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February 19, 2014 - 8:19 am

Hi u36,

   I've actually been inactive for a little while now.  But I have noticed Insurances going up on my properties all around the place.  Last year they all added to 20 – 25% – but none were anywhere near $2000 a year.   That is scary-high.  I don't hold any in those areas right now, so haven't noticed what you have.

  My highest is about $1400 and that is on a huge property in a suburb close to the CBD – so there must be "something else" loading those others so high.

Benny

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February 18, 2014 - 10:45 pm

Hi Bish,

  I would think the amount of time you had owned the property would be relevant too.  e.g. If you have rented it out for 10 years, then calling it a repair is probably fine. 

  But if you have just bought in the last 12 months, I wouldn't be too sure of it being classed a repair.

Benny

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February 17, 2014 - 6:23 am

Hi Melbinvester,

  You appear to have tacked a reply onto a 6 year old thread !!   

  Your situation might be better suited by starting a new thread with your own questions, situation, etc outlined for all to see.  t sounds like you might have been "low-balling", but a bit of background re what (general) area, your reasons for the low offer, what is your planned "top price range" for this purchase, other comparable values in the area, etc.   

   Without that, your question is like asking "How long is a piece of string"…… 

Benny

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February 12, 2014 - 2:35 pm

Hi Vincent,

 

Quote:

The loans would be $200,000 plus $315,000

  Since he makes no mention of a THIRD loan (like Terryw did) this does sound suspiciously like he was going to xcoll the two properties. 

  Note that Terry's idea actually prepares for further borrowings against your PPOR via the LOC up to the 80% mark (still no Mortgage Insurance at that point – that starts at 80.1%.  This could provide Deposit and Costs for a second IP and maybe a third without having to go get another loan.  Of course, you would need to pass the Serviceability test to be able to get extra loans of $440k.  That brings your wage and other loans into play (e.g. credit cards, etc).   But hey, if your wage can handle it, why not? 

  If you can "handle" a big credit-card-type loan without going crazy buying junk that depreciates – overseas trip, new car, etc – then go for it.   It is nice to have extra funds "on tap" especially if a deal of a lifetime comes your way and you need to settle quickly….

  Oh, and be sure that you DON'T mix your personal spending with the IP costs via the LOC.  Keep it PURELY for IPs or other investments that provide tax relief.  And look at setting up an Offset account against your PPOR loan too. 

Benny

PS  I am NOT a registered adviser like some of the others, so my words are merely my opinion, not advice !!!  

PPS  Is your Mortgage Broker aligned with any particular lender????  Could be a good question for him.  He sounds like he might be……

 

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February 12, 2014 - 6:27 am

Depends which river …..  

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February 11, 2014 - 2:23 am

Hi Jate,

  As a "broad brush" approach, anything to do with the having a lender issue you a Mortgage(s) are a Borrowing Cost (which are usually claimed back at 20% per year over 5 years).  So these would include things like (from your example):-

Property / Title Searches   (could be – if the search was requested by your lender)

Stamp Duty                           (if this is Stamp Duty on Mortgage)

Registration of Mortgage  

Registration of Land           (if related to Borrowing)

Discharge of Mortgage       (did this discharge relate to "borrowing the money?")

Clearance Certificate

Loan Approval Letter

Government Search Fees  (could be – was the search related to "borrowing the money?")

  The rest (thinking back now – it has been a while) would be Purchase Costs which I believe are capitalised and only recoup as a deduction on Sale.

Hope that helps – but your Accountant will know for sure….

Benny

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February 6, 2014 - 5:04 am

Link broken????

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February 6, 2014 - 3:30 am

Broken link ????

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February 4, 2014 - 4:57 am

Hi R.M.

Quote:

So here is my question, should I let the $45,000 stay in the offset account or should I utilise this money in another way?

BTW: my mortgage on the PPoR is $420k or 40% LVR

I'm with Johnny A (the second part – "putting it in a offset account on my home loan"). 

While ever you have non-deductible payments to be made, make them your primary focus for any savings, and leave the IP mortgage to handle itself.  As an example you will soon have $45k in Offset reducing total Interest paid, yet two different possibilities:-

In an Offset against your IP, your Interest payment is reduced by (approx) $2700 per year.  Your claimable amount for Tax relief is thus reduced accordingly, so you get less Tax back.

