Forum Replies Created
Hi Dominique,
It appears to me that things don’t quite compute….. A quarter acre should be PLENTY big enough to fit a house and a Granny flat, with room to spare. Some folks do this on half that size block. Was there something else that was unsaid – e.g. are there easements on the block that can’t be built upon? Is the house a very LARGE 3 bedder?
Or is there something else I’m missing?
Benny
November, and the RBA, with yet another 0.25% lift, does the “same old, same old” – well not really !!
The “same old” used to be “Lift rates a couple of months in a row, then sit back and contemplate their navels to see the effect of their actions”. But not these days. Now it is squeeze the life out of everything by increasing Interest Rates (a major non-discretionary item in many folks’ budgets) while other non-discretionary items have already jumped hugely.
Power increases and petrol/diesel costs have already had a major effect on stores and their products – e.g. food (a pretty useful non-discretionary item, that one), not to mention basic household costs too. So let’s add to the pain by continuing to bump the Cash Rate !!
Who is really controlling the ship, and why are they steering it onto the rocks?
It’s got me bluffed !!
Benny
Hi jeeakz,
One thing you might not have considered when purchasing a Town House would be any Body Corporate fees and/or restrictions. Though you might own some land, there will also (likely) be some areas that are controlled by others making up the property (other owners of the remaining townhouses). A Body Corporate usually means extra expense, so I hope you have taken that into account. Same for units.
As you said, the capital growth will be less, mainly because you own less land. i.e. your block is not able to be further subdivided to increase its value. And, I believe there may be many others like me who DON’T want any Body Corporate determining my decisions about anything. So for me, it was always houses and their land, thank you very much.
If you want a 5% yield, there are areas where you can get that in houses. Just be prepared to shop around and look further to find them. Could be other centres or regional areas, but 5% is still an option for some houses.
Did you ever get to check out “Westnblue” and his actions about years back? Here’s his story – let me know in reply if what he did is something that you could (or would) also consider doing. It seemed to do him pretty well at the time :-
It’s a good story eh?
BennyWell, well, well – the RBA only lifted by 0.25% this month. Are they learning? Or (as I’ve heard one commentator mention) will they continue to lift, only to bring rates back down next year when results prove “They went too far, too fast!” No news to me with that last comment (check the earlier posts above).
But OK, with a 0.25% lift in October, that allows this update :-
After today, the RBA cash rate is 2.60% and the average mortgage Interest Rate will soon be 100% higher than it was just 6 months ago.
How are folks travelling in your area? As mentioned earlier, it is not just mortgage interest that has lifted astronomically in the last months. One example is a box of tissues. The cheapest 6 months ago were $1 at both Woolies and Coles. Just two or three months ago, these lifted to $1.30 – and recently they leapt again to $1.70. A 70% increase in half a year? Lucky it’s just tissues…..
Oh, it’s not? Hmm, what else? Petrol, power, interest rates are the obvious ones – but also (smaller?) lifts in some foods, postage….. And what of other non-discretionary items? Insurances? Have to be going up as floods hit don’t they? What about Rates? I haven’t seen these lift – yet – but the lift in Council costs must lead to a similar lift in Rates over time – but wait, I did get a new valuation on our home, and noted a 30% lift in its value. That will become a Rate increase of 30% over time.
Have I missed anything? Probably…… let me know…..
Benny
Hi jeeakz,
Hmm, is this the same jeeakz that posted THIS topic a few months back? If so, I’d added some thoughts in reply, but didn’t hear back from you to help further.
The name is right, but the scenario outlined in each post seems WAY different. Anyway, lets concentrate on today’s question :-
Off the plan or existing house. Which one do you think is a better option in today’s market?
For me, the answer is always “existing” for several reasons. You mention one, which is that the return (or yield) is likely to be way better. But there are many others – see the link below for some ideas re why NOT to buy OTP.
https://www.propertyinvesting.com/buying-investment-property-off-plan-dumb/
And, should you choose to buy OTP anyway, read THIS link before signing on the bottom line:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/page/3/#post-5038486
While in this last link, do have a look around – especially hte very first post on page 1 as it outlines all the subjects referred to in the topic, and some of them may well answer a heap of questions for you.
