[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

April 22, 2009 - 3:28 am

Hi Scott,

Both residential.

Thanks.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

March 14, 2009 - 12:06 pm

Don't understand why lenders are the bad guys here?

Where was the deception? Did they not advise you of the exit fees and how they are calculated? Part of the contract isn't it?

Isn't the idea of locking in to a fixed rate loan that you have the benefit of pre-defined interest payments? The instituation offering you this deal also takes on some risk and seeks to offset some of that risk with higher exit fees, etc.

If I could have locked in my interest rates, knowing that if I had bet wrong and they were going to fall heavily…… but it did not matter since I could just go back to variable whenever I chose with no penalty….well I reckon that would be a popular deal – proably too popular for the lenders!

CS

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

March 12, 2009 - 3:19 am

Hi mtime,

Lets look at a couple of different scenarios to see what good COCR can look like.

1. Say we buy a block of land and build a duplex on it. At the end of the project we sell the two homes. Lets say that all up purchase/development/holding costs come to $600,000, but that you borrow most of this from the bank and you only have to put $100,000 of your own money into the deal. Now lets say the net sale price of the two homes is $800,000, meaning after you pay back the $500k loan you are left with $300,000.  So our COCR for this deal is 300,000/100,000 = 300% return!

2. Now for an annual return situation on a house being rented out. House purchased for $400k, with 80% loan you end up contributing $95,000. Rental income is $800pw, or  $41,000 per year, netting $14,000 after all costs. in this case your ANNUAL COCR is about 14%.

Both these examples are what I would consider to be healthy returns.

So returning to your example above I think you need to decide what you are looking for:
 
If you are looking to perhaps spend some additional money to reno and then sell, then you would need to figure out how much you might end up with after the sale (and having repaid any loans) and dividing this by the total of $90k plus whatever you have already invested into the property up to this point. There are marketing/sale costs, etc too – this is just for a rough estimate. 

If you are planning on a $90k reno and then renting it out I think you have already answered your own question. You are going to get a negligible annual COCR. And that is without even including whatever money you already have in the property.

CS.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

March 7, 2009 - 3:13 pm

Hi mtime,

I think the way to approach this is to evaluate how you are arriving at an annual return of just $809. Is this correct? Is this a profit from sale or from rental return?

If this is the actual return then .89% is indeed the true return – and yes it is small because $809 annually on a $90k investment is crud!

If however your MONTHLY rental return is $809 then you annual income is $9708 and over a $90k investment gives you an annual COCR of about 10%.

CS

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

February 10, 2009 - 12:19 pm

Hi propertylearning,

Not able to assist in answering this one for you, but would be interested to know why you think everyone would automatically strata any duplex they build?

We plan on doing a duplex development in the near future, and have no intention of adding the expense of strata titling, since we intend keeping both properties and renting them out. If down the track we want to sell, then we would (most probably) strata.

I've also come across plenty of duplex and dual occ properties where no subdivision/strata titling has taken place……

craigsed.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

February 9, 2009 - 7:20 am

I've had it one contract were we purchased last year and also came across it in another property we were doing due diligence on.

Our solicitor advises it is now quite common, and the box may be checked by the sellors solicitor, even when they have no land tax liability.

From what I remember they are looking to reclaim that percentage of the land tax bill for the year after they have sold the property.

They can ask, and you can say no, or use it as a bargaining chip. In most cases it is only going to be a fairly minor amount in the scheme of things….

craigsed.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

February 9, 2009 - 7:07 am

Hey freelance2020,

Properties good. But so is not relying on just one thing.

Think multiple streams of income. Security, diversification, wealth!

I think it was a Kiyosaki book that talks about how the wealthy have multiple streams of income, so that even if one thing is not performing well for a period of time, there are other incomes still rolling in. Naturally most of the streams (the good ones) are passive…..

craigsed.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

January 31, 2009 - 3:59 am

I think the question is, how do you physically pay a deposit on hammer fall when you do not know how much the winning bid is going to be? You can't get a blank bank cheque….. Do they take a personal cheque? Didn't think so….

Thanks for the question WiNmaKlIn, it's something I have pondered on once or twice, but never sought out an answer to….. Looking forward to finding out how an auction works!

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

January 31, 2009 - 3:55 am

Interesting to see how people think they are making rational predictions of the future based on what they 'believe'. Just look at how many times the word has been used in this topic so far.

Dictionary definition of belief:

1. The mental act, condition, or habit of placing trust or confidence in another: My belief in you is as strong as ever.

2. Mental acceptance of and conviction in the truth, actuality, or validity of something: His explanation of what happened defies belief.

3. Something believed or accepted as true, especially a particular tenet or a body of tenets accepted by a group of persons.

