Forum Replies Created
Why not try for both? Find an IO loan that allows extra payments. That way you can pay your extra $100 pwk but not be committed to it. You could then access the extra equity when needed.
Or an offset account might work for you – you put the $100 pwk into the offset account and it reduces the interest you pay by deducting the balance of the offset account off your loan, and then calculating interest accordingly.
There are a few options to explore.
Wake
Hi Anthony
I did the Just Renos course also.
I’m sure you would pick up at least something from the seminar, however you may not feel your money is justified.
I know some people on the forum are opposed to spending money on seminars, and believe they can pick this knowledge up from elsewhere cheaper. I attend an average of 2 seminars a year, and read countless books, and I put the info into practice as an active investor.
Its not that this is not a worthwhile seminar, but I already had most of the knowledge they imparted.
Wake
It depends on what you are looking for. They give good general info about property investing, and basics about renovating. However, if you already have experience, or are reasonably knowledgable about investing, you may be a bit disappointed.
I thought there would be more tips and “how to’s” for renovating. For me, it was an enjoyable day, but not worth the money as I didn’t acquire the renovating info I was hoping for – it really only skimmed the surface.
Wake.
What is the vacancy rate in the area? If there is a strong rental demand, and the tenants don’t want to pay market rent, give them the required notice and find a new tenant.
Make sure you increase the rent in accordance with the market from then on, so you keep your investment in line with others. Most tenants expect an increase periodically, and as long as you are being fair you shouldnt have to worry about losing a good tenant. By the way, paying their rent on time is what is expected of them – that alone does not make them a good tenant, so don’t feel guilty.
Good luck.
WakeTFN = Tax file number.
It sounds like you’ll need one, and its easiest to apply for both at the same time – just tick the box.
Wake
Hi Puddlegum
If you have set a goal to retire at 40, you will hopefully have worked out what income you need to be bringing in to live on. Assuming you don’t yet have enough properties to generate that income, then generally, investors that are in the growing/accumulation phase will opt for IO loans, as the principal you might have otherwise paid can be put towards another loan on another new IP which can also be growing in value over time, and possibly bringing in income from day one. Reverting to P & I is not inevitable. Our lender has said that they recognise that many investment loans will never be P & I as this is not the best use of some investors’ money.
I feel that paying down a loan, or putting extra money in via a higher deposit in order to achieve +CF is giving you a false sense of return. Sure, on paper that property looks +CF, but how much harder could that extra money you contributed be working for you elsewhere?
If you are at your serviceability and equity limit at present, or don’t feel ready to buy right now, you might want to continue to pay down an existing loan, or put the money into an offset account, but I would still consider renegotiationg the IO term, as this gives you the most flexibility.
Congratulations on being in that “top percentage”. I’m sure you’ll reach your goal!
Wake.
Hi
I don’t know how Councils work out values, but your value for building insurance will probably have no connection to this at all ie. the difference between the market value, and Council value of land is not the value of the building for insurance purposes.
Building sum insured should cover the cost to demolish and dispose of the house, all fees associated with preparing and obtaining permission to rebuild plus construction costs. If you’re not sure what this should be, you can get an insurance valuation from a registered valuer for around $150 (I think).
Wake
Hi
Depends what state you are in. If NSW, and the vendor is the owner who strata titled, it s unlikely there will be an owners corp actively set up yet. This has to be arranged once a minimum of one third of the unit entitlements are sold eg if there are 6 units, and they each have the same unit entitlement, then if you sell 2 you need to activate the owners corp. This means, by onselling the units to you, technically they are responsible for establishing the owners corp, which is done as below. In reality though, as the new sole owner, you would only be consulting with yourself on matters such as budget etc, so very little action would be required until you then start to sell off the units.
This is quite simple, Select a strata management firm, or ask your solicitor if they can recommend one if you are not sure. They will charge a fee of perhaps a few hundred dollars to set up the books and records and handle the affairs on your behalf up until the 1st AGM. You will need to give them certain records eg copy of strata insurance policy which should have been taken out when strata plan was registered, certain plans and documents relating to the building, and the original owners’ details. Depending on the age of the building, some of the info may not apply.