Any questions, reply here and let’s see what we can do….
Benny
Hi Troy,
I have a few thoughts, but I’ll step aside right now to see if others with the right credentials might stop by first. (I don’t have any credentials – just opinions…) Suffice to say, you sound like you are in a really good place. :)
Benny
PS While I think of it, there is one link I can provide that MAY hold some ideas around this subject. It may not fit directly your situation, but it should at least give you some extra angles to explore….
That’s great news, Intelligent Trader. :) That sounds like a really nice retirement place too. A hobby farm? Orchards? Animals? Or not bought yet, so don’t really know what’s there? Anyway, a terrific tale, and we look forward to hearing more from you.
Benny
Hi Tom,
as an investor it is time to move on
Right on – that’s all that is left now. Such a shame – I hope you find a buyer soon to allow you to exit these once-upon-a-time good investments. I hope the same manager doesn’t screw up the tenants who had earlier put their faith in the place and you as the landlord.
And good luck to you Tom – I’d love to hear what you find “Next!” ;)
Benny
Hi Freedom,
I really can’t help you. I watched as Perth sank while the East were going up several years back. I always heard that “Perth did its own thing”. Just recently I saw signs of life in Perth, but I don’t have a handle on just what is happening there. What are you seeing?
There are some Perth members who pop in from time to time – maybe they will see your post and add their thoughts….
Benny (Brisbane)
Hi Tom,
Long story short, the manager’s behavior is leading to large costs incurred by the owners.
Sorry to hear that, but I quite agree – I never did buy into any property that had a body corporate. I had liked hearing of your success with the older folks and the nice returns available, along with the happiness your move evoked in your tenants.
Shame that others have one hand in your pocket though. Have you explored any “ways” to get around that? Like, could the leases be redrawn or something to limit the power of the Manager? Anyway, good luck with your exit plan – I hope it works out well for you,
Regards, Benny
Well, same same…. The RBA does it yet again. No “wait to see the effect”.
Qualifying Rate – I heard they stepped from 2% to 3% some months ago. And folks couldn’t get a loan unless they could handle a 3% lift in Interest on a mortgage. OK, fair enough, but then what of the FACTS that it hasn’t JUST been mortgage costs that have been increasing lately? Hasn’t petrol increased by something like 50%? Food costs? Energy costs? For the person who WAS able to qualify recently, how much buffer does the 3% qualifying rate really provide when all these other non-discretionary costs are being stretched along with the mortgage Interest Rate?
After today, the RBA cash rate is 2.35% and the average mortgage Interest Rate will soon be 90% higher than it was just 6 months ago.
How many folks are going to be able to handle that? How many were already stretching to buy a property in latter days, then found their new purchase has LOST value, even as their mortgage increases? More importantly, when did the RBA get taken over by forces who are more interested in bringing our citizens to their knees? Will the current RBA ever get back into the mode of “touching the brakes” then sitting back to see its effect before touching them again? Or are we SO out of control that the only way is to keep on applying those brakes. If that was what was happening, surely they would’ve been better to do this in one 2% Chunk rather than pretending that “It’s just a little bit more” five times already.
If I ever had any faith in the RBA before, they’ve lost me now !!!
Benny
Hi Iboorer,
I found spreadsheets were my preference back in the day. The other thing I recommend is to meet up with other investors – on websites like this, look for the meetings that take place from time to time. Brisbane and its Coasts have a regular meeting taking place – other cities are “now and then”. Of course, you can ask on forum for others “in your area” so you can swap stories. And of course there are Facebook pages too, so check them out too.
Main thing is to increase your knowledge so that you know enough to keep YOUR property managers in line !! :)
Welcome aboard,
Benny
And, sure enough, a further 50 basis points (or 0.50%) added just days ago. I do hope the new Govt takes the time to give the RBA a bloody good talking-to !!! They sure can do with it.
