Forum Replies Created
Istvan .. nice thoughts but obviously you've never dealt in the real world before.
Out of every 30 tenancies i have .. there is a consistant 2 that will be bad. Either they are discovered to be bad immediately and terminated as soon as possible .. or they hide it well and are discovered to be poor tenancies at a later date.
Tenants dont need a 'body of govenance' outside of what they do. They dont need a government entity monitoring their behaviour. Thats taking their basic responsibility out of their control. They SHOULD have that degree of control .. but most of them dont.
Australian tenancy law is actually pretty good. Its slightly more toward the tenant than the landlord but thats a good way to keep the landlords on their toes and making sure the tenancies they get pull their weight. We also have a poor tenancy register. So it remains within the best interests of the tenant to do the right thing or they dont get further accomodation easily.
Is it good? I have tenancies who coming from landlord biased countries .. who are so scared of the possibility the landlord might just get a spur of the moment decision and evict them .. that they WONT REPORT PROBLEMS. They sit there with leaking taps and mould and non flushing toilets and flyscreens that need repair. And they dont complain because they are so scared of being chucked out. Thats not a real issue. But for them it remains so. Thats what happens in landlord biased countries.
Then you have the USA .. where the tenancies are so poorly regulated by laws .. the tenants can and DO get away with murder. Anything from breakage to stripping the places down for parts. Criminal offences yes .. but try catching them.
The tenant doesnt need a watchdog. It might sound like a simple and subtle strategy but power begets corruption .. and an overseer can exploit that relationship for his needs. Thats unacceptable. You may not see it because you imply a trust relationship. As i said before .. a trust relationship is an enigma not a reliability. For the tenants own freedom .. he doesnt want that.
The existing situation remains convenient and impartial. It doesnt need a 'brand new solution' to fix problems its already solved.
Its somewhat a matter between getting finance .. and owning property. The banks will put a natural limiter on what you can borrow .. so you can try getting your money from other sources.
Believe it or not .. there are lots of people quite happy to be getting 8% or 9% secured by property from a guy who pays his bills on time. If you can prove that with ready documentation you'll find you can approach non-bank lenders to get your finance resolved. And since they arent banks .. their lending criteria is a lot more flexible. Five or six months later you turn to the banks to get the whole deal refinanced. And you end up with a reduced rate .. a happy lender .. a set of loans with the banks .. and an increased portfolio.
Dont get caught with loan sharks. They also advertise through regular means in the money columns and the internet. They just ramp up the interest when it suits them too. Which can leave your kneecaps in danger.
Gearing high works in a near neutral or close to positive market because your borrowings are high .. your movement is postive and upwards and your gearing means the input from yourself remains small. However the risks remain LARGE. If you find yourself in a slowing or downturn market .. the margin of ownership can revolve into a margin call .. as the banks now own more of the property than you do. They'll send you a pleasant letter stating that you now owe them money .. could you please pay up. That can be anything up to 20%-30% of the properties value depending on the losses incurred due to a price drop. So your 20k invest with potential on a 400k property can turn into a 80k liability to the bank.
Doesnt mean you cant do good calls. I started off my folio on positively geared country properties with upside. And once i had a couple the banks were prepared to lend on (NOTE THIS – banks are doubly shaky on some country areas for lending against them), I drew against my equity and income .. to purchase more central capital city properties with potential. I always considered my country properties long term buys and cash cows – higher risk. But they had to meet my strict criteria for workability. The real investments were always my city properties. With the excess cash i got from my country properties i was able to neg gear some of the city properties to offset the existing income. Worked fine for everyone.
After a certain size and value of the portfolio .. land tax and the purchasing relationship should be reviewed by you. Thats a longer term strategy and you should do that when you are ready for it. For the moment .. utilize the tax advantages of personal ownership and negative gearing to get the best out of your properties.
Traditional in hard times for people to save up and renovate instead of repurchase.
Not unusual.
