Forum Replies Created
Hi, Neilvs, Cattleya
I do not think you can buy a cashflow positive property just off the street, even with some hard searching. The market is such that when Steve wrote his book, it was possible while looking around in the regional areas. If you want to invest in those areas and that is your strategy, that's fine. Also, when he and his business partner, Dave, were buying back in 1999, it was possible to buy cashflow positive almost off the street.
In the current economic conditions, cashflow positive properties have to be manufactured via renos, targeting different tenant markets, or using different investment approaches (Often a combination of these methods and others), and you also have to factor in the current bank lending criteria.
For example:
1 – Cashflow positive thru Renos: Buy a well-placed property at a good price, do a reno on it to increase rental to cover the purchase cost of the property;
2 – Targeting different markets: Say you bought a high-end property, instead of renting to the residential tenants, maybe you rent out to corporate tenants who are willing to pay more; hence turning your property into cashflow positive;
3 – Different investment approach: Instead of renting out an entire property, you could rent it out per room to increase the rental returns and turn the property into cashflow positive.
May I suggest that you spend more time reading the tens of other PI books available in your local public library first, and surf this forum and other similar ones like Somersoft.com often, so that you can structure your questions better. I see that there are very few replies relative to the number of viewings.
I suspect that it would because while you want to seek out answers to your questions, it comes across you are just looking for the answers to be given to you and that you are not willing to put in the hard work to find them out yourself. Read up one PI book or magazine per week for the next 6 months; that will really accelerate your understanding.
Saying that this or that PI method does not work is how a reflection of the method, but a reflection of how you are seeing the issue.
All the best.
Daniel Lee
Hi, JimmyJ
This link might help. I started it because I had similar questions as you.
Regards
DanielAll we need is for the Fed Govt to decide not to extend the FHOG Boost; then the party will be on for Property Investors.
I read on The Age today that the FHOG Boost cost the Feds $1B so far, money which can be used more effectively in other areas than propping up the weak housing market, which has already been helped by the interest rate cuts anyhow.
I really that the FHOG Boost is creating a bubble on the lower-end of the market.
Regards
DanielHi, Richard
This issue got me interested enough to show some simple figures to show CBA's credit tighening will affect property prices.
Established Property value: $140K
95% LVR: $140K * 0.95 = $133K
90% LVR: $140K * 0.9 = $126K
Difference in credit available = $7K. FHOG Boost of $7K will cover the difference.Once property value goes above $140K…
Established Property Value: $200K
95% LVR: $200K * 0.95 = $190K
90% LVR: $200K * 0.9 = $180K
Difference in credit available = $10K. FHOG Boost of $7K. Deficit of -$3K.So, as more lenders tighten their credit criteria in the near future, episodes of these credit shortfall will increasingly occur for FHBs in the lower end of the market. When enough of these shortfall occur and more FHBs are unable to put in emotionally high offers anymore, even that end of the market will start to cool down and vendors' expectations along with it.
This could get interesting when other lenders follow suit.
Regards
DanielCombined this with not recognising the FHOG Boost as geninue savings, this will really tighten the rope around the typical FHB's neck. A requirement of 5% geninue savings takes the FHOG Boost out of the equation.
Is this the continuation of a credit tightening trend from the banks, as a defensive strategy in their forecast that property price will fall accordingly?
Would this not lead to a slow down in the number of FHBs in the market, if the rest of the Big Banks proceed down that path? In return, more FHBs being forced to save more also means more renters in the market, so good for landlords.
Interesting to hear other comments.
Regards
Daniel LeeMan… been reading the last couple of post and I have to say, it reminds me of conversations that I have had with my best friend back in Singapore. Since coming over to Australia in Feb '04, I have been intrigued by property investing and recently, started learning about Sharemarket investments.
Over the years, I would email my friend about the need to building one's wealth, maybe set up a business and provide jobs to others. We had a number of arguments over the years via email due to misinterpretation, differring views, etc. When I was back in Singapore last year, we took up this discussion again, and he said to me this.
"The financially rich got to where they are because they stood on the shoulders of others, depended on the elbow grease of many below. I have not come across one rich fellow who is also a nice generous person. If you want to be rich, make sure you do not exploit others, even if others are willing to let you stand on their shoulders."
I then brought up the whole idea of businesses providing jobs to those in 3rd world countries, as I had just returned from a holiday in Cambodia. He responded.
