Forum Replies Created
Hi MM,
Good to hear you are breathing once more…. :p You appear to be in really good shape – you will look back in 10 years and give yourself a huge pat on the back !! But wait – you could even do that NOW !! What you already have is a nice base to start from.Do catch up with this thread :-
https://www.propertyinvesting.com/forums/general-property/4349450As well as pointing to answers to common early questions, you will cheer to find one post links to a thread which discusses “To buy? Or to Rent” Which is better. Do note that it looks only at the FINANCIAL side of things. You have already mentioned other important considerations, and they might have you choose to go “the other way” – and that is OK too. So long as you have chosen after knowing all the facts, it is all good.
And welcome aboard – it seems you are already glad you joined up :)
Benny
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This reply was modified 9 years, 8 months ago by
Benny.
Hi Ms New,
Richard >> there are plenty of other better suburbs depending on what you wanting to achieve.
Ms New >> I am currently renting and I hope to be able to buy my PPOR in say 5-6 years. So CG is more important in my situation.Richard’s point is well made !! It all depends on what you want to achieve, and by when? The HOW comes later.
Consider this – though you may be able to buy one inner suburb property worth $600k, you might also be able to buy $1m worth of outer suburb properties (with higher yields, the banks may be more amenable to allowing you to buy 3 x $330k IPs). If the $600k property grows at 7%, your Equity jumps $42k. But the outer suburbs might still jump 5%, and 5% of $1m is $50k, and with less risk as you have three tenants instead of just one.
Have a think of your “risk factor”… (or “sleep at night” factor). Are you more comfortable having your risks spread across several lower-cost IP’s, or one higher cost (with probably lower yields) in a higher growth suburb. Then, can you afford to negative gear for a while? Or do you like a mixture of both types (negative and positive geared)?
What is your ten-year goal? And which kind of purchase takes you down the path toward it? Higher growth, higher cost, lower yield? Or the reverse?
Keep asking questions as you chart your course. And don’t be in a rush – make your first buy a cracker – the rest will follow more easily.
Benny
Hi Higherdale,
The only formula I know that would calculate that is to write “HEAPS”. When developers can build up to 8 stories, the land values go into the stratosphere. Given that your group (assumedly) are talking about this, it may be worth having two or three of you spending the time (and $$) to learn all about it for yourselves.Depending on where you are, there might be a company that can assist. One I know (Brisbane based) is Bob Anderson – he runs workshops while also developing. I have done his course, and his manuals provided appear to be very well written and complete (as far as I know). Given that State and Council laws could be different, you might need a local to assist you.
Then again, there seem to be companies that can
1. Assist you with planning, DA’s, etc but leave you to do the building, or
2. Do all of 1, but also can provide a team to construct, etc.
3. Can offer to buy the sites from you and they will construct for themselves.So Google around – with the mega $ likely available to you all, it is well worth the time spent. Of course, the actual location within a city/town will alter the $$ available (e.g. 7 adjacent lots zoned for 8 levels in inner Sydney is worth far more than the same lot pattern in outer Moree).
Keep in mind that there could be winners and losers in your group of seven too. Depending on lot sizes and their actual position in the group of 7, some lots will be worth more than others. Indeed, some might turn out to be “surplus to requirements” too. It may be worth drawing up legal agreements between you all if planning to operate as one coherent group (could be a bit like herding cats, though eh?).
Anyway the rewards if all lots were to come available together can be massive – and, if you all were able to fund the development yourselves (even after paying for consultants and construction, council fees, etc) the worth to you all could have you all retired afterward.
Let us know where you are (suburb) – who knows who might be reading and are looking for 7 adjacent blocks for high-rise…..
Benny
Hi Johnny,
In case you haven’t seen these already, do check out this post (started about 3 years ago, but some great input in first three pages…)https://www.propertyinvesting.com/topic/4404268-30-properties-before-25-finance/
And then, there’s a catch-all thread that has a heap of links – one near the end of the first page points you to how a young bloke amassed a huge portfolio in a short time. I think he was a pizza delivery driver from memory, so not overly flush with ready cash :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/Take some ideas away from those, and see how they might fit with your situation,
Benny
Hi RPI,
Based on the numbers, it seems only 45% of the land can include housing. What about garaging – can they be separate and take up more of the land? Or would they have to be underneath to stay within the 45%?As this block is (I believe) LMR2, is that two levels of living, or two levels including garage under?