My gut feeling is .. if you are really earning well .. i'd now level the 100k up as a pretty positively geared backstop. Since you are bearing a reasonable tax burden due to your income level anyway .. it really doesnt make sense to have it directly in your name. This is one of those situations where setting it up in a company makes a load of sense. It gives you a property in a company .. but separate from your own name. And you can use it to keep as a seperate running entity from your existing property ventures. Hence .. increasing your indirect wealth and a backstop .. regardless of how your job performance turns out.
After a certain level .. you may find (like I did) that a holding company is a very good way to offset your existing enterprises. It exists at a higher taxation level, however .. if you are already there .. then that shouldnt be an issue for you.Having spoken to Paul Giezenkamp himself at two years worth of Property Expos .. he offers a comprehensive set of services for the novice investor. If you are coming from a point where you dont understand property or need to create a property investment solution .. he's got experience with what can be done .. costing .. maintainence services .. upgrade services. Having them all as part of the Property Solutions package .. reduces the overall cost considerably.
If you are a novice investor that needs solid guidance from start to finish of property investing .. upkeep and maintainence .. his company is very effective and thorough. Because he offers the package deal he manages to keep overall expenses on the whole deal down. Which allows you to make money.
And thats what its all about.
When I term novice .. he does what its taken me a little over 20 years to be competent with. So .. he knows what he's on about .. and he'll save you about 20 years experience.
Your values laid out here step back to a period of a village mentality.
A tenant wants the ability to rent .. the ability to pickup and vacate if and when he chooses. The landlord wants the ability to have his property let out to anyone who stakes up the right amount of money per month to justify his letting.
They dont want to know each other. They dont need to know each other. Outside of the provision by the landlord and the occupation by the tenant .. there is no other need for a further extension of that relationship.
And as far as family occupancy of properties providing lower rents .. you are actively trading on the goodwill of relatives to provide lower cost accomodation. Thats socialism, which requires a generous landlord relation .. and a fool who assumes that a cheap rental is actually helping him. In other words .. the fact that you have a slavish tenancy who just happens to be family .. is actually impoverishing the landlord. It may not stop him from being enriched in the short term, but it leaves him vulnerable to higher expenses and rates that the slavish tenant has no interest in helping out on. As I stated in my previous post .. it forms a dangerous relationship.
The worst part about people owning multiple properties is it not only enriches the owner .. the trickle down spread enriches the whole community that the individual resides in. Think of the greek .. the italian .. the vietnamese communities that came from overseas with pennies. Real property wealth .. enriched not only themselves .. but with the excess being redistributed into the community .. made everyone in the community a little wealthier.
There is a little part which is never mentioned when people romanticise about the village mentality being a 'better way of life'. They tend to forget that food was scarce .. people had more kids because they didnt expect them all to live. The village bully tended to burn your shop and home down if he didnt get his way. And the law was in the hands of the municipality only.
Property not only parlays wealth .. it promotes individualism and rights. It provides a ladder for any member of any class or group to make a success of himself. Its a great equaliser .. and therefore .. the primary format of attack by people who believe that those sort of rights are 'against human rights'. Its like the black leaders in America who seek further enrichment of their own pockets by keeping a black/white hate framework in constant perspective. Its a means of division and enrichment.
naisy, as a regular investor and multiple property owner .. what if i told you there was no correct answer?
Except there is.
As an inheritance .. it'll be your money. That means you can spend it all on golfing equipment .. pornstar escorts and fancy sportscars if you wanted to. You realise .. as far as you are concerned .. that you want it to being doing more for you. And thats a hell of a start towards thinking right for yourself. Coming from a background where apparently no-one else has done this .. is a hell of an achievement.
As listed above with Pazza .. the primer is a solid education. I can tell you 100 ways to invest .. and have things working for you. Without a proper primer in both managing .. negotiating .. and buying and selling .. your chances of carrying the investment to success remain minimal. Thats the real key. Not the investing .. any fool can toss money at an enterprise. Its knowing what to do AFTER you've tossed the money .. that will make you rich.
