I don’t know why I keep replying, but you’ve completely missed the point. Don’t consult a PM, what would they know? Consult a lawyer, as this is covered by contract law. The PM is the worst person to ask this sort of question as they are completely biased in their opinion.

Contracts need to have ‘consideration’. In this case, the PM will manage the property to an appropriate standard and you will pay them. Pretty simple.

If they don’t provide an appropriate standard of service, then they are in breach of contract. The type of breach (there are a few different types), will determine what remedies you have open to you. That is why I said to give them a written warning that they are in breach of the agreement, and give them the remedies you need them to fix by a set date. If they still fail then you’re in a better position to argue a fundamental or anticipatory breach of contract, which you negate the notice period. This is 100% ethical, and to be clear the PM not providing a service and still charge them the full management fee for this period and try to enforce a termination period… THAT IS UNETHICAL.

If you still don’t get it, then good luck to you, but I really recommend you do some research on contract law.

PS. The reason I know this, other than the fact that I read a lot, is that I had the same problem with one of my PM’s and I consulted a number of lawyers to determine my rights.

• This reply was modified 10 years, 6 months ago by  TheNewGuy.

Bennytee wrote:

<div class=”d4p-bbt-quote-title”>TheNewGuy wrote:</div>
A tougher stance, would be.

I would send them an email outlining your concerns and ask that they rectify the problems by a certain period otherwise you will terminate the agreement.

If the fail, and since you have contact with the tenant give them new bank account details and get them pay you directly.
Wait until the latest payment from the RE is in your account then send them an email along the lines of ‘as per previous email you have failed to rectify the issues and I am terminating the agreement effective immediately. Since you have breached the agreement by providing sub-standard service, I do not believe I am bound by other terms of the agreement such as any notice period.’

I believe you will still have to pay their management fees for the notice period, even if you said you wanted everything handed over to you tomorrow. Remember, by signing the managing agreement you have agreed to the terms & conditions on that document.

No, you wait until you get paid and every RE I’ve used pays out the balance every month / fortnight, then you have the money and they have none, so they will need to get it from you. Most importantly though, a contract GOES BOTH WAYS – they provide a service, and you pay for it. If the Real Estate breaches the contract by not providing the service, then you don’t have to abide by the termination clause. For this type of breach though, you’ll need to give them the opportunity to rectify it, otherwise if they do choose to sue you, then you’ll probably be liable.

However, I really do recommend contacting the owner. I’m assuming they’re different people, and you really should bring it to their attention.

• This reply was modified 10 years, 6 months ago by  TheNewGuy.
• This reply was modified 10 years, 6 months ago by  TheNewGuy.

Hi Kieth,

Why are you going with a new build?… that might be another topic, but I’m not 100% sure I would do the same without looking at the numbers.

Anyway, my father has a couple of units that are set up through CentrePay and he actually likes it. Basically, it’s about as low as you can get, when Centrelink pays the rent / bond directly to the landlord. He is basically buyying very cheap places that have limited capital gains, but are delivering positive CF from the start and not much hassle with rent as it’s paid from Centrelink. There are other considerations, but I wouldn’t be doing this with a brand new place…

Hi,

Sorry, I thought you meant you had leased it earlier in the FY based on the comment ‘I had it leased in ’13 Financial Year’. So, do you mean you had it leased in 12/13 FY, and not 13/14 FY?

The question seems to simply be, can you claim any expense, including interest repayments if you never generated rent? That’s definitely in the realm of an accountant, however, it sounds ‘ok’ in that you are incurring expenses in ‘gaining or producing assessable income’.

I would be interested to know the answer, so if no one else responds, then let us know how you go.

I recently had a discussion with my bank manager about a similar investment, and it would have been my first as well. I wanted to get a loan for about $2mil to build a bunch of units. The basic information I got was:

– They would loan up to 65% of the final value of the properties.- You need to be able to service the loan at all stages. Since you don’t normally draw down on the entire loan at the start, you needed to be able to show you could pay this.
– The interest rates are higher than standard residential loans

As long as you could do that, they seemed pretty happy with me and didn’t really care too much about pre-purchasing. The pre-purchasing allows you to secure / pay the loan to the bank as you get paid. I was also able to put in $500k in cash, and my servicability was pretty good anyway, so I was hoping to sell very few of the units.

I found talking to an actual bank manager to be pretty handy to start getting some numbers for planning purposes.

Hi David,

I work in IT, but use that as an income source to support property development – I have a few friends who do the same thing. I can definitely earn more in IT than I probably would in RE. Out of curiosity, where in Qld do you live and what area of IT are you in?

I tend to take the family on an overseas trip once or twice a year, but since my wife only sleeps under '5-stars' and likes to lay flat on flights it can get quite expensive! So, I'm trying to cut back on the travel bit for the next few years, however, having my 2nd child due in a few weeks will certainly help that. I also play sport, at least 4-5 games of something a week, and so far my knees are holding up.

I do work a lot, and again, I'm cutting back on that, and have taken 3 months leave from my 2nd job. Well, that's not true, I've just taken leave from the travel component, which means that I won't be traveling with 'work' for the first time in 15 years!

Weirdly, I like learning, so I find myself looking up lessons on MIT Open Courseware (FYI – MIT have quite a few FREE online courses that anyone can do), or actually doing another course at uni to keep myself distracted from my day job.

Hey Krystal,

I was in a similar position a few years ago. I left it positively geared and it's really good to know that you have a house / unit generating an income while you're feet-up drinking mojitos in Vegas (.. i wish!). From a purely financial perspective, it's not the best as you end up with a high loan on your PPOR and lower loan on your investment, so the tax deductions aren't the best.

Considering my next PPOR was well within my means, and I wasn't stretched and looking for tax deductible savings, I left it and I'm pretty happy that I did. In the end, you can expand your portfolio and get one / two slightly negatively geared / higher capital gain properties that balances out the other property.

This might not be your situation though.

PS. If you do keep the unit. Get the equity drawn as a separate account and pay it down ASAP. Then redraw for investment purposes and buy another IP with it.

This has me a bit worried. I would like to know what this is based on, because it doesn't make sense to me and if I had a mentor, I would like them to make sense.

FYI – I just bought another IP, I didn't touch my offset, have a deductibility on 103% of the loan, and nothing is crossed….

Hi Littlelegz.

This is what I would do, but I am very new as well:

Account 1. Loan $400k. Secured against your PPOR at $650k

Account 2. Loan: $120k+ (80% LVR, more if you pay LMI). Secured against your PPOR. Tax deductible.

Account 3. Loan $250k. Secured against your IP at ~ $340k. Tax deductible.

What you have is 3 accounts set up with each account held against a single property. You use the money in Account 2 to pay for the deposit, stamp duty etc of the IP. The remainder of the IP value is held in Account 3. This way you have over 100% of the IP interest as tax deductible.

If you have already paid LMI on your PPOR, you could draw a bigger amount in Account 2 and use the LMI as credit and get a larger loan for the IP.