Forum Replies Created
A further thought – make yourself aware of any covenants that might be in place. e.g. the building might need to comply with certain stated conditions so as to “fit in” with the rest of the properties surrounding it. Those conditions might add extra costs to your build that you were not contemplating.
Also, do compare the land cost with other similar developments by other companies. Some over value their blocks, thus limiting its capital growth for some years. Don’t go buying it just to help a mate – “No, sorry” is still a valid reply in English. :) It needs to make sense to you first.
Benny
Hi Natni,
In my Welcome PM to you, I posted the link to the “Big Picture for New Investors” topic. Spending some time trawling through that may well yield some good answers for you. In particular, page 3 of that link has several subjects that seem appropriate for you at this time. Here’s that page 3:-
One early post in there talks of “Off the Plan” purchases – I’d recommend a read of that one for your current situation. Further on, on Jun 8, 2021 a topic of “For anyone just starting out, and unsure where to start”. That is well worth a read too. A few others on page 3 may pique your interest. After that, there are still pages 1 and 2 to be explored.
Start there, then see if it leads to other questions, but with better knowledge now of “what to ask”. i.e. you may be further along, and can pinpoint specific “need-to-know” areas.
Let’s see what other members might offer too.
Regards,
Benny
Whoopee – another 0.25% down. Hard to raise a cheer, but it is better than the alternative.
Well, they did it again – a 95% prediction of a rate cut, and the RBA said “No”!!
I have been hearing that the economy has been on life support for almost 3 years now (just ask anyone whose discretionary income has become quite depleted as non-discretionary costs have soared – mortgage interest being a prime contender).
But the RBA has chosen to NOT cut rates this month to provide a modicum of relief. Why? Ask them – seems what “might” happen is more important to them than what IS happening. You know “Oh, Trump’s tariffs might send our economy into a tailspin”. OK, so we’ll keep our long-suffering citizens struggling just in case?
To me, a tailspin is a lot like a bridge !! We don’t try to cross a bridge until we reach it – and I would think attempting to correct a tailspin before it occurs would severely disrupt level flight, wouldn’t it? (Where’s that rolling eyes emoji?)
So come on, RBA. How about you spend the next meeting talking to citizens rather than dreaming up “what ifs” and acting to thwart them? This is our real life you are disrupting severely with your stupidity. We eagerly await the August meeting…. Wait, did I say eagerly? Maybe not – I think we have learned that the RBA doesn’t speak Common Sense much these days.
Hi Fooko,
A further point – re ” the experience may well provide answers to questions you didn’t know you had !!”
Another tool that will likely provide you with the same, is to read that “Big Picture” topic that I messaged you earlier. There is a wealth of “nuts and bolts” info hidden in there. It can help to prepare you for the seminar by filling a lot of the early info that is so necessary.
In case you hadn’t kept the message, here’s the link:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/
Benny
Hi Fooko,
Great words from Steve – and I wanted to throw out a couple of other thoughts.
First, you mentioned you had recently refinanced – was that a Fixed Interest loan at all? ‘cos if it was, BEWARE. Find out just how much it would cost to break that agreement and close the loan. Fixed loans can have VERY nasty consequences.
Second, do go to the seminar in August – you will learn so much, and the experience may well provide answers to questions you didn’t know you had !!
Third, I tended to stay clear of apartments – why? Lack of control, less land value, higher costs (Body Corp), less chance to add value (your apartment is only worth what other apartments in the same complex are worth). Limited appeal – OK for a couple with one or two kids, but families don’t typically purchase apartments – i.e. over half your buyer base gone right there.
Anyway, that will add a little more, but Steve’s words are most important. Which road are you planning to go down?
Benny
Hi Jenny,
Wow – quite a post there !! Some good news in it, but also some areas that would depend on other answers to questions asked of you. I’ll have a crack at sharing my thoughts – some may help you to focus more on “where to next” that suits you.
I’ll attack each of the 4 points you mentioned – with comments, and sometimes questions:-
First though, with $200k income, there is obviously a good amount of income left to be able to service approx $750k in loans. How much more is left though to buy more if you WEREN’T to sell one or both properties and reduce debt? One to think on. :)
With both properties being in Greenfield estates, it is often the case that capital gain stays minimal for some years. Is that so in your cases? Are they growing in value or not?