Books .. property magazines … and getting an idea of how things work. Thats your starter kit. Go to open houses .. ask questions .. go to tiling and bathroom places … get the knowledge .. grab your expertise.
Istvan051 wrote:Hi Catalyst
I understand your point of view how if you own property in the current world its always going to be much better to use agents to handle the tenants and the problems they may face. They are better at doing this as they are professionals and have a lot of experience and are trained to handle people.
Based on your reply you obviously didnt quite get a full understanding of what im trying to say. What im trying to say is that I disagree with the simple fact that we are allowed to own properties in which to derive rent in which another person or family lives which is not part of our own. This is not to say I dont beleive in capitalism or anything like that. I think capitalism is the most ideal system and I believe strongly in each persons right to own and accumilate wealth in the form of $$$ however they please.
But, by allowing people to own property another person or family which is not part of your own family lives in, we are creating a need to manage extra unnessasary relationships in our life with people who are not really part of the group of people we relate to regardlessly.
I beleive the person who you identify as your primary relationship in you life should also be your landlord. This may be one of the following- A parent, sibling, aunt, uncle,cousin, ect.
I beleive this person should also be your work manager so when you go to work this is the person who tells you what to do.
By doing it like this we are reducing the number of people we need to manage relationships with significantly and making life
a hell of a lot easier.Regardles of if your primary relationship is actually your landlord or not, you will have to maintain a relationship with this person
and if it happens to not be your landlord then you will have additional people to maintain relationships with. Additionally if you own property then you will be required to maintain a relationship with a person who hopefully is good at being a professional and managing tenants and their problems. If not then you have to manage an additional relationship with a tenant and good luck to you!I beleive humans naturally form hirearchies based respect. The objective of every person is to maintain the respect of their primary relationship in order to maintain its position in the world. So as you grow up and reach independance and interdependance from
your parents and particularly your primary relationship. Rather than moving into a house owned by a third party, every person should move into a property own by their primary relationship and at the same time actually be employed by this person in business. Then the primary relationship should have the option of actually deducting your rent directly from your salary before you
are paid so you will be be better able to manage your cashflow.I dont need to go into extensive detail about how wrong this is. Socially .. financially and morally. Whatever you do .. dont write a book explaining about relationships.
Human relationships exist on two levels .. co-operative .. and dominant. Usually when they are co-operative they are actually seeking common goals .. no matter how simple they are. The sheer idea that just because its a more personal relationship than a landlord its going to be any better is lunacy and actually dangerous. DO YOU REALISE HOW MANY FAILED RELATIONSHIPS THERE ARE ?The agent i employ as a property manager acts as a go-between. He's the 3rd person I refer to as the manager of my property .. the collector of the rents and the condition reporter of what goes on with my property. He's vital in all 3 aspects. I dont want to be there managing my property all the time .. i want people who are there competant doing that for me. I dont want people I have to chase up for rent .. property manager steps in and does all the growling when necessary. I dont want to shuttle up to a property every time the tenants marriage is in crisis. Thats not my problem and nor should it be. Thats what a property manager is there for.
From the tenants perspective .. he's getting the use of a substantially more expensive property at a budget rate for his general usage as long as he doesnt abuse it. On most propertys thats 5% of the property value OR LESS. Thats using a 5 cent coin to purchase a dollars worth of goods !!!! Can you think of any aspect of life where thats possible? (actually for your real interest .. the normal level of rent to property value is historically 10%. So for now its HALF as cheap)
Rent is expensive? Rent is unnecessary? Good. Then you'll be ok moving out a couple of suburbs where the rent is more affordable .. the facilities are a little less .. and the convenience is not a good. WHAT? YOU DONT WANT TO DO THAT?
I as a landlord .. provide a service that the government is unwilling to provide at a reasonable rate .. simply because it would cost them money. And governments dont spend money on necessities .. easily. You currently get that at a budget rate .. so you can afford those large screen TVs and computers i see in your places when i go for 6 month inspections. What .. you didnt think i notice?
