things being equal the same block of land with a new house on it will be more valuable than the same block of land with an old house on it. However, just try to find a block of land in the middle of Carlton without an old house already on it! Reno is done rather than demolish because the relative returns are much higher. One could spend $30k doing up an old house for a $100k profit or one could spend $200k demolishing and building a new house on the same land for $100k profit (figures are example only and in some cases the historic heritage carries intrinsic value). Investors prefer to spend the least to make the most so old houses get renovated rather than demolished.
Mind you, if I had the money I’d always demolish and build new for my PPOR as I know what I want and I know I’m not going to get it in an old house (or most new ones for that matter).
Surrey.
Hi,
The sale of a house is not too different from the sale of anything else.If you were at the market and busy haggling with the storekeeper over the price of a jacket and another person entered the fray offering more than the original price the store keeper can so “sorry mate I’m selling to this guy who is offering me more” and that’s that. Same too with a house. Until you’ve actually entered into a contract all signed and sealed the house is still for sale at whatever price the vendor chooses.
You say you’ve put down $100 deposit? Was anythign signed at that point? Do you have a receipt and some sort of paperwork indicating what that deposit is for? That may have been a holding deposit for example which means the vendor wont sign another contract until a certain time period has expired, but only if you have something in writing that says that.
The game the agent is playing is called “get the highest sale price”. [biggrin]
Until that contract is signed and witnessed by both you and the vendor a price has not been agreed on and no obligation to sell or buy has been created. (though it is a bit rude)
Surrey.
I’m buying. I agree in principle with you g7 but I feel in the areas / markets I’m buying that time is now.
I just bought a block of land and getting a house built on it. I’m getting $6,000 off the house price (to stop me going to a competitor) and $2,600 worth of landscaping for the block as part of the deal. Not to mention that the block is big and relatively inexpensive. The only question is how long do I have to wait for the real growth to kick in? I’m guessing 2 years for really solid returns. But that’s better than my other options at the moment.
surrey.
And in case the link doesn’t work:
$188,000
MANDURAH
Located in fast growing community of Waroona is this great investment. Currently tenanted as commercial laundry depot @ appox: $1800.00 per month. Leased until 2006, with 5 year option over 400sqm of floor space.This place is a commercial laundry that is very positive cashflow. 11 second rule:
$415 / week = $207,500 price for 10% return. Since the price is < that = most likely cashflow positive.The draw backs I see: commercial property generally needs 60%LVR or lower and from the photo’s it looks a little old so may need some maintenance soon. Lease will expire next year so be prepared for it not to be renewed.
Good points: cashflow positive for sure. Waroona is set to burst at the seems in the coming couple of years. Alcoa is investing very heavily in that area and there is a great demand for commercial space.My father-in-law has presold his 5 unit development there and pre-leased his yet to be developed residential / commercial land there also (I missed buying the block next to his by a matter of days for only $42,000 [glum2])
Though in general WA around Perth is all about CG. One of my places has jumped up in value by nearly $150k in the past 2 years (doubled in price) in Mandurah but the rent is still way down because the house is crap but the land is huge and everyone wants to subdivide it (me included)[biggrin]
Especially if you have no job always go for what gets you more money.
Personally I couldn’t enjoy a holiday knowing I was blowing all my money and would return with nothing. I think my partner would understand and probably appreciate my investing for the future.
30% return on $20,000 = $6,000 / year. Considering you are putting in $5,000 you will be seeing close to a 100% return on investment.
I have trouble believing a duplex would cost $20,000 or that it would return 30% however. Is it actually a park home (a cabin in a holiday park)? If it is you can’t get a mortgage for it and with no income you would have a great deal of difficulty in securing a loan of any sort.
I would recommend saving the $5,000, get some form of income (any sort will do) then certainly get some assets.
Surrey. (I’m also getting married soon and trying poorly to save for the occasion!) [biggrin]
You’ll need a solicitor that’s for sure.
But I thought:
1. If the flat was renovated (assuming a good job) then it would rent for more money.
2. The tenant wouldn’t want to renovate themselves out of an affordable flat.
3. You can’t promise the flat to the tenant forever nor can you not claim a higher rent for a better flat.
4. If the tenant stuffs up what happens?
5. etc…So:
1. get the tenant to write up a proposal including diagrams, materials samples / colour schemes etc. (just like if you were getting a third party in).