If NOT selling either, at 80% you could borrow $535k against PPOR – could that be deposit/costs for two more? Depends eh? Or maybe allow a reno or two. By selling, you release far more cash, but have a few costs to cover when selling (CGT on the IP – no CGT on the PPOR though). Then, of course, would you rent and invest in several IP’s or a commercial property?
OK, there were a few random thoughts – now for your 4 points :-
1. Trusts have costs, but the right ones also provide protection and some useful options re taxation too. My thoughts would be to only put in Trusts those IPs you wish to keep. If doing a reno/flip, or buy/reno/sell, I wouldn’t.
2. Wouldn’t this be on hold for another 2 years? Or do you have spare time to travel and reno, even while in current contract work?
3. Certainly you could ramp this up while still working – does it work? Hmm – not one I can answer – I’ve done one or two renos but never made a business of it, so can’t add much.
4. I have heard of several developers doing well in the past. But more recently, with costs ballooning, I’m not so sure. Hundreds of companies went bust during and after Covid over higher costs. How is it now? PASS !!
Re commercial, Steve often says “Make your money in Resi, then switch to Commercial for Income.” What could you get for $1.5m ? Again, PASS. Others will know.
Now that I’ve got up to dance, I am hopeful others might join me !! :p
Benny
Note – I am NOT a professional adviser – just a bloke with an opinion, so none of the above is advice of any sort.
Woohoo – they did it !! Another 0.25%. Be still my heart….
‘scuse the dripping sarcasm. Opinions still seem to be mixed about whether there will be more drops or not. Many say 3 more this year (and our re-elected Treasurer is one of them) and yet others say “Not so fast” – tariffs could impact inflation yet !!!
I’ve heard the average saving from the 0.50% drop is around $200 a month. If that is so, then the 13 increases totalling 4.25% must’ve cost (on average) about $1700 a month. So I don’t think too many will be leaping for joy just yet. Still, it seems the RBA have learned the lesson of “Make a move then sit back and wait a bit (like they used to).
Time will tell, and I don’t plan to hold my breath – how about you?
And a bump to bring it fresh after adding a photo !!
Hi Owen,
“Never ask a barber if you need a haircut!” is my comment re the concreter. He would be looking for work 24/7, so is likely to guide you toward his point of view re the cracks in the driveway.
Re the uneven patio, it depends just how uneven you are talking. You could check to see if the work ever had Council Approval or not. If no, THAT could be a bigger problem for you, as Councils can demand you remove them if not up to scratch. Did you have a Building Inspector check this place out? If so, what were their comments?
Buyers like to see a pleasing interior, so I would concentrate on that part more than a driveway. I’ll hold further comment re the patio, since the uneven-ness could be a few things – sign of someone throwing it up to suit their purpose, but never approved, or a sign of foundation problems or ground subsidence. Again a Building Inspector can be guided to spend a bit more time on such “concerns” if you request it.
Good luck with your next move,
Benny
Good one Stu – well caught !!!
Benny
Hi Lisatfs,
Since no-one else has “got up to dance”, I thought I’d share a few ideas. Note that I have only bought in Brisbane, so I have NO direct knowledge of Gladstone. However, I recall some events that put a pall over Gladstone some time back – in one example, some major industrial event was planned, everyone got excited, values screamed up, then the event did NOT proceed and the rug was pulled out, and many folks lost money. I am talking many years back now – ten or more?
What you can do is to type the word Gladstone in the Search area on the home page then check out the results (it takes several seconds for all the posts to pop up). Each title might give a clue re the contents, OR just read them all, taking note of the dates. That will give a historical view of the place.
I vaguely recall some suburbs mentioned where one should “stay away”. Are they that way today? I don’t know.
Using realestate,com.au, I quickly saw that prices in some suburbs have had a boom time recently e.g. a 25% gain in the last twelve months and close to doubling over 5 years. Which ones? Again, I don’t know, but you will likely have an idea of what and where, so seek the info on those ‘burbs you like.
Oh, and Units? I’ve never bought one in my life. I like land content. You’ll need others to talk of Units themselves and/or Units in Gladstone specifically. Good luck with your search.