As a landlord i am held to the covenants and laws that bind me to a responsibility to keep the place in reasonable working order. The tenant should have rights to stay in the property .. and the right to not feel harassed or bled on the rental rate. He also should get regular maintainence. Outside of that .. he's got his world to live. And I have mine.
I'm tired of listening to the stereotype of the greedy landlord .. or the property manager who cant possibly be of any use. Its repeated in the media over and over again. I remain a landlord who has a significant responsibility to a large group of people who depend on me for the purposes of cheap and effective rental provision. Government wont provide that. The tenant either cant or wont provide that for himself. I make sure all that happens. And i'm tired of getting a stereotype that is innacurate rammed up my ass every time i would be seen to mention it.
I'll be reading your book. I'll be seeing what insights you can provide to improve what is a very workable situation. A very difficult relationship at the best of times .. but a workable situation.
If you are going to change the world, make sure the world needs changing.
First of all donkey .. we'd all love to live off the rentals. Thats the goal in the end.
You have to think outside the box. Build Assets and Income so the bank can talk to you in a better light.
I have a friend who came to me with an issue. She had received an inheritance and needed to invest it. About 100k. The main issue there was that she had no reportable income and a rank job history. Now out of that it meant that she would not be able to borrow for her investments as the banks were not able to turn around and lend her money on the current terms. In other words .. 100k didnt buy enough and she didnt have enough to show for it.
So here was my creative solution for her. Go searching for a property thats close or near to 100k (they still exist). Purchase it OUTRIGHT. And then after three or four months with a 100% owned asset and a rental income from a property .. go to the banks.
She managed to find two investment properties side by side … at a reasonable level. And she went to her family and asked for a small 'family loan'. So she ended up purchasing TWO propertys at 100%. And owing family about 60k. But the banks dont see that. And nor should they need to.
Come this month .. she's taken that set of two properties to the bank .. and they say they are quite happy to lend her for ANOTHER property based on the total ownership she has on these two properties. She's building an asset base .. and an income base that after only a year will be substantial. And within another 6 months .. enough to look at a greater asset .. even a house locally.
Knowing what the banks will be looking for is the key. Banks will be looking for serviceablity of the loan. That means INCOME .. ASSETS .. RENTAL INCOME and EXTERNAL ASSETS (income from other sources .. shares .. etc.) So the more of this sort of thing you have .. the better and easier it is for the banks to deal with you.
Outside that .. negotiation on the deal can give you a lot more asset for a lot less dollar. Use your head to put creative solutions together and you can produce win-win deals. And further your interests.
You start from where you start.
There will always be opportunities ripe for the taking in any market. And you dont end up making assumptions that just because a certain area of the market is hot (or not) that its a given to remain this way.
The opportunities that Steve took dont exist anymore. FIrstly .. they were taken by Steve, and second .. the markets have moved on from there. Not that there arent similar opportunities out there .. there just arent the SAME ones to be taken.
If you have read those books properly you'd be knowing what to be doing at this point in time and how to do it properly. Glean the wisdom from the books and then sow the seeds of your own wealth.
Samualbc,
its a well covered topic on here. If you do a search you'll come up with lots of reasons why not to.
If you are looking for an investment you are looking for a property that will increase in value .. is easily exchangable for cash .. is lettable to just about anyone and you remain largely in control of. On all these fronts the student accomodation comes up short.
fWord wrote:OK, comics aside for a moment, entertain me, I implore you. What should we do?!I suggest you treat the market with a degree of caution. And look whats ACTUALLY happening in it. Because that way you can be the best judge of whats happening and whether you can be moving your investments in the right direction.
Ventilation is a major issue in a lot of bathrooms.
I just did up a bathroom that really was shot to pieces. The landloard was a genius (previous landlord). He painted the bathroom EVERY new tenancy. GENIUS. Thing is .. being a bathroom .. there was mould that sat under the paintwork. Result? Frequent and consistant mould. Peeling paintwork from mould explosions. Brittle paint from moisture produced by the mould. And tenants who had breathing issues as a result.