2. ask the tenant for a quote on their time to do it and for materials.
3. take the proposal to a professional (or two) nd get them to quote on the job.
4. Now you can either:
(a) “pay” the tenant to do the reno by not raising the rent by as much as you would until the cost of the job is paid off.
(b) Pay the tenant cash for the reno and raise the rent accordingly, presumabely the money you paid them would be used to offset the rent increase.
(c) Get a pro in to do the job and raise the rent (the tenant doesn’t get any benefit other than living in a nicer flat)Either way in the above scenario you have a formal contract (hence a solicitor) for work done and consideration in kind. This means if the work doesn’t meet the job specification in the contract you can claim remuneration / reparation (probably covered by insurance too). It also protects the tenant because it guarentees you will provide some quid quo pro for the work done.
I would avoid any situation that starts sounding too much like “mates” verbal agreements as they always end in tears (generally the land lord’s).
Hi,
The amount of the deposit is not a mandated quantity, nor does it help or hinder the vendor. The deposit money is help in trust upon settlement where it is released to the vendor as part of the settlement money. As such at $1 deposit is legally and financially similar to a $1,000,000 deposit. Failure to settle after the contract has gone unconditional results in a default payment based on the amount of the property. This default payment is firstly taken from the deposit and the rest taken from the purchaser. So the only reason a vendor should feel more comfy with a larger deposit would be if the (I think) .2% default amount is quite large and it is likely that the purchaser will default.Given that it is a $70,000 property the default amount would be $140 for breaking the contract (probably might get chased after for some legals and interest). But I’ve found if I point out to the realestate agent that I’m not wandering the steets (metaphorically of course) with $7k to have sitting in a trust account for several months doing nothing they have willingly settled with $1,000; easily enough to cover defaults or late settlement or what have you and enough to show I’m serious, but not so much that I have to liquidate valuable assets (shares, managed funds).
I bought in WA a $179k block of beach land on a $1,000 deposit after the REA asked for 10%. Given the above reasoning they agreed no worries and off I went (land now settled).
Surrey.
There is the ability to roll over capital gains from one asset to another, though in Australia that is only avaialbe with certain business sales and not with IPs.
I think it is called rolling over one “active” asset to another “active” asset. However once the final in the chain of assets is sold the CG crystalises on all previous events and should be calculated at that point.
I have to warn you that i read this at the ATO in 2001 so a lot could have changed since then. The idea was that you could sell your ongoing business concern and use the proceeds to purchase another ongoing conern without paying tax (yet) with the idea that throughout the period you are “in business”.
Still none of that applies to residential investment property, though it may apply to such things as hotel businesses (not just the hotel building) or retirement community businesses (not just the units involved).
Oh and not that it is mentioned here but the word is advice as in “I will provide advice” not advise such as: “I advise you not to jump on your toes”
[biggrin] just something that bugs me (also, a lot not alot)
hmmm strange mood I’m in.[blush2]Hey thanks everyone. Exactly the sort of info I need. Now I’ve got a few “buzzwords” to search the net on. I often find that the hardest part when researching something new.
I’ll do a search for the terms G unit and H unit. I also like the idea that by getting a remote you don’t need to wire in extra controls. Sounds good.
I’ll be getting the fans installed during the build so there will be an electrician on site wiring up the lights and kitchen and so on. I don’t expect there will be any particular extra cost in wiring in the fans at the same time.
I’m not looking for flashy fans, just neat and tidy looking (better than bare light bulbs) and able to keep the occupants comfy in summer.
If I come across anything in my searches I”ll post it here in case someone else does a search on cieling fans in the future.
Surrey.Yeah, sell the worst tenant rather than try to evict. Selling is quicker and easier and you get money at the end of it[biggrin]
pay down the loans on the other two better propeties and then see where you sit.
As for shares: well I’m just now selling my shares (should have sold 2 weeks ago but…) as I’m seeing interest rates rising, US economy sucks hard and we have just come off the back of a great growth period in aussie stocks. Mind you I’m selling because I’m not a real share market afficionado and I’m pleased with the returns I’ve got so don’t go thinking the share market wont work. But as was said property offers better leverage and you can take personal action to increase equity (heck just giving the outside of a house a good wash can raise it’s price).