In an Offset against your PPOR, your Interest would be reduced by a similar amount, but you lose no Tax benefit over it. 

Benny

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February 2, 2014 - 6:50 am

Welcome aboard Tom,

  Hey good for you to be considering these things at an early age.  I can only think your parents have been doing a fine job !! 

  Your question led to a recollection of one of my earlier property investing "self-help" books.   Check out "Real Estate Riches" by Dolf de Roos.  Within the first five pages (I think, but REAL early in the book anyway) he makes mention of himself planning to go to University.   

  His comments re "what happened next" blew me away…..   It is well worth seeking it out and seeing what happened.  I am sure you will get a lot from it !!!

  Re studies, I'd say English and Maths – after that, you choose.   

Benny

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February 2, 2014 - 6:38 am

Quote:

Benny, would you say Kingston or Woodridge will be more likable than Eagleby?

  Two things – when we were looking (about 30 years ago) Woodridge had a "name", and Kingston is right next door, so wore a bit of the name too.  Then the "toxic sludge" thing in Kingston (actually localised to less than one block, but the news made it sound like the whole suburb) sullied it further.  

  The prices in Woodridge and Kingston doubled, and Eagleby was "invented" as a low-cost offering.   We never did follow up Eagleby – had no reason to at that time.  But my wife was in RE at that time, and anyone with little money was sent off to Eagleby.     OK, so that is the long past history.    I have recent;y driven through Eagleby, and been surprised by how much it has grown.   Seems nice enough to me, but it still (like Kingston and WOodridge) has that old history.  i.e. homes were built "to a price", so nothing flash in these areas – but they are affordable to most.

  Woodridge and Kingston have railway, busses, and huge shopping centres.  I've heard that folk from neighbouring suburbs drive to Woodridge to shop.  And why not.  Logan Central (carved out of Woodridge) houses the Logan Super Council, so lots more jobs, and decisions made in this area for this area.   A quick observation of Eagleby sees it as more of a backwater.  It is a "cul-de-sac" suburb – i.e. you don't even drive through it to get anywhere else.  The only way out is the way you came in.   So, what are its saving graces?   Well, the blocks seem to be reasonable sizes and the roads are relatively new and/or well sealed.  And it is still cheap.   Like Woodridge, maybe one day more money will be spent on it, and more people will buy "own homes" there.  That usually lifts a suburb, but it is finding "what would you go there for in the first place?"  That is the question, and I really don't have the answer, except that it remains affordable to most everyone.

  For me, Woodridge, Kingston, Crestmead, Marsden, even Waterford West.   Woodridge really does have a lot going for it when you boil it all down, but there are still a heap of 30 – 40 year-old "cheap homes" (commission homes) way out-numbering any newer, better ones.   So, still cheapsville, but with great potential to my mind.   Again though, there are areas within areas too, so softly softly.

Benny

 

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February 1, 2014 - 8:51 am

Hi Mattsta and SSM,

  Thanks – they do take time to find.  Problem is, once found, HOW do we remember where to find them again? 

  Hence this thread. 

  I hope to keep adding to it… and I will endeavour to find the very best of posts so it might become a useful reference thread for new players.  Of course, it is open to others to add THEIR finds as well.   With many oft-asked questions from new members, a thread like this could save a heap of Searching !!.   Glad you liked the posts so far….

Benny 

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January 31, 2014 - 5:14 am

Hi Muddle,

  Well, these extra words tell me that you may have indeed stumbled across a "bargain"…..  

Quote:

There is a discussion of a possible price tag of 300 – 320k. Which would give it a yield of (where's my calculator?) let's say, over 8%. This leaves us to think it has been under valued or we are missing something obvious!

……………….

Gauging the market value is a tough one: neighbouring properties (all single dwellings) sell around the 300k mark & are rented for around $280 pw. So, we wonder if the single title issue could reduce its value THAT much? That is a difference of over 12k annually in rental returns.

