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- Fully wrote:Actually,
http://www.collegesquare.ymca.org.au/about/Pages/default.aspx
Obviously is student accommodation….
Still student accomodation, and run under management. The conditions of occupation is whats changed. Under a student covenant the management are only allowed to have the place used by current active students and no-one else. Under the newer terms the property can now have an owner occupier or rental tenancy OR a student within the property.
They still fall under the banks criteria as student accomodation. And for that I'd be hard pressed to find a single broker in Melbourne who is prepared to lend on them at the moment. If you know anyone who is lending on student accom at the moment please tell me, as my understanding is the goodwill for lending on these has just about dried up.
570 Lygon St is an exception to the usual student accomodation in Carlton. It was built as student accomodation originally but unfortunately or fortunately for the owners .. the required specification for students only was not mentioned in the contracts. So a group of the owners went to the body management and finally the council and overturned the 'student only' use. Unfortunately for anyone purchasing .. the banks still see them as such.
From student only to variable tenancies .. they went up 40% overnight. Now the places that were trading at 110-130k now trade at closer to 200-230k .. simply because of the change in agreements.
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In the 20th century the property was all about position and proximity to the CBD. Now .. as you might be aware .. the need to be going to the CBD is now minimal. I'd be lucky if I go to the CBD 4 times in a year. So things are organised for the 21st century in terms of ease of access to public transport, proximity to good facilities and shopping centres. This means a couple of things, the real growth will come in areas you'd think were hot already.
Areas such as Maribynong and Doncaster will not drop out of fashion. With Westfield and Highpoint .. these dominate the retailing landscape and create a CBD in its own right. Continuing demand will have a lot of these places going to multi storey within close proximity of the shopping centres. Snap up full blocks in the surrounds of these areas while you still can. I think Point Cook is heading the same way. Sure its properties start at 500k now for land and house, but its got a fabulous pair of shopping centre and its close to public transport with good roadways. Narre Warren has a good shopping centre .. but lousy road networks. If they improve the roads in that area (look out for this) then this could be a one for the future.
I see the death knell for the student accomodation taking place shortly because of the way the banks are now treating them. If they lose their student-only status (which when landlords are panicky .. could well happen) then they will become the new slums of the 21st century. This means Carlton .. and Melbourne CBD are vulnerable to this.
Southbank and Docklands remain duds. I had great hope for Docklands when it was proposed, but its just so unfriendly even now. I dont think anyone living there feels any different.
East Melbourne is picking up in demand because its not Melbourne and close enough to walk there. Even though its expensive now .. its not going to trend far from being a good thing.
In the 10k from the GPO (which isnt a GPO anymore) most areas have been rediscovered .. renovated and revalued. I think Collingwood still remains .. much unloved. This is one I have a couple in.
And as someone said before .. Geelong and surrounds are too cheap for the value they offer. Once that happens and the transport to and from Geelong improves, expect industry and jobs to flow. One thing that will start that off is the downturn in the car industry. The Geelong council will be actively competing for new intake of businesses to the area.
Finally .. Dandenong may have been a big mover in the last 10 years .. but its still holding 44% of all manufacturing in Victoria in its backyard (based on official stats). That can only mean that for the early 21st century .. business will be happening in and around Dandenong in a big way. Get in now .. the prices you pay are still under a million for prime proximity land to the Dandenong CBD. Try to get R2 zoned land, its getting harder to get and there is more demand for it.
I never get too caught up with body corp payments. You either accept it as part of the transaction and value it as part of the ongoing and further expenses, or .. you dont buy. Its all a matter of what you are intending to get for that deal. I have seen body corps that are as low as 800 p/a with basically common area and insurance to maintain .. and .. there are the ones that you pay for luxury.
When the building at 368 St Kilda Rd first hit the market .. i was seriously considering one of the apartments on the 31st floor and the saleslady went through the pitch as to what the building offered … blah blah. So .. for the security and facilities .. gym .. pool .. sauna … weights room … doorman / concierge .. office facilities .. and reading room … (yes its more than your avg facility) I enquired what the total body corp costs would be. Reply from the lil lady …. oh .. about 7k per million dollar value .. per apartment
The apartment I was looking at was … 3.2 million … making that a body corp p/a of roughly 21k
From what i'm aware .. its more now (about 8300 per million per apartment) so as you can see .. if you really want to pay it .. the price is right.