Benny
Hi Jesse,
This doesn’t sound so bad, but then it depends just what “older concrete foundation that has some minor cracks” actually means. I believe concrete can develop hairline cracks over time that don’t affect things too much – if the crack is any more than a hairline though, it is likely indication of a bigger problem.
My path in the past was to ALWAYS use a Building Inspector to check out any property I bought, as their knowledge was way superior to my own with regard to such issues. You may wish to do the same – good luck whichever way you choose,
Regards,
Benny
“The RBA admits it raised rates too late”. Yep, I think we all knew that. That “emergency setting” was around COVID times. The rest of the world were madly cutting theirs too, so we were playing follow the leader I guess.
In my opinion, it should never have got to 0.1%, but since it did, at the FIRST sign of a lift (was it around May21?) they should’ve started lifting again then. Instead they waited another year (till 4May22) before starting their rate lift marathon.
And, if things were so bad, why lift at 0.25%? With the cash rate being on that emergency setting, why not lift 1.0% to get a big effect right off, then sit back and read the tea leaves (like the RBA of old) before the next hike? Their hikes seemed almost never-ending, and many folks got hammered. If they had lifted more quickly, things would have settled down quicker, making it LESS likely to need as many further rises?
Now, they have realised the economy is in intensive care, so they drop 0.25%. Wow, that’ll start the heart again…. maybe. “But don’t count on more drops right away” they say. I will be waiting for them, and commenting, if they take too bloody long to do it again. Sometimes I think they live in a parallel universe to you and me.
Benny
Hallelujah !!! The RBA finally got to do something right (imho…. :p ) A rate cut of 0.25% that will save the average mortgaged citizen around $1200 a year – or $100 a month, or $25 a week roughly.
“But don’t plan on more coming any time soon” say the RBA. Ah well, it is some small mercy, but little more than that. Perhaps it will allow those who are stretched to hold on a bit longer – until the next cut? With the damage they did two years back, it’ll take more than one rate cut to bring things back square.
Of course, I know it will never get back to 0.1% – that was an emergency setting that (I believe) they should have never gone to in the first place. Then, once done, they waited too long to bring it OFF that setting. So what rate should they settle at? IMHO, something around 3% should bring things back to a more stable footing. See, with rates being as low as they were, many folks bought up large – too large perhaps. The governor at the time also famously said “No rate rises until 2024”. That was stupidly wrong too (the hike started in mid-2022), but I’m sure it led to so many becoming WAY too heavily mortgaged once the rates took off.
Add to THAT, that banks lifted Qualifying Rates to 3% above required (this had been 2% mostly). Now when people need to refinance (with a larger mortgage than ever, and ALL living costs having gone thru the roof), their applications are rejected. Some banks are already looking at Qualifying rates once more (as they should) as the likelihood of rates going up hugely any time soon have dissipated pretty well, yeah?
Of course, on the flip side, those with accumulated funds will have their Interest Rate payment ticking downward too. So, I get this is a balancing act – but the way the RBA seems to have handled it is by going straight from A to B by swerving left and right !!!
Feel free to tell me I’m wrong….. I’d like to hear other opinions too, ;)
Benny
Could it be “on”? I hear CBA is predicting a rate cut likely at the Feb 2025 meeting of the RBA, followed by up to 3 more through to the end of 2025.
Can’t come soon enough for mine, and, I suspect, lots of others too. So if it comes to pass, the 4.35% Cash Rate should be 3.35% by year’s end. And no, that is not a 1% drop (of course) – it is far more significant than that. It is close to a 25% cut.
Of course, your Bank won’t be reducing from 4.35 to 3.35 – theirs is more likely to drop from something like 7% to 6%. That’s about a 14% drop, so not to be sneezed at, particularly if it allows you to have a wee bit more discretionary income available to you. Of course, we don’t count chickens before they hatch, but there’s nothing to stop us dreaming, hey? :p
Benny
Hi Firefly,
Ah, not such a bad outcome then….
Re the short term rentals, I’ve been there myself, and the extra rental goes well IF certain things can be mitigated:-
1. Does your place have a “point of difference” that has people choose your place over others? Proximity to the beach could be one….
