Forum Replies Created
- Dubstep wrote:
Not long now.
I'm looking forward to the phone call from GoldencasketYou might be able to afford a bigger fish !
Firstinvestment
To approach your idea of a good investment you need to assess the three main market figures
Market Demand
Market Price
Product saleabilityMarket Demand is literally what is needed in the market at any particular point in time. In a tight market you'll find that even 1br studios get rented and sell because people just need a space. In a slack market however .. these may be significantly harder to rent out simply because the other options will be competing for the same dollar. In an oversaturated market .. no-one needs the lower end .. simply because there are better options to choose from.
Market Price ….. you have said HE thinks the property will rent for $450 per week. Is he the market now? You'll have to make your own judgement on whether the product actually fits into that market bracket and whether it remains a reasonable price. That means finding REAL market comparisons to your property to assess what it can be rented at. Its a bit of homework but if you are staking your hard earned money on it .. you want to know.
Product Saleability … if its a bad egg .. it doesnt change. If the bedrooms are too small .. the bathrooms badly placed .. and the views are of carparks and toxic waste dumps … you arent going to find a person to buy it at any price. Make sure the place is light without needing artificial light to brighten it up .. that the bedrooms are reasonable size and well placed and there is shopping facilities within easy WALKING distance.
Your product in demand .. is your sale in the future.
py .. you may be going through 'first year jitters'
Thats when you purchase a property .. and when it hasnt made immediate gains within six to nine months .. you panic and doubt your decision in the first place.
People will tell you 100 times over that property is a longer term investment option and if you want to make serious gains on it you wait over time. Thats whats best described as 'surfing' inflation. It means your majority of gains will be against the value you borrowed versus the growth due to inflation on both rents and capital gains on your property.
Which is a slack way of saying .. if you sit there and wait 10 years .. you'll have made SOME money on it.
Just between you and me .. i cant be the type of person who sits there and holds on for a lifetime. I have too much living to do. When making my purchases .. I allocate a specific period of time for them to prove themselves. If they havent .. I remove them from my portfolio.
SouthBank is the better of the two new development zones close to the city. If you'd told me you had invested in Docklands I would have just said SELL. Having watched SouthBank for many years now .. its gone through a period where it was all relatively new apartments and not much to do there. But the area is picking up around it. Claredon St has quite a life now to it .. and of course it has direct access to everything that is city based. Need I mention that Casino building nearby?
For anyone who does business in .. near and around the city .. a southbank apartment is still darn convenient and much in demand .. both in rent and sales aspects.
New developments are coming online in the Southbank vicinity. It not only breathes new life into the area with newer apartments .. it also creates extra demand for the area. More buildings = more foot traffic = more viable commercial enterprises.
Stick with this one .. its a good 5 year proposition. And thats a short enough timespan to hold and wait on.
Rent to own and vendor finance are basically the same thing.
Instead of the bank playing decision maker on the deal .. the vendor supplies either a line of finance .. a condition of terms or a means of payment for making a property deal happen.
It means you have to impress the vendor as to your credit suitability for the deal.
For someone who doesnt fit the stricter terms that a bank might issue .. it presents a position of flexibility for possibly getting a property.
As finance terms go .. its an expensive option in that while you might get 7% (or close to it) from a bank or credit institution, you might be paying 9% or 10% (or higher) to get the same deal from the vendor. The vendor wraps a deal and makes a margin over bank interest, the buyer gets a property without dealing with bank restrictions, and it gives him a good footing into the property market.
If it suits your needs for getting onto the property ladder .. then the answer is .. go for it.
Read all the fine print on the deal. Its not unknown for vendor finance providers to add sticky clauses into the paperwork. Be warned.
Deano the braveheart wrote:Perhaps there is a need to look at why the engine needed restarting..why the battery was flat in the first instance Xdrew…. Who was the roman who twiddled on his fiddle, whilst rome burnt?…His name was Nero .. and it remains a false accusation against Nero .. as the fiddle wasnt even invented at that time in history.
Nero may have been a madman .. and in his operation as emperor a troubled genius .. but he was not a fool.