700 bucks .. scraping back ALL the seven layers of paint on the roof, a new load of paint on the ceiling AND the walls .. anti moulding primer underneath the second coat .. and what do you know? A bulletproof finish.
The next stage is to implement proper ventilation out the existing window so the room breathes properly. Thats another expense for another day.
If you do a bathroom .. make sure its done properly. That way you only need to do it the once. And yes, mould can be a major culprit in paint deterioration. So solve it by ventilation or giving the room a proper finish. Either way will negate the issue.
I dont have to read those articles.
Because consistantly … and regularly the 'experts' in the paper have been proven wrong.
I am not going to mention names .. but there is a certain person in the investors section of the paper that gives me a regular giggle with her insights. She's been SO wrong … i read her for the laughs now.
The market HAS bottomed .. and before it starts up again its going to need a supply of people able to get loans. IF as predicted the credit markets overseas seize up .. then even with cash, equity and baseball cards .. you wont be able to pick up a loan from the banks for love or money. That'll plug the flow of cheap money. And as people compete for getting whats available .. that will raise interest rates by several notches.
Or you can listen to the newspapers. Try the comics section. Do they still publish Garfield?
fWord wrote:Oh, for those still reading, I read an article in yesterday's newspaper just today (go figure). Anyway, for those who have this Saturday's Domain, look at page 16 for the article by Chris Tolhurst titled 'Know whether the market is turning'. Also, read the article on page 15 by Kate Roberton, titled 'The fringe of a revival'.Are these articles indirectly telling us when to buy and where not to buy respectively? You be the judge.
BWAHAHAHAHA
Ok .. for anyone who is sensible .. DONT READ THE NEWSPAPERS. Simple as that. Every second article is doom gloom and how there will be an eventual reckoning. If I trusted the papers I would have missed both major booms in the last 5 years. So .. I didnt .. i actually used my head and it made me richer.
June 2006 – Markets overbloated .. destined for a rethink – THE AGE
(sept 2006-Feb 2007 prices go up by 30% on average)
Feb 2009 – sharemarkets set for more turmoil .. investors flee – THE AGE
Invested big in stocks (blue chip) as of March 2009. Who is laughing now?
Papers are a hard sell to morons. Look at the facts .. look at the figures .. and ignore the papers.
Rent to Own remains largely a vendor run strategy.
Therefore .. even despite the strict codes regarding finance lending … you'll find yourself at the mercy of the vendors rules.
95% of them will be ok … and there will be the couple that just arent. But thats life .. there are the shonkys.
Rent to own fills the gap where the person CANT go to the banks or lending institutions because of poor credit histories … a variable job record .. or inability to produce correct documentation. They charge a premium for it .. usually anything up to 3% above bank rates ….. but you get your chance to get into the property market. So .. you are an increased liability .. but .. they take that on board .. they CHARGE for it … and .. they make their money on the deal.
Vendor terms may have significant extra vendor conditions involved in the contract. Like any document .. READ WHAT YOU ARE SIGNING. The last thing you need is to pull up and think you can quit the contract .. and a penalty clause is invoked. Its vendor money and they play the bank. That may not always work in your best interests.
There is always a good time to buy property. Its a market .. not a singular format strategy.
That means there are always people going up and down in the property market. Trying to sell to cover debts .. trying to sell because grandma has died … trying to sell because 2 new twins wont fit nicely in a closet. Trying to sell at a loss because the recently divorced other half gets the rest.
You look ahead .. and I look ahead .. and if the crystal ball told the truth we would all be millionaires and happy. Thankfully it doesnt .. and therefore you bet on the best possible contingencies. Just like a horse race .. you bet on the horse MOST likely to get to the finish line first. Position .. Convenience .. Demand .. all have major plays in this. And you'll find that even in tough times .. the good stuff still remains in demand.
