Hi all,
I have recently opened my eyes to the property investing world, and have bombarded myself with books and seminars etc. What I am having trouble coming to terms with is what type of strategy to go for? Theres negative gearing, positive gearing, strata titling etc. I have received most of my information on negative gearing, and since doing a little more research it seems some people think it is a poor strategy??
I am also having trouble with finding out how to include all your costs in buying and selling a property, eg. closing costs, land tax etc..Any help on these questions will be greatly appreciated,
Only you will know which strategy suits you and your situation. As you rightly point out there are so many ways to purchase property the challenge is to work out which strategy suits you.
This forum is very much a cashflow forum if you were to wander around the net even more you will probably find people who wouldn't consider cashflow as being a very important goal when making investment decisions.
Each strategy has its own strength and weakness.
I suggest you list the benefits and drawbacks of each strategy and then run these against your personal situation. You may find there is a 'perfect match' for you.
Thanks Derek for the reply, are there any sites or books you can suggest on reading to get an idea on the pros and cons of each? I have a few written down, however the more information the better I believe.
Thanks again.Costs to buy are Stamp duty (check website below) + solicitors fees (including searches etc) $2000 + bank fees $1000? max.
http://www.acgol.com/stamp_duty_calculator.shtml
Personally I think all this CF+ vs CF- is crazy. You'll drive yourself mad trying to decide what to buy and end up with nothing. No-one likes paying money out of their pocket but if you fork out $10,000 a year but your property grows by $30,000 your on your way. Plus as rents go up the outlay will diminish.
A newby will be battling to buy/create a CF+ property that is not regional.
What do YOU want from property? Can you afford a CF- property in a high CG area? or are you strapped for cash and can only afford something IF it is CF+? It all comes down to research.
Personally I want something that's not too CF- but is in an area I believe will get decent CG. No use having a property that in 2 years time is CF neutral if it's going nowhere. That will not create wealth.
Cash flow is great but without CG you have stagnated.These forums are great but the problem is newbys keep waiting for that elusive property that ticks ALL the boxes and get frustrated. I know I did it. Kept hearing "it's got to be CF neutral" . I wasted a lot of time and passed up a few good deals because I didn't factor in other things that outweighed the yield. Eg under market with chance for great CG with a minor reno. So it would have been CF neutral after that + big equity gain.
So what I'm trying to say is it's not this or that. You need to value each property on it's own merits. Get out there. Look at properties. Make a choice and move. It may not be the most wonderful property when you look back on it after years of investing but you're one up on the person who reads for 5 years waiting for the "perfect" property.Catalyst wrote:Get out there. Look at properties. Make a choice and move. It may not be the most wonderful property when you look back on it after years of investing but you're one up on the person who reads for 5 years waiting for the "perfect" property.Catalyst makes a very good point. You don’t want to cop the dreaded “analysis paralysis” – where you spend too much time over analysing and looking for something that ticks every box instead of making your move into investing.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks heaps guys for the reply’s, its good to get some hands on advice from other people playing the game. One last question I have, is there a rough set of guidelines for doing your due diligence? I know it includes doing your research on the area, owner occupiers vs. investments, people per household, infrastructure plans, but sure enough when doing research you will overlook something, possibly a big factor in returns, so is there a book or a site that recommends certain research and a list or the like?
Thanks again, your help is much appreciated.scotty8911 wrote:One last question I have, is there a rough set of guidelines for doing your due diligence? I know it includes doing your research on the area, owner occupiers vs. investments, people per household, infrastructure plans, but sure enough when doing research you will overlook something, possibly a big factor in returns, so is there a book or a site that recommends certain research and a list or the like?Margaret Lomas has a book called '20 Must Ask Questions for Every Property Invester' that outlines things that should be considered before you buy a property. This book is a good read and seems to be popular with other investers.
Cheersscotty8911 wrote:Thanks heaps guys for the reply's, its good to get some hands on advice from other people playing the game. One last question I have, is there a rough set of guidelines for doing your due diligence?The answer is yes, look for value in the deal. Look for the ability to either place value or achieve value with the property. I think anyone who tells you that you just buy what looks good on paper is delegating to someone else what the achievement will be. Know what you will buy, know what remains value. And most importantly .. if you are providing a housing service for a certain societal level, make sure that you are aware of area changes that may affect that property class. Property isnt a hold on and wish for Peter Pan to whisk you to riches Neverneverland. Take a visual snapshot of your area .. at least every 4-6 months to see how things are going. It takes less than a year or two if the area is slipping into crisis for that to become visible.
scotty8911 wrote:Thanks heaps guys for the reply’s, its good to get some hands on advice from other people playing the game. One last question I have, is there a rough set of guidelines for doing your due diligence? I know it includes doing your research on the area, owner occupiers vs. investments, people per household, infrastructure plans, but sure enough when doing research you will overlook something, possibly a big factor in returns, so is there a book or a site that recommends certain research and a list or the like?
Thanks again, your help is much appreciated.Hi Scotty
Welcome to the forum.