2. The cleaning and preparation between each visit – in our case, we started out by hiring cleaners, and that was OK as the rents covered that cost. But then, I retired, so we handled everything from then on. That made a big difference to the income
3. We found a “homely feel” worked well for us – others like to have a “show home” – over to you re your desires.
4. We had a set rate for a couple, then a nominal amount per night for extras – but then, we had 5 bedrooms and could sleep 10…. And of course, a higher rate for weekends.
5. We had locks on all bedrooms, and provided just enough keys to cover those staying. That meant the unused rooms didn’t need to be “made up” after each visit. Though our place was ideal for families, we also offered couples the place too (with bedrooms locked off).
6. We offered air mattresses (with linen, blankets) to accommodate any extras that exceeded our bed limit – great for a larger family and/or with kids. Many places are “couples only” – our niche was as a “family home”.
7. We discounted a 3rd night, or more, quite heavily – no extra sheets to wash, or cleaning to be done – the extra is all cream !!! That can also be a point of difference from others. The longer they stayed, the average cost per night went DOWN.
Other “plusses” we found – with no long-term tenants, we could schedule repairs through the week with tradies if needed. We could also visit and enjoy the place ourselves whenever it was not in use. We could “stay over” ourselves if there was work that might need to be done over a day or two. Less overall wear and tear as the tenants tended to respect the place instead of becoming “familiar”.
they wonder why there’s a rental shortage and they leave us almost no choice but to remove our property from the long term rental pool!!!
Amen to that !! I spoke to that in another post – here :- https://www.propertyinvesting.com/topic/5083103-how-does-an-increase-in-the-rbas-cash-rate-help/page/2/#post-5090493
The State Govt certainly didn’t want to see investors stick around eh? Of course, the rental shortage comes from other factors too, but those regulations didn’t help.
Anyway Firefly, good luck with choosing the right path for you. Keep in touch eh?
Benny
Hi Groono,
Is the ‘big picture’ link sent to my personal message box?
Sorry, I hadn’t yet PM’ed you – it’s coming…. ;) But here is the link in one of the forums anyway:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/
I know that council rates, and interest can be tax deductible. But generally, what percentage can be deducted?
That percentage would be equal to your Marginal Tax Rate. Some expenses related to an investment are claimable. What that does is REDUCE the Tax you need to pay on those costs. e.g. If you’re Marginal Tax Rate is 30% (i.e. you earn between $45k and $130k) then when those expenses are taken off your income, the Tax saved is 30% of their total. Expenses of $1500 would therefore save you a Tax amount of $450.
One would want to find an investment that doesn’t only rely on future growth. That is where buying smart helps. So does “adding value” (renovation?). Repurposing – turning a 4 bed house from a rental of $600/week into an HMO dwelling where you might get $1200/week plus. And there are a host of other options – JV’s, syndicates, options, etc. Lots to learn, and not all will suit you, but good to know of in case they might suit eh?
Keep reading Groono – sounds like you already have – you seem to be aware of much already !! :)
Benny
Hi Groono,
Good for you for starting to consider property as a vehicle for building wealth. It certainly is, as many on here can attest. But as you seem to already know, there is a lot to learn before pulling the trigger. Regarding timing, with Interest Rates as high as they are, finance is harder to get for many. Yet Banks still want to lend (it’s their bread and butter) so loans can still be found. You seem to know that you are OK for up to $800k, so I guess you have already checked your financing capabilities, yes? If not, it is a good place to start, as you don’t want to search for $800k properties if it turns out you can’t finance them.
Like you, I have always favoured buying property with land content, so I bought no apartments, only houses, townhouses, etc. It is land that rises in value, while buildings deteriorate, so the more land, the better. Also, don’t buy new unless you are having your own builder building it on your land. Why? Simply because in areas where developers build lots of homes (e.g. at Pimpama/Coomera) they have already charged you over-the-top $ to buy the finished product. There is not likely to be capital gain for many years. Whereas, if you buy a home that needs renovation and you can make that happen, then you are adding value that is all yours to utilise once complete.