The strata manager will establish a strata roll, will prepare a proposed budget, and once a third of the UE’s are sold off they will call and run the 1st AGM, at which time the owners will decide if they want to appoint a strata manager, or self manage. At or prior to this meeting, the manager should also explain to owners about common property, and their responsibilities.
Your sole responsibility ends at that meeting, and from then on the owners corporation is responsible for all common property matters. Levies will be collected to cover owners corp expenses. You will be a part of the owners corporation. As each unit sells, the manager will also supply sect 109 certificates to your solicitor, which details insurances, levies if struck yet, contact details for the owners corp, committee members and other legally required information.
You may find that much of the set up has already been done. If not, the cost is minimal, and can be done quite quickly.
It is essential that you ensure that the strata insurance is providing adequate building cover, as this is often dangerously underestimated, and an insurance valuation for approx $165 is a wise investment, even if you still own them all.
Feel free to contact me if you wish to discuss this further.
Regards
Wake
Don’t waste time worrying about whether it’s too good to be true. Put your time into checking market rents for similar units/houses to see if the rent is fair, and that market value is also fair (if not already done). In our experience you will usually get a higher rent return on a property that has several dwellings, than if being used just as a house. Check the types of things Crusher mentioned which should not take long, and if it seems OK, it probably is.
The beauty of such a place is that if one unit is vacant, you still have money coming in. We have a similar IP in a QLD mining area which I suspect is near where you are looking, We bought on a 8.5% yeild 2 yrs ago and it is now on 11.3% based on our cost, and 8.5% based on its current market value. Only 1 day vacant between tenants.
Good luck.
WakeI agree with Kim. If you are looking for nuts and bolts, or are already experienced at renos or investing in general, you might be disappointed. We felt as Kim did, that it was good info and well presented, but very little about the nitty gritty of renovating.
Wake.
Hi Kieran
Assuming you have a strata manager, just a simple letter or fax would be helpful. Tell them the problem, as you did in your post, but a little more detail eg are the rollers on the door past it, or does it rub or jam somewhere? Anything you can identify helps them. Provide contact details for a tradesman to arrange access ie managing agent, tenant or yourself.
Regarding the balcony “sinking” they need to know if its the floor tiles, or is the slab moving, railings unsecure? This helps them identify what type of tradesman to send out. No fancy wording required.
The owners corp is responsible for maintenance of the windows, doors and balconies in most cases, unless the unit was buit pre 1967 ish, in which case it is different. It is not reasonable to expect that your windows will be replaced if the rest of the building has original windows, but if they are all bad, then the AGM is the time to discuss a major project like that.
Normally, a manager will receive a maintenance request such as yours and issue a work order to the appropriate person. You might like to wait a week and then ring to follow up and find out who you can expect to be contacted by. It is not reasonable to expect immediate contact unles it is an emergency. The tradesmen are independant contractors and arrange their appointments to suit their schedule. Most are flat out.
It is also not necessary or helpful to demand anything. The strata manager knows better than anyone what the responsibilities of the owners corp are, and will attend to matters as long as funds (or committees) permit. If, on the other hand, the building is self managed, try the above and cross your fingers!
Good luck
Wake
crj has the right idea.
If you bought an IP for $200k and rent was $300 pw, the yield would be 7.8%. If you did well and bought under market value, you might be achieveing that 7.8% in a location where perhaps 6.5% was the standard return, as an example.
If over time, and for whatever reason, the accepted rental yield in that area dropped to 5% return, and you were still obtaining rent of $300 pw, the market value of your IP would now be around $312k.
Regards
Wake
My husband just swapped his 2001 Ford XR8 for an XR6 Turbo FPV Typhoon. Fantastic! Goes like a rocket, handles like a dream, very smooth. We opted for an 18 month old model with minimal mileage, leased through our business.
