You may have concerns about whether the costs for the agent are proportionate to the service, but just remember .. the agent only earns his commision (after retainer) when the property sells. So .. for your benefit .. the agent has every incentive to sell your property.

The agents incentives and costs dont have to be proportionate to the value you sell at. Most will ask for the advertising costs upfront, as they are not included as either part of the commission. Agents commissions can vary depending on how good and frequent business is. In outer suburbs where the transactions are frequent but of low value they can ask anything up to 3.3% (GST inc) + incentives .. in inner suburbs with higher priced properties they look towards trading at anything down to 1.1% or 1.2%. The agent wants to make about 10-20k (for the agency) minimum on the property else he is working for nothing. Agencies usually distribute on a rough 60/40 basis to the sales agent .. 60 to office .. and 40 to agent (split into a listing and a sale).

But really .. the agents fee is irrelevant to the equation here. If you are doing a transaction without the agent you just work out what an agent would cost you .. and deduct that from the sale price. Or just drop it by a little .. since you arent getting the headache anyway.

There are a lot of factors to weigh into when investing in Albury / Wodonga

First, it has been previously a town that resided on the transit from Vic to Nsw. With the recent bypass thats no longer a transit requirement. It doesnt stop it from being a nice convenient 4 hr stopover from Melb .. or a 6 hr stopover from Sydney. Its just not necessarily a direct destination anymore.

Second, the pressures on both industry and land prices are making towns with established industrial zones and good transport systems much more desirable. Albury/Wodonga may be at a lowpoint now, but it has all the right ingredients to provide a good quick employment grid for any industry that requires workers, transport and location close to commercial/business zones.

Third, because of its position and usage, it too has suffered from the rural drought. Any rains or change in farming patterns around it and it just takes off again.

In summary, as long as its a well established town with good infrastructure and good business potential, it beats the hell out of a lot of other proposed investment destinations. However .. all this requires industry and manufacturing to return to the area. Thats a judgement you have to make for yourself.

Returns can be as high as 8.5% and units can start from 70k for a 1br .. 100-120k for a 2br and about 250k for a house (W/B is less).

Because of the tenancy and work situation rents are low in comparison and there are a lot of long term low budget tenancies at the moment. There is a high amount of established units in the area and good parklands.Because of the relatively low unit price it is still possible to buy whole blocks of units, which is great if you want to avoid dealing with owner contributorys (you own the lot .. so you control that aspect)

There are two major shopping centres in the area and one major shopping strip. There is a Centro Lavington (North Albury) and a Centro Wodonga. Both are substantial shopping centres which supply all basic needs.

Without stating the obvious, dont forget in Wodonga you are dealing with VIC law and requirements .. and in Albury/Lavington/Thurgoona you are dealing with NSW law and requirements.

I think for the foreseeable future .. with a full basket of goodies .. 3 kids 2 pets and one home mortgage .. you are going to have to take small bites for your next nibble. Your pretax residual of around 5k leaves you with the possiblity of being able to borrow about 300k roughly in investment loan from the bank. Add to that a substantial equity that sits unused in your property, and .. what are you guys waiting for? With current vals you have given as long as they hold and are realistic .. you can go up to just under 600k (thats borrowing + existing equity in the PPOR).

Does that mean that you use all of it for your next investment?

Depends on your comfort level and your risk factor. If you've been burnt on schemers already .. invest to a comfort level rather than a performance target. The main issue you will have is remapping your idea of dollar values. You are used to a set wage packet and no more .. and for at least the first year or two of the new investment .. you'll have to still live like thats the case. But if you are doing things property .. your asset value .. your income value will increase around you, which means in a short time .. you'll again have more money .. more asset .. and have to do the whole thing all over again. So the smartest move .. play like you DONT have the investment .. and enjoy that you do

I'd also recommend fixed interest rates (interest only) for at least a 5 year period at the moment. Since interest rates have been too low for too long, and you want a period where the amounts you pay are the barest minimum and a known amount, it provides security in the longer term. Sure its a percentage point difference .. but thats also the security you have of your situation not changing in the short term when you will be vulnerable. PLEASE NOTE a fixed year term expects you to be paying the loan for that period, it does not allow for refinancing or changing terms until the end of the period. Keep that in mind.

Oh yes, your idea of keeping cash reserves is great, but .. they dont need to be huge unless you are planning to do something else with them. 30k is too much as a cash reserve .. its money losing against inflation. You should have roughly 2 – 3% of the property value as a cash reserve .. max. Which on a 600k property would be about 12-18k. The rest can be better spent .. say .. as a startup for your NEXT property???

I am aware of the fact that i havent included stamp duty and transfers with this deal. Thats simply because that varies from state to state. On avg its usually about slightly less than 5.5% in VIC .. and there are other inclusions in other states.

And finally … Jamie M is right (again !!!). Read up, grab some tips from any of the local property mags .. fill your head with pre-purchase knowhow .. so when the next invest comes .. its sweet and easy .. based on good knowledge.

Try for Australia … http://www.refindhouseprices.com   Lists the property … how long its been on the market (with the current agent) and any price discounts (in % terms as well !) … very handy for making value judgements on the area.

Bahar7,

Steady as she goes sailor !

You are about to embark on the greatest mistake of your life. Rushing property investment.

You've done the right things .. you've got the big block to subdivide … and … now you reach your dilemma. Serviceability !!!!!

The good news you arent the first person in history to reach this point with the banks. Granted I am not 100% sure who the first was … Plato .. Socrates .. Nero? But .. you arent the first by a long shot.