Bill .. if you are looking for exclusively cash flow postive properties in the current market you are looking for a very generous upside. Most places at the moment are trending towards the mid 4% or less .. requiring a 4% improvement margin just to create a positive cashflow. Thats if you are working with capital cities. If you head to country areas .. you can go as high as 11% but it comes with proportionate risk. The correct approach however would be learning how to alleviate or minimise the risk components involved to produce a better outcome.
So the ultimate answer I can give you for the moment, read some good books (there is these couple from a guy called Steve) on how to find .. procure .. manage .. and profit from property. I think the idea you have of just waltzing into a positively geared investment is a recipe for future disasters. Learn your trade and then profit from it. And even in the current market there are hot deals to be made. I have just picked up a block of four properties returning 8.4% gross. Which means after my 20% is factored in, they are totally postively geared. But i spent two months learning the area .. the risks and the benefits. I got the local paper, talked to several agents to understand the market, then went off to talk to a couple of the locals. By the time I laid down my hardearned, the strategy for owning the property was already confirmed.
The correct answer is read. Lots, and as quickly as possible.
Its interesting that you are quoting this amount dougie. I just pieced together a plan for my younger cousin (is 40 young these days?) to get something together. She's never had a great income .. but now she has a gross rental of 15k. Net that works out to 11k .. but she can now use that as leverage when she goes back to the banks. She'll have two debt free properties and 11k income for next time around, when she can boost that with a job (hopefully).
Yes .. it was a fantastic deal .. 93k a piece for each property (2 for 186k). A rarity in todays market. But what she needed was the income not the capital growth, so it worked well for her.
Its not the ideal live off it for life deal .. its what you'd call an assistant deal. A couple more like that and she can retire. And with a job even a consistant part time one .. she'll have both assets .. income .. and rental income. As long as she doesnt max on credit cards she's looking better for the near future.
You wont be creating a paradise out of 200k and nil leverage potential. However it just makes sense to improve your position with good long term assets. I'd be sitting out on shares and gold until the whole bag stabilises. The markets are calculating a SECOND possible re-evaluation of the US. That is not good.
ajay … all i can say with taking on housing NSW is good luck.
My cousin had a house in Ballarat lent out to housing commission tenants. Now there came a call saying the housing commission had decided to remove the tenants from the house because it was 'deemed unliveable' and therefore could be slated for demolition. As you might guess my cousin was horrified ! Apparently the tenants had decided they wanted a smaller property in a better area, and went to the trouble of actually destroying large sections of the property to get the possibility to get another one! After getting a housing inspector in to actually assess the damage .. he said it wasnt to be condemned .. it just needed a bit of repairs. But they actually went to the trouble of punching in walls and smashing skylights to make their point. It took a couple of thousand in costly repairs .. but it was repaired and then resold.
Yes its a horror story, maybe its only a certain group that has that level of contempt. But, if you feel that you are better with a barebones tenant rather than none .. i wish you more luck.
Pumperjs,
The idea of a buffer account is great. In fact its an unmentioned that you should always separate out your accounts per site for easier accounting. So .. have a dedicated account specifically for a single site property. It means that you dont have to flip between several folios of service and rental receipts to justify the figures. And the other thing .. regardless of how pricey your property is .. allocate between 2% and 3% for the purpose of having a buffer. Surprises happen, and when they do .. you need to be able to have backup.
Manageable negative gearing is never an issue. The issue you should be looking at is the fact that Mr Nice Taxman is getting his hands on 60k of your hardearned. Now, wouldnt you prefer that .. in your pocket?
The mistake that most people do with negative gearing is one of the two. They gear to the maximum taxable benefit, which of course leads them to financial hell when the interest rates rise, or income falls. Second, they use the cheapness of a variable loan over a fixed loan. Again .. when the interest/income problems kick in .. the brick wall hurts.
I have friends in investment who rely on 3 months worth of rent (equivalent) as backup for their investment, but i think thats too much held in store. Aim for 3% of the initial property value and you should be ok.
A financial planner / property manager investor breaks my basic rule on property investing. That is .. for decisions and control, it should all be in your hands. Some people like the idea of having someone they can trust managing their funds. Then again the number of scandals where mis-management or poor body corporate control happens .. too many for my liking.
Get a comfort level which you feel is acceptable for you regarding your property investing. With a 60k tax burden to ATO, you could probably stick 35-40k safely without feeling out of pocket or close to the margin. FIX your rates, so all you worry about is the paying of them. A percentage point wont make the difference in the long term. Oh .. also just interest only to start with. The tax deduction is allowed on the interest component paid .. not the principal being paid back. By the time the fixed period lapses and you revert back to interest + principal .. your own figures should have changed in the meantime.
