Forum Replies Created
Point number 3 of Steve’s article 3 Dumbest Things Property Owners do in a Hot Market, discusses just this.
And I totally agree. ;)
Cheers,
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Sunvi,
Welcome to the site.
Very complicated question you have there. Short answer is, interest rate will definitely go up, even though we currently have higher interest rates. In fact, the level of interest rate is not relevant factor in considering whether it is going up or down.
The relevant factors are macro economics and Global economics particularly the economics of our trading partners.Higher interest only means that should the RBA need to stimulate the economy, it has more ‘ammunition’ compared to other countries.
Anyway, long story short, interest rate will go up. The rate history does show double digit interest rates – just go further back from the period you looked at.
Lemme know if you need further analysis / persuasive arguments… but I’d trust the economists and the wise people who say interest rate will go up.
Cheers,
Cattleya
Here to learn the ropes of property investing and hopefully help others along the way.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Zac,
By way of introduction, I am also a participant in this website and am here to learn about Property Investing and wealth creation in general. I am interested in your comment:
I’m not buying another ppor anytime soon and im also sceptical on investing in more investment propertys at this time but may eventually down the track.
So if not property what are your options? I am not trying to challenge, just wondering what and why. I am also thinking, and below are my thoughts:
1. Equities? It’s currently going downhill and nobody knows whether it’ll be another GFC. The only way, I think, is to analyse each company’s financial statement and predict their futures. Do you (I) have time to do this? The skill required is not just accounting, you see. It is also understanding about the particular industry(ies) and macro economics trend, etc. Once bought, equities also need constant monitoring to decide when to get out.
2. One of the safest buy where you (I) can buy and forget is ETF (Exchange Traded Funds) but there will be no advantage such as ownership of shares, tax franking credit, etc. And it is only tracking the market performance.
3. Our super is predominantly invested in equities and these are managed by professional fund managers. Maybe easier to just top up more super? But then again, no tax credit.
4. Investing in Bonds? Not save, currently volatile market as well. And even government bonds are no longer save heavens. The analysis require even more research and skills. Bonds are also called ‘informal banking’ because investors are essentially lending to companies (or governments) directly and without the due diligence and controls Banks usually apply when lending to corporates. I mean, Banks usually ask for collateral. If you buy Bonds, you are lending them without collateral.
These days, there is not a lot of attractive investment venues. Though Warren Buffet always says buy when the market is scared.
Any thoughts? Or rather, any other ideas on where to invest?
Cattleya
Here to learn the ropes of property investing and hopefully help others along the way.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Steve,
I have nobody to refer as I am also looking for a good accountant / lawyer. ;) It’s probably a tad more difficult for me to find somebody as I know a bit more about their stuff and therefore know what I am looking for.
However, I think it is best to keep an eye on your properties yourself, do not rely too much on the professionals. I am not saying they are bad, I am saying though, it is natural for everybody to look after Number One. Naturally, nobody looks after your interests better than yourself.
And you get what you pay for… peanuts are only for monkeys with little, if any, reputation to up hold. If you pay a lot and still get monkeys, at least you can sue them / report them to their professional associations or at least get them on the media – if they are big enough the local newspapers are all ears.
Just my 2 cents
Cattleya
Here to learn the ropes of property investing and hopefully help others along the way.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Steve,
This is a very interesting question, one I still mull over.
Basically all advantages and disadvantages are like jigsaw pieces. You pick and choose the ones relevant to your strategies and hopefully all fit together. Hence you need an accountant / lawyer who understands business / property investing.
Below is the lists of the benefits of both sides as far as my knowledge, and others will chip in. Then you decide for yourself, which ones are the best for you.
The benefits of doing it under personal name
– Tax minimisation through negative gearing, if you are on high tax bracket.
– Land tax threshold $432k (and $2.6mil) of the value of all IPs under your name.
