[BennyModerator@bennyJoin Date: 2002Post Count: 1,416]

November 21, 2014 - 9:07 am

Hi Aque,
It would be helpful to understand a bit more of your situation before we attempt to show you “another way”. Would you add more info re these questions?

Is buying a PPOR your next priority, or are you talking of paying down the debt on an existing PPOR?

PS Tell us more about the title – “Contaminated deposit” – how is this so? I hope you are not cross-colled with your PPOR…..

See, while we are not sure just what you are trying to achieve, our ideas can only be general in nature. Help us to help you by spelling out just what your situation is right now, and what you wish to achieve.

Benny

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November 20, 2014 - 9:52 pm

Is the landlord keen on selling the property though?

It is on the market now, so I guess “Yes”. Maybe the vendor can leave in 10% ………. – it’s worth a try.

Thanks for the thought.
Benny

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November 20, 2014 - 8:55 pm

Hi Buddy,
Use the instructions shown in this post to put an image in your post ;-
https://www.propertyinvesting.com/topic/4995714-youngest-nobel-peace-prize-ever-winner-malala-yousafvsai/#post-4996543

Benny

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November 20, 2014 - 4:00 pm

Check out some on here – a Mortgage Broker will be able to identify your lending limits, and an experienced one will have all kinds of useful knowledge that may not be advice per se, but will no doubt be useful.

Some on here are certified to give advice too – pick someone who posts here regularly, whose posts appeal to you, and have a chat with them. The effort will pay you dividends.

An accountant might not be useful right now, but for sure, you will need to find a good one at some stage.

Financial Advisers come in Heinz 57 varieties – so be sure to go for one who IS into Property Investing. Otherwise, if you use Yellow Pages, you might be talking to someone who will steer you into other areas which may or may not be what you are wanting.
Or go with a Mortgage Broker who is also a Fin Adviser – problem solved.

Benny

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November 20, 2014 - 12:46 pm

Hi JZ,

Is it a sound strategy to find the right property and negative gear it for 2-5 years before it becomes a CF+ property?

That can work too – but so much depends on your situation. Negative gearing in an area of good growth can see Equity growth that makes up for the loss over time. But it helps to have an Income that can “ride a few storms”, otherwise you might be putting yourself at risk going that way. Especially good to buy something which can be made better and rents increased – reno, granny flat, subdivide/develop, change to a higher use, etc.

Main thing early on is to discuss your whole financial situation with an adviser who can then tell/show you where your limits might be, and even how to overcome them. Know where your ship is heading before leaving port…. ;)

Benny

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November 20, 2014 - 8:10 am

Hi Aque,

Any equity loan I draw from these IPs for my PPOR will be tax deductable.

As I understand it, such a withdrawal would not be deductable. The purpose of the loan determines deductability, not the asset which the loan is drawn against.

Your following comments indicate that you KNOW that, so I think your first (quoted) statement was simply missing the word “NOT”. I agree that having higher leverage against an IP makes sense in most cases.

Re your second paragraph, I’m not sure that debt recycling is the only way – but I agree it might have worked better by paying LMI when borrowing for an IP. As always your “numbers” need to be considered – each situation is different, based on your pay, any savings, your working situation, age, risk profile, goals, etc.

Is buying a PPOR your next priority, or are you talking of paying down the debt on an existing PPOR? Depending on the situation, perhaps a drawdown on the two existing IPs can provide deposit/costs on your third, thus increasing your income for “debt recycling” on your PPOR loan.

Lots of ways to cut it, and I’m sure some of our resident finance gurus will be able to add more, especially in a one-on-one with you where you share a lot more detail.

Benny

PS Tell us more about the title – “Contaminated deposit” – how is this so? I hope you are not cross-colled with your PPOR…..

• This reply was modified 9 years, 5 months ago by  Benny.

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November 19, 2014 - 12:44 am

Hi JZ,

1 bedder unit for $320K that looks like it might be able to fetch around $320 per week rent.

Those base numbers don’t sound like +ve cashflow to me – it is only a 5% Gross return. Surely body corp costs, Rates, Insurance, RE mgmt fees would take this into heavy -ve geared territory, wouldn’t it (??). Or is the calculator doing tricky stuff with Depreciation and Capital allowance to paint a rosy picture? I’d be looking elsewhere….

I’d be wondering if the 1-bedder might be over-priced to start with… this would depend on just what market you are looking to buy in.