The first thing you learn being a real estate salesperson is that EVERY property is on the market. For the right price. And using this you use the fine art of white lies to get people to put their property on the market.
Its really the same with development.
Make a brochure, plain as possible, stating that you HAVE a developer who is interested in purchasing property in the area and prepared to offer substantial money (dont mention a figure, you'll either preclude or exclude possible vendors). Also mention that as a private transaction there will be no agents fees (some people like that). The other word to use is PROMPT SALE. So someone reading the brochure/leaflet will feel that there is a possibility that THEIR property may be the one you are looking for.
The correct answer is .. at this stage .. any place you'll get will return an avg of less than 5% no matter where you go. Unless you go country in which case you are placed at a higher risk / maintenance level.
There are two ways of thinking on this. First, you can go for a smaller income and just purchase a property outright. In this case you are probably looking for a property around the 280k mark (leaving room for stamp duty conveyancing and transfers). On that premise the maximum you'll get is close to about 14-15k maximum GROSS return. Might be small .. but its basically indexed. So its a little bit of income.
However, the more creative way is to wait until you have something solid as far as work goes. I'm guessing that the job you'd be in or getting would be close to 40k (heck you might be more employable than that) So going to the banks after a period you'll be able to borrow about an extra 200-250k (depending on how they feel). That would get you an interest in a 500k property. Which would provide about (working on the 5%) a 25k gross income. Again .. its indexed. But its a lot better than 15k
There are more creative ways to do things, but they are inherantly more risky. I suggest you do the investigative measures to assess whether this is a risk you are prepared to take .. assuming future work .. at all.
matt .. you are treating property as a house of cards or dominos. Sure there are impingent effects that come from crisis in one economy that ricochet off onto other economies .. its inevitable. But then you've got to work with how the country handles itself in that situation.
Australia remains at this point a relative safe haven for a lot of money .. simply because just like gold .. we are so far away from most of the major action. And one of the things we have had that influenced our housing prices .. was always having a below par dollar vs the US. Now .. with a 1-1 ratio or better .. of course our housing looks overpriced ! We were based on a 1-1.3 ratio .. now we are not .. of course we look expensive in comparision.
There are effects in play that must be dealt with. Dont sit there and tell me what sort of housing problem we have when most of our country towns sit there under-let and underserviced. If there are houses that are empty out there .. why is there a rental issue? There are obviously places to rent … just not near your favorite shopping centre .. or your local nightclub. And there are real financial concerns brewing in the near future for Australia .. one of which is where it gets most of its business from. Because the mining 'boom' doesnt last forever .. it never does.
This is an absolute doom and gloom scenario and totally implausible, placed by someone who has absolutely no idea how the whole financial circle works.
First, the US is a basket case for the moment .. because .. it hasnt actually changed anything from what it was doing before the GFC hit. The same people who made bad loans to bad clients are STILL doing that … to the same sort of people. If I was anyone who thought the US has sorted out its finance grief yet, I would want to know why it is still continuing on the same dead road. The only way you get off the railway tracks is to change direction … not run headstrong into the oncoming train.
The US has nothing to do with Australian dependancies, reliances .. and long term financial failures. Take a good look at where most of our money .. trade and income comes from .. its not the US .. which accounts for less than 10% of that. Most of our business is done with east Asia and provinces. We have little to no exposure to most of the countries that are suffering at the moment.
Our current finance issues are compounded by the reality that the big four have hammered down on lending criteria to almost ridiculous levels. I had a friend who has over 20 million in assets and was lending on a property worth 5 million for 60% of the total value (unencumbered previously). The banks actually turned around and asked for more security !!!
The reality is .. unless you got a solid job situation .. zero issues with repayments and a saved deposit, banks arent lending anywhere near what they used to. So .. EXPECT that to affect your housing situation in the near term. Less available money means less buyers. Its really that simple. No big bubble .. just a slide.
The other major criteria is .. we somehow expect that having plunged a couple of hundred billion in stimulus out of the economy, it has to have an effect. And it is having that effect … its moving the lines and prepping this country for an inflationary hit .. of massive proportions. Not the nice growing business kind either .. the 'money is changing' kind. Thats not usually the good type. You are probably feeling it or seeing it in food prices .. labour prices .. and goods. Its there and happening now.
So between these two real conditions .. you will have money moving upwards .. and housing coming down. Thats all part of a normal cycle. And at some point where the money moving downwards meets the housing coming down, someone in their 20s perks their nose up and says .. wow .. property is cheap !!! And .. off the property clock goes again …..
