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  • Profile photo of BennyBenny
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    Hi Lucinda,
    Use the Search box above, and type in “investors club” (complete with quotes). Then have a read…..

    And welcome – I hope you get some benefit from our website.

    Benny

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    Hi Ollie,

    Time to sit back and read and learn

    Smart move !! And to get you on your way, try this thread :-

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

    I’m sure it will provide some answers to questions that you didn’t even know to ask. Enjoy,

    Benny

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    Hi Chris,
    … and welcome !! There are a wealth of useful threads that would (collectively) steer you down the right path. One thread I recall that asked particularly re IO loans and “how they work” that could give you some fresh thoughts. And, with the kind of $$ you and your fiance are bringing in, this can be good news. Here’s the thread:-
    https://www.propertyinvesting.com/topic/4410595-im-a-bit-confused/

    Keep in mind too that there can be ways to generate Equity. Things like renovating, changing the “function” of a property, developing, subdividing, etc. Also, keep an eye out for Investor Meetings (regularly advertised on here) and go meet some others who are already into property. You will learn heaps from the presenters, and also from networking with like-minded people.

    Enjoy your time here, and do come back with any more questions. Hint – the only silly question is the one you don’t ask !!

    Benny

    PS Also have a read of this one :-
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

    • This reply was modified 9 years, 10 months ago by Profile photo of Benny Benny.
    Profile photo of BennyBenny
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    Hi Eljay,

    ….and welcome. You’ve come to a good place !! Congratulations on setting yourself up so well, but, as others have been alluding, there may be other things worth considering even before you settle on the next one. Richard (I think) mentioned Offset Accounts, and he would be able to give you chapter and verse on them, for sure….

    But if you are interested in catching up with some important and useful reading, do take a look here :-
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

    That link points to a thread that catches up with some really good “early knowledge” – including Offset Accounts. Have a read – I hope it is fruitful for you,

    Benny

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    Hi Se7en,
    As I understand it, you may choose a flat rate or a reducing rate. With flat rate loans, the % is owed on the TOTAL amount even as you reduce the amount still owing.

    I think (long time back now, so can’t be sure) there may also be a fixed term to it e.g. You can’t pay it off within a certain time frame, or, if you do, you STILL owe the flat rate interest on the full amount until that time frame has passed.

    Have a read of the fine print – the flat rate of 5.22% may SOUND great, but in actual fact it may have a nasty sting in its tail. You may well find it is roughly equivalent to a 9.49% reducing rate, give or take….

    Benny

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    Hi all,
    Whatever they end up doing, I trust they will take the time to “think things through” before introducing some radical change.

    The NCCP change introduced a couple of years back was an ill-thought-out change (IMHO). The major thing Govts need to consider is that changes may well be worthwhile to “stop people getting into trouble”, but any restrictive changes suddenly introduced can play havoc with those with skin in the game already. BOTH sides of an issue need to be considered before making wholesale changes. For those “in the game”, perhaps any change should be made non-retrospective, and even to take effect some years into the future – to allow time for those already committed to change direction.

    I trust the Libs will be a wee bit more circumspect than Labor have tended to be over time. Tony Abbott’s catch-phrase “First, do no harm” holds a measure of hope here. If he stands by those words, I would think any changes will be of value, even if unwelcome for some.

    Benny

    • This reply was modified 9 years, 10 months ago by Profile photo of Benny Benny.
    Profile photo of BennyBenny
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    Hi Poor Miner,
    I’ll add a +1 for Nick Moustacas.

    I have used him previously and he was on top of everything, and a pleasure to deal with. I suspect he would still be in Hurstville, but a quick check of “Strategic Wealth Management” website would affirm that,

    Benny

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    Hi Ben,
    First off, please note that the following thoughts don’t directly answer your question, but the thoughts therein might still be useful to you.

    Many of the following poster’s “numbers” won’t apply directly to your situation, but do have a read of this whole thread :-

    https://www.propertyinvesting.com/topic/4410595-im-a-bit-confused/

    In there, several posters share some very useful information that can perhaps turn on a light or two for you. In particular see my post of 29th March, where I project the poster’s likely situation in 10 years time. Note that I take an EXTREMELY conservative view of things (e.g. rents DON’T increase over those ten years), and yet the final outcome is pretty darn good anyway.

    Perhaps take that example, run YOUR numbers through it, and see what YOUR situation might look like in ten years too. You might also get a very pleasant surprise.