The 50 Basis points SHOULD discourage saving. The major problem is that people are so fixed on existing price schedules and the possibilities of discounts from existing price schedules that they believe it will continue to happen. The ongoing inflationary rate that is broadcast over the media includes depreciating items such as plasma TVs .. computers and mobile phone technology. That produces a FALSE inflationary rate which biases any movement in monetary streams. Which actually devalues the buying power of your money as the real inflation is not dealt with properly in either annual increases or ongoing expenses. This means standard consumables keep going up .. the wage does not .. and it gets to the point where something has to give .. either groceries .. or the mortgage. And unsurprisingly enough .. there ARE people who will give up groceries over rent or mortgages. Literally reducing their consumption of food .. for the potential of paying their rent / mortgage payment.
Not a healthy procedure.
What needs to happen in the nearer term is the publics UNDERSTANDING of money needs to change. Once they have to reset their expectations as to what they can get for their money .. they wont be as scared to spend it.
THIS NEWS IS AWESOME !
Finally the Reserve Bank is stepping up to reality !!!
A couple of points down is JUST what the doctor ordered !
Its like a flat battery and using jumper leads to restart the motor .. its what the engine needed !
This is big.
Go through the proper channels.
It might sound like you are saving a penny but you are costing yourself a pound.
A lot of times the tenant will look ok .. and then you'll find out he's done something bad in the past.
Sub-letting … trashing a place .. the property manager VETS against these sort of disasters.
Getting work done on the property and co-ordinating handymen .. and making sure the rents actually get paid.
I dont have time or WANT to have time to chase tenancies on rent .. or complaints on leaky faucets. Thats what a property manager is there for.
Bypassing the agent is like not taking insurance. You take the extra risk component .. and the liability if something goes awry.
If you do so, I suggest a thorough familiarisation with knowing your rights as a landlord. The REIV (and probably in other states too) used to put out a booklet KNOW YOUR RIGHTS with all the details about what you can and cant do. See if they still produce it.
For cigarette and urine smells .. wash the walls down with a white vinegar and then steam clean the carpets.
What changes a market .. and IS currently changing a market is the availability of flush capital to stoke the market.
The trends .. the norms .. the variables .. all base themselves on the availability of funds to make the project happen.
At the moment the markets I was talking about locking up earlier on in the thread HAVE done just that. So .. the good properties .. the FHB specials .. the land in good position .. has all left the market .. awaiting a better price. Its just not available.
To bring it out again will actually require not only a decent price .. but a higher price. The vendor now sees that only a better price will get him to bring his property out to market again. The vendor now believes that its worth more to hang onto his property rather than realise a current cash price for it. Cash for him just doesnt hold the value it used to.
So in monetary terms .. its a bust. And it means that for a lot of people they just wont have cash reserves because their cash purchasing power will have dissipated.
Note the sudden movement in planning permits on land .. the developers are hedging their bets with what they can build and profit on in yesterdays dollars.
Is the price now too high? Who has the correct gage for that? You can quote graphs .. trendlines .. statistics .. but at the end of the day its always the willing consumer/purchaser of the goods that makes the final decisions. And he makes those decisions based on what he can borrow .. at what gearing level .. and what return he can get on that.I would be going with the idea that inflationary pressures will push this market like a cork out of a champagne bottle. Thats NOT good, as it means that money and savings rapidly becomes … a lot less. All those years worth of saving just disappear in an inflationary rocket .. that shouldnt be good for anyone.
It doesnt pass my 8pm rule.
Really thats all that needs to be said.
I set these rules because they just seem to work.
The 8pm rule is quite simple .. if there isnt a decent nightlife after 8pm .. there isnt a reason for investing there.
Its actually quite an important rule because the 8pm rule allows for tourism and travellers .. young and the young at heart to indulge.
And thats very important for the ongoing wellbeing of a modern town. Outside of that .. you'll be getting many generational pastoralists and elderly community representatives. Thats the sign for a dying town .. as it doesnt have the support and ongoing impetus with modern facilities to keep it going.Rural economies at the moment really dont get the praise .. infrastructure or commitment from the government they should. And Horsham and Stawell are prime results of this. Can it change? Absolutely .. but it needs an ongoing positive trendline to become a worthwhile asset and longer term investment.
