Perth
Hi,
Were desperately looking for some direction or advice here. My partner and I have recently purchased our second home and jumped into the world of investment.
YOU ALL STARTED SOMEWHERE…..WHAT HELPED YOU TAKE YOUR FIRST STEPS?
We are a couple with a young family with a combined income of approx 120k p/a. No education on investing / finances whatsoever, adequate tax knowledge. With a secure and sizable asset ownership.
OUR STATS
Total current Assets value = over $2.1million Total current debt = $750,000 Total yearly income = $120,000 Total yearly rental income $31,200
We have a rental property generating a $600 per week rental income with tenants that wish to sign on for 5 years (currently started on) Worth approx 650k with 280k guarantor by parents, remaining on loan.
Our second property is our family home in Busselton worth 500K with 360K remaining unseccured. Lastly a total personal ( I thinks its called liquid asset, cars, caravans goods all owned) estimate of around $90K.
We had no real desire to buy more property or increase our portfolio (if that is the correct word) due to lack of knowledge, guidance and fear.
However we do recognize our advantageous position which is probably going to waist where we could be building a more secure future for our family.
Fears for future financial stability have recently become a reality when our parents were denied a retiree pension a few years ago as they have two properties and no morgatage. The houses (one in Guilford, one in Albany) have been on the market for a number of years. Albany has been in the family for generations but is empty for 3/4 of the year. The parents combined land value is approx 900K completely owned. Whilst in desirable suburbs and perfectly livable however the houses are very old, unappealing plasterboard structures which have received very little interest..
Our parents, unable to work at all, are now down to their last few thousand dollars of their savings and facing an urgent problem as we cannot afford to support them due to our second morgatage.
THIS IS WHERE WE NEED ADVICE.
Is there anyone that could offer their opinion on a profitable and simple solution. As we are the only children we feel that it is our obliga.tion to try our best to make their lives more comfortable.
Would it be difficult/ expensive / legal for us to take on ownership of their properties in order for them to receive a pension? Should we decrease the already low asking price for quick sale (easy out) and miss out on a profitable opportunity? We are prepared to focus on a project to in order to gain as much return as possible with access to resources within the building industry.
I had the thought of sub dividing the large Guilford block and building two 3×2 simple houses. The land is currently worth approx 400K and has recently been zoned for industrial/commercial (don't know if that is relevant or benificial…) if we build smart and simple we could sell each house for around $370K each….securing the parents retirement and paying off a large chunk of our morgatage. Whilst keeping the Albany property as their residence and still in the family. However land prep/clearing, demolition, sub division and license approvals etc are all beyond my knowledgebase. The project could be completed within the year providing sizable guaranteed return in the current market
HOW THE HECK DO WE GO ABOUT EXECUTING OUR PLANS???
Were not too impressed with bank lending as they over complicate the lending process (which shouldn't have happened with the amount of equity and security we have) and we feel that they tend to apply sneaky and unnecessary requests to gain caveats all of your houses. Is there an investment/lender/builder service around that direct the project for a percentage in the return. Or better still a lender that requires no deposit based on security alone with very low or no repayments until the return is received? Are there private investors that would be interested? If so, how do we apply/find them? is there a standard investment presentation/plan that I would need to start on? We are not really in a comfortable position to take on another financial commitment as our current morgatage repayments leave enough for our family of five to live comfortably without accumulating savings. We also have the other problem of the need an immediate cash boost that his parents require to simply live on until completion. Are there lenders that provide investment loans which we can use toward project at own discretion?
As you can see we're simply a clueless every day mum and dad that are ready to learn how to be savvy investors. Thank you for ANY advice or guidance you are willing to give.. please include any usefullinks.
If you are feeling generous enough to email us please do we are happy to pay for trustworthy experienced advice.
