Forum Replies Created
I would get things sorted before you exchange contracts. I know someone whose house and the neighbouring house used to belong to mother and son (now both houses in different hands). The pool (or pool surround) in the yard of the people I know is slightly in the back yard of the neighbour. Obviously it wasn’t such an issue when mother and son lived in the two houses.
After years of living there, suddenly the non-pool owners have the yard surveyed to replace a fence and discover the pool problem. They discuss things with the neighbours, all is friendly, they even apparently discuss keeping the slice of back yard needed for the pool and giving the neighbours the equivalent in the front yard.
Discussions are going swimmingly (pun intended) when the non-pool owners slap a letter from a solicitor requesting $25,000 for the portion of land. Situation goes from friendly discussions to solicitors letters exchanged and much heartache and possible expense in sorting it out.
If you really want the house, I’d sort it out first. If the real estate agent knows of the situation, my understanding is that he/she is duty bound to disclose it to any other potential purchasers. You need to check on that, but if it is the case, I’d say most purchasers would want to sort out the situation before going ahead, so you may have time to get it solved, and not miss the house you want.
With the neighbours house partly on your land, I could imagine only trouble ahead and, personally, would not touch it with a barge pole.
Hope you can get this solved to your satisfaction, Wylie.
Just an update. Called again and got a yes this time. I have prepaid and, nice surprise, it is considerably less than last year.
Thanks to all, Wylie.
I know with our Westpac housing loan, our every day account (husband’s pay goes in, rent goes in) is fully offset, so the benefit is the same as we had with our LOC. In effect, we don’t have to deposit anything into the offset, it is our daily account.
Regards Wylie
I also find the same thing. We know a family who say houses are a lesser wealth builder than shares (each to their own), don’t understand our interest in IPs, waffle on about the sharemarket and say we’d be better off with shares.
We used to have these discussions, say that you can’t build a deck on a share certificate to improve it, etc etc.
These people have money, their kids are snots (like their parents), they have the latest of everything, three new cars in two years. Big consumers. Everything is outsourced, including cleaning, ironing, yard and dog washing. I just shake my head.
But they think they are on the top of the heap. Makes me laugh. I wish I had their (seemingly unending) disposable income, but I sure as heck wouldn’t be flushing it like they do.
Anyway, to each their own, but I agree that you have to be careful who you talk to. It used to bug me when people told us we were “lucky” to have investment houses. What a joke! No luck involved, is there? Just hard work sometimes.
But I wouldn’t have it any other way. I wish I had more houses to clean up.
Regards, Wylie
We had a LOC for four years with one bank and at the end of four years, owed the same amount. Admittedly the loan was for less than $40K and we had a much larger investment loan which we paid each and every month, because we had to.
With three growing boys, our cost of living was escalating, so I would keep drawing the LOC to it’s maximum. I also kept my credit card up to it’s maximum (only $1500 limit) which only cost me a couple of dollars interest each month, but it frustrated me that I couldn’t seem to get rid of it.
Whilst I was always very disciplined with our investment loans, I just found the LOC too easy to keep drawing down.
Eighteen months ago, we restructured under a professional package and changed our housing loan from LOC to P&I and haven’t looked back. We are with Westpac and anything sitting in our every day account is fully set off the housing loan. If we need to, we can redraw on the housing loan, but I really think twice about doing this.
Personally, I would not go down the LOC path again. The package we are now with is much better and for the first time in my life, I pay the credit card off each month.
Regards, Wylie
How do you know the owner of the house you are renting is subsidising your rent with his pay packet? He may have had a big deposit towards the $550K purchase price. He may also welcome the tax break from the negative gearing.
It is unfortunate that in four years you didn’t make anything when you owned your PPOR but that is just a matter of timing. In a different four year period, you could well have doubled your money.
We’ve been negatively geared (happily) to a greater or lesser extent for many years. It has helped us build up wealth. I know many on this forum thing gearing is not the best way, but it has been a good savings vehicle for us.
I know advisers suggest people could rent and invest the money they would have put into a (higher) mortgage, but I suspect many wouldn’t be disciplined enough to do this. I know we would probably find lots of things we “need”.
Anyway, we are all different, with different needs and goals, but, personally, I’d hate to pay rent.
Regards, Wylie
Hi,
So sorry for what you are going through.
Please get in writing whatever you can from the staff who have confided in you that your dad was not in a fit state to sign a will. If you don’t get anything now, they may forget the details or worse, be pursuaded (or not allowed – privacy laws are very strange) to give you any copies at a later date.