We are well on the way to that 150% increase. Where are we right now then? A total 175 basis points (or 70% – see below) so far.
A 0.25% increase against a 2.5% mortgage interest rate is a 10% lift. That is actually correct for anyone with an IO (Interest Only) mortgage. For those with a P&I (paying both Principal and Interest) mortgage, the % uplift will be lower. That is because the uplift is measured against a larger $ amount.
Using that same starting rate of 2.5% interest once more, where are we now, with the RBA having added 1.75% in just 4 months (and the banks dutifully passing it on to all borrowers….) Isn’t that a 70% lift already? Who can handle that, even as petrol, food, transport, and utilities climb into the stratosphere too?
Hey, RBA, stop and smell the roses !!! This is ridiculous – and dangerous.
As this began, the warning signs were already there – check out the first post of this whole topic :-
Don’t all those things still apply today, and since then, mortgage interest has jumped by 60% for many borrowers? Isn’t that alarming? Time for the Govt to step in – with an axe perhaps…..
Benny
Hi Helen,
You had me worried here for a minute:-
I think you are missing the opportunity to gag your own and others’ freedom of speech.
And then I realised this was a response to “What am I missing?” and, realising that, it put a whole different slant on my understanding of your reply.
Thank you for your response – and that last sentence was SO on point !! Well said.
Benny
Hi Daniel,
I checked with Steve – he mentioned that Wealth Guardian is one that he has wanted to update, but he has several other projects on the go and is short on hours. No ETA provided on when a new WG might emerge.
Re other products, STEPS is a classic (imho) for anyone looking to buy a property, as it takes you by the hand and steps through a very complete due diligence procedure, along with calculators and templates to enable you to buy with confidence. Available now, and with a 14day free trial – see the advertisement on the Home Page.
The other one Steve is actively working on is a revamp of Deal Detective. Again, no ETA, but I have already seen and used a Beta version, so it is coming….. This is a good one as it seems to interface well with anyone searching online for deals.
I don’t know Wealth Guardian at all, but it appears to have something to do with structure – a good accountant might be the place to start for you. If in Melbourne, I have heard good words of Mark Unwin & Associates in this realm,
Benny
What do you think about THIS comment from PragerU?
“This does not mean that climate change is not an issue – but exaggerating the threat concentrates our resources in the wrong areas.”
See the context of that statement in this link – around 2:20 >
The whole 5 minutes of this video would be time well spent as it also addresses the solar & wind energy outcomes vs their expense (quite a surprise there, as we constantly hear how CHEAP these are, when the reality is quite different (around 3:20 in the video).
As said before, more light is shed in these videos on the subject of climate change, hopefully offsetting a lot of HEAT that comes from other sources.
Benny
I just caught a headline on TV that indicates the RBA is considering a 50 basis points rise for EACH MONTH up to year end.
Please say it isn’t so….
I bloody hope NOT !!! That would be a further 2.5% uplift on the 1.25% already foisted on us. And let’s check the figures from my last post re the likely effects of such a braindead move:-
But let’s take a look at the mortgagor – the poor old Mum and Dad who were on a 2.5% Interest Rate for their mortgage.
That 1.25% lift is a FIFTY percent increase in the Interest cost of their mortgage, with (it seems) more yet to come? Who can handle a 50% increase?
If true, this prospective 2.5% lift by year end will totally cruel the Mums and Dads. Forget a 50% rise in the Interest costs of a mortgage – try 150% !!
Landlords will often have IO loans – in effect, their mortgage costs will be affected in direct proportion to the RBA’s lift. Let’s take a realistic mortgage amount and what would have been their IO payment each month. A mortgage of $400k is not out of the question – if on a 2.5% IO interest rate, that is a cost of $10k pa or $833 pm on that mortgage. So far, the RBA has lifted that rate by 50% (see quote above). So now $15k pa or $1250 pm (about $100 a week extra that needs to come from somewhere).