I'll try and break things down into more sizeable chunks so my answers make more sense.
wanttosuceed wrote:Were desperately looking for some direction or advice here. My partner and I have recently purchased our second home and jumped into the world of investment.YOU ALL STARTED SOMEWHERE…..WHAT HELPED YOU TAKE YOUR FIRST STEPS?We are a couple with a young family with a combined income of approx 120k p/a. No education on investing / finances whatsoever, adequate tax knowledge. With a secure and sizable asset ownership.
We started out as accidental investors many years ago. Bought a place to stop us wasting our money at the pub on weekends. Had the property for a few years and the worked out the property had significantly increased in value due to the rising market at the time and then started a self-education process. Since then have become more and more involved in property including building a portfolio and now running a property investment company.
The key is 'education' – while that is so simple to say there is no real shortcut. I know some people are happy to follow the advice and suggestions of 'professionals' I prefer to see people undertake some self-education so they have control over the decisions that affect their livelihood and future.
There are plenty of books on property investing and investing in general. Then there are a swag of resources on financial matters. Reckon grabbing a couple of these is a good place to start.
wanttosuceed wrote:OUR STATS
Total current Assets value = over $2.1million Total current debt = $750,000 Total yearly income = $120,000 Total yearly rental income $31,200
We have a rental property generating a $600 per week rental income with tenants that wish to sign on for 5 years (currently started on) Worth approx 650k with 280k guarantor by parents, remaining on loan.
Where is the property? Is it commercial? What is the value of this property?
A five year lease gives you a bucket load of certainty with your tenant but make sure you include regular (6 monthly) rental reviews otherwise you could see your tenant paying $600/week for the next five years. Inflation over this period of time will erode the value of that $600.
I would be taking all possible steps to remove the $280K parental guarantee on this property. I would suggest that you speak to a broker (not your bank) about this process. A good broker will help you get things in place so that your interests are looked after.
I know a couple of brokers in WA who may be of assistance. Equally there are plenty of good brokers on this forum who could assist.
wanttosuceed wrote:Our second property is our family home in Busselton worth 500K with 360K remaining unseccured. Lastly a total personal ( I thinks its called liquid asset, cars, caravans goods all owned) estimate of around $90K.
So your debt level on this property is 72%.
Typically banks will happily lend up to 80% of the value of an asset so you have a possible $40K which could be released here if you desire. It is possible to go higher.
wanttosuceed wrote:We had no real desire to buy more property or increase our portfolio (if that is the correct word) due to lack of knowledge, guidance and fear.
However we do recognize our advantageous position which is probably going to waist where we could be building a more secure future for our family.
It could be your lack of knowledge is the hurdle that is preventing you from seeing the possibilities that could open up for you if you wanted to. This is where having a good knowledge base comes into play.
End Part 1.
wanttosuceed wrote:Fears for future financial stability have recently become a reality when our parents were denied a retiree pension a few years ago as they have two properties and no morgatage. The houses (one in Guilford, one in Albany) have been on the market for a number of years. Albany has been in the family for generations but is empty for 3/4 of the year. The parents combined land value is approx 900K completely owned. Whilst in desirable suburbs and perfectly livable however the houses are very old, unappealing plasterboard structures which have received very little interest..
Our parents, unable to work at all, are now down to their last few thousand dollars of their savings and facing an urgent problem as we cannot afford to support them due to our second morgatage.
Why is the Albany property empty 75% of the year if it is the family home (in reference to a comment you made elsewhere in your post) – Is this Albany property a different one than the family home?
Your parents, or you on their behalf, need to grill the agents to find out why the properties aren't selling. It is usually the wrong price that is the reason for an elongated selling period.
The Albany market (at the lower end) has been moving reasonably well in more recent months. Where is the property and who is the listing agent? I would suggest getting another agent onto the job. There are a couple of more dynamic agents and agencies in Albany that would be worth speaking to.
You could also consider, as an interim measure, a reverse mortgage. While this is not an ideal situation it may keep the wolves from the door.
wanttosuceed wrote:THIS IS WHERE WE NEED ADVICE.