As you can see BELIEVING in something is far from something being a fact. How many people would really like to substitute BELIEVE for HOPE/WISH/PRAY?

None of the luminaries quoted above claim to know the future (as far as I can tell). They are making informed assumptions based on history and also on what is presently known. This may be enough to get a pretty good handle on what will happen and over what time period…. or it may not. So far the pace and depth of this financial turmoil has caught the financial boffins out many times, with regularly downgraded expectations being issued. Each time they make a revised prediction they are admitting they got the last one wrong.

My point is that whilst we all need to prepare for the future, it is largely unknown at present – this event takes us into new territory.

For every commentator you can find that says the recession will be shallow and last six months you can find another who will say we are heading for a depression and it will last for years. For every economist who says the Australian property market will hold up well as we have a huge undersupply of homes and way less sub-prime (type) loans than the USA, you can find another to say that there are actually a huge number of available (vacant) homes and that affordability is at an all time low and property is going to fall 40%!

If you must seek out expert opinion to help you decide what to do, what qualities might you look for in your guide? As a start:
1. proven track record of making broadly correct forecasts of macro events
2. old enough to have lived through (managed funds/investments) at least a few financial cycles
3. has his/her own money on the line
4. does not have an agenda in setting public opinion (this knocks out ninety-something percent of them doesn't it – nearly all of them are pushing some wheel-barrow even if it is not obvious). Even when it might not be obvious (a supposedly innocuous economist for example) – how many of these poor, otherwise pitiful creatures seek out their 15 minutes of fame with headline grabbing statements when the opportunity arises

Jim Rogers is probably one of the few commentators I can think of that comes close to fitting the bill, though others may well disagree.

The thing that scares me the most is that we are going to have to rely (mostly) on politicians to fix this. As has already been demonstrated any institution deemed 'to big to fail' is going to be bailed out (note current definition of bailout seems to imply passing over at least enough funds to continue paying executive bonuses – ha ha). So the option of allowing the week to fail and getting a clean start is apparently not an option (for better or worse). The decision has been taken that the western world will buy it's way out this problem. Didn't work for Japan, but what do they know hey???? The man spending the big bucks (Obama) has submitted his plan – part 1, version 1. Despite the rhetoric it includes as much pork barrelling as could be stuffed into the package – only a small percentage seems destined for true infrastructure development and jobs creation activity (key stated objectives). And it is to be implemented (if passed as it stands) with highly protectionist clauses, despite history indicating protectionism contributed significantly to the length and depth of the Great Depression.

In summary, I BELEIVE that the machinations of politics will ensure this current downtrend will last longer and cut deeper than it otherwise would have. That's a fact I will be counting on……..

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

January 23, 2009 - 2:42 am

Hi W4L,

I would be interested in hearing a little more about your Warrawee property. More so about the thinking behind building in the current market. Are you intending to sell the properties now (at depressed prices) or do you intend holding the market starts rising again? If you are holding, are your acquisition and building costs low enough that you will be able to hold the property(ies) cashflow positive or neutral at least?

My wife and I have a couple of old homes on good-sized blocks in the St Marys area (quite a different demographic to Warrawee I would suspect) and we are discussing when we should make the move to develop…….

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

January 17, 2009 - 6:59 pm

Hello PropertySeeker,
I can't find a reference on the ATO website for what the actual penalty might be. There are two references in the PAYG Withholding Guide that might point you in the right direction:

"Your application will be processed based on the information you provide. It is your responsibility to ensure that this information is adequate to enable your withholding rate to meet your end of year tax liability. "

"False or misleading information could result in prosecution and penalties."

So, nothing definite, just the threat of a big stick!

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

January 17, 2009 - 6:48 pm

Hi Crashy,
Have a bit more detail now to show you how this works. Below quotes from ATO website – Australia and New Zealand Treaty – key points:

"Dividends, interest and royalties may generally be taxed in both countries, but there are limits on the tax that the source country may charge on dividends, interest and royalties flowing to residents of the other country. These limits are, 15 per cent for dividends, 10 per cent for royalties and 10 per cent for interest."

"Double taxation relief for income which may be taxed by both countries is required to be provided by the country of residence as follows:
– in Australia, by allowing a credit for the New Zealand tax against Australian tax payable on income derived by a resident of Australia from New Zealand sources
– in New Zealand by allowing a credit against New Zealand tax for the Australian tax paid on income, profits or gains derived by residents of New Zealand from Australian sources."

My interpretation therefore is that any income earned in New Zealand will be taxed in Australia at your nominal tax rate, with a credit for any tax already paid in NZ.

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

January 15, 2009 - 6:07 am

Don't you have to declare all foreign-earned income in your Australian tax return?