Thanks for all your answers,
Benny
I understand that I could hold onto the apartment and that it will be positive but I think I’ll have to hold too much money in it.
True, but then you can borrow against its Equity to become the Deposit on another IP (making the extra Loan deductible) and/or take equity to buy a PPOR. Whatever you choose, it is great to have so much choice !!!
Rock on,
BennyHi Ray,
I have PM’ed you,Benny
Hi Rob,
Welcome, and well done. You already appear to have a chunk of equity – that is a good start for someone of your age.Right now is the right time to identify your goals, thus your direction. Keep on reading, especially stories on here of what others are doing, who they are seeing, and how they are charting their course. While doing tht, ask yourself a bunch of questions – e.g. :-
1. Would you be prepared to stay in your current apartment for another xx years if necessary?
2. Do you have plans of starting a family, which could have you lose (or lower) one wage?
3. Are you a handyman – do you enjoy doing reno work?
4. Would you consider creating equity in other ways – e.g. developments (subdividing blocks, or rebuilding after demolition of older homes)?
5. When considering “positive vs negative geared”, take advice on long-term effects of such a path. It may be better to concentrate on equity building now, and create/purchase positive geared IPs later – or vice versa. This is where taking advice from others with real knowledge can set you on the right path (e.g. a MB or FP with “runs on the board” and a wealth of exdperience). What may be right for others may not be right for you.You mentioned having an apartment with just $100k owing on it. You seem concerned that it has been paid down, thus not an ideal Rental (with less Tax deductions) and yet you mention buying positive geared in the future (which will also have less/no Tax deductions). As you can see, determining just WHAT is needed now to get you to your goal is paramount.
One good reason to SELL your apartment might be to enjoy CGT exemption, and liberate a huge chunk of cash. That can then be applied to whatever becomes your “next step” (buy a PPOR, or an IP – or both?) But then, there may well be good reasons to KEEP it.
For now, I’d say – keep on reading, thinking, and taking advice all around this subject. Meet up with other investors at “Meetups” that occur around the country. Discuss your family needs with your partner, and identify what your goals are. Once you know just where you want to be, plan the basic steps to get you there. Read some good books too – Steve’s books put in a lot of “numbers” that help to understand how IP investing works.
I learned how to use Excel prior to my first purchase and, following almost a year of free seminars, meetings, reading, and spread-sheeting, I had built up my knowledge to the point that I went into purchases CONFIDENTLY, knowing that I now had good knowledge of many of the early tripwires, and could avoid them. That, along with having a number of people with whom I could discuss any problems or plans, helped me immensely in my early days.
Again, welcome Rob. Get on this horse and ride it home (wherever that is for you). It is a sweet ride – mostly….. And in case you haven’t yet seen it, do check out this link for starters,
https://www.propertyinvesting.com/forums/general-property/4349450
Benny
Hi Ray,
I wasn’t able to read the RP clearly, but the letter came up fine. It seems a larger block was subdivided way back, giving you a ~640m2 chunk of a larger block. It appears that your land is confined by your boundary, thus I think the Elec Co is up for the adjoining fence with your neighbour, not you.That RP plan was so unclear I can’t be totally sure of everything. Still, I see your land is 12.89m wide – yours and the 3.11m driveway would have been cut from a 16m frontage. It appears your block is ~50m deep. So, 50 x 12.9 = 645m2 which is about what you thought, yeah?
I think you are in the clear re that fence. Let’s see if others agree – I am not a Town Planner, nor even a builder, so I am reading this as a “layman” (i.e. I may have missed something important)…..
Benny
Hi Ray,
Bsed on the updated information and the map, and your words, it seems to me that the Energy Co owns a “battleaxe block”. Thus they would own the driveway and be up for the fence.BUT, you use the word “easement”, which usually indicates part of a block of land being made available for “others to use”, and restricting you from building on that portion. So, is it an easement on your land or does your land stop at the boundary as you said.