You'll need to think creative solutions. Banks arent stupid, despite the numerous ways people try to fudge their figures and make things look good. They like straight down the line .. hard facts. And to them .. your serviceability doesnt meet par with their requirements.

Two ways of handling this. The first is to run around and see what you can get from other borrowers .. or approach private lenders. But .. since you have a situation where you are pushed already .. there may be little hope from there. I find that some non-bank lenders (who are owned by banks .. figure that one out) are a little more flexible. But they still have serviceability clauses .. regardless.

The other is to think outside the box on your deal. Two things will work in your favour .. time .. and your ability to get things to happen. Try approaching builders .. see if you can work out an effective deal. Private funds … hard to get at the moment … would require substantial equity at least. And from your scenario I dont think you have that yet.

You want to escape the ratrace? … the first thing to do is stop thinking property is quick money … and start thinking of it as SMART money.

On my second investment … the bills got awfully close to the margin .. to the point where several times I approached my father and suggested I should sell to relieve my debt burden. His answer was to hold on .. and bear with it for another four months. Four months later … the property was still a debt burden. But the rent had gone up 10 dollars .. and the value had increased another 20k. And all of a sudden the figures didnt look that bad.

If you are in a holding pattern thanks to serviceability issues there is really only two things to do. Cure your serviceability issues either financially .. or .. creatively. And .. do your research as to what others have done. Read up big.

I would resent the whole thing being called a scam.

 The real estate agent did his job, which was to market the property effectively to obtain best possible price from the public.

The developer provided drawn up plans at great expense from his own pocket showing what the property would be looking like when built. He also would have had the property passed through council .. which takes a couple of months.

Local Council would have vetted the development and made sure that it fitted in with their specifications for apartments in the area.

The banks provided the assurity to get the whole situation going as long as he met his 'sign-up' quota.

Seems the only person who didnt do their due dilligence was … the purchaser of the property????

I am always confounded by people who head into the property market with blinkers on and hope that the damage they cause themselves financially isnt life threatening. You had plans for the property concerned. Now … the only reason that a property would be not renting easily is if .. IT WAS A BAD PROPOSITION to start with !!!!!

There really are developers who are prepared to maxx out a property with itty bitty apartments with top gloss finishes that really no-one wants to live in. They do 2 bedroom apartments that are really tiny (does 62m2 sound tiny to you) and expect people to buy on the basis that 'they are a good investment'. Would you buy junk furniture for your house? Would you buy a 40 yr old Ford with 300k on the clock?  …. no .. ? Then why would you buy a unit thats overpriced and undersized?

For future reference … these are the sizes to look for .. and any less .. dont bother with them.
A good studio should be 40m2 .. A good 1br should be 55m2 … A good 2br should be between 70-85m2
A good block of land should be 600m2 if its full .. and at least 340m2 if half  … and it should be square if possible.
A bedroom should be close enough to 4 foot by 4 foot roughly .. have inbuilts that dont intrude on that space .. and a window.

You've bought an issue .. now the best thing i can suggest is .. do what most people do with an issue .. hold on and hope for it to get better .. or cut your losses while possible. As far as renting goes .. if you are having an issue .. get someone in .. at any price. The breathing space you'll have on your bill payments will reduce your stress levels.

Just for reference .. the only time i will purchase off the plans is when the builder has had several successful projects and .. i'm aware of the market swinging upwards anyway. Otherwise I prefer the old see feel and touch for property. And i'm prepared to pay the stamp duty for that privelege.

I remember them being rated as overpriced when they were 30% cheaper.

I remember a certain nameless newspaper suggesting house prices would tumble in June 2006 .. right before they went up another 30%.

I remember the idea that this just couldnt continue … stated .. across the front of the property section …… in 2002.

It must be hard being so wrong.

Last entry on the list is .. Blocks of Units.

Its a real time saver .. its a new entry (they only stuck it in less than a month ago) and yes .. it finds .. just .. blocks of units.

But here is a hint .. the entries that arent properly listed as blocks of units .. are the best buys

Actually now its the other way around. The 0-130 book was the first .. but now its been updated recently. The 0-260 book deals more with a downturning market and the property cycle, rather than the how to find or make positive growth properties. There is a book in the middle as well .. 1,000,000 in property in one year. So there are a couple to choose from.

If you are starting out in the current climate I suggest the 0-260 simply because its talking about how to deal with downturns.

Hi maz_lc

The correct answer is know your market. I suggest you take an open eyed look at your local fruit market for a good guide .. its a commodity market .. a different commodity … but its a good idea at how to deal with a commodity (in your case rent)

The fresh fruit .. unbruised .. ripe .. looks great? Its always at a premium .. it goes quickly and its easy to sell.
The last of the bunch .. end of the day? The grocer wants to get rid of it before it goes rotten .. he marks it out at a discount.

Your property may not be finding its niche, you may not be advertising it correctly. And your thought that the amount you pay should have some bearing on the renter .. is irrelevant. The renter will pay market rates .. or if its more desireable (fresh fruit) he'll pay a premium for it. The amount you pay to the bank is between you and the bank, not the renter.

At a certain level you'll get people in the door. As long as the property is well located .. well facilitated and is easy to live in .. people will only be too happy to pay the going rate to get in there. If you want to make comparisons .. go to a real estate agents window (or rental list) to get an idea of where your property sits in the current rental market. Advertising well above the market rate .. people can make comparisons. You are operating in an active and comparable market and supplying residential accomodation .. you should respond as such.