Is there anyone that could offer their opinion on a profitable and simple solution. As we are the only children we feel that it is our obliga.tion to try our best to make their lives more comfortable.
Would it be difficult/ expensive / legal for us to take on ownership of their properties in order for them to receive a pension? Should we decrease the already low asking price for quick sale (easy out) and miss out on a profitable opportunity? We are prepared to focus on a project to in order to gain as much return as possible with access to resources within the building industry.
I would be looking at a reduced sale price rather than you buying old your folks' property. Emotion will cloud your judgement and it is a time for cool heads to prevail. Having gone through the exact same thing with my folks last year I know how challenging it can be. But keep a cool head.
wanttosuceed wrote:I had the thought of sub dividing the large Guilford block and building two 3×2 simple houses. The land is currently worth approx 400K and has recently been zoned for industrial/commercial (don't know if that is relevant or benificial…) if we build smart and simple we could sell each house for around $370K each….securing the parents retirement and paying off a large chunk of our morgatage. Whilst keeping the Albany property as their residence and still in the family. However land prep/clearing, demolition, sub division and license approvals etc are all beyond my knowledgebase. The project could be completed within the year providing sizable guaranteed return in the current market
The current zoning of the Guildford property will make building of two house an extremely difficult and lengthy process. Firstly you will need to get a zoning change and obtain development approval. A straight sale is a preferred option in my opinion. Keeps things simple. Once again drill the agent to find out why this property hasn't sold. Chaneg agents. Get a second opinion. Don't wait for things to happen – make them happen.
wanttosuceed wrote:HOW THE HECK DO WE GO ABOUT EXECUTING OUR PLANS???
Were not too impressed with bank lending as they over complicate the lending process (which shouldn't have happened with the amount of equity and security we have) and we feel that they tend to apply sneaky and unnecessary requests to gain caveats all of your houses. Is there an investment/lender/builder service around that direct the project for a percentage in the return. Or better still a lender that requires no deposit based on security alone with very low or no repayments until the return is received? Are there private investors that would be interested? If so, how do we apply/find them? is there a standard investment presentation/plan that I would need to start on? We are not really in a comfortable position to take on another financial commitment as our current morgatage repayments leave enough for our family of five to live comfortably without accumulating savings. We also have the other problem of the need an immediate cash boost that his parents require to simply live on until completion. Are there lenders that provide investment loans which we can use toward project at own discretion?
Use a broker – banks are more inclined to look after their shareholders than you. A good broker will be able to provide you with a full range of options for you to consider. Their focus will be very much on your needs and wishes.
It seems to be property is not your parents issue – rather just a lack of knowledge and direction. Certainly if they had their time over again they may well have done things differently and this is where educating yourself will help you to avoid similar mistakes.
wanttosuceed wrote:The houses (one in Guilford, one in Albany) have been on the market for a number of years. Albany has been in the family for generations but is empty for 3/4 of the year. The parents combined land value is approx 900K completely owned. Whilst in desirable suburbs and perfectly livable however the houses are very old, unappealing plasterboard structures which have received very little interest..
Even though the market is quite flat at the moment, the fact that they have been listed for a number of years with no result means something is wrong. You say the property has been in the family for generations… could this be clouding your parents judgment on what the property is actually worth? Have they just picked a figure on what they think the property is worth or had a professional valuation?
I would also change agents as the one they are currently with obviously isn't doing a good job at pushing the property, even if it is just advising of a lower price range they should be doing all they can to turn the property over.
Even the most rundown, unappealing houses will sell for the right price. They can even sell really quickly if the price is better then whatever else is on the market. I would try and remove all emotion from the sale of the property and meet the market in terms of price. Get a couple of agents appraisals and go from there.
Another issue is why it is vacant so often? Is it the same case with thinking it is worth more than it really is and charging an above market rent for the quality of the property?
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