I drive a 2003 Falcon wagon, which I love. Fits everything, tows the trailer, plenty of power and great to drive.
Wake.
Sam & his website have been discussed before, so a search should reveal more info. They are legitimate, but as with any person/company offering properties for sale, you need to do your own due diligence on the area/type of property/rent/price etc to make sure you are comfortable.
The cheaper properties with higher rents are often in smaller towns, which some investors may not be keen on, depending on their risk profile.
Yes, he makes money out of your purchases, but he is running a business after all, and for those who may not have the time, confidence or knowledge to locate and buy on their own, its a viable option.
Wake
Hi Grant7
You should check with the local council. I know in some areas if the DA was approved specifically as an over 55’s complex, this is registered with the title, and although anyone can buy, only over 55’s can live there. Many sales agents are ignorant to the fact so their advise is probably next to useless. Having said that, you might get away with renting to under 55’s if no-one complains or realises.
Wake
Hi
I can only advise on the situation in NSW, so if you are buying in another state you should check with the Office of Fair Trading or equivalent to find out the body who can advise you.
The owners corp can resolve to register a by-law/s that gives each unit the right to the exclusive use of certain areas of common property. This can include front and rear yards, gardens, driveways, and the building including roof, walls, windows, services and other items that would normally be common property. This would mean that you have to maintain your unit as you would a house. If appropriate and done properly, this can result in the only common property being the common driveway, any services that run under the driveway, and perhaps some fencing.
Although the NSW Act allows duplexes to be insured seperately, no insurer will do so, so you might still have to insure together under a full strata policy.
Owner disputes – where do you start? There is the potential for disputes whether there are two units or twenty, including maintenance of the common property eg gardens and lawns, painting etc. Then there are illegal parking issues, noise, appearance of the lot eg one has curtains, the other hangs blankets on the windows and washing off their balcony, doesn’t put their bin away etc. The list is potentially endless.
The ultimate would be to buy both sides, but otherwise, just make sure you check the records to try to see what type of history the property has.
Regards
Wake
Hi
We have had access before settlement on two IPs. One was a deceased estate, and a special condition was put in the contract to allow access for specific purposes ie recarpeting, repair balcony rails and some painting. The second had nothing in writing, but the owner moved out a few weeks before settlement and agreed to let us in to do basic renos.
We have had access denied on another potential purchase. It was vacant and being sold by mortgagee in posession. It needed work before it could be rented, and would only work for us if we could do it before settlement as we were committed to another reno at the time it was due to settle. We were denied access on the grounds that if the sale fell through, they would be left with a unit that required even more work (mind you nothing we did would have made it look any worse!). We offered to put a clause in the contract that made us liable for rectification in that event, plus taking out insurance, but they still denied. We didn’t proceed.
Wake
Hi
We use a solicitor in the state we are buying in. The legalities vary from state to state so we don’t think its likely that a solicitor will be familiar with all state laws.
I could be wrong, but I recall reading that in Qld you have to use a sol. from that state?
Wake
Hi
Strata searches are carried out at the place where the strata records are kept (strata manager’s office or committee member’s home, if self managed), usually by professional searchers. Look up “strata searchers’ in yellow pages. There is not one central location. A report is compiled covering the various facets of the owners corporation, of which minutes are a small part.
The person requesting the search must be a duly authorised person eg owner, or purchaser who is authorised by seller. Records can also be made available if a court order is served.
Wake
Mat
Depending on what state you are buying in there is no requirement for the agent to supply the last two years AGM minutes. Ask your solicitor to arrange for a search of the strata scheme records, and you will receive a report on things such as the financial status of the owners corporation, any pending additional levies, planned major works, any disputes etc. The searcher knows what to look for in the records. The minutes may not mention matters that happen throughout the year.
Most strata managers will not tell you more than the most basic details and will advise you to obtain a search. It is not reasonable to ring up and expect them to give you a run down on the building off the top of their head, nor are they being paid to do so. They could spend all day fielding questions from possible purchasers!
Wake