Re using the Offset – fine, so long as the money in Offset can’t be used in a more meaningful way…. It is a good place to “park” spare cash (a 5% return, with no Tax to pay on the Interest saved – cf a savings account….).

DO you want to share the actual numbers re Interest, Rates, body corp, etc – maybe we can help you with those,

Benny

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November 18, 2014 - 7:39 pm

Hi Wiwin,
A quick primer on average and median – average is derived from all sold prices added up and divided by number of properties. Averages can be skewed if sales are heavy (say) at the top end. e.g. imagine a suburb that has 5 houses sell last month – 2 at $250k, 1 at 300k, 1 at $400k, and 1 at $600k. Total is $1,800k – divide that by 5 (number sold) and the average is $360k.

The median price for that group is simply the middle property price in the group. Thus, the median is $300k. Of course, most suburbs will have a larger number of sales than just 5 – but it shows you HOW it happens.

Some investors say “Buy below Meidan price”. This gives you the best chance of adding value – whether by reno, good bargaining, or whatever. Lower priced properties are affordable to more renters, thus increasing your market.

Benny

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November 18, 2014 - 9:11 am

Hi Brm,
There are a number of MB’s on here – I’m sure some of them will stop by to help you out. Meantime, do read this to help with some of your questions (some you may not know you have…)

https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

Chase down the links in each post to read about that subject – you’ll see what I mean,

Benny

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November 17, 2014 - 11:25 pm

Hi brmiau,
Oooh – watch out for this bit :-

My mortgage broker says I can borrow $280k without LMI or around $400k plus $30k for LMI and fees with the loan being 100%.

Your MB might be looking to cross-securitise your IP with your PPOR. DON’T go that way. Ask them how many separate mortgages are they looking to set up? If the answer is one, RUN !!

Others can flesh this out more than I, so watch out for their replies,

Benny

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November 17, 2014 - 11:17 pm

Hi F,
Just a couple of thoughts that come to mind….

Does the location matter more than the amount of units? What land content is appropriate?

Probably demand is the big factor – you can have a great location, but if the block is unpopular (for whatever reason), it will likely remain so. Find out as much as you can re demand for these units. e.g. Sales History, how often sold, how long on market, number of renters lining up to rent one when available, etc. Maybe chat with three or four local RE agents, residents, etc. If there is a problem that lowers demand, identify it, then consider if it is something you can FIX.

Re the land size, it will likely have some effect on future growth. Obviously, the more you have, the better. Divide the total area by 12 to get an idea of “your share”. Compare the m2 to similar smaller unit blocks (e.g. if 200m2 is “yours”, as opposed to 230m2/unit in a block of 6, then the effect is not so bad).

Let’s see what other, more experienced, members have to say,

Benny

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November 16, 2014 - 12:25 pm

Hi Ajay,
That sounded like a pretty good gross return, until the body corp costs hit. Rates shouldn’t be much more than $2k, so the body corp costs must be $4k? What do you get for that? Is there a security guard, or just electronic gates? Seems way high….

Re Eagleby, I have always thought of it as a “cul-de-sac area”. That has both plusses and minuses. See, no-one drives through Eagleby to get anywhere else – mostly, you just drive past the entrance as you hammer down the M1. I often drive through Beenleigh for one reason or another, so am more up-to-date with “what’s going on” there – not so Eagleby. Then again, cul-de-sac areas are less troubled by traffic, so that is a plus. And it was originally a low-cost area, so anyone can afford to rent or buy there. Over time, “bad news” fades into oblivion as more people end up buying their homes and tarting them up. Eagleby too is getting better – but it still lacks the infrastructure that Beenleigh has. Also lacks a “drawcard” to bring people in.

With yields growing, it is in that part of the cycle which leads on to capital growth (at which point yields will plummet – not in $$ terms, but in % terms). How far away is that? Well, first, let’s see where/when Brisbane peaks – hasn’t yet – and then add up to two years. I live in Logan – also a low-cost area – and have seen my place grow 600% in 22 years. Settled back a bit since GFC, but a lot of interest and development starting up now – more good times to come?

Benny

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November 15, 2014 - 12:01 pm

Hi Kurtuk,
As the others have already said, the “numbers” will tell you.