    Benny

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    Hi Bullion,
    Nice opportunities there. :) Re the CGT, I am certainly NOT an expert, and, the more I look at it, the more I think I should “Pass” and have you tell us after speaking to a good adviser (Accountant). But below were a few of my thoughts – see what you think….

    At first, I thought great – by selling half, your Cap Gain was ~$53k max. (then a 50% discount, then taxed on $26k = stuff all tax to pay). But then, that would then mean ALL of the $185k would be a gain on the second sale, so the CGT ramifications would be huge (and would depend on what you would earn in next FY too).

    Or, maybe on the first sale you would apportion HALF the initial cost as the Cost Base, thus giving you a Gain of over $90k on the first sale (then 50% discount, then taxed on $45k = a few $k tax to pay – not too bad).

    Are you allowed to CHOOSE which method to use? I don’t know…. But I would certainly like to hear the answer.

    For sure, do check all options before making the decision. The numbers will tell you which is the right way to go. Maybe it will make A LOT of sense to build on it as your PPOR… Interested in the outcome,

    Benny

    Later – I see Terryw was answering you as I was compiling mine. Cool !! Terry is one who really does know – unlike me ….. He picked up on the possibility that the land is owned in joint names (I’d missed that). Thanks Terry :)

    • This reply was modified 9 years, 11 months ago by Profile photo of Benny Benny.
    • This reply was modified 9 years, 11 months ago by Profile photo of Benny Benny.
    Profile photo of BennyBenny
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    Hi Tom,

    As JacM said, the API mag can be good, but it will often be two or three months in arrears. Still, it can provide a “history” of a suburb if you are wanting to observe that suburb over time.

    Another way to consider (especially if you are buying in your own area – but then, there is always the phone, eh?) and that is to talk to your friendly RE agents. Ask them how many properties they have on their rent roll, and how many they have vacant. This can lead to “spikes”, but their words can also give a feel for the vacancy rate – e.g. “We can’t get enough homes to rent!”).

    If you talk with 3 or 4 RE agents, and they all have very few homes on a large rent roll, then this might be a more up-to-date answer anyway.

    The calculation is simply “Homes available for rent, divided by total homes able to be rented” So, if an agent has 200 on rent roll, with just 4 available today, that is a 2% vacancy rate. (4/200 = 2%)

    Benny

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    Hi MelPO,
    ….and welcome aboard. Already you have had some great answers from some VERY experienced investors/advisers.

    Since you specifically mentioned one of the first really important questions (“Do I buy, or do I rent?”), I wanted to point you to this thread :-

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

    It is a source I am compiling to lump together some of the vast wisdom of this place, tailored especially for newer investors. I plan to add to it as I find more useful information. I hope it is of some help to you,

    Benny

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    Hi GW,
    Ah well, as I said, I don’t know your area. What value DID the valuer put on it?

    Anyway, you are in the box seat, and it is yours to sell. I think someone is going to get a bargain at $1.5m – what do other Sydney-siders say?

    Benny

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    For the hell of it, I just did a quick cruise on realestate dot com website for Moorebank land. WOW !! I think I need to upscale my calcs earlier. Have a look at this :-

    http://www.realestate.com.au/property-residential+land-nsw-moorebank-200833671

    That link shows a 322m2 piece of land with an asking price of $410k !!!!! Better call my original estimate VERY conservative :p Your goldmine is probably DOUBLE the size I thought it might be.

    Benny

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    Hi Gateway,

    I have a 4,300mtr property in the Liverpool/Moorebank area. It is the last of the original subdivided blocks from the 1920′s so the valuer is not able to take more than an “educated guess” with the caveat that even that could be wrong as the place is the last uncut block, has 2 street fronts, zoned med density, not bad house etc etc etc. Basically no one has any real close estimate of the place’s worth.

    I don’t know the area (I’m in Brisbane) but I would have to think you are sitting on a small goldmine. Just a quick “back of the envelope” calc should get you close. Again, since I don’t know your area (Council bylaws, zoning meanings, etc) I will just do a quick example that can point you in the right direction (perhaps).

    For my example, and to make calcs easy, let’s say this can be subdivided to form 10 blocks for building – a size of 430m2 is pretty common today, and could even be less size with many Councils, perhaps allowing you to form 15 blocks. But stick with 10 x 430m2 blocks. And, let’s say a 400m2 block in that area fetches $200k. That means you would have the possibility of $2m or thereabouts.