Property values run in trends and, as you would be seeing, a shortage of rental houses and a surfeit of people wanting to rent, leads to increases in both values and rental rates. But then, that changes regularly as “buying becomes cheaper than renting” and the rental market falls back a bit. Buying could become more preferable as Interest Rates decrease again (maybe this year?) but for now the rental is king. Rents are growing hugely, as are values.
Re “is it really worth it if rent doesn’t cover expenses?” – it can be, so long as the value is climbing, and/or there is another reason where changes can be made that WILL lead to increased rent in the future. e.g. a renovation perhaps, or a subdivision, or even a change of purpose like changing from a single family to an HMO style rental where you house 3 or 4 people, each paying rent. (HMO is Housing with Multiple Occupants).
Keep in mind too, that times like these make things hard for some folks. There can be multiple reasons for a sale (the three D’s – death, divorce or destitute – are common ones) and some folks “just want out” and are not looking to get the best possible price. You would be helping them out just by making an offer, and they may well sell to you for a bargain price just to be free of their situation, allowing them to “move on”. So yes, even today it can be worth making offers.
For yourself though, set limits. Use your strengths to your advantage. e.g. if you are handy, look for a place that can be renovated by you. If you can manage people, find others who will renovate for you. If you prefer to be a passive investor, perhaps a Joint Venture with someone else who is a “live wire” but has little money of their own. Or if that’s not you, then maybe investing in other areas is better – e,g, Steve’s SOGIF fund for one.
Meanwhile do keep reading – some things will speak to you and perhaps provide a catalyst for your investing. Do check out the “big picture” link that I sent you – there is a host of good info in that link. And check out the Training Centre on the Home Page.
Don’t be in a hurry to invest – chose your battles after you know just which type of fight you like to be in. :)
Regards,
Benny
Yeah, Land Tax – ouch !!! One of the negatives of Equity Growth eh? And again, that’s a 140% increase in just two years. HOW is that any kind of fair? Especially as mortgages have gone up by even more than that for you, haven’t they? (3% to 9% is a 200% increase, right?)
At times like this, I like to look at the numbers to see if “there’s another way”. Unfortunately, being in a Trust in Qld has you liable for a way higher Land Tax than if in Personal names. That can’t be undone without a lot of expense, including perhaps CGT. So let’s look elsewhere:-
1. IF a deal is likely that will allow you to increase the rent in September, one way to “hold on” is via a temporary loan. You’d need to know that the deal ahead is going to cover all you need. e.g. Is there a “cap” on the amount you can increase the rent (like, a max of 10%?? or something?) If so, would that be sufficient to cover all you need it to?
2. If a temp loan is needed, how much for, and what Interest would that cost? For small amounts, where you KNOW it will be catered for in the future, the interest can often be miniscule in the scheme of things. e.g. You said you are now negative geared – let’s say by $10k for the next 8 months (till Sept). $10k at 9% is $900 for a year, so $600 for 8 months. Would that $600 be money well spent to allow you to sleep better at nights while you wait for September to come? Just a thought – add your own numbers to see what is really what !! ($600 for 8 months is less than $20 a week for perspective – of course, the loan to be paid back, but after the rent has been increased, yeah?) And for that same $20 a week, you can take your time to repay the loan, right? Not too bad after all?
3. Sorry, but I think you may need to take a hard look at your current tenant – here’s the thing:-
a. She didn’t notify you of the extra person, nor the dogs.
b. When found out, she reverted to bullying to try to get her way. If her integrity is in question (in both a and b), her future with you is also worth questioning, eh? What of the boyfriend’s integrity? Do you know?
c. The other tenant might be considering THEIR options if she and her boyfriend (or dogs) are a problem to them. Where would that leave you if that other tenant chose to leave?
4. Yeah the Govt. It hasn’t been pretty for some years – landlords can’t dismiss tenants so easily, tenants can bring pets without landlord approval, rent caps (no more than one increase per year), put holes in walls to put up pictures, etc. And then Land Tax – I’ve been there, also held in a Trust – an extra $100 a week that had to be covered, with penalties for late payment !!! What a way for a Govt to stuff up a market eh?
But then, there is the Capital Gain. You’d know the numbers thus far. Is it worth holding on if you can redress that rental issue?
That’s a beautiful part of the world to hold property. I hope it all works out for you in one way or another,
Regards,
Benny