I agree with JacM,
I think you have to realise with property is that you buy in one set of rules and schemes and may sell into another. So when I keep saying have a 3% safety range .. i'm not saying it to pump wind.
The depreciation schedules are a nice bonus but they are really just that .. and you shouldnt be dependant on them. The biggest mistake is to rely on .. be dependant on .. either a set of tenancies .. or a set of rules set out by the government … to run your overall investment scheme. In recent times there have been all sorts of extras thrown in .. and some you just wouldnt expect. Land tax is providing an ever creeping extended inflationary bracket and dissuader from the government for investing .. and every once in a while the government will throw in a doozy .. like the 100 buck flat tax per property. Minor at the moment .. yes .. but that doesnt mean its always going to be a minor change. You cant expect every single new tax or realignment of property. But you can leave yourself a safety range to support such a change.
I find especially in the US .. i get a sudden notice of inspection .. penalty notice .. etc etc .. and it throws my plans out of whack for up to three months. I take it if its unavoidable .. complain if its not my issue .. and just shut up and pay it if its more fuss to negotiate my way through. I'm getting 26% gross on my property there and its just not worth piddling issues for a cash cow.
There is no quick fix for starting up your investment other than .. resources .. credibility .. and ingenuity.
One will start the others. You can do collaborative projects to share expenses and rewards .. you can do vendors terms on buffing a place up for a better price at sale …
All you need to remember is that when the banks go to your record they will want to see
Assets – Something they feel they can lend against .. bricks .. mortar .. bluechip shares …
Income – A job .. preferably a steady long term job .. and maybe rental income or share income.
Clean Record – if that means you have to wait for it .. then thats the time to save.
Responsible saving – Some idea that the money for a deposit has been saved up and not foisted upon someone to get a loan.How you get to that stage is up to you .. but the recommendations i've suggested earlier might make good sense.
Things to remember – ALL PROPERTY IS FOR SALE … AT THE RIGHT PRICE
and of course … when a vendor wants to sell .. he wants a conclusion at an acceptable outcome. Negotiate.Build your bank .. step by step .. profit by profit … and you should be able to do some amazing things in no time.
http://www.ato.gov.au/individuals/content.aspx?doc=/content/36887.htm
From the ATOs mouth .. the relevant passage and how it works out.
6 years .. you can claim as main residence .. as long as its your ONLY residence.
Are you trying to say that Moranbah madness is somehow different from any other miner madness over the period from 2005 onwards?
Are you trying to say that the commodities markets dont know what they are on about when they are busy repricing these metals on the markets?
Because if you are .. you are suggesting that demand and hype renders investors unable to visualise the fundamentals. And thats kind of wrong. Most serious investors get to KNOW their substance and the backing behind it. And then .. when the figures and the reasons and the logic go out the window .. they sell off to the speculators who are busy driving the price into the stratosphere.
Nathan Tinkler might be seen as a one-off speculator .. but he did the right thing .. at the right time. He sold up to purchase a non-functioning coal mine in a period where demand is high and getting higher .. used OPM for finalising the deal .. and ended up owning a mine. All parties were satisfied with the end results of the deal .. and they ALL made money. Thats how you do a deal.
Once the investor ceases to see value beyond the fundamentals .. he sells. Its the speculator who becomes dangerous .. he'll drive that price into ridiculous territory and .. that doesnt work for anyone. Neither the miner who KNOWS he can get better value .. the Mining Company who at a certain level will just buy land and build their own housing .. (what .. you didnt think of that ??), or the locals who regardless of how overpriced their existing houses become … still feel they are being cheated on all fronts.
Its something where a responsible local council or government should step in and produce temporary measures to alleviate the situation.
But that would mean a local government actually taking responsibility for its area in Australia.
Good luck with that.
simple wrote:Fascinating replies!On our last company BBQ, I have spoken with workers (over 50ppl). Two where selling, few where regretting that they purchased in the last 3-5 years. None are buying.