Is it someone else’s easement? The Registered Plan for your area should put this argument to bed. If it is someone else’s, then it is they who should be sharing the cost of the fence.
Benny
Hi RPI,
Many thanks for the quick response. Could you expand on this comment please :-By my rough calcs you have a 238m2 per-1946 site coverage at the moment and are allowed a 364.5m2, so only an additional 126.5m2
I’m not sure what you just said… Are you saying only 126.5m2 extra land could be utilised for any extra dwellings if a someone were to purchase/build? Or does your comment mean something else entirely?
Given that it seems the house might have to stay, could its size be reduced from the rear, allowing more free space to build other homes (but retaining the front, and thus the street appearance)?
Could the internals of the house be re-jigged to produce two flats within the walls of the house without impacting DCP? I might be grasping at straws here – sorry – just trying to learn a bit more.
And thanks,
BennyHi RPI and Don,
Thanks to you both for your replies.RPI – I have emailed you as requested. By all means reply (without ID) on forum. It is a subject others could do with knowing more about. Whatever you can add would be welcomed.
Don – a good point about FOI. That is not an area I have trodden – any pointers re “getting started”? Does FOI allow me to discuss someone else’s property that was sold about 7 years ago? Interesting point……
Thanks again,
BennyHi Kurtuk,
Well, it seems that area can ask that sort of price, as I see (on the internet) many 2bdrs selling at that price and above. Even some 1 bdrs are asking near to $400k. Which is yours? If yours is a 1bdr, you might like to check this out :-http://www.realestate.com.au/property-apartment-qld-bowen+hills-117474263
I don’t know any more than what I see there, but I wonder if having 2 side-by-side might offer opportunities that could trump other possibilities. e.g. what would be the income from TWO apartments, with a purchase price of $260k each? Can you service an extra $120k? What risks? What yield? Serviced or not? Location? Why the “low” price (an investor wanting to liquidate)? etc…..
Anyway, just thought I’d share FWIW,
Benny
Hi Callie,
I can’t answer your question from a legal standpoint, but it does appear to me (I’m just a layman) as still having possibilities for your parents-in-law. I’m sure our financial gurus will be able to shed more light, but for now, this is what I see for them:They have a heap of Equity in a valuable shared property. This Equity could help turn a broken egg into an omelette. They could look at arranging to “take over” their daughter’s mortgage, or re-finance completely for 50% to pay out their daughter and pay off her mortgage. I would think they could take out a 50% mortgage pretty easily, especially if they were OK with renting out the other Duplex. Again, one of the more qualified members on here will be able to give more of an idea.
Or, have your parents take a look at “strata titling” THEIR half of the property – the Bank holding the mortgage might have something to say, but it possibly could be done. Of course, this means that they would then have “someone else” buying the duplex next door – and maybe they would rather sell out than stay on the property in that situation.
The major problem I see with selling out “as is” (without strata titling), is that their market is probably limited to investors, or other families who want to try a “shared property” with their kin.
Anyway, good luck to your parents-in-law. I hope they are able to find a way through a situation that sounds pretty stressful.
Benny
Hi Kurtuk,
$400k could be a high price or an OK price, depending just where in SEQ the flat is. Have you seen similar flats in the block you are purchasing that confirm this price?What about costs? Body Corp, Rates, etc. A 6.9% gross return sounds good, unless there are other costs that will chew major $$ to leave a low Nett return.
Benny
Hi Shibby,
Welcome, and good on you for entertaining thoughts of investing at an early age. Your post shows you already have a good grasp of what can be done, and it is now a matter of refining your thoughts to suit just where you want to be. The good bit is that, with careful planning, your journey can retain flexibility, allowing changes in direction with minimal disruption. How? Read on…. ;)My thinking is, wouldn’t it be better to have as little of my cash as possible ‘stuck’ in the property by using the smallest deposit I could? So that if I turned the PPOR into an IP down the track I would have a larger amount of deductible debt that I can claim? OR would the LMI costs affect me too much?