I'm sorry .. i've lived through the 73 oil crisis .. the 82 recession .. the one we had to have in 90 and the dot com collapse. And the only consistant thing they've all said is .. THIS ONE IS DIFFERENT.
Its not .. the people are all .. talking the same.
This is the extra bit i think you should add to the above stated facts from the SMH … which pretty much say .. people who are holding onto their property because its worth money … dont want to have people do things to make that go down.
The reality is … property in a civilised society is just an asset .. like anything else. But people moving in and out of this asset places the asset in demand. And not everyone who sells their housing asset goes on to buy another house. Some sell and reinvest that money in the economy, creating small businesses .. and investing in other areas.
So what you are percieving as just a property loss is not just a OMG its property falling loss. Its a loss of capital that would feed fabric and fund other members of society.
In the very early years of the United States, there was a puritanical idea that property was there for the common good, and as a result no private property ownership. Come a couple of harsh winters and poor crops, people started starving for no good reason other than they had no private property to lend against .. for fabric and food. With a little rethink .. they re-established private property rights. And as they said at the time … 'nary hath been a person who looked back'
Bo5hen,
A major achievement .. to be holding that much as a start! Since you have just graduated from university and started on your track to success, there has never been a better time than now to get your investment underway.
There are four key components you will be taking to the banks, your savings, your job history,external remuneration (non job earnt money, rents stocks etc) and of course your creditworthiness. Make sure that you have all these in place before you approach banks now. Before the GFC they'd let one of these components slide .. but now with the current pullback on lending, they expect all of this.
My first suggestion is before you dive, learn to swim. You can either learn from books, or learn from observation .. but that takes time. And whatever you purchase .. make sure you are in control of it. Too many people buy into shoddy bodycorps, off the plans that never happen, and student accomodation. And really .. at that point the only person they have to blame is themselves .. for allowing someone else to take control.
Student accomodation, aged care, and hotel managed properties all fall into the same category. You are buying a small asset with a ramped up rental on the basis you are securing a SINGULAR DEPENDANCY. Now if i'm a real investor … i want a property that i can stick anyone who feels like renting it into, without restrictions or legal issues. And these propertys have their singular dependancy as their point of failiure. Banks see this .. and now they wont lend on most of those categories. There are still much better deals to be had out there.
Visualise mentally where the property you purchase will be sitting in 5 or 10 years. Will there be growth happening in or around the property? Most times you can see in advance .. a suburbs direction. And you need to be able to percieve this before you set money down on a property you want to buy.
Finally .. buy a property with upside and potential. Good sized bedrooms, big backyards, location. Property .. despite presenting figures … is still .. all about people. Buy something that can be lived in repeatedly and often.
Here is your real issue .. <edit> about negative gearing abolishment like its a good thing.
At this stage .. thanks to negative gearing .. the owner of the property who is using negative gearing is getting incentives to own a property at great expense to provide housing for renters. This means the government is effectively paying through reimbursement a small portion of your rents. It also means the property owner is providing rental accomodation for the renter, otherwise .. it makes more sense just to trade the property .. without worrying about rents.
If you remove all the incentives that exist in negative gearing .. you create two outcomes. The rents WILL go up, as there is now no subsidy structure in place to assist with dampening rents. Second .. the incentive to own property for tax deductions goes, reducing the amount of actual rental properties on the market.
So you will end up with a situation where you are dependant on the government for reasonable and responsible housing for living situations. Ask anyone who has been searching for public housing how that works with the government. One major factor in our current housing issue is that the government hasnt been doing proper levels of public housing for almost 30 years. Can you really see that improving as more affluent renters fall into the same boat? I dont think so.
Summing up .. remove negative gearing .. you cancel these incentives, make rentals harder and harder to find and more expensive. If thats your idea of an ideal world … i suggest you try somewhere that already has these issues. Like .. New York for instance. Its never fixed a pricing issue .. or patched a rental gap. It has however separated those who can afford their issues from those who cant. And personally I wouldnt want to see that here.
TKline posted under at least two other names .. on separate threads. It only takes a glance at his current posts to see he's doing almost exactly the same thing on this account.
Talking about housing busts … how the ratio of australian house prices mean that our properties are the most expensive in the world … and extra doom and gloom.
He's pretended to be different ages .. and be different people .. but his story is very much the same .. and he represents the same stuff. Last time he was actively countered .. he went back .. and deleted all his posts.