So it would appear that only some specialty investors are out there doing some purchasing.
Interesting times.
I find my best information derived from company BBQs amongst middle management and blue collar workers. People who will never take the risk necessary to change their lifestyle .. people so conformist in financial bad behaviours that they wont make the time or efforts to get rich even if they knew how to.
In fact .. to ask the man in the street works even better .. look for men in tattered coats handing out issues of THE BIG ISSUE. They also know the finite points of investing .. that got them to the graduated position that they are in. Sophisticated and knowledgeable investors whose prime tactics allow them free time, poor dental and the chance to afford tattier clothes.
Try number 37 on the roulette wheel too. Its not available, but heck .. if you are going to gamble your money on bad opinions you might as well lose properly !
Howabout next time around .. asking the investor .. the developer (who watches the street demand like a hawk to prevent himself losing money), the real estate agent who gets up everyday and lathers himself in daily market conditions?
Finally .. howabout checking the actual layout of the market in the KEY demand categories? Its visible by gathering a large segment of the properties that are actually listed on the market. And the sales listed from week to week? They are available in the paper. Sure they may be lying .. but .. every week? On every property? .. UNLIKELY.
hornbill,
There are lots of parts to say about your current invest.
First .. you do realise you have 6 years to be away from your PPOR and still claim it as a PPOR and receive all the capital gains from that? At the end of that 6 years you can either return to the property or sell it. Thats gotta be worth a cracker to you .. you can have someone paying half your PPOR bill for you and you reduce your exposure to the debt by half or more ! FULL CGT exemption .. but no depreciation allowances or interest deductions. Sucks on one account .. but profit on the other.
Transferring between person to company .. or family member to family member is not a great way to save on tax unless you started with that as the main reason for the deal. Unless you are dealing with larger folios or multiple properties .. bundling into separate names attracts transfer duties and is an expensive way to solve an issue that should have been straightened out in the first place. In other words .. if you are going to run a large company structure or a small one to minimise on tax .. start that way from the outset. Re-arranging assets once title has been exchanged can be a ludicrously expensive procudure to minimise any tax you receive. And on that .. there is always the chance the tax department will change the rules on you. Think trusts .. as they used to be.
Presented with a deal where you have a bad egg (because you are dealing with building defects and legal issues) to take to the market, you'll reduce your chance of effecting the best sale price. Wait until all builders defects and warranty issues are off the table to assure potential purchasers of a solid deal. I make money purchasing bad eggs, and waiting for that .. so I know what I'm on about. The difference between a bad egg and a solid deal can be up to 20% of final sale price .. so its worth that security.
By the way .. you can still run better deals in the current market. Mashing together a couple of properties and splitting a block into strata title .. i revalued it and borrowed against a couple of the properties without need to sell. Gearing with OPM on the rest of the deal .. i am getting 22.7% Gross on the deal .. coupling to 18.3% net after expenses. Its all about gearing and how you work the deals .. NOT how the deal exists on the market.
As far as working in overseas or interstate markets .. it requires you to be on top of the legal requirements .. obligations and permissions 100% of the time. Read a couple of posts in the overseas section to recognise what sort of requirements you need to be fully aware of the dangers posed by investing overseas. Become your area expert .. or .. roll the dice.
I understand your situation, in fact I just had to supplement a cousin that was in exactly the same boat.
She had a clean credit record .. unfortunately not enough income on the books to register more than a 15k property loan in total. That wont even buy you a motorboat.
So she had a cash windfall of around 100k that came to her all of a sudden. She needed to spend it wisely and I suggested getting into a property situation. She felt bad because she couldnt borrow so therefore she couldnt buy anything. The fact that fixing up her situation with a fulltime job .. didnt register. She went through the motions too of looking for places that didnt provide any real degree of either property safety or security. I promised her that I wouldnt MAKE the decision for her .. i would tutor her as to what was a reasonable decision and why. We eventually came up with an acceptable compromise.