– If you want the cash, you need to sell and pay Capital Gain tax.The benefits of doing it under company structure (Ltd)
– Income tax rate is 20%, lower than personal income tax rate
– Land tax threshold is nil, meaning you always pay land tax on the full value of the IPs
– Losses can be carried forward to the next tax year (when the income is < expenses, company loss can be carried forward to the next financial year).
– If you want the cash, you can sell the shares in the company, rather than the properties themselves. In Qld there is no stamp duty for transferring shares. You don’t even have to sell the shares you currently have – you can create new shares to sell. Meaning you can get friends or families to inject money into your company in exchange of shares and future earnings.
– As the director of the company, you can pay yourself a salary – you can calculate how much your salary is such that your strategy is met either tax minimisation or cash flow management. Whilst in private name setting, you cannot employ yourself.
– As the share holder you can arrange to be paid dividend, which carry tax credit for you. Because the company already paid the 20% tax, that tax can be compensated against your own personal tax.
– You can also choose whether you want your money as shares or loans to the company. The impact is, you either get dividend or interest payments.
– If the company uses your PPOR for office, then a fraction of all expenses, including mortgage interest, can also become expenses to the company. Again, you can arrange this to suit your strategy, provided that you are reasonable. For example, you cannot just say 50% of car expenses, mortgage interest, electricity, etc. unless you can prove beyond reasonable doubt that the company indeed uses 50% of all these.
– If for some reasons the company is sued, worst case scenario is you only lose your shares. Theoretically, the court cannot go beyond the company assets to get you.
– It is also easier to transfer shares to your kids, compared to IPs. Obviously you can transfer the IPs to them, but you can also sell / give the shares or re-arrange the books and create shares for them. You can also get them to be the director and pay them salary. The salary can be money or shares.The above is for Ltd structure. There are other structures such as trust and partnership / Joint Ventures.
See, it’s all about your strategies. You pick and choose the correct jigsaw pieces to fit your strategies. And companies get more jigsaw pieces to choose from.
Anybody else has inputs? Always happy to be proven wrong.
Just my to cents
Cattleya
Here to learn the ropes of property investing and hopefully help others along the way.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Terry Waugh, Stefan Miraglia, KatarinaH, DT your wise counsels are much appreciated and I am taking all your inputs into considerations as I go along.
My status now,
1. Area – Qld 4171 so Bulimba, Hawthorne and Balmoral, for 2-3 bedroom flats. DT, thank you for your input re. 1000s of new developments in Brissy. It gave me cold feet and second thoughts, but I decided to be brave and go ahead with Brissy. Simply because other states have their own warnings, for example NSW and Vic are over priced and predicted to crash soon. Adelaide and Perth are smaller and reliant on commodities which has been on a downturn.
You’d agree that any investment will have ups and downs and our survival is largely determined by our financial strength, strategy and luck. There seems to be no clear advantage of choosing one state to the other. I’ll just hold my nerve and jump in anyway. These are how I select the properties:
a. Since April 2015, I diligently list all properties offered for sale / auction in the area and the actual prices they were sold at. My data tells me that:
i. Bulimba is the most popular of the 3 suburbs. It has the most movements, generally more expensive than the others. The average prices (both offered and sold) are $286k per bed room in Bulimba (based on 82 properties), $264k per bedroom in Balmoral (based on 32 properties) and $254k in Hawthorne (31 properties).
ii. Hawthorne seems to have more houses, a lot of which are being gentrified into modern flats ie. a lot of off the plan purchases. Which I am not interested as these usually have high mark up and building and internal defects may not be apparent until a few months / years down the track.
iii. Most properties are sold not much different from their advertised price, though they are rarely cheaper than the advertised price. The ones auctioned are usually deemed to be favourite properties and hence more expensive.
iv. It usually takes 3 months to sell, although some are faster.
v. Rental wise, Bulimba also commands higher rates at $269 per room. The cheapest is Hawthorne at $193 per room. I also know renting is not a problem as the properties are usually gone by 3-4 weeks.b. I also get a report from ANZ about how much a place was last sold off. So if I made an offer, ANZ tells me when it was last purchased and how much. So I know whether the price is reasonable or not.