I like the way you are already thinking – to have the “best of both worlds”, read up a bit more on “Offset Accounts”, and on “Do I buy an IP first, or a PPOR?” You will find links to both esconced in this thread :-
https://www.propertyinvesting.com/forums/general-property/4349450
Look at using an Offset Account against the property loan to give the best effect. Whether you buy IP first or PPOR, do all of your saving in the Offset (assuming you have no other non-deductible debt (credit card, car loan, HECS, etc). That way, the only decision you will need is “Which first?” – the link above might help with that.
Depending on just where your savings are sitting right now, it may be beneficial to move all remaining savings into the Offset too. Your financial adviser, who sees your situation in its entirety, will be better placed to guide you on that one. Or, instead, it might even be preferable/possible to buy TWO houses (one of each?) Who knows….
THe world is your oyster,
Benny
Hi bns,
Basically I’m asking the age old question PPOR 1st/ IP 2nd or IP 1st/ PPOR 2nd.
It certainly sounds like you are starting to understand things better, bns. Your questions are well-thought-out, and you mention several things that show you have been doing some research – well done !! I suspect you might have already seen this, but just in case, do take a look :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697967It will provide evidence to show which way is best financially. Of course, there can be several other non-financial reasons to take the other path. e.g. spouse, family, security, etc. And at certain times in the property cycle, it may be CHEAPER to take the other path (i.e. buy your home first). But then, if renting is costing significantly more than paying a mortgage, it could be that property is about to boom, and rental yields will drop as house values rise. At a time like that, it is good to be “in the market” with property, whether as a PPOR or as an IP. And a PPOR can provide CGT exemption.
Are we better off renting for another 2 years then buying our house (PPOR) and drawing equity from that to fund the IP? (Setting up IO loans on both, offset on the PPOR , all incoming and outgoing funds into the offset and using credit card to pay for expenses) Ideally this is the way to go to maximise our tax deductions yeah!?
Any answer to “Are we better off renting for another 2 years” requires a crystal ball, or detailed knowledge of your local market. Some believe that inner Brisbane is set to soar, so waiting two years might ensure you pay a lot more than it would cost today. But then others still believe all Australian house prices are due to collapse by up to 50% (but that is not me!!).
But If we were to purchase the unit first, how could I end up with the above scenario and restructure the loans to ensure we have maximum tax deductible debt?
SuperAndrew has already covered that well, and you affirm that it is the way to go. Offset account on your IP first allows you to totally withdraw the Offset funds for ANY purpose (e.g. a deposit on a PPOR) and the original IP loan (IO) remains as the full amount. With no funds left in Offset, the Interest payments on the IP mortgage revert to the full amount, and are all Tax Deductible.
Set up a similar Offset account on your new PPOR (also IO) and pile your savings into that. The Offset will emulate “paying down the loan” and, as this is non-deductible debt, it is the right one to “pay off”. But by paying it off in Offset, flexibility remains, allowing you to change your mind in years to come, by perhaps making the PPOR into another IP.
Or, if keeping it as your PPOR, you “could” choose to pay off the mortgage once the Offset funds exceed the mortgage. Or, as Equity grows, you could borrow via a separate loan for deposit/costs on another IP (deductible for that loan, as the purpose was to invest, not buy a PPOR)….. and the beat goes on…..
Hope that helps,
Benny
Hi Solomon,
Wow, from a Branch Manager that is pretty much unforgiveable !! One might expect such “advice” from an over-zealous new hire, but surely a Manager should have known better.Thanks for sharing the story – for sure, it puts a red flag up for all. And I agree the large majority would have no idea that they were being misled.
Re similar bad advice, the worst that has happened to me was that an Accountant whom I trusted sold me on the idea of using a Hybrid Trust to purchase a property. That has turned out to be the biggest sink-hole for cash and I now wish I had simply bought in my own name.