Sum it up .. she eventually purchased two well placed units in a decent large country town. She didnt have the full amount for both of them so she requested a small private loan from her mother to fix up the difference. So, as far as the banks were concerned in the end .. she had two properties at 100% and about 15k rental income gross from this 'patched up' deal.
Nine months later .. (as i promised to her at the time) she went to the bank with her 100% ownership of the properties and her current situation. The banks turned around and offered her 180k as a loan. With this .. she went ahead and purchased more property.
She now has four units in a country town .. and a rough income from rentals at about 30k. And a loan from a bank (she had equity), and income leftover from the deal. Not bad for a lady who nine months earlier could only borrow 15k in total !!!!
The deal you make .. has to be a smart deal. And it has to be a deal that provides you with ongoing wealth for the longer term. An INVESTMENT .. (the dirty word that it is) is a gearing for the betterment of YOUR future, not a property manager .. property consultant or accountant. And on that you have to make better choices.
Here is my $5 bet to you
You can take ANY student property in the CBD, good .. bad .. or ugly. Come back to me in 10 years. Thats enough time for it to have proven itself as an investment. Barring inflationary pips to push it along .. it will have done absolutely NOTHING.
Am i only offering a $5 note on that? Lets make it more a realistic bet .. lets call it $7000
As of 2012 .. i've watched some of these student investments across town for just over 10 years. So I'm pretty confident i'm going to win that bet.
You can make good choices .. and bad choices in real estate. But delegating management to a property management company for a transient group of tenancies for a property thats small sized and relies on being a fashion statement to bring in the students, well .. thats just ASKING for trouble.
Ben.I
Whatever you do .. make your next investment where you place yourself in the position of control. A shared concern is great but it means you cant borrow without really divesting .. and you cant sell because you have to vote all affirmative (or majority) to have it sold.
The problem with serviced and student is that there is control allocated to a hotel group or student management group. And your actual SAY in the place remains limited. Outside of that .. the fact that most are small and with limited lease tenures .. you are investing in someone ELSE's success. They sell you a dud with limited growth and .. they profit. They know that proportionate to the investment .. its possible to make a killing on these places. So they keep on building them. So the rarity of your place .. and therefore demand .. keeps on going down.
The BEST you can hope for is a consistant rate of return with a straightline on the capital growth. At worst .. you dont get your return .. you dont get your growth .. and due to excessive amounts of property on the market .. it actually goes backwards on you.
To put it another way .. there are some of these properties that have remained consistant for up to 8-10 years .. considering how my money has been moving in that period … you've been losing out big time.
KrisL
Without realising it .. i think you've almost answered your own question.
You see, my view on property is more simple and specific than most people … probably more due to experience than anything else. And that comes down to what I see the property is going to be used for.
I have a friend who invested 1million dollars in a suburb that was on the up and coming when the 1 million dollar pricetag was quite a lot. She works on the old 'tried and trusted' to have her property make further gains. The suburb was Port Melbourne. On her insight .. it WAS a good investment. But .. she paid a heck of a price. The property zoomed into the mid-4-5 million bracket in no time thanks to the demand brought on with the area and surrounds. That put ALL of her property into a higher Land Tax bracket. Which meant a hefty land tax bill. Also she wasnt a real property manager. She let the pool and gardens run down until .. she had to reduce the rents to get people through the door.
Good overall investment? It was ok, but the expense of the Land Tax really ate into any gains and rent she was going to be living off. She made her gains on the property (she DID eventually sell) but she didnt really make much because due to poor property management practises and land tax .. she started digging herself into a debt hole.
If you are looking for PPOR potential .. you look towards a house with ongoing potential. Most of the houses of the upper middle class families I grew up with were lived in and graduated to becoming substantial properties over and above what they started with. If you are looking for PPOR potential .. you are looking at .. renovating .. extending .. and maybe even land division and townhouses. Thats making the most of it.
Once you leave the valley of potential .. you are left with the increment of inflation and demand to make your capital gains on your property. Both inflation and demand are VARIABLE prospects and shouldnt be your major considerations for a PPOR. Your major consideration should be the ongoing potential and flexibility of your PPOR .. to your dream aspirations.
Lucky 300th post !