c. Discussions with agents to understand what they think. I listen very carefully to their intonation, words, etc. I believe this is where the ‘game’ is. Haggling.
d. I confirm the ‘look’ of the property through other websites such as Google map, domain / realestate.com and any other information on the web.
e. Overall criteria: definitely not off plan; difference in price must make sense (for example better buildings, etc); no swimming pool (translates to cheaper strata fees), and if possible currently tenanted, the rent also must make sense (if very high rent and cannot find any justification then something is wrong – alarm bells go off).
2. Yes Stefan, you are right I cannot agree more. I appreciate the benefit a buyer’s agent provides though I still struggle to see why they’d strive for my interests. Their reward structure simply does not incentivise them to do so. Having said that, I may later on change my mind and hire a buyer’s agent. At the moment though, I still think I am better off without them.
3. Yes KatarinaH and Terry, you are right, I totally agree. I am still thinking about getting an accountant / lawyer. Lawyers I contacted seem to be less investor friendly than accountants. Accountants seem to be more proficient in business concepts, though the ones I met seemed to be over burdened with their existing loads it felt more like a sausage factory where it is all about meeting their deadlines. My expectation is to find a business partner / advisor I can trust, long term relationship where we support each other. In the future there will be a lot more work re. conveyancing / legal, tax advise, etc etc. I suppose I need both accountant and lawyer and don’t mind paying on-going fees or a premium for a good reliable service.
Currently it seems a bit too late to create a company structure. I’ll just buy this one under my name and give myself more time to find an accountant / lawyer I like.
4. No exciting news re. financing. I am still with ANZ and totally happy with them. Service has been awesome, a few hiccups here and there but nothing major.
5. What now – I have made a couple of offers to the agents and expect these to be rejected. After all, nobody accepts first offers as they always ‘haggle’ for higher prices. I have also started looking for a conveyancer and building inspector to get ready for doing their bits.
I understand that this is where a buyer’s agent will be most helpful – face to face negotiation and all. I am just not convinced why they would strive to get the best price for me when his fee is on a fixed price and even more so if % of purchase price.
Thank you again for the advice, and do let me know if there is anything else you think I should’ve done differently. All comments are welcome.
Cattleya
Here to learn the ropes of property investing and hopefully help others as well.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Vyaw2003,
I agree with Benny, if you are happy with what you have, then just keep doing what you do.
Quick question to Benny, please – before I continue with the ‘thing’ about the Mexican fisherman which I think relevant to us all.
Benny, are you the Moderator of this website? I have a few simple queries re. the 5 yellow stars, etc. If you are, I’ll pm you?Back to the Mexican and American guys.
In life we, highly social creatures, are driven by how others perceive us and this perception is based on how we measure up against each other. Unfortunately the most universally recognised measure is money because it implies how hard you have worked, strived to get there. With money comes security (food, accommodation, illness, etc) and respect from your fellow humans and, more importantly, from yourself. And as much as we’d like to think that money doesn’t buy love, it definitely does. Try not feeding / giving shelter to your loved ones. Even the wealthy need to be ‘working’ to gain respect, to prove themselves.This is what the American guy alludes to. Sure, the Mexican guy can just do nothing, but he does not have security when his loved ones are ill, his children would still be fishermen because he cannot give them first class education, etc.
Having said that, it is obviously up to the Mexican guy how he wants to live his life. If he doesn’t want security, self respect, respect from his loved ones, respect from people around him, better future for his children – then he can stay the way he is. For those of us who do want these things and work for them, the reward is a quiet life with friends (like the Mexican has) plus all the trappings money can buy.
To anwer Vyaw’s question – you are the only one who can answer it. But your question seems to indicate you want to do / achieve more than what you have now. Just hesitant because you know the difficulties ahead.