By year end, that landlord might well be paying $25k pa or $2083.33 pm – from $833 to $2083. What needs to happen to the rents he receives to offset THAT hulking rate increase? That is now a $300 a week increase in his costs !!!!!!!! You think we have a rental crisis now? Just wait till year end !!!!
All I can say is that the new Treasurer’s RBA Review can’t come soon enough. I am hearing little good news re the RBA at all.
Benny
Hi Alexus,
Yes, I think you are missing something. This part says it well I think:-
the flat dollar increase allows BOTH parties to afford an extra cup of coffee per day (i.e. it is equal for all, though the percentages look quite different).
To me, this seems to be the fairest way of all as all parties receive that same “extra cup of coffee”. The other two options are unfair:-
1. A percentage lift for all unfairly penalises those on a lower wage (see the $5 vs $50 increase mentioned earlier), and
2. A minimum wage lift helps ONLY those on the lowest wage – those not on minimum wage get nothing (until they strike…)
So, you see, that flat rate really does make sense. And don’t worry about the wage cut – that was merely a thought (if prices go up when we all get a wage rise, perhaps a wage cut would drop prices more, making us all better off – but it was simply another “out of the square” idea).
Anyway, thanks Alexus for your interest in this. Me, I am a little surprised that others haven’t chimed in with a response as I find this a conversation with some value.
Regards,
Benny
Hi Alexus,
From your answer, I think I haven’t explained things well – there is quite a huge difference between a dollar increase and a percentage increase.
An example. Let’s say the Govt orders a 5 percent lift in wages across the board. Then to the person on $100 a day, he gets now $105. To someone on $1000 a day, he gets $1050. One receives a $5 boost, the other a $50 boost. Quite a difference there.
Taking the other line, a flat $5 increase per day gives the person on $100 a 5% increase, while the person on $1000 only gets a 0.5% increase. So a flat $ increase can assist people on lower wages far more than those on a higher wage from a percent uplift perspective.
As I said earlier on, a percentage increase just helps to widen the gap between rich and poor. Whereas the flat dollar increase allows BOTH parties to afford an extra cup of coffee per day (i.e. it is equal for all, though the percentages look quite different).
Benny
Wow !! There must be more to this – is the RBA deaf, dumb, and blind? First, let’s take an early comment from back a few posts:-
For the person with the average mortgage of (say) 2.5%, that is a 10% increase right off the bat. Why so big so quickly? While we have a housing problem, a 10% increase could lead to even more rental anguish. A $400wk rental might now be $440. And what about the “6 rises before year end”?
OK, so since THAT time, there have been two more increases (and what increases!) The second increase was 0.5% as was the third. So suddenly, from a 0.1% cash rate, we are now at a 1.35% cash rate. OK, that affects banks and THEIR transfer of money. But let’s take a look at the mortgagor – the poor old Mum and Dad who were on a 2.5% Interest Rate for their mortgage.
That 1.25% lift is a FIFTY percent increase in the Interest cost of their mortgage, with (it seems) more yet to come? Who can handle a 50% increase?
What ever happened to the RBA of old who would make a couple of changes, then sit back to read the tea leaves and see what effect the changes had rather than slamming down harder on the brakes when property is already becoming shakey as buyers desert the market?
Yeah, I know, that 0.1% Cash Rate always was an “Emergency Setting” – yet there appeared to be no move made last year to increase it as our employment rate dropped to its lowest level in years, and, even today, businesses are still struggling to find workers. Wasn’t that a sign of recovery back then? And didn’t house prices start increasing then too? Wouldn’t it have been smart to tap the brakes back then?
What took the RBA so long to get off that “emergency setting”? Why does it now (as prices of food, petrol, rents, etc all go through the roof) decide to add to the pain with three increases in a row, and maybe yet a fourth to come in early August?
To me, this all sounds a little “too much, but too late” from the RBA. Can we vote in another RBA group please !!
Benny