    Now set your own figures to that. Then you need to allow for subdivision costs, so the price would drop to allow for those. Maybe you can look at subdividing “a small part every two years”. Like, subdivide 4 blocks off one end and arrange to build 4 homes on them over a 2 – 3 year timeframe. Keep in mind access for those in the middle. Maybe you need to “give up” one or two blocks to satisfy the access problem.

    By developing them yourself, you save around 20% of the cost, AND you already own the land (less the cost of subdivision). It strikes me that you could set yourself up pretty nicely over the next decade. Sell off a few to pay off the rest (maybe sell 3 or 4 to keep 5 or 6 without mortgage) and go play golf !!! With the land costing you little, and the wholesale building costs if you develop, these should be hugely cashflow positive.

    I’d be interested to hear what others think too – especially those who might have done similar things. And I’d like to hear what you think. Can the above idea be massaged to “fit” your situation?

    Benny

    • This reply was modified 9 years, 11 months ago by Profile photo of Benny Benny.
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    Hi LJ,

    Wow, sounds like you are having two bob each way !!! I thought you were saying it was me doing that. :p

    The US and Australian markets are as different as chalk and cheese. To make comparisons and try to cross link causal affects is to not understand either market or its fundamental dynamics.

    Isn’t all of your talk about a “property crash in australia” arrived at by comparing to the US crash?

    And then, there was this :-

    National Consumer Law Center (NCLC), at least 10 states can be generally classified as non-recourse for residential mortgages:

    Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon, Washington

    (The bolding was mine !!) So, if “at least” 10 states are non-recourse, that is way different to “at most” – in fact, it could mean that double that number, or more, are actually non-recourse, couldn’t it? A quick read of the “Overseas Forum” sees some members discussing Altanta and Florida having non-recourse loans – these two didn’t make your list. Could it really be “at least 20” States after all? Who knows – I don’t !!

    Yes, I am aware the GFC trigger was more about the “AAA rated” junk notes (so-called “backed by Real Estate”) that were peddled all around the world (some Local Councils in Australia lost money over them). Add to those though the “every man in the US should be able to buy a house” message, where banks were encouraged to lend to anyone/everyone at a low honeymoon rate a few years earlier. The kicker came when the rates were due to revert from (say) a 2% loan into a 3.5% loan. That 1.5% increase was really a 75% increase, wasn’t it?

    With no-one chasing them over a mortgage (non-recourse) many just handed the keys back to the bank, leaving them with truckloads of houses that they didn’t want, and this MUST have had an effect on their RE market, wouldn’t you say? Probably additive to the whole GFC thing, even if not the CAUSE.

    In Australia, I am not aware of anyone who has a non-recourse loan – thus, if you walk away from a house, and the bank can’t get their mortgage back, the Mortgage Insurers will settle with the banks, then chase YOU down for the rest. A way different scenario. Therefore, the same laissez faire approach to a mortgage doesn’t exist here as does in many areas of the US.

    In summary then, I still believe the differences in the way US handles RE as a whole is so far removed from the system used here, that such a violent crash is unlikely to occur in our market. But yes, there will be ups and downs over time.

    Benny

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    Thanks LJ – very useful !! Cheers,

    Benny

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    Woohoo !! We have a “Search” function again…. I just spotted it (and used it too).

    Can we have an option to search “just titles” too, please !! :)

    Oh, and some smileys again would be nice,

    Thanks guys,
    Benny

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    Hi Long John,

    You should be a poly Benny. You’re talking a lot without really saying anything or committing to any position. That usually indicates one doesn’t understand the problem or have an inkling of which way things are going.

    Well if you think that, you either didn’t comprehend my words, or you choose to continue to promote your personal bias and take a shot at anyone who puts an opposing view.

    Anyway, for the sake of others who might have thought I “wasn’t taking a position”, let me share a very interesting link (showing “house cost vs Income ratios for 2014” – for the whole world !!!!) Let me preface it with this quote from my earlier post:-

    If, as Glenn Stevens says, we are at “cost equals 4 times earnings” for the most part, where’s the bubble? I don’t know exactly what this figure is today, but it will rise and it will fall from time to time.

    http://www.numbeo.com/property-investment/gmaps_rankings.jsp

    Now, I know what that figure is – and Glenn Stevens wasn’t far off…

    There is good ol’ Aussie, with ratios of 3 or 4 in most areas, but with capital cities a bit higher (Sydney and Melbourne in the 8’s – gee, it must be a bubble… :p) No, they have had a recent climb in values, so it will take a while to taper and/or allow wages to catch up. I guess they may never quite get down to 4 like less popular cities, as immigration and overseas investors will see to that.