"Sure, those Corporations are providing jobs in the developing countries, but they are still exploiting them. Companies are making even bigger profits by offshoring such operations. Where they used to pay a worker in their developed home country $2K a month, now they only pay $200 a month. You want to talk about being fair, then pay that 3rd world country worker $400 a month instead. You, as a business owner, still make $1600 per worker in lower cost."
It made me realise this; that I should go about to create my wealth in an ethical and moral way that harms no one. After all, if I was meant to be rich, I will be. There is more than one way to be financially rich, and still lead a respectable life.
Regards
Daniel LeeHi
I was just thinking about the FHOG boost the other day, while checking out some property prices that hace gone through the roof in a couple of suburbs that I am keeping an eye on.
The lower-end of the market is kept buoyant with the FHBs and the FHOG boost, yet the number of properties available on the market has fallen to one-third its peak here in Melbourne.
The FHOG boost has simply brought forward demand from FHBs who already had the money to buy, or were almost ready with the money to buy. That was the first rush back when the FHOG Boost was introduced in Oct/Nov 08, setting the market to bubble nicely. If a whole lump of FHBs have already gone through, that could leave fewer FHBs available to prop up the market.
1 – So, there could be a FHBs rush to buy property should the FHOG Boost end by 30 June;
3 – or if the FHOG Boost is extended, the market will normalise as the urgency to buy goes away, which also means an opportunity for investors;
3 – the Boost ends and coupled with tightening credit such as the rapidly disappearance of low docs and 95-100% LVR loans, will see the weaker FHBs exit the market. Less demand means vendors will have to adjust their expectations and could lead to lowering asking prices. More buying opportunity for those who are cashed up.Lets see what happens.
Regards
Daniel LeeHi, Kenyus
There was a similar thread some weeks back. This might give you some ideas.
https://www.propertyinvesting.com/forums/property-investing/help-needed/4327326
Regards
Daniel LeeHi, Seddar
Yes. it does sound easy; just find a property to invest in, rent it out and get someone else to pay the rent.
Expanding on this would be:
Where to invest in (Capital city or regional area)
What type of property (apartment, units, houses or specialised areas like retiree homes)
How much to invest?
How to get maximum rent to minimise the cost of holding to you, since most properties are not positively gearedExpanding this further
Why are you investing? What is your purpose / aim / goals?
What aspects of PI do I not know?
Do you want to go into PI, or do other areas like Shares intrigue me?As WJ Hooker mentioned, spend some time reading up in this forum and read through plenty of property books for the next 6 months. Investing is often more than just buying something; it often is a mindset and lifestyle change.
All the best. This is a good start.
DanielHi, Anon (and Linar)
My view came about because of this:
Back in May 2007 when my partner and I were looking for our first PPOR, we visited her ex-boss where partner worked casually while as a Uni student. Her ex-boss told us that we could each go off and purchase a PPOR and each claim the FHOG, as his friends and their partners were also doing so.
We asked would that not be fraudalent for each of us to claim the FHOG, and he said not if the property title deed, loan agreement and all mails goes to the individual properties, so effectively living separate lives. So, as long as both parties are not living together in the same property, then it was not a problem. A couple of his friends and their partners maintained this arrangement for 12 months before moving in together and then renting out one of the PPOR as an IP.
Clearly, it worked our for ex-boss' friends and their partners, but it depends on your arrangement. If your partner is living with you and intends to do so in your new place, then might be best to forgo the FHOG. After all, nothing beats saving for 3-6 months to cover that amount while waiting for the market to cool down even more. The FHOG might be extended as well.
As for partner (now wife) and I, we decided to just claim one FHOG as we were going to living together anyhow, and purchased our first PPOR in Aug 2007.
Regards
Daniel LeeI attended a couple of auctions a few wks back in a inner northern Melbourne suburb. After the auctions had ended, the properties was withdrawn and then put back onto the market for much higher prices.
Example 1 – A 3 bedrm unit. Original price range of $340K – $380K. Highest bid was $393.5K. Put back onto the market asking for $420K.
Example 2 – 3 Bedrom Edwardian house. Original price range of $420K – $450K. Highest bid of $487K. Put back onto the market asking for $515K.
Clearly, there are many vendors with unrealistic expectations of what their property can attract, considering the current economic conditions.
Regards
Danielgmh454 wrote:SHales wrote:When a place at palm beach, a little weekender, bought for 5.5M with 100% finance no sales at a mortgagee auction, for 2.5m, the top end has tanked.
Is that the 40% drop that Assoc Prof Steve Keen was predicting about?
Regards
DanielHi, Anon
Just my personal thought on this. In practice, if you apply for a property and the subsequent loan in only your own name, it should not be a problem to get the FHOG. Even if you need a guarantor to increase your loan amount, I think you can still use your boyfriend. After all, he only has to be a guarantor.
I applied for my Aust residency with my partner 2.6 yrs back and the amount of paperwork needed to prove that you are in a relationship is quite substantial, as we were not married at that time. So, that means to prove that you are not in a relationship is very easy indeed, for the purpose of buying a property and obtaining a loan.
So, in this aspect, I agree with Richard in that the actual application process for the FHOG is quite different in practice.
Regards
Daniel Leeoh yeah… read that article alright. Yes. It looks like a scary article, the increased FHBG has led to some FHB buying houses by simply using the both Fed and State FHBGs as the 10% downpayment. When the first interest rate increase comes with the decreasing employment levels, it will seriously affect those who are not in a good position to service their loans.
One question though; since all residential loans in Aust are recourse loans, even if the lendees are no longer able to the meet repayments, they will still be forced to do so. Unlike in the US where lendees are able to walk away due to the non-recourse nature of their home loans.
Shouldn't the recourse nature of the loans in Aust not be a factor in keeping lendees on to meet their repayments, and this thus keeping housing prices stable or limit their decline? Plus there is a strong domestic pride towards home ownership, meaning people will do what they can to hold on?
Regards
DanielW4L, I found the link to the article I believe you were talking about.
http://www.news.com.au/business/money/story/0,28323,25223797-5013951,00.html
Australian housing market holds sub-prime danger
Regards
DanielHi,
W4L, do you have a link that the article that you read in the papers. Would like to read it.
In the suburbs that we are looking at buying into, REAs are out scouting for more property to sell. There is definitely a much lower stock available for sale and with the current FHBs rush, they are pushing auction rates up.
Still, I have seen vendors who hold out for a generous buyers like it is still the boom days or something.
We have not found anything reasonable to buy, and am happy to wait for a good property to come by. At the mean time, we continue to build up our cash reserves.
Regards
Daniel LeeIn the suburbs that we are looking at, the lower-end of the market is supposedly running pretty hot. Yet there are contradictory signs happening at the same time. With many FHBs out there, you would think that there would be more properties for sale; yet REAs are scouting around looking for property to sell, as people are not offering them up for sale.
The low interest rates, coupled with a market that is only buoyant due to the FHBs, generally mean that people can afford to hold onto their IPs and probably rent them out instead, which could explain why rental rates have gone up in some suburbs.
We have not found anything suitable for us to 'reno' on at the moment, and am still looking. With the increased FHBG ending its end in 3 months time, will the rush of FHBs encourage more people to attempt to cash-in and sell their IPs?
Regards
Daniel LeeHi, Aisha
I assume the mortgage is for your home.
First – If you have a redraw or 100% offset account facility, I would suggest you put your savings into that first. You save on interest, and the 'savings' is not taxed at all.
Second – to find out what hidden cost there are, you have to be specific with this forum. What hidden cost are you talking about? Exit cost? Redraw cost?
Third – The fact that you are asking what to do with your savings means you have not spent enough time educating yourself as to what area of investing (Shares, property, minerals, etc) you want to do. Perhaps you should consider Suggestion 1, then spent 6-12 months educating yourself with books and frequently this forum to learn more; that is if you are really serious about financial wealth management.
If investing was so easy, than everyone would be rich by now.
Regards
DanielHi, Rellie
We had a similar experience as yours as well. Recently put in an written offer for a 'renovator's delight' around 6% below the lowest asking price range directly to the Vendor. The agent contact me a few days later, and in an angry tone, informed that the Vendor was only interested in an auction. The property got sold at the auction for way above what we would be expected to be reasonable to emotional buyers.
The point is that even though an agent is 'obliged' to forward all offers, many do not forward offers that are below the expectation of the Vendor. Most agents are happy to sugar coat ther dealing with vendors, put in minimal work and hope a generous buyer offers something above expectation (There are plenty of generous FHBs at the moment). One agent has even told me in an email that to submit our offer would be an embarassment for them.
I think keep on putting in offers and when you meet a good agent, you stand a really good chance of securing a deal. That was how we got our PPOR back in Aug 07.
Regards
Daniel LeeHi
I recently went to an accountant with experience with DTs. The accountant would be responsible for the DT's tax return, but the actual trust deed will be set up by a lawyer.
In my case, the Trust deed was done up by a law firm in Sydney.
Regards
Daniel