Just my 2 cents
Cattleya
(Here to learn the ropes of property investing. Not selling anything, though also not trying to prevent professionals on here to sell their services. Trying to be impartial, but always happy to discuss further.)Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Bala,
Welcome to the site. And also congratulations on your first steps towards better financial futures through property.
It is an exciting time, but also full of worries because of all the potential issues isn’t it.Anyway, straight to your questions. In my honest opinion, the question should not be which suburb to buy, but which suburbs fit your strategy / requirements – then choose 2 or 3 areas to focus your research on.
There is an example from another new member, Emma_Vic, who knows what she wants and chose the suburb she wants to focus on. She wants to buy for:
1. Investment Property which means the suburb needs to have good population growth, plenty of jobs / easy transport to where the jobs are, government activities, etc.
2. Good capital gain, which also means the above.
3. Her financial constraints – looks like the suburb she chose is within her budget
4. She is investing long term – which means she is not after speculative properties.She chose her suburb well, she just needs to find the right property. Please see here for her thoughts. It is really clear and sound.
https://www.propertyinvesting.com/topic/5010979-thoughts-on-ballarat/Going back to your situation, I think you know best which suburbs you want. If you have time, focus on all the suburbs you mentioned and honed in the properties that meets your requirement. The more you look, the more knowledge you get, the easier to make decision. When you know enough, the right property will come up and you will simply know it. I know it is confusing at the start, but the only way is to get ‘your hands dirty’. After all it’s too much money to let other people do the work for you, because if they get it wrong, you are the one with the loss.
Hope this helps?
Thanks
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Timbo.
Welcome to the site and hope you find it useful.
Re. your question, you are the only one who can answer that. We have a lot of finance experts around here who’d answer your questions. However the answers will only be as good as information on hand. Given that your question only have limited information, I would answer it from my perspective ie. if I were in your shoes, I will buy her out because of the following considerations:
1. I am confident with my finances, there will be no surprises in the next 1 or 2 years.
2. I have enough money to cover the stamp duty, mortgage refinancing fees and other costs.
3. I have enough reserves, for example if the flat is vacant for 2 months or so, I can cover the total mortgage payments and expenses without too much stressPlease note, the above is specific to me and my finances.
Just my 2 cents
Cattleya
(On this website to learn and exchange ideas with other fellow investors. Not trying to sell anything, though also not preventing any professionals on here from selling their services. Hence I try to be impartial but always welcome any further clarifications / discussions on the topic.)Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Kristy,
I am not sure where Realestate / Domain or indeed other websites get their data from. Data Integrity is always the problem even for ABS, their reports usually come with caveats.
But given our investing purposes, does it really need to be 100% accurate? I think not because there are so many factors determining a good price of a particular property for example:
1. the IP itself: location, condition, the potentials, etc
2. the buyer: our emotional feelings towards the property, our investment strategies and our financial ability, etc
3. macro economics: those buying immediately before GFC (I did – but I consider it to be a blessing because mortgage criteria was more relaxed)So I think, we only need to know the rough ‘truth’ of it and the rest is subject to details.
Having said that, remember they say property prices double up every 7 years? I don’t believe in that, but if we hold an investment for long term, the buying errors tend to become more insignificant as the time goes by. the danger usually comes from our own financial circumstances. If the IP is vacant for a long time, so long as we can cover the finances all will be good.
AK – thank you for the input. I will use that tool.
Just my 2 cents
Cattleya
(On this site to learn and exchange ideas with other fellow investors. Not trying to sell anything to anybody, though also not preventing any professionals on here from selling their services. Hence I try to be impartial but always welcome any further clarifications / discussions on the topic. Thanks.)Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi RP,
I am also in the process of buying. May be it’s a good idea to start a topic on this.
I want to buy in Brissy. I think there is always pros and cons about buying in any part of Oz. It just depends on your circumstances. I also don’t know where to buy, but I think all those arguments – which are usually at high level – are good but overall none of the areas is fool proof / guaranteed not to fail.