Surrey
It’s a fairly standard referral system. That is if I go out and, having bought through Devine, evangelise about the wonders and such which leads to more customers for Devine they pay me for the effort and the reason I’d feel rather inclined to refer and overlook minor stuff ups is that I know the person I refer on will get a dishwasher.
Now, I’m assuming they get the dishwasher at some remarkable discount direct from the factory or such so it is cheaper than other forms of advertising.
Considering I’m making a $200,000 purchase I don’t think the $1,000 is much trouble for Devine. If it was a $20,000 purchase then it would be different…
I’ve thought of alpine apartments, but I had one major consideration:
Global warming.
Sounds a little dire, but hear me out. It is a well proven scientific fact that we are changing our climate and that change is an increase in average temperature. That will lead to reduced snow yields and shorter snow seasons without a doubt. Of course this effect may have no major effect for another 30 years say, or it may be 10 years. These things are hard to know. But what will it mean to the market pschology? Already I’m influenced to not buy alpine… But! there are summertime activities up in the alps (mountain bikes, hiking, 4wd, etc…) so if I was to look for an alpine apartment I’d be looking in areas that support the summertime activities because they will be sure to become more popular [biggrin]
Of course, maybe rents will go up (and thus yield) during winter because of the reduced ski season = less supply of ski time = more demand on the use of those apartments.
Those are my thoughts anyway.
Others no doubt have their own (or at least I hope so).
Hi,
Well I’m not sure what you mean by claim, but:To borrow funds the bank needs to know how much the place is worth (they’ll do a valuation) and they need to know how much is to be borrowed (loan to value ration: LVR) and then how much net income the borrower gets.
There are legal fees (land transfer, title search etc…) and loan application fees which will probably all up total about $800 or so.
Assuming he gets the $7k then all up he has put in $8k leaving $142k = 95% LVR = lenders mortgage insurance (assuming he can get the loan). The saving grace here would be if the property is valued more than the asking price (very unlikely).
So your friend would need another $22k to bring the LVR down to 80% which is generally the cut off for insurance. This extra could be equity in other assets (another property, or a guarantor’s property). However, the closer to the 80% mark he gets the less insurance he’ll have to pay and it may be that the insurance is not that much.
Shopping around you can find home loans on special with no application and set up fees (save about $600 there).
Is that the sort of info you are after?
Surrey.
Hi,
Yeah I though of that[biggrin]
I checked their testimonials and such, but they only use their first names.Anyway, I’ve got a name now. I cross posted to the Australian Hayabusa Club forum (the motorcycle club I belong to) and one my biker brothers came to the rescue. He bought one about 4 years ago, made a stack of CG during the boom and sold it nearly 2 years ago.
So thanks for those who contacted me and thanks for putting up with me bumping my message, but as a wise man once said: “deals are made, not found”[buz2] and I’ve made a deal worth $1,190 (new dishwasher) for zero outlay.
Surrey.
PS: if anyone else is buying a Devine home just ask and I’ll refer you. At this stage I don’t know if they are any good so I wont actively tell you they are.
Still not one name?
Hard to beleive no-one here even knows a single person who has bought a Devine home. Hard also to believe no-one knows someone who knows someone!
[blink]I just need a name, no other details, just a name oh please wont someone give me a name? My kingdom for a name.
Hi,
I know one thing that wont endear you to many agents and that is putting in lots of low-ball offers hoping one will stick.The concept of “below market value” is a bit fuzzy anyway. For example: Buying a house that has just come on the market and only listed with the one agent you might then be able to advertise it in other cities / states or on the ‘net and get a better price. In that situation the seller got what they asked, the agent gets a happy seller and you effectively bought “below the market” because you had a wider market to value the property.
The other main way of getting something below the market is to buy in a different market to the one will use the property or sell the property into. That is a large 6 bedroom house might be worth more as university accomodation with 6 borders in it that as a family home for example. Finally I’d also say that renovation, as in engineering an increased market value is a popular way of buying below value.In essence: Time and money are interchangable (if someone has no time, they must pay more money and conversly if you have lots of time you don’t need to pay as much) And knowledge is power (knowing a NZ property will sell more to an Australia investor than a local)
So to find a deal you need to “make” a deal because the chances of hitting on the one house that will sell below market value before another investor comes along and offers more than you are slim.