I know how this can rip families apart. It happened when my husband’s father died. Just days before he died, one daughter tried to have him change his will. He didn’t, and wasn’t capable of doing so anyway. One week after he died, we had a will reading. He had left rather an ambiguous will and no doubt, had his own reasons, but I have never seen such disgusting behaviour on behalf of three of his four daughters and I am glad I was at the will reading to see the true nature of his “loving” daughters.
Stay strong.
Regards, Wylie
Hi Chris,
Just a slightly different thought…
Instead of paying any utilities, why not try offering the first week free. I have never done this, but have seen it suggested before and think it would be a big incentive, maybe just to help someone decide to rent your house over a similar one.
Is there anything else you can do to spruce it up a bit, or is there a problem you cannot overcome, position, bad condition etc.
Regards Wylie.
Hi Colin,
Apology accepted, and very much appreciated. I was rather shocked by your previous post but I do understand that these posts give only a tiny glimpse of what people are really about.
I’m think I’m probably just as quick to jump to conclusions and judge people from a couple of sentences. That’s why I probably ramble on, to give a bit more background. (Hope it does not get too boring for anyone.)
Thanks again, Wylie
Hi Colin, your comments – Wylie your boundless opportunities never cease to amaze me.
When I checked back today you have twice the opportunities you had yesterday.
And just like a solid rock you are still sitting there. I am sure that you have a perfectly good and reasonable excuse for no action.
Perhaps your kids will understand. End of quote.I don’t apologise for not telling all my business on this forum. My kids certainly will understand.
When I was 15 my parents bought their first IP. Since then, I have renovated at least 28 times. (We certainly don’t have 28 houses between us, but some long term houses have been done up more than once and others have been sold.) We have cleaned up after tenants, painted houses inside and out, with my parents, with my husband and with my kids. My parents are self funded retirees and we renovate their properties and ours. We all pitch in and help. My kids are fantastic. They will be very wealthy boys one day, but there is not a snotty bone in their bodies. They are very gounded. My parents, myself and my husband have been very careful not to let them get grand ideas.
We busted our guts (my parents, my brother, my husband and myself and my three kids) at the end of last year to renovate a house my parents wanted to sell, after holding it 18 years or so. I couldn’t have been more proud of my family for the way they pitched in for weeks on end.
We are happily married, have a great life (with the usual dramas that three children bring). Perhaps you will understand that after all the renovating we have done, I’m enjoying doing nothing. Of course, when the next house needs doing, we’ll swing into action again.
If I have misread your post I’m sorry, but to each his own. I have just had the all clear after waiting a week to know if I had breast cancer. I could get a job tomorrow and we would have a better cash flow and probably could buy another house.
I choose instead to be home in the afternoon when my kids get home from school. We worked hard before I had kids and I can now stay home. I think I am lucky. Others would think they’d go mad at home. Again, choice.
Hope the above helps you to understand why we are doing nothing at the moment.
Life awaits!!
Regards Wylie
Thanks Colin, Your reply is well thought out and pretty much I think we’re on the same wavelength. We have two of these properties in the same street, both 36 perches. We plan to do the same to both, but as I said, we are in go slow mode at the moment.
Foundation, we don’t think this property was overvalued at $520K a year ago. House immediately behind (smaller house, same block size, unrenovated) sold $520K and right next door (unrenovated, same block size) sold $520K within a month of so of the bank valuation. I know valuers contact RE agents and check recent sales, hence the valuation coming in at $520K.
We do know that we wouldn’t get that now, but that doesn’t worry us a bit.
This house is long term, always was and unless disaster strikes, we’ll hold it for the long term.
We’ve watched houses doubling about every seven to ten years for the past 30 years. We know it peaks and levels (and sometimes drops). But for a long term hold, we are only interested in a valuation for the purposes of borrowing capacity.
We don’t care what these houses will be worth in 2015 because by then we’ll be living off the rent with no debt (and hopefully have built or moved a house onto each block).
We will no doubt probably have bought something else by then, depending on how the building pans out and what the cash flow is like.
Cheers, Wylie
Hi Colin,
While we have had fantastic capital growth on this property, to buy a similar house would be at least $450K. Whilst negative gearing doesn’t deter us, our children are growing and getting more expensive to feed and clothe (two teenagers – they eat a LOT and one younger) and I don’t want to stretch our budget so tightly we have to live on baked beans.
Our plan was to build a house at the back of this IP and use our “free” land to give us instant profit. We got pre-lodgement approval, but have not taken it further as yet and for the moment, have put it in the too hard basket. Also, the house we had drawn up would have cost $200K and with the boom and building prices blowing out, would now cost $300K (ballpark) so we have not pursued it at this stage. The back yard will not be going anywhere so we can pick up on this plan at a later stage.