My initial thoughts were buying two places at $350k so that I can diversify etc, but this also means I will pay double stamp duty,

The Stamp Duty subject brings up an important point – first, each State sets its own Stamp Duties. I used Qld figures to get this :-
Purchasing one IP at $700k – Stamp Duty is $24.5k according to OSR’s calculator.
Purchasing one IP at $350k – Stamp Duty is $10.7k according to OSR’s calculator.

So, TWO $350k properties will cost you LESS than one $700k property for Stamp Duty in Qld. Worth knowing, eh? What do these Duties look like in the State you are considering buying?

And, re “paying double Rates and bills,” you have two Rental Incomes to cover them, and USUALLY at a higher yield than one higher priced property might offer.

Doing the numbers will have you more confident about your choices. And might contain more pleasant surprises…. :p

Benny

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November 12, 2014 - 11:26 am

Good thoughts already !! Kudos.

Though your Title refers to apartments, I’m replying below as though this is shared accommodation in a house – most of these could apply to an apartment too….

Add to that the numbers may look really good with (say) 4 students paying $160 a week – beauty $640 a week instead of $450 to a family group. But wait – factor in
a. not all weeks of the year have students staying (subtract the weeks they WON’T be there, or find a stop-gap for those weeks – or lose the rental!!)
b. extra management with 4 different groups ending tenancies at once (better find four new ones!!) – four bonds, four personalities, four times the chance of people “falling out” (i.e. loss of rental until replaced, but most other students locked in for their year already – so a very limited market).
c. need to provide furnishings, then repair/replace as required.
d. any extra compliance issues (check the new housing plan if Brisbane – some changes there).

So yeah, some opportunity, but certainly some headaches too. Work it through carefully,

Benny

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November 11, 2014 - 9:38 pm

Hi Josh,

there is a rental guarantee of 470 for the first year,

That is one amount that you will have paid for in the price, for sure.

But right now, the BEST thing you can do is to check comparative units in the same area (not in that development) and see whether $470 a week is “about right”.

If it is way over the mark, that sends you a very loud warning. Just think ahead to “what happens after 12 months?” And, how positively geared would it be if the rental used were the TRUE amount? Hmmmm…..

Benny

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November 11, 2014 - 9:28 pm

Hi tjamuna,

i am looking to borrow as much as i can without realizing equity ! !

Does that mean you are looking to take out a Personal Loan then? Or use a credit card? Is there a particular reason you DON’T want to draw on equity?

Benny

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November 8, 2014 - 8:30 am

Hi Chief,
Have you got something to share with us? Did you end up investing there yourself? How has it gone? Does Danang still “look” like it did 8 years ago? Do tell,

Benny

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November 6, 2014 - 5:13 pm

Hi Hiiph,
Welcome to this place. Has your brother also registered with us? There have already been some great answers posted – kudos to the posters *applause*

I figured your brother might also get some benefit from this link :-

https://www.propertyinvesting.com/forums/general-property/4349450

It endeavours to group together a lot of “early learnings” for newer investors (saves a lot of searching). I hope it is of benefit to him,

Benny

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November 6, 2014 - 5:00 pm

Hi PW,
That link to the Sage property was a good one. I was impressed by a couple of things – the low vacancy rate, and the “look” of the apartment (IF the photo is of an apartment selling for $345k, that is). It appears to be genuine good value.

Add Mike Matusik’s words, and overall it looks pretty good – almost unbelievable. But then Merrimac is not beach-front, and I don’t know of any “drawcard shopping” or anything else there. It is away from the crazy land prices of Main Beach or similar, so the land can be purchased at a better price, and, when building in blocks of 24, the small land content at a low cost means you are only paying for the construction – almost. What is the land component of a unit? Can’t be much. Could be worth a closer look…

Benny

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October 29, 2014 - 11:39 am

Hi SAH,

My main question was about the new unit market? Any thoughts,

Although Units often have a Gross Rental Yield higher than houses, their Nett Yield is not often positive unless you buy very well. And purchasing OTP is not usually the way that one finds positive yields. I’d be interested to see if these ones are any different – can you share some basic numbers? (price, rent, Body Corp costs, number of units in block)

CBD’s have a habit of offering many units in bulk, often leading to oversupply and a pullback in rents. Consider too, that many NEW apartments are sold to the overseas market. If for any reason they then need to sell, other overseas investors CAN’T buy them (as they are no longer new, so second-hand sales are into a smaller market.

I choose to stay away from that area – but if buying at a greatly distressed price it might work out. Give me houses first any day, or units in small boutique blocks if/when price is favourable.

Benny