For an investment to fail, there are so many uncontrollable factors in play. And if you are in there for long term, your investment is more likely to weather all the storms – but then again there are big ones such as GFC.
Anyway, what I wish to say is: provided you are mindful of location location location, in long term your investment is more likely to pay off rather than not. The bigger threat usually comes from our own financial circumstances such as get sick / lose jobs, etc.
Just my 2 cents
Cattleya
(On this website to learn and exchange ideas with other fellow investors. Not trying to sell anything to anybody, though also not preventing any professionals on here from selling their services. Hence I try to be impartial but always welcome any further clarifications / discussions on the topic.)Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Found this article on how to select Buyer’s Agent:
http://www.realestate.com.au/blog/how-do-i-choose-a-buyers-agent/
It is very useful because, I think, it is independent.If anybody is interested, there is also the Buyer’s Agent Association website http://www.rebaa.com.au.
I suggest really choosing carefully as:
1. The fees are quite substantial and if the property bought turns out to be a dud, there is even further costs.
2. There is very little regulations. If the property turns out to be a dud, can you sue them? I’d rather avoid this legal wrangle in the first place.
3. There is no dependable performance measures ie. if the job is to negotiate the best price, how do you know that best price? And therefore how do you know that it has been reached? If there is no reliable measures, then there is practically no responsibilities. It depends on how they argue / defend themselves against your complaints. And these people can talk.
4. You use a Buyer’s Agent because presumably you do not have time. Then you are totally blind and totally dependent on the agent. Whatever they say goes.I am not saying they are bad… I am just saying investors need to be very careful because it is a matter of trust (which usually takes a while to develop) and the investor has a lot to lose with no recourse. Not just the fees but also further costs associated with failed investments.
However, the alternatives are:
a. doing the work yourself – you just have to make time and do it
b. doing some of the work yourself, such that you know enough to be able to challenge your agent
c. not have an IPBottom line is, you just have to make an informed choice.
Just my 2 cents worth.
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Sorry PE, I would like to ask a couple of questions on top of yours. Hope you don’t mind?
So what’s a reasonable fee for a borrower’s agent, please? Do they all provide the same services or do we need to specify what we need?
Rephrasing the questions: is it all you can eat or do we select from a menu? And what’s reasonable?Thanks,
Cattleya.Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Kristy,
Welcome to the site.
Maybe it’s a good idea to introduce ourselves whether we are on this site to learn or to offer services.
Like you, I am here to learn and hopefully help others along the way. I am an accountant working for big companies but not to individuals. Hence I am also learning the ropes of property investing.Answering your questions:
I think Australian Property Monitor sells information about sold properties by suburb. It includes $, the usual stuffs like land size, building size, number of bedrooms, etc. There are also other companies / organisations selling similar information. Google will give you their websites.For rental, I usually go to Domain.com.au and Realestate.com.au. I am not sure whether there is anybody out there providing rental prices. So I usually determine which suburbs I want and record the rental rates and other information and analyse it myself.
Would be good to know if other people / members can provide tips as well?
Cheers,
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Chris,
I understand your eagerness to start again. Everybody who has played snake & ladder board game knows how strong the desire to get on to a ladder when we are dealt a major snake. But by the same token, it is even more important to avoid another snake.
Putting my self in your position, these are the things I would consider:
1. There are factors beyond my controls that can make or brake an opportunities. Given my current financial position, financial help will be very difficult and expensive. Therefore a careful / conservative thinking is needed. For example, does that $150 weekly out of pocket include:
– strata fees,
– emergency maintenance (boiler break down, etc),
– council rates,
– insurance,
– Sydney Water,
– 1 month interest payment without rental income (this is because, if current tenant moves out it takes at least 3 weeks to find another one and the admin involved. Which means there is 75% possibility I need to pay mortgage instalment without the support of rental income).2. Refinance does not solve the high interest rate and it comes with more fees. I can only get low interest rate if my finances get better. And in 1 years time my bankruptcy records will still be there, in fact it is still on my records years later. Refinancing is going to worsen my situation because of the fees involved.