I read some of these posts and think the energy and enthusiasm is fantastic. We are now mid 40s and have reached a stage where we live comfortably and we aren’t hungry for the thrill or the chase. In fact, we have burnt out a bit I think and are in lazy mode.
We will no doubt get back some motivation and get on with our plans to build but in the meantime we are enjoying doing (almost) nothing.
Cheers, Wylie
Just giving this some more thought, the house we bought in Coorparoo for $156K about seven years ago was valued at $520K last year. (We put about $30K into it over a couple of years and it is spic now.) I know that I can probably take off $50K off the latest valuation (perhaps more) in today’s market but I have a lot of faith in the seven to ten years calculation. Of course, it all depends on the area you buy. I couldn’t afford to buy that same house again now.
We have only bought in our own stamping ground and know it very well (but can’t afford it anymore).
Just a thought, Wylie.
I’m one of the believers in house prices doubling every 7 to 10 years. I remember when I was about 17 (1977) my parents went overseas for 10 weeks. They had just sold my grantparents house for $29,000. They advised an English family who were looking to move to Brisbane that for the value of their house, they could emigrate and buy a house to live in and one to rent. In the ten weeks they were gone, house prices moved substantially and they had to very quickly phone these people to tell them to hold everything because prices were on the move, FAST. Very similar to what we have just had again in Brisbane. Estimated the house they had sold for $29K would have sold two months later for $45K.
This boom is not the first time. My parents have had IPs for 30 years and I have had IPs for 25 years and the prices in that time have certainly doubled about each 7 to 10 years. Of course I can only speak personally for houses in inner south Brisbane suburbs where we have our IPs. Maybe the last 30 years is a “glitch” but I don’t think so.
I don’t know if things will keep going as they have for the past 30 years but I have made some very good returns on property, and I understand my local area very well. I also think that it is hard for each past generation to get into their first home. I suspect our need to live in a “better” house first, rather than settle for a dump or tiny house as a starter is one of the problems people are complaining they cannot afford a first home. My first home had two bedrooms and was 7 squares. I certainly could not afford a 4 bedroom, ensuited house, but that is what my son will be looking for when he wants to buy (I suspect), until the dollars pull him back to reality.
Anyway, to each their own. I am a buy and hold person, but have bought and sold a couple as well. I have sold for lifestyle reasons and have regretted it for a while, but ultimately, we like a nice place to live in and at least we won’t pay CGT on our own home. I really admire those on this forum who rent their PPOR and put all their funds to investment houses. Personally, I like the stability and permanancy of my own house, but if I was single or without children, I’d do the same (I think).
Just my thoughts. Wylie.
Hi Milly,
To give a different perspective, here goes.
We have always had IPs and while others think we are “lucky”, it has meant hard work and either no holidays or, at best, pretty average holidays. We have all our “needs” met and a fair amount of “wants” as well. Life is good. I’ve chosen not to work since our second baby and that is a lifestyle choice. I want to be home for the kids and we have worked and saved hard enough pre kids to enable this. Sure, if I worked we’d have much more to spend, but I like life like this.
My point is that recently we busted our butts helping my parents gut a kitchen and bathroom, repaint inside, landscape etc etc a long term rental they wanted to sell. We all put in several weeks of 12 hour days (including my boys). My parents paid us and we put the funds into our housing loan.
I then had a breast cancer scare, which turned out to be benign, but it did make me stop and think. My kids are 16, 13 and 9 and we’ve never had an expensive holiday. Because we’ve never had “spare” money before, we have decided to take a Disney holiday. Therefore, we’ll redraw the money from the housing loan and do it.
Our 16 year old may not want to go on holidays with us for too much longer – it is a holiday they’ll never forget and the housing loan will still be there when we get back.
My point is that sometimes, despite knowing what you “should” do with a windfall, you just have to go the other way. I have struggled with my desire to reduce the housing loan and wanting to have one decent holiday.
Obviously our situations are different, but perhaps you could put most of it into the housing loan and have a great holiday without tents.
If my kids were younger than they are, we would probably not do the big holiday. It is only their ages and the fact that they may not want to come with us soon, that we have made this decision.
Sorry to ramble. Hope this helps.
Regards, Wylie.
Hi,
Valuers usually ring the local real estate agents to get an idea of value. I used to type up the valuations in a big bank. The valuers were always conservative – after all, they just want the bank to be able to get their money back, nothing more. So, apart from the fact that they are sometimes crucial in getting your loan, bank valuations are not worth the paper they are written on, in my opinion.
Let’s face it, if you are paying for a valuation yourself, you can ask the valuer to put whatever slant on it that suits your purposes in getting the valuation.
