Forum Replies Created
Hi Investhut,
If you are prepared to lose it, you may well win it.
Pick a figure you are happy to pay, front up, say “that’s all I can afford” – and be prepared to walk away.
If nothing else, it will get him thinking. It seems there has not been too much interest. Maybe he is getting anxious (or maybe he is DETERMINED to hang out for his price – I reckon you need to KNOW this, if this is the case).
Perhaps you can then offer him his price (but with settlement 6 months away – that could change his mind [blink]). In short, though, you need to be prepared to walk away to gain the upper hand. Can you do that?
Best of luck,
Benny
PS Leave him your phone number – you never know …
Can I say, don’t depend on Silhouette to get you there. The numbers provided are seriously flawed.
$rent / 2 x $1000 x your best bank interest rate.Eg (say, best bank rate you can get is 6.84%)
$295 / 2 x $1000 x 1.684 = $248,390 is the top price to pay
If using this as a rule, an Interest rate of 2% would have you offering $177k for an IP – but, if the Interest rate was 8%, you could spend up to $265500.
Not a good idea at all – methinks a rework is needed to THAT rule
Benny
Your still going to have the same amount of debt if you just use the equity and purchase another. Yes your intial house will be $50k more in debt but your second will be $50k less in debt and you only have one property to worry about all the buy in costs involved.I don’t agree. If you’ve sold the first IP to fund the next two, then you have cash in hand as the 2 x $25k deposits. Therefore your next two are LESS in debt. If you had taken an equity loan against #1, then your $50k (deposit, costs) IS a debt. But by paying cash for the deposits no debt is associated.
Will it be better? I don’t know as I haven’t done this. And did you have to pay capital gains tax on the sale? Sorry – probably more questions than answers
Benny
Hi Carpe-diem,
Sounds like you “seized the day” – and good for you. And I love what I read from you:-
in fact their value is going up by 10% minimum pa so that makes the overall value increase by 170k for the coming year alone.You’ve got to be on a winner right there, CD. If Derek is right, and you only need $37k pa, this HAS to be good news, right? Isn’t that the next 4 – 5 years already taken care of? Even if not quite right, it does tend to give a good idea about the value of equity growth, yeah?
Anyway, it’s good to see you are back with us again, and charging forward. Keep on reading, and adding to that “store of knowledge” that allows you to make the best decision for YOU. For me, it’s amazing just how LIBERATING this knowledge can be – I wish the same for you,
Good luck,
Benny
Hi Redwing,
I dont understand this point at all?Am i missing something?
My point was simply that a 1 year old townhouse would still be looking pretty good – but a 10 year-old house could maybe do with new carpets, a fresh coat of paint, etc.
Were you missing something? Hell, I dunno – but that’s where I was coming from. What do you think after reading this, Redwing? Do you have a different take on this?
Benny
Hi Dazzling,
I haven’t always agreed with you in the past, but you get my gong for this comment. Hehe – as if it matters [blush2]
Over the last two years, I’ve also found talking about investment properties to elderly folk to be one of the most ‘positive’ aspects of investing, and indeed have landed one absolute cracker of a deal via word of mouth…no advertising…..simply by having a chat.In fact, your total reply in this thread has been very worthy – but I particularly liked the above quote – shows you in quite a different light. Onya, Dazz
Benny
I’ve always tended to think a free-standing house would appreciate more than a townhouse….keen on anyone else’s thoughts.
You’ve got me, nhowarth – I agree completely. You haven’t included land sizes, but i am more comfortable with houses than units/townhouses. But then, we’re all different.
If the 10 year old house were to receive a cash injection, this could generate a whole lot more equity. But doing that on a 1 year-old townhouse will likely add $0 to the value. Just my thoughts,
Benny
Hi Carpe-Diem,
I realise it will be a couple of weeks before you read this – and I wish you the very best re the medical operation you are facing.
Just wanted to add that you are already where I want to be financially – so well done. From what I read, you have already amassed over $1m in equity – at that point I believe Living Off Equity is almost a doddle.