You’re on the right track – and the book from Lomas that Blair mentioned is a good resource. If it helps, I’ve got a list of links that may be handy for carrying out research – http://www.passgo.com.au/property-data-websites
All the best
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Scotty
One stategy that you could look at is real estate vendor finance. We've been operating in this niche since 2003 and it's worked for us. If you'd like to learn more about vendor finance in Australia, I suggest you do a search for Vendor Finance here and in the Somersoft forum. You'll get an immense amount of reading material in both these forums.
A few web resources that may help in your search for information about vendor finance are:
https://www.propertyinvesting.com/strategies/wraps
https://www.propertyinvesting.com/strategies/lease-options
http://www.jvpropertypartners.com.au/index.php?option=com_content&view=article&id=50&Itemid=75
http://www.vendorfinancelawyer.com.au/
http://www.vendorfinance.asn.au/ The Vendor Finance Association of AustraliaCheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Thank-you Paul for suggesting another stratergy, I have heard of vendor finance but never really looked into it, I will check out those sites ASAP.
Another query I have is how to calculate a ‘profit and loss statement’, similar to that of a business I suppose. SO, what costs are involved with having a property, and if there is a format or a sheet out there that people use to easily calculate how much a property is costing you per annum, or how much it is making you.
Thanks everyone for the information and helpful hints, it is greatly appreciated.Hello everyone, thanks again to all your advice and suggestions. I have another question. I have been considering taking on the strategy of reno’s. Mainly due to the fact that I am in the trade industry myself, and have a few close friends who are too. Is it wise to think that I can buy a investment property that is in need of renovation, carry out the work within a set time frame and budget, then I can rent this out and charge a premium rent? (looking to obtain CF+ from the property) SO, I guess my question is, can you buy a property, renovate, then expect a positive cashflow?
Thanks in advance for your input.Thank-you Catalyst for your reply. Are the properties CF neutral before the reno’s or after? And, what do people mean by ‘crunching the numbers’? It makes a little sense but would like some clarification.Thanks
scotty8911 wrote:Thank-you Catalyst for your reply. Are the properties CF neutral before the reno’s or after? And, what do people mean by ‘crunching the numbers’? It makes a little sense but would like some clarification.ThanksHi Scotty
I take it from Catalyst’s comments that after he/she adds value, he/she is able to command a higher rent – the rent coming in is equal to the costs of holding the property – making it cashflow neutral.
This spreadsheet might help with crunching the numbers – http://www.passgo.com.au/pass-go-investment-property-analysis-tool
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Scotty,
A short answer from me – plenty of great ones above….
You don't need to stick to one strategy.
Work out where you want to be (in terms of assets and cashflow) at a target date.
There are numerous ways to get there and you don't need to stick to one.Hi all. Thanks Jamie for that link to the spreadsheet, should help alot with crunching the numbers. On that, does anyone allow a certain amount for maintenace, and other ongoing costs, or is there a rough % that people allow?
Thanks.Just to let you know what suits us. We are very handy and look for houses with problems that nobody wants and we can buy cheaply. We do the ncessary work to bring the property up to scratch and then decide whether to hold or sell.
Just to give you an example we are about to settle on a property that has had termites. The previous contract collapsed because the purchaser had a building inspection that uncovered the problem. The vendor had the property treated and we were given a comprehensive copy of the pest inspection reports noting no structual damage. We are doing a reno, repairing the damage and putting down a termite barrier and going to resell. We purchased the property for $250K. The previous offer that collapsed was $319K with the house needing repair. Houses in this area in good repair fetch $330K so even if we spend $30K we will make at least $50K profit.
I find it difficult to pick just one strategy. Each property transaction is different for us and more than one strategy can be present. Start off small and as you gain confidence stretch your wings. It all about learning.
enjoy the ride!
scotty8911 wrote:Hi all. Thanks Jamie for that link to the spreadsheet, should help alot with crunching the numbers. On that, does anyone allow a certain amount for maintenace, and other ongoing costs, or is there a rough % that people allow?
Thanks.No worries Scotty – I hope it helps.
It’s hard to put a figure on it – and it’s obviously dependent on the age of the property. I usually account for $600 p.a per IP. Some I rarely spend money on – one in particular (an older property) has already blown it’s maintenance budget this year
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
There are some shocking properties out there- here’s the current one we are renovating at the moment…. scroll down and have a look at the photos. There’s profit in the deal and thats what counts – http://www.renovateandprofit.com/RENO-Excursion
Hi Scotty,
It's fairly daunting and not easy to get up to speed with the many strategies that's available.
If you're starting out and you really want to just make money off property investment, I would typically go for a positive gearing strategy with the hope of making good capital gains. Now that's easier said than done – depending with where you live, rental yields in Australia are pretty low and often lower than interest rates. That means that you're likely to be negatively geared anyway.
The money you'll ultimately make especially when you're first starting out is from capital gains – so look for high growth areas.Ask the real estate agent for as much details as possible.
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Good luck and let me know if you need a hand.
Jase
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