Six years ago, we sold an IP. Bank valued it at $150K, we sold it for $215 a matter of weeks later. They were just lazy and didn’t do any work. I also know that we had to ask our bank (when refinancing) to actually come into the house because they often just do a drive by and if the house doesn’t look any different from the records of the last valuation, they haven’t a clue about what you may have done inside.
Of course, the drive by is fine if you don’t need the value to increase, eg just a refinance, but if you want more money, you have to prise them out of their car to actually take a look.
I take the whole valuation thing with a big grain of salt.
My parents bought a house inner southside of Brisbane a couple of years ago (before the boom) for $118K with land valuation of $115K. Bank valued it at $118, surprise, surprise!!
Regards, Wylie
Hi again, Just re-read your post and realise you are in Sydney, property in WA. Much as I don’t personally use agents, the distance involved would seem to make it a good idea to get an agent. You can’t jump in the car to check the property out if there are problems.
Regards, Wylie
Hi Candy,
We’ve had IPs for 25 years and never used a manager. We sometimes pay for landlords insurance, depending on the tenants in place at the time. We look at it each year in relation to the risks. For example, one house rented for two years now, fantastic tenants, no worries for us about them abusing the house – we don’t currently have landlord insurance. If the tenants change, we will review it.
Having said all that, our IPs have always been within a few kilometres of our PPOR. I do know that some (many?) real estate managers don’t do a good job (family member was a REA, I’m not talking without knowledge). I know investors using managers, who still find the tenants haven’t paid rent for four weeks.
Many used to (don’t know if they do still) just hand out keys to prospective lessees. Many don’t even take the prospective tenant through the house.
Personally, I wouldn’t waste my money using a manager, especially one who is slack. On several occasions over the years, we have used agents to find us tenants in exchange for a week’s rent. Almost every time, we have then found our own tenant, and usually do not hear anything from the agent.
I do understand that if we were going to give them the ongoing management, they would no doubt do a better job of finding us a tenant, but I cannot understand why they even bother accepting the challenge if they don’t bother.
On one occasion, a REA rental manager found a tenant for us, a prostitute who had done time in prison because she wanted to know what it felt like to stab someone in the neck. Luckily, she left with no problems, but it was a bit scary. Incidentally, she left the house in an immaculate state.
I seem to have rambled on somewhat, but if you can’t screen tenants personally, and if you don’t have any local plumber, sparky contacts etc, I suppose the management looks the best idea. If you can screen them personally and can be contacted to organise maintenance and repairs, I’d give it a go.
Good luck, Wylie.
Hi Dazzling,
Am I wrong, or did I read you also were having major problems with feral tenants in your non-residential IPs.
Please forgive me if I got that wrong, but I’m sure I read that somewhere in this forum.
I think it takes guts to run a non-residential IP for a number of reasons, mainly that I see many sitting empty, sometimes for months or years. I wonder if the owners are using the empty space as a tax write-off.
Secondly, with three kids (two teenagers) I certainly don’t need any more stress or complications in my life. If guess it all comes down to what you feel comfortable with. I have grown up with my parents having multiple residential IPs and so I am extremely comfortable managing our own.
I do acknowledge that my hesitancy in taking on the purchase and/or management of a non-residential IP would be matched by some people’s hesitancy in managing a residential IP themselves.
I don’t own shares because I don’t understand them enough. It’s the same with property. Go with what you are comfortable with.
I really enjoy reading these posts and do admire what you and others have accomplished.
Regards, Wylie
Marissa,
We recently had a similar situation with an IP in Brisbane. Nutty tenants pulling all sorts of tricks. We manage our IPs ourselves.
In Qld Residential Tenancies Authority (RTA) website has all the forms to print off and issue. We followed the RTA procedures. Make sure you give the proper notice and keep copies of everything.
We gave them notice several times, and they kept paying up. Each time they didn’t pay we gave another notice. We really wanted them out (as did the neighbours). Finally, I arranged for the local constabulary to come around with me the morning after the midnight deadline passed because one of them was fairly abusive. I didn’t need to take this course, as they did move out.
I needed a good lie down and a stiff drink afterwards though.
The thing is, they presented well at the beginning. We generally rent to people on gut feeling and in 25 years have only got it wrong a couple of times.
This time we lost four weeks rent and luckily our insurance covered repainting where they had done some damage to a couple of the walls and a couple of other minor things. Luckily walls were VJ boards, goodness knows the damage if they had been plaster.
My suggestion is don’t be put off by people saying don’t get into this type of property. We have only had residential IPs and one bad experience shouldn’t put you off.
I’d say get the forms to the tenants, hopefully your bond should cover some of the loss. Get them out, clean the place up (if needed) and find the next tenant.
Look on the bright side, you don’t pay tax on the lost rent.
Good luck.
Wylie