3. It is also a good idea to hold my horses now, get better financially and wait for a better opportunity. The experts say that the economy is not doing well, and indeed the $ is depreciating against major currencies. If they are right, it might be better to sit this one out, wait for the tide to go as low as I think it would go, and then seize the opportunity.
4. I will use a reputable bank, and not just some small desperate bank somewhere. Reputable banks are legally required to have clear process and procedures to make sure they are doing the right thing by their customers. So if these banks won’t lend me, there is a good chance they are right, I cannot afford the loan. Meaning, I will use these banks as independent counsels on my finances until my finances are back in shape.
That’s me in your shoes. Obviously, only you can decide whether it is worth investing.
Chris, one more thing, the Banks are not allowed to give loans to people who they think cannot afford the loan. Exactly the same way pubs are supposed to turn away intoxicated customers. But then, there are rogue banks who are willing to take on risky loans and hence the high interest rate. Just for comparison, I know somebody whose mortgage is 4.28%… which shows how risky they think you are at 8.3%.
Hope this helps,
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Emma,
Welcome to the site.
I think you are very good with your analysis. Although the area is only half the story. You need to find the IP you like and then think about its potentials and performance thus far. Again, firstly location location location and secondly, you make your money when you buy not when you sell (this is because you don’t know the personal and wider economic circumstances that will happen when you sell. there is a good chance that you cannot sell at the price you want). So make sure you buy low.I personally would not mind about competition. If I have the best location in town, IP is well looked after, tenants will look at my IP. Your analysis also says low vacancy rate ;)
I know this is not much help, but I think you are just having buyers cold feet.
Good luck in your search,
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Chris,
Interesting question you have there. Ultimately, the only person who can decide is yourself. Seems like your risk appetite is bigger than mine. I personally wouldn’t do it as my stress level threshold is quite low, I cannot bear the thought of a demand for payment letter coming through my door. I keep a close eye on my debts, making sure that after servicing them there is still enough money to live.
But, if I am in your situation, these are what I would be considering:
1. Legal requirements. Whilst I am in my discharge period, would the creditors be entitled to take all or part of my investment to pay off my existing debts.
2. The rent income of the IP must be at least break even or positively geared and tenancy is secured / easy to find. At this stage, cash flow is more important than capital gain because without good cash flow I may have to sell up before time and forfeit the capital gain. So I will only buy if it definitely can look after it self.
3. Good investment opportunity will always be there. It’s not like if I don’t buy now there is not going to be buyers market anymore or people stop selling properties.Just my 2 cents.
All the best.
CattleyaCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Vyaw,
So the properties overall are positively geared and you are paying even more tax?
I obviously don’t know your situation, but if I were you I’d definitely buy again especially if I am only 29 yo. And at 6.6% the new properties are also positively geared – my mortgage is at 4.28% so 6.6% is awesome return.Why is a debt of 1.2m too much? If the properties are positively geared and the underlying principles are met, there should not be any problem.
Good luck,
CattCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Hi Kerky,
Welcome to this site. This is certainly my favourite haunt. So welcome.
I suggest you keep on searching because it gives you more knowledge and confidence of the market. Initially it is confusing, but eventually you get a feel of the market and either your idea of a house in regional areas will firm up or you change idea ie. a flat in a suburb. You’ll know what you likes and dislikes. At the beginning you may even be confused about which suburb / regional areas to look at, but eventually this firms up as well. Just keep on looking and get ideas. IMO it is part and parcel of learning.
Everybody starts out at the same point like you :)
All the best
Catt-
This reply was modified 8 years, 10 months ago by
Cattleya.
Cattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
Tracey, no worries, the more the merrier.
Terry, many thanks much appreciated. I will contact you trough your company.
err.. which one do you prefer, the Loan Experts or the Property Tax Solutions, please?Thanks,
CattsCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
-
This reply was modified 8 years, 10 months ago by