  From your earlier words, it sounded to me like you might be going to pay a price for each unit.  If indeed the price is for BOTH units, then this sounds like a VERY interesting proposition.   It also shows that these "units" are deemed to be around half the price of ordinary strata units – so no rip-off there.   And to get double the income for the cost of just one ordinary unit or house, sounds worthy of some quick due diligence and lock it up if it all passes muster.  

  Re due diligence, one obvious requirement is to endeavour to determine the "reason for selling".   It could be a deceased estate, where the family has no interest and just want it gone.  OR, it could be that something else is known about this place that makes it a problem for the seller – they just want to quit it – quickly.  

 Your mission is to endeavour to understand what may be hidden.   e.g.  Is it full of termites?    Is there a block of flats about to go up next door, which will cut out your sunlight?   Is there a new road proposed heading right through the property?   Local gang issues?   etc.  etc.  One neat trick is to go "see" the place at different times of day/night.   Just park and observe.   Gauge the "neighbourhood" – listen for raised voices, watch for any unusual "pedestrian or vehicular activity", smells (any abbatoirs nearby?), etc.   Go before school, after school, early evening, later evening – if you can.  A "wait and watch" could turn up some answers – or not.

  On the face of it (with that more complete explanation from you) it strikes me as quite a deal if any "hidden surprises" aren't too much of a problem for you.  Good hunting – now it's time to get your skates on…..  

Benny

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January 30, 2014 - 11:34 am

Nice post, Shape !!!   

*applause*

Benny

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January 30, 2014 - 11:28 am

Hi Muddle,

   … and a big welcome to you too.   Good to see a new member "jumping right in the deep end and posting"    

  I believe that in the Commercial Investment arena that is exactly how one determines value – all based on yield.   But hey, that also might fall over in a similar way to Shape's comment re "location" – I don't know.  The comment re Commercial was "something I read" and I noted at the time that it was quite different to Residential Investment in that way.

   With residential, location is a huge factor and each house has its own "features" that make it different from the one next door.  As such, I guess your next move should be to endeavour to gauge (from the RE agent – or more than one agent) the expected "market value" of this place.  Once you know that, you can calculate the yield (or use Steve's way, and set the yield you want, which would then dictate the price you would pay).   Of course, in that instance, you may need to find an area that will provide such a yield, or find a bargain that allows it – but in the latter case, watch out for "Why would no-one else buy it?"   All part of due diligence.

  Do you have a particular yield in mind?  Oh, and "As much as possible" is a FAIL mark – sorry !!     It all depends on what you are seeking – can you renovate?  Are you looking to subdivide?    Develop?   Are there other ways you can add value to a place to increase its yield, even if it didn't quite meet your initial benchmark?  Change its use – e,g, go from family rental to student accommodation, shared housing, etc.

  Meanwhile, keep on reading (and searching) as there might already be threads on here that can provide you with answers.

Benny

PS   Oh, and just a hint here:-

Quote:

The property is on a single title, but is comprised of two independent units.

 

   That would tell me that the units should sell for LESS than equivalent strata titled units – maybe even a lot less.   Keep in mind, that the seller has a much more limited market with such a sale.   They can sell to investors (primarily) or perhaps a family that wants to provide an extra unit for grandma/pa, aunt/uncle, etc – or a "Home and Income" for someone wanting a bit more than just a home.   So the numbers of potential buyers drops markedly – this should work in YOUR favour.  Just don't let an RE agent mislead you by comparing their value with other (strata titled) units..

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January 30, 2014 - 10:57 am

Hi smartcube,

  I think Jamie has nailed it :-

Quote:

If there's a chance that the property may become an IP down the track then it might be best to pay a bit of LMI and borrow more from the bank.

  As Jamie also said, you would need to provide more detailed information to get any more detailed answers.  Re all of the other "ins and outs" of finance, you'd be best to engage with someone like Jamie – they know this stuff backwards.  And they have access to a whole tranche of lenders – some of which will "fit" with your situation, and others that won't fit.   It is great to have a Broker sort all of that stuff out – saves a lot of shoe leather.

  I'd suggest you share your situation in full with Jamie (or another MB if you wish) to see where that leads.  No doubt, that meeting will answer a lot of questions you maybe didn't even know you had !! 