As a FHB you are looking for a property with potential growth and demand. Take it where you can find it. Know what sort of property you are looking for. Try to find a deal with some value already there. Reno … needs work .. poorly presented … changing suburb .. you'll find the deal. Thats IF you know what to look for. Buy brick .. buy land .. buy position .. buy value.
Its still a market. And unless people vacate Australia in droves .. there will still be a large group of people willing to put their hand up for your property. Of course .. saying that .. thats at the right price . . . . .
If i was writing a book or thesis as of now .. that would be really interesting .. i would look at the differing property climates across the globe.
Some of the ways that property is recognised or transacted .. some of the compliance rules .. can be really interesting. Some of the rules and structures can be racist .. inferior and downright offensive. Some of the solutions devised for solving these property solutions can be just as entertaining. Compliance codes .. issues with borrowing .. differing systems of loans … the ways to purchase a property can be very enlightening to someone who has never seen these issues before.
You could also concentrate on what works or doesnt work in the local property scene and why its an issue or not an issue.
Topics such as negative gearing .. rental controls … damage claims .. owner onus .. tenant responsibilities .. insurance issues .. requirements … common problems …. body corporations (owner corporations) as a power structure .. requirements of competent property management. Land value vs structure value … resource and asset valuations.There is at least half a dozen little topics in there that you could write a book on .. much less a thesis. If you sprout any other ideas from this .. feel free to follow through.
Shales,
you mentioned this property in a separate thread. And i gave my opinion on it in that thread. But my overall recommendation is .. if you like it .. go for it.
When i'm an investor i look at a property and do the figures and work out what its worth to me .. what its REALLY worth on the market .. whether the rents are sustainable or overpriced .. the bedrooms are an ok size .. the property is light … with a garden .. or view of a garden … more importantly .. would I like to live there?
If its selling for 15k and you LIKE it .. go for it. Your adventure and knowledge begins where you start. If you feel its something you can handle being empty or vacant .. take it on. If you think you can tart it up at minimal cost and have a nice place .. go for it. With the current rise in rents vs living conditions .. people are often seeking a little more lifestyle and they dont care where they get it .. if you think your property is of a standard where you can have people living in it without too many issues .. go for it.
Nathan takes on problems and makes solutions. That comes from experience. I tend to look for value .. minimal maintenance .. good positioning and low out of pocket costs. I should also mention that if I'm buying a property I look with an investor eye and not with a bout of vendor enthusiasm. If i feel for one reason or another that I'm looking with a hyped up perspective .. i'll pull back from the transaction for up to 48 hours. Vendor enthusiasm is the result of a good salesman and not something an investor should rely on. Its cost me immediate sales sometimes. But historically .. recognising the opportunity is the hard part. Outside of that .. opportunity tends to happen more than once.
At 15k you are more likely to be taking on a problem than a veritable solution. And a problem is usually an expense. The question will be at the end of this .. is price and outlay going to be cheap enough to provide a return and value once the property problem is solved?
P.S. Nathan .. still love the deals you manage to pull.
Michael,
Being an investor in both overseas and local markets i will tell you the first bit is to do your groundwork. Even for me .. the first time i crossed borders .. the conditions of occupancy .. the statements of management and the expenses varied terribly from state to state.
Each area … each investment must be first assessed on merits … then understood on conditions in the legal market for the property concerned. I am sure most investors are not aware that in some US states .. they have invoked property seizure through eminent domain for consistantly negligent (or SEEN to be negligent) landlords. In other words .. unless you have a property manager that is competent and on the ball .. with the local legislation and compliance requirements .. overseas investing can become quite a headache. You MUST know what you are doing !!!
I might suggest you learn your local markets first before you graduate to taking on other propositions. Managing a property remotely can become quite a task unless you have competent people doing what they are paid to do. Even locally i'm constantly finding that a good property manager is replaced with an average property manager and all of a sudden a couple of my properties head into neglect. You must run your properties like a business and keep hawkeyed on what goes on. If you arent in charge .. chances are .. someone else isnt either.