Its not going to help responding to him. Ignore him and he'll just go away.
Zaul,
You are about to get the best advice anyone has ever got on this site. Take it wisely and absorb it thoroughly. Its not big and .. its very useful in your future day-to-day transactions.
3 words. Thats it. 3 words of useful information and if you carry them with you .. they'll save you time and again.
WORKING …… FOR …….. YOU ……
At the moment .. you are having the time of your life doing vids and stuff. But lets be real .. 19k dont pay the bills for dreams, and it also limits your future options. Money is nothing more than extended options at current day prices. Thats it .. there is no mystery or claim to that. So .. with 19k .. how many options are you allocating for yourself?
What it affects is your serviceability. And .. basically thats what all the banks .. thats what they are looking for. You are going to be working uphill at the moment to please banks .. and thats NEVER where you want to be. Banks are the worst best friends to have, but great when you need them.
There is no reason why you can't prepare for your ideal world .. your castle in the sky .. your extra holidays .. and your new flashy car. But, you have to set solid foundations for that first. That doesnt mean slogging it out on two or three jobs, it means working harder and smarter. Having your money … WORKING FOR YOU (did you just see those three words bounce back in again?)
My view against you doing flipping now, is that .. even having read all these wonderful property books .. you really dont have the efforts to cater for a loss. Its quite easy the first few times to make mistakes even if you've been careful. And you do learn from them. But it costs. And with no real financial backup yet, any losses you make would flatten you totally. You would have to be right literally from the first purchase. It would take lots of reading .. lots of investigating .. and lots of studying. But I'm sure its possible.
Write out your first set of investor .. investment goals. Give yourself a timeline. Look at a couple of property calculators to work out how much you can be borrowing. Work out how you can achieve your goals and work mix so that life is still good. Grab an extra job and keep focused on where you are going.
Serviceability will be a mix of your income .. your expenses .. your assets .. and your other sources of income (rentals). Keep that in mind when building your asset base .. and i'm sure you can succeed beyond your wildest dreams.
At the moment .. you are helping Mr Blockbuster succeed to greater heights .. at the moment he has your claim .. as far as he is concerned .. you are WORKING FOR HIM. So .. who is getting richer?
I think the real issue with Detroit is you have to assume that any investment you place into Detroit is an absolute gamble. I have got a series of properties there, and they are truly remunerative. But the first thing I did with all of them is pay them off in full. Granted it was easy because they were cheap to start with. But I'm just not up for the exposure to risk that exists in Detroit. There are too many people leaving at a consistantly high rate for me to feel any investment in Detroit remains secure. I prefer to have it as an income earner without any debt residing on it. That way .. for me the only way is either .. out .. or up.
Sorry that your wonderful investment in Tamworth is getting a bad rap from poor property managers.
Did you try the local LJ Hooker? I thought they were actually pretty good when I had my 3 in Tamworth (9 years ago now) I'm 100% sure they dont have the same agent who worked with me then .. but they were a good co-operative team who did the right things at the time.
With a housing comms (or ex) property you are always gonna get rough tenants. So you'll need a property manager with a backbone. Here is a hint .. if he/she doesnt come across as tough to you .. they wont be able to bluff a tenant who thinks they can play the system. And usually the lower the tenancy payment .. the more likely they are to try that.
Good luck with your endeavours in finding someone. I'd also like to find out who you ended up choosing and on what basis.
This is the reason I keep saying in country destinations that the tenant is gold bars.
The frequency of tenancies remains the critical issue with country properties. If you are lucky and the town is booming then the swap rate between tenancies is acceptable … but .. outside of that .. you really are looking for someone who will want your property at parity level (at or close to the value you list at). However … you are looking for a tenant in a limited patch of tenants. Most changeovers and swapovers are best kept to end of year / start of year events. Once the year starts .. .. few and far between. The good part is once they are in there .. they stay for ages.
Check the price vs similar options in the area. Most tenants grab the local rental list .. and make comparisons. If your property isnt moving, it may be overpriced .. or uncompetitive in the rental market. Check this against local agents rental lists .. and then make your own decision. Also .. dont be scared to approach other agents if the process takes too long. Often .. agents with large rental folios have more swappage happening between tenancies .. simply because they get more people in through the door.
The final thing … dont let yourself get caught in extended vacancies … you should have 3% minimum of the property value in the bank reserved for such occasions. The biggest mistake is to be spending up to the wire on properties and then getting caught out when repairs .. maintenance or vacancies hit. Thats when the penalties start rolling in and it all goes downhill.