Benny

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January 30, 2014 - 7:02 am

Hi Dreaming,

  Can you provide more detail here?  e.g. did you buy it as an IP?  Was it ever your PPOR?   What is current value, and current mortgage?   etc.   

  Of course, if you ARE one of Jamie's clients, you probably have all of this at your fingertips.   And anyway, Jamie may well have already answered a lot of what I was thinking.  

  My thoughts in a nutshell are:-

  o If this property is costing you nothing to hold, and perhaps giving you back some nice Tax Refunds, and you have good long-term tenants, are you in a position to draw on it to fund another IP (but this time, move in as your PPOR, renovate, then make it your IP down the track).

  o Of course, the funds might not be there, or serviceability, or desire……   And all of those are important.   So, what can you tell us?

Benny

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January 30, 2014 - 6:46 am

Hi Tracy,

  Welcome to another new member.  And "Well done!!" to you and your family for setting yourselves up so well.   Approach IP investing slowly and thoughtfully, and i have no doubt you will do well. 

  I mentioned in another post somewhere that I spent almost a year – reading books, going to (usually free) seminars, meeting with others, learning to spreadsheet, watching the market, etc before finally committing to purchase 3 properties in the first year.   We had paid off our home too, and we re-borrowed against it (tax-deductible this time, as Jamie said…) to provide "deposit and costs" for those 3 IP's.   We also took the simple route – buying up average homes that anybody/everybody could afford to buy and/or rent.

  Frankly, I was amazed at how well those three did in setting us up for more down the track.   My timing was fortunate too, as we bought them (in Brisbane) just prior to Brissy "going off" (this was 1999/2000).    I had a 13 year goal that we achieved in just 7 years, thanks to our IP investing !!!

  Starting out, I read Rich Dad, Poor Dad (which set me off on the path in 1998) and Dolf de Roos's "Real Estate Riches".  He made some salient points that stick with me today.  Then I found other inspiring books – and met some very inspiring people too.   I suggest you read Steve's books, and I also particularly like the Jan Somers books – hers are also very readable, with a wealth of "numbers" that show the way.  That suits me, as I am primarily a numbers person.   

  You sound like you are "good to go" too, as I was back in 1999.   Plan your path, check the numbers, read, learn, meet others, find your "team", research your buying area(s), then go for it.   And do drop in any time to ask any questions.  

  Good luck,

Benny

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January 30, 2014 - 6:21 am

Hi Draytone,

Quote:

I was under the impression that even if I do rent the property out for more than 6 years, pushing me out of the CGT exemption category, that a CGT event won't happen until if and when I sell the property?

  As Jamie said, you are quite correct.  However, what WOULD change after 6 years is the CGT-exempt status.   i.e. this property can remain your PPOR, thus be CGT-exempt for up to 6 years after you leave (so long as you don't nominate another property as a PPOR meantime).  As such, if you then sell, no CGT is payable.   But, if you wish to continue to rent it out, after 6 years (AND you haven't moved back in to "restart the clock") then it would become a CGT-payable property from that time on.   My initial comment was to investigate the valuing of the place around that time, so it may be PROVED that "at the time it became CGT payable, the value was $xyz,000"   

  Now, that is as I understand it.  I am sure there are little bits that I am not familiar with, so do take advice from your favourite adviser re the above.  Forewarned is fore-armed !!

Benny

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January 29, 2014 - 10:13 pm

Hi Rob,

  Well done – you and your family sound like you are in great shape, and your "trawling" on here has obviously paid off.   Your ideas sound pretty good to me. 

  The only extra thought I had was "Do you think you might return to this home at some time in the future?"   The answer to that will determine what else you need to do.  

  I am thinking of the "6 year rule" re CGT exemption.  Have a chat with your accountant re "What if you didn't come back to that home", and what events take place should you later wish to sell, or continue renting it out.  In my (non-advisory) opinion, it may be as simple as arranging a proper (paid?) valuation once you have been away nearly 6 years.   This should set a "value" at that time for CGT exemption vs "ongoing rental with no CGT exemption".   

  Of course, you might choose to sell within 6 years anyway, so no problem.  Other than that, looks good to me.

Benny