Look at it this way. Any lender will immediately lend up to 65% as a pure “Asset Loan”. In other words, they don’t care what you owe, or earn, as they have the right to sell a property worth 50% MORE than what they are lending. This is your “safety net” – many will lend on a far better basis – but this is the worst it gets.
As I understand it, you have at least $1.2m equity, but just don’t know HOW to access it. Can I say “You are in VERY GOOD SHAPE” and that must be because of the decisions you’ve made up to now. So, for that, congratulations – you’ve done well.
Based on Derek’s response (that you only need $37k per year to live) you are a shoe-in to not need to work for the next 20+ years. And if you retain the current properties, their value would at least double over that period – probably far more – therefore allowing you to borrow more to take you over the following 20 years.
I am getting close to being able to do this, but I think you are “already there” Enjoy,
Benny
To hb again,
But then, as I re-read, I noted you mentioned SMSF – of course, if you invested in a property that way, you’d have NO leverage !!! Was THAT how you did it hb?
You don’t put too many numbers into your story, so its a bit hard to tell. And maybe you just wanted to take a swing at property anyway – well, we’re used to that. [smiling] BTW, the $500k WAS profit wasn’t it? Against WHAT outlay? I’d be interested to know – wanna share?
Benny
Hi hb,
You made a good point
profit today….$1.5milmakes the 500k look dismal
hindsight is a wonderful thing
but tell me, what would CBA have returned to you if you’d used the same deposit that you’d put into the property? Would it have been $1.5m? (I suspect it might’ve been slightly lower)
And – It’s easy to say “x share would have been the greatest” but what if you’d chosen y share? (You said it – hindsight is terrific) What if you’d put that same money into Telstra? How would you be today?
Still, in the spirit of sharing knowledge, I’d agree that property is NOT likely – over the next 4 years – to do what it did over the last 4 (depending just where you are investing). But you can still do well using the leverage available. Can you get 100% leverage in shares with the same lack of volatility as property? Hmmmm?
Benny
Hi gfb,
I gotta go with WYlie there. Use whatever means to claw some more cashflow out of those places. Add a carport/garage, a/c, dishwasher, broadband, whatever – and, of course, an agreed rental increase – it doesn’t take much.
With Interest rates as low as they are, you’d be really unlucky to end up on the negative side of things. But first, check with a local RE agent just how much value a garage or a/c, or dishwasher adds to the rent. Then do your sums. You might find that you can lift rents (specially in summer) by $15 a week by fitting a/c – and it might only cost you $5 a week, even if you borrowed the lot !!!
Make it work, gfb – just do your sums first – and hold onto them. When they double in value in x years time (while being funded by the tenants meanwhile) you’ll be glad you did [smiling]
Benny
Hi Bobbackoz,
Are there other costs – like management fees ? Body corporate ?
Any other costs that wouldn’t normally apply to an IP investment – like (perhaps) built-in laundry costs, registered nurse subsidy, ….
I don’t know, as I’ve never chased this kind of deal. But I’m seeing a HUGE return, and I’m looking for the catch. Is there one ? Do let us know, Bob, as we’re all learning too
Benny
if instead had you got some bhp shares today you would have made 40k – then you could have bought maybe 2 IPsThis is of course assuming that the same deposit could be leveraged to purchase that same value in shares as the property.
e.g. If the property was purchased at 90% lend, this would mean a $12k deposit (+ costs of maybe $8k with LMI inc.). Would you be able to buy $116k of shares with a $20k down payment? If not, then the amount of $40k profit might be somewhat over-stated, yes?
But I agree that resources certainly have the sun shining on them ATM,
Benny
Well, EZ-rent, this is for your wife, not you
“Grand-children are your reward for not strangling your kids when they were teenagers”
Benny
PS I hope she likes it – it’s one of my faves
Investment property purchased for $285K with $57K deposit (20% required because we were ex-patriots at the time); $228K owing on interest only loan; value recently appraised at $450K.Hi Krookfamily,
Although I’m normally a buy and keep kind of person, I think I can see benefit for you in selling the IP. Here’s what I think:
Taking your figures as reality, you’ve made a profit of $165k on the IP. Subtract the buy/sell costs, and maybe $150k profit. Now, if it is owned in Joint names, then each of you own half. Thus, $75k profit each. And, since you’ve owned it for >12 months, that gain can be halved – so $37.5k each added to your wage as Income Tax is calculated.