And won't that mean it will be used when calculating your taxable income?

And then won't the tax you have already paid in NZ be deducted from what you owe the ATO?

That's how it worked when I was trading shares in USA  – thought it would be the same for NZ???

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

December 30, 2008 - 6:41 am

I wonder whether passion99 is one of Roy's minions……

It was amazing to see how passionate the core group of helpers became towards him. They were nearly all early to mid 20's and I think very impressionable. But over the course of a couple of years involvement I realised they quickly disappeared and were replaced by other 'totally committed' helpers. Just another aspect that gradually turned me off the whole organisation.

A great study in one persons ability to influence others.

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

September 12, 2008 - 3:38 pm

Hi Richard,

Thanks for that. Yep, one title.

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

July 23, 2008 - 8:29 am

Hi Tysonboss1,

Joining fee is not significant $100? around that – it goes to Amway – for that you get quite a bit of product for self-use (samples you might call them) plus a catalog, paperwork, some admin – not a big profit for anyone. And none of the joining fee goes to the networkers.

There is money made when people buy/sell product. There is also money made by the people at the VERY top of the networks when you buy marketing aids (tapes/books/seminar tickets/etc).

That's it.

The reason they focus on getting numbers in is because you don't really know who is going to do what (you can't rely on the ones that appear the keenest) so you just aim for as much momentum of numbers as quickly as possible. Then if you come in with reservations (as most do) but you quickly find a small qroup of people in your network you are less inclined to quit. Momentum builds mommentum….

That's how it is supposed to work. Personal experience is putting in many people who did absolutely nothing. Therefore gaining little momentum.

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

July 18, 2008 - 12:59 pm

Hi Tysonboss1,

Amway is a real company, so you probably don't need the quotes…..ha ha

This business supplies products, the opportunity for people is to form organisations to consume/sell the products and make money from a percentage of the sales price.

There are two main arms of the Amway networking marketing business in Australia – Network 21 and IDA. Network 21 is the smaller and (so I have been told) more agressive.

In principal the business model works. It definitely has worked for quite a few people. Every month there are people recognised as having reached milestones in the business magazine.

So now a couple of big BUTS…..

But look at numbers retained. See if you can find out how many Amway distributors there were say 10 years ago in Australia, as compared to today – I would imagine a very small number – maybe even negative. And if you are trying to build an oganisation that loses as many people as you get in, it is a failing proposition.

Also, try to determine what the real income is Directs and above are earning. I personally know of two couples who had reached the Emerald level, retired, then later on quit the business – I suspect because the income was not really there – because so many people leave their organisations that need to be replaced.

Amway has a very bad name with many people, especially with people over 40 who have come in contact with it by now. I think it is a bit unfortunate. Many of their products are excellent (some would argue about value for money). The system could and would work if the self-defeating Amway tag did not blow so many people out, or stop them even looking in the first place. But anyway, I think the damage is done.

And the bad name of so many network marketing ventures of the past couple of decades must make it very difficult for any to now make good inroads into Australia……

I remember in the 90's the folks in Amway that really were doing well where the ones who were breaking into the new markets for Amway – asian and eastern european countries were going off! Plenty of millionaires came out of new market openings……

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

July 18, 2008 - 12:27 pm

Hey Bonds,

I have been looking at quite a few properties recently, both with existing granny flats and with possible conversions. The suburbs I am looking in (western Sydney) are desperate for rentals and granny flats do very well and are easily rented. Here are a few issues for you to consider (can only speak for the Penrith council areas I am looking at):

– seperate water and power meter? Easier to manage if you have them. Cost not that great, but will need to be council approved to get the seperate power meter. That will require a seperate address for the granny.

– many granny flats out there being rented out that are not council approved. That means no insurance. That means if something goes (horribly) wrong you could lose your shirt.

– council approval is required for a granny and it needs to meet same requirements as any other dual occ. This means many of the non-approved grannys I have seen would not get council approved – maybe block not large enough or driveway access not wide enough………

– granny will need to have appropriate bathroom/laundry/kitchen facilities. Even when keeping things very basic if you are building from scratch or converting a garage I would imagine keeping it under 10k would be tricky. Probably much better looking for properties with existing council approved grannys or with grannys that you know would get past council.

Good luck,
Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

June 16, 2008 - 1:13 pm

Yep, can confirm my SMSF is costing me around $2,000 a year in accountancy and associated running costs…….have around $150k in it, and I consider each year if it is worthwhile running as a SMSF at that size……

Craig.

[craigsedParticipant@craigsedJoin Date: 2004Post Count: 37]

August 6, 2006 - 11:34 am

So Dazzling,

Any tips on how you marry up a potential tenant with a piece of property? How do you find the potential tenants in the first place?

Craig.