There are supposed benefits with a Trust, but here are some of the unanticipated troubles associated with it :-
1. Land Tax (Qld) is 10x what it would have cost if held in person – $100+ per week today (instead of $10 per week).
2. Difficulty getting finance – not so many lenders would look at it when purchasing in Hybrid Trust (that may have changed now – purchase was in 2004). It didn’t start out that bad, but changes to laws have contributed to the massive difference I see now.
3. Extra Auditing/Accounting fees per annum to comply with stricter rules.
4. Rules seem to change from time to time, making the existing Trust “non-compliant” and requiring $$ spent to bring it right again.
5. Asic fees – $212 per year – but DON’T ever be late in paying THESE. It quickly doubles and more if an oversight has you not pay them on time.Not something I will be repeating in a hurry, for sure….
Benny
Hi Paul,
Like others earlier, I also don’t know Reventon. I’m sure the majority of house and land marketers are kosher – but those that aren’t will typically display some tell-tale signs :-1. They will check that your PPOR has sizable equity before wanting your business. This is so the excess equity in your PPOR can make up for an over-valued IP that they want to sell you. Of course, any salesperson might quiz you to see if you have “Deposit and Costs available” – either in Equity or savings. Those with bad intentions want to see EXCESS Equity !!
2. They will make it a “one stop shop” (make it easy for you) by providing you with financier, solicitor, valuer, etc.
3. They may even offer “free flights”, limousine, etc – making sure you are driven on a route that does NOT advertise other H/L packages at reduced prices from what they are trying to sell you.
4. They will endeavour to press you to sign THAT DAY (or you will miss out – including having your consultant receiving SMS messages saying “Another one sold – only three left now…” and using similar pressure tactics).
5. They will be touting the “investor” line (Tax deductions, property doubles in 7 to 10 years, etc) and massaging your ego to become an investor, set up your kids’ futures, etc.
6. There will usually be a Rent Guarantee – well-built, well-priced IP’s don’t usually need a guarantee.
Paul, if any company is happy for you to use your own financier, solicitor, etc and their prices seem about right when compared to similar properties for sale via the Real Estate market, then they are likely one of the many kosher operators
Any salesperson will be applying SOME pressure to have you sign, but if they allow you the space/time to “check things out” with your solicitor or adviser before signing, then again, they are probably OK.
I’d suggest you sit down and have a chat with a financier yourself BEFORE going to see any Sales group. In that way, you will already have a good idea of the Deposit/Costs that apply for a NORMAL purchase. Then, if a subsequent meeting with a Sales group seems to be quoting figures that are way too high, it is a warning sign to keep both hands in your pockets. Or, as Jenman warns – “Don’t sign anything”.
Benny
Hi Chris,
Well done already !! I’m with JacM in suggesting you look at Interest Only. WHY? Well, “assuming” this is to remain an IP into the future, there is no need to hurry to pay it off, particularly if it is positive geared. It sounds like it would be positive if converted to an Interest Only loan.Smart move using an Offset too – as this effectively reduces the Interest Owing each month, making your Offset grow even quicker, thus Offsetting even more of the current mortgage. If you REALLY wanted to pay it down, then the funds in your Offset COULD be utilised to do that – but that should be a well-thought-out decision after consdering your whole situation in detail.
If wanting to “move on” with investing, keeping surplus funds in the Offset is KEY (rather than paying them off an IP loan). Do take a look at the post refering to “Offsets” in this link :-
https://www.propertyinvesting.com/forums/general-property/4349450Do read any of the other posts too – these are a cross-section of questions and answers that affect newer investors. Ruminate over each, and think how the suggestions posted might affect YOUR situation too.
Re going Fixed, it is probably a pretty good time to do this. Keep in mind though that any “paying down” of the Fixed Loan might be limited by the lender. AND it will also mean that you re “locking in” any sale of that property for x years. Break costs come into play if you suddenly want/need to sell while under a Fixed Loan.
If it were me, I would certainly be looking to use the Equity to purchase again, or at least put it to good use in another investing method. It is available to you, so do consider how best it can work for you. Maybe make contact with JacM or one of the other Mortgage Brokers that add sound guidance on here.
Benny
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This reply was modified 9 years, 8 months ago by