Now, if you haven’t earned much in Oz, then the Tax is likely to be 30% (or ~$23k total in CGT). But I’m not sure how your earnings in the UK are considered, so you’ll need to allow for that. And then, if you don’t sell until 1 July, then you won’t be due to cover the CGT until ~Oct 2007 (by which time, you may well have garnered further investments, and can easily handle the $23k CGT).
So, initially, the $165k profit can cover MOST of the building cost of your PPOR, then be “clawed back” by using an LOC to fund another property (or pay your CGT). After its built, it seems you will have a $600k PPOR with mortgages of around $200k.
This leaves plenty of Equity to go shopping (depending on your DSR of course). Good luck
Benny
Tonyy mentioned one of my favourites “Buying property with OPM’s” by Allan Falkner (?).
If you’re trying to find it (often in libraries, but no longer available for sale) you need to know the author’s correct name – it is Alan Falkson – and well worth the effort in trying to find it.
You were close Tony – I’m sure you don’t mind the correction, as your question mark indicated. One other thing, I think this book was released under 2 different names (the other name was something like “Buying RE on a budget”), so check out everything by Alan Falkson when in the library – it’s probably all good stuff, based on the one I read,
Benny
Aquila,
My reason for this is to evaluate the scenario based on a cash flow only.From my recollection, the cashflow is not huge. Are there other mitigating factors that might be worthwhile? (Like Capital Growth?)
Based on a “cashflow only quote” (your words) I’d say “Go find something else”. To me, I’d want a fair bit more than a 0.13% return (or maybe I’ve read that wrong).
I see you’ve spent a lot of time on presenting your data – so it seems you are quite diligent. If so, rather than just saying “find something else” I’d be wanting to know more about this investment, like what else do see about this investment, good infrastructure, likely future growth (above the norm perhaps)
What more can you add here?
Benny
Hi swifteagle,
and welcome aboard…. First, can I say there are literally HUNDREDS of ways to build wealth in property. I think it is worthwhile for you to consider where you are at, and what you need to “move on”.
Let me explain – if you are on a lower wage, with little chance of buying (and holding) without having the investment paying its own way, then “positive geared” is possibly the best way for you.
But, if you have a wage that has a lot of slack dollars that are screaming out for an investment (rather than buying “the latest flat screen TV with coffee-maker thrown in”) then negative geared might be better for you. (sorry Steve [exhappy]) Buying in “better” suburbs has its own reward – though maybe not immediately……
First off, though, I should say to spend some time EDUCATING yourself before launching – this forum has a wealth of information that will give you some useful ideas (and some of them will “ring bells” with you).
In the end, it’s gunna be YOUR decision, so go for a decision that suits YOU. For some, negative gearing is good – for some, positive gearing is good. Both work (imho)
Steve has a quote that makes a lot of sense – “success comes from doing things differently” I take this to mean “look for THE DIFFERENCE that I can make in any investment opportunity – e.g. can I convert this little 2 bdr cottage to a 3bdr house? Or, can this 3bdr with no garage be better suited as student accomodation (and can I make this happen?) Or, is this ugly, tired, shabby property able to be transformed with a couple of weekends work (and a barrel of paint)?
In the end, it’s up to you – what can you see? And what can you DO ??? Read a bit, swifteagle, and don’t be in too much of a hurry – you have a LOT of years on your side. Set a realistic goal relative to your age, then work to make it happen. Good luck,
Benny
Steve,
This bit is not working for me –
In regards to the RESULTS folder… you now have the option of collapsing that forum so that you don’t need to see any of the posts that are in itI click on it, and it laughs at me [blush2]
Benny
stuck-at-2,
Total Loan amount divided by Total Value as a percentage.
i.e. LVR (Loan to Value Ratio)
Benny