    If you want to see real pain, click on some of the Red paddles. Now THEY have a problem. Probably where it takes three generations to pay off a home?

    And my position? I’m a “middle of the roader” – I’m not bullish on property at all times. I endeavour to take a balanced view, but to retain the ability be a “swinging voter” as times and circs dictate. Right now, warm on property.

    Re the world situation, well hey, I am not in any position to be able to influence anyone except myself, so the best I can do is to do my best. If it all goes to hell in a handbasket, I guess I won’t be alone, and hopefully better prepared than many.

    Since LJ put a burr under my saddle, I went looking for information to either back his POV, or mine. I found both types, but for ME, this one makes a whole lot of sense, and probably explains why LJ, Scamp, et al have been posting what they have :-

    http://australianpropertyforum.com/blog/entry/3174279/8081

    Seems like some “Demographia survey” has been widely quoted as saying Australia is unaffordable. Well boys, read THAT link, then see if you feel the same way. It sure put my mind at ease, ‘cos frankly, I just couldn’t see the doom and gloom that you were belting us with !! That link shines a very bright light on what may have been a massive chunk of mis-information.

    Benny

    • This reply was modified 9 years, 11 months ago by Profile photo of Benny Benny.
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    Hi Long John,

    You talk as if the threat is over and everything is honky-dory again…

    We are seeing a “cycle” as we have seen over decades. And yes, there are peaks and troughs. I believe we will see harder times, and easier times. And we will see decisions made by Govts that help, and others that don’t help.

    If, as Glenn Stevens says, we are at “cost equals 4 times earnings” for the most part, where’s the bubble? I don’t know exactly what this figure is today, but it will rise and it will fall from time to time.

    Keep in mind, if houses screamed up 100%, it only takes a 50% drop to have them back where they started – so talk of a 50% drop is HUGE – and some here were talking 60% drops!!

    While ever people talk at the extremes, their words will be challenged. As someone earlier pointed out in this epic, somewhere in the middle (between “boomers” and “gloomers”) is where the truth lies.

    Benny

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    Well, I enjoyed reading that one. And yes, I enjoyed reading both sides of the debate.

    In early 2008 we were “enjoying” the rise in Interest Rates that followed newly-elected PM KRudd famously saying “The inflation genie is out of the bottle”, prompting the RBA to start raising interest rates as the rest of the world were madly cutting theirs (think GFC) !!

    Also in early 2008, I had the good fortune (?) to have some of my Fixed loans come out of 6.49% to be hit with 9% variable. A 2.5% increase? Nope, it was a 50+% increase. Things did get quite tight for me (and COULD have seen all of Australia become a buyers market quite quickly, except that the rates then got SMASHED later in the year when the RBA realised they had got it wrong).

    So I do recall WHY some of the gloomers were saying what they were, with 50% drops in values, etc.

    They also used the US as a mirror of what would happen to Australia. But the US uses mainly non-recourse loans – you can take the keys to a house to the bank and walk away from any mortgage. WE can’t do that here. Thus, our market would never be subjected to the wild swings tht their system makes possible (in my humble opinion).

    And the comments made about “house costs equal to 9 times wages”? Yes, we do see spikes now and then (it was similar in late 80’s wasn’t it? I recall values doubling almost overnight) but a comment today from Steve included this :-

    Of interest, RBA Governor Glenn Stevens recently made this comment about a possible Aussie property bubble:

    “You can never be 100 per cent sure. But the price to income ratio has been around four times … for about 10 years, so a very long-running bubble, if it is a bubble. Most do not last that long.“

    Steve’s article is now off the front page of the forum, but you can read it all here :-
    https://www.propertyinvesting.com/heading-property-crash/

    If the long-term cost is around “4 times earnings”, then a sudden doubling in price would quickly become “8 times earnings” – until wages caught up again.

    I just wanted to bump that old thread. Times change, and it is always useful to keep a weather eye on developments in real estate, so I appreciate threads like this one. Certainly, along with the raw emotion, there were some very pertinent comments made therein.

    Benny

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