Forum Replies Created
Hi Rocksquad,
I doubt that this can be done, but we’re about to interview a SMSF expert on one of our podcasts. I’ll ask him if he knows anyone and let you know.
Cheers,
DenHi Amy,
Make sure the loan you get is right for you as far as other conditions go before worrying about interest rates exclusively. Your bargaining power will depend on your LVR and your lender, amongst other factors.
Right now I have 6.21% with Commonwealth Bank but I have a larger mortgage and an LVR around 60%. It’s also worth noting that they’re not fighting as hard now to get business as they were last year.
Finally, I’d suggest making sure you (always) know how much it’d cost for you to pay out your loans. You can use this as bargaining power, and it’s always good just for your knowledge. We make a free podcast and our latest one (EPI 039) talks about exactly this. It could be worth a listen if you want to download it.
Cheers, and good luck with your investing,
DenUltimately this concept involves living off borrowings and hoping that your capital growth will exceed your living expenses (and by a fair bit). A tax implication of this is that your living expenses aren’t tax-deductible so you slowly turn your investment (i.e. tax-deductible) loans into non-tax-deductible loans. Not necessarily a wise move. It’s an extremely risky strategy!
Capitalising interest involves paying the interest on your investment loans from the investment loans themselves. This strategy may mean you have to increase your investment loan limits (sometimes they end up greater in value than the property they secure). The advantage of doing this is that you can pay off your home loan faster. My experience is that you need to get a tax ruling to capitalise interest, and your primary reason given needs to be that you’re paying off your home loan faster. If you say you want to capitalise interest so that you can reduce your tax debt, it’ll be a miracle for the ATO to rule in your favour!
I hope this helps.
And good luck with your investing!
Hey there,
I’ve had a good sniff around this area and I reckon Blacktown is still a pretty good area to look at. Of course you need to do your research and make sure the place you buy is reasonable – there is a wide variety of property in Blacktown.
Add to this the positives that Sydney has the biggest housing shortage of any city in Australia (according to RP Data) and there has been a lot of investment in developing Blacktown. It’s not hard to get to the CBD (train is right there) and there’s a big shopping centre, good roads etc. etc.
Hope this helps. And good luck with your investing!
You're right mattsta, regional areas tend to offer a higher percentage of CF+ properties.
You do need to be careful, however, that the area you're looking in is a viable community. Some mining towns may be booming now but they lose their "boom" and can become ghost towns in a few years. It's worth checking to see that there are enough other industries to keep the town going in the case that the major industry busts. It's these single-industry towns that are very risky – some people invest there and do extremely well, and others fare far worse.
I'm too conservative to take such risks. I tend to look for certain indicators – a McDonald's, a Bunnings and an airport that offers passenger flights, and not because of my penchant for burgers, hardware and travel. Generally, I have found that if a town is good enough for Ronald McDonald to set up shop, it's worth investigating.
I hope this helps, and good luck with your investing!
I reckon you can always get some inspiration from these free seminars, but I follow a couple of golden rules.
1. I always consider the core purpose of a speaker. If their core business is selling property but they offer free "education" then I find it hard to swallow that the education will be unbiased. After all, it's in their interest to "educate" you into buying one of their properties…
2. I always run any numbers through MY OWN cashflow calculator (you can get one for free at our website – http://www.everydaypropertyinvesting.com), and do MY OWN due diligence on any potential purchases. I look for as much independent information as possible (i.e. find rental rates for similar properties, vacancy rates, area demographics from sources OTHER than the sellers).
Too many people I know have been sucked in to buying bad investments that lose them money, thinking they were buying something great. Be careful, and go in with your eyes wide open!
And good luck with your investing.
Hi Big AJ,
Welcome to the forum.
I have advice for you:
1. If you want to get educated about property then go to a company or business that specializes in educating you about property.
2. If you want to buy property, then choose the property you want to buy yourself.There ARE some great companies that will help educate you around property investing, who also can offer properties for you, but in my experience these are few and far between. I have encountered several companies who “educate” you to buy THEIR properties for investment. Their core business is selling property, not educating you. Therefore the purpose of their “education”, in my mind, is questionable. If you EVER consider buying property from a business like this, you MUST run the numbers yourself, independently (and I would advise with your (not their) accountant).
Read some books by independent authors. Listen to some podcasts (we make a free podcast – there is a link below, and you can also find us on iTunes). Read magazines.
If you have a considerable amount of money to invest, then there are companies that would love you to invest it with them. I’m not sure how you will do out of it, but I can assure you that they will do very well thank you very much.
Get smart!
And good luck with your investing.
Hey TT, and welcome to the forum!
Interesting point you bring up there! Have you had a look at where they get their data from? Quite often there is a little delay in the data they publish (so current magazines might have data for September 2011, for example) as the data companies need to make their money somehow! So I’d check how up-to-date the data is. You might find that they’re comparing different data.
You might also find that one magazine is comparing unit prices and the other house prices.
If, however, they are both comparing “apples with apples” then you have to wonder! I’d suggest going to a third source!
Good luck with your investing.
lilhazel wrote:Thank you all.Personally i would buy myself, start small, structure it correctly and go from there — Richard, how do I ensure that I structure it correctly ?
G’day lilhazel!
Welcome to the forum.You’ve a lot of questions and there’s a lot to learn. Have you done any reading about property investing? There’s lots to find out and there are some great books available for you (check out authors like Margaret Lomas and Steve McKnight – Steve runs this forum). There are also free podcasts you can listen to (we make one – see the link below) and there are two major property investment magazines you could buy, although they don’t necessarily help you make the first tentative steps into the property investment world.
I hardly knew anything about property when I started, and I was lucky that the I bought at the right time. I believe that the market isn’t going to boom for a little while, so you have a little time up your sleeve to get educated.
Nevertheless, I reckon it’s a good idea to start small. A portfolio with a few smaller properties is a far better way to spread your risk than one big property, and you can start earning faster with smaller properties. Often, smaller properties have higher cashflow than larger ones do too!
Hopefully this helps. Check out those books, our podcast (it’s free) or some magazines.
And good luck with your investing!
I’d be checking some tax-related stuff with your accountant.
By purchasing an investment property (in late 2010) you were eligible to claim certain tax deductions that you wouldn’t have been able to claim if the property was your PPOR. Check with your accountant to ensure you’re not liable to pay any of this back!I agree with Derek, you need both cashflow AND capital growth.
Cashflow gets you into the market and keeps you there, but capital growth gets you out of the market in a profitable way. If you, like me, are looking at growing a portfolio and then selling a portion of it to pay off the debt then you need both. The cashflow will help you buy and build your portfolio while keeping you afloat and keeping food in the fridge, and the capital growth will mean that you need to sell as few properties as possible to wipe out your debts and live independently.
You can be more sure of good cashflow because you can do all the sums and work it out. The unknowns are future interest rates and future rents, but it’s a fair bet that if something is positive cashflow now, it will continue to be (unless interest rates rise significantly to push it into the negative).
Problem is, you can never be sure what capital growth will be – that’s crystal ball stuff. You can hedge your bets and do your area analyses, but there’s always an element of uncertainty.Good luck with your investing!
Hi Patrick,
I think there are a couple of things you need to sort out:
Who is your solicitor / conveyancer? Get them to look over the paperwork, and do it fast!
How much do you have and how much can you loan? Will this cover the cost property as well as purchasing costs?
How long is the cooling off period? You might be able to use this to your advantage if your offer is accepted and you need to do some FAST research.
What is the location of this property? Does it have solid fundamentals or is it a single-industry area which might bust in two years’ time, thus leaving you with a considerable debt and a property that nobody wants in a ghost town?
Do you trust the figures you’ve been given? If so, then wouldn’t you want to check them again (we have a free cash-flow calculator on our website)?
Is there already a tenant? If so, how long for? If not, what’s the demand like in that area?
Have you spoken to a lawyer or accountant regarding the best entity to purchase such a property in?I’m worried that you’ve seen what could be a great buy (or it could be a good-looking stinker!) and you’re jumping in too fast. Take a few of these steps, get yourself some advice (read through this forum, listen to some podcasts – there are lots of free ones, ask some experts) and then make a cool-headed decision.
And finally, the guys who have responded to your thread may seem like they’re arguing, but they ALL have the best intentions with their advice for you (from what I can tell). Yes, you need to get the seller to sign the contract so you can’t be gazumped; yes, different banks will only loan so much. Advice, as well-intentioned as it is, can be conflicting. Make sure you read different points of view and develop a good understanding of property investment before you buy.
Good luck!
DenMaybe the market has bottomed out – house prices have risen in November (0.1%) and December (0.3%). There are still relatively strong fundamentals (demand exceeds supply) and the lowering of interest rates will free up some more cash for those who are interested in buying (and for those who already have mortgages). I would expect mild growth for the next year – if we follow the December price rise (and this is just a prediction) then 12 months at 0.3% would give 3.6% growth.
Let’s say somewhere between 2% and 5% growth would therefore not be an outlandish prediction.
Remember also, by the time you realise that property values are heading upwards, you’ve missed the best buys!
Also keep in mind that there are MANY property markets in Australia, so more careful research might point you towards regional areas, or units, or god-knows-what… I’ll certainly be looking, and I’m focussing on capital cities.
Hope this helps, and good luck with your investing!I'm always wary of stories about people who seem to amass huge fortunes in a short space of time. There are a couple of things to keep in mind:
1. some of the "bright stars" that are featured in articles like this took incredible risks that happened to pay off. They're not employing conservative strategies and they often buy in unlikely areas that happen to inexplicably boom. They were the lucky ones. Are you willing to take these risks?
2. someone with a $4m portfolio may own very little of it (especially if they have a 95%LVR; a 95% LVR for a $4m portfolio would mean the investor has a net worth of only $200,000. Not bad for a couple of years but hardly remarkable!).
I've managed to build a $4m portfolio (and no, I don't have a 95% LVR!) on a below-average income in ten years. I can't imagine how I would have done it faster considering my income and the fact that I don't take many risks.
I started in 2000 when the market was growing strongly. Now, in a climate where property values are generally moving sideways more than upwards, it'd take me longer. Granted, I didn't do much renovation and I've done no flipping, development or unconventional finance arrangements – I've just tried to buy as wisely as I can and build a portfolio slowly. I bought my first property in 2000, my second in 2002 and my third in 2006 – that's how long it took to build enough equity (and save enough) to grow the portfolio. After then I was able to buy at least one property each year. It builds momentum, but you've got to be patient (or risky and very lucky!).
I hope this helps. It's just my opinion but I thought it was worth speaking up.
Good luck with your investing!
This is a toughie!
First of all, you need to sort out what is going to happen with the laneway between the two properties. You also need to get a good feel for whether development is going to be permitted. There’s no point buying them for development if you can’t develop them! Council planning offices are far more helpful than their reputations suggest…
Then it’s time to do some more due diligence and eventually make an offer. Tactically, I’d be more likely to let the agent know that you’re looking at buying both or neither. The agent wants to sell their properties (obviously – that’s how they make their money) and the commission that the agent actually makes won’t alter that much if you get them for, say, $10,000 less. (Remember 2.5% of $10,000 is $250. Once the agent’s company takes their share, it’s unlikely the agent will receive any more than a hundred bucks. Hardly something to squabble over!) Furthermore, you’ve said that the agent doesn’t seem to be great at looking after the owners, which could further benefit your position.
Finally, I think the biggest danger is that one owner says yes and then the other owner says no. You could then find yourself paying more for the second property. This being the case, make sure you have enough conditions in your offer to be able to pull out of this all-or-nothing deal.
Sometimes I think we over-think the tactics of buying a property – if you offer the right price, the sellers will take it!
Good luck! I’d love to hear how this goes
Cheers,
DenI use excel spreadsheets as well. There are a few products available but I have always found that the spreadsheets that I create are more useful for me. I ran them by my accountant when I was creating them as well (it’s a good idea to do this, to make sure they include what you need) and he seems very happy with the lay-out.
Excel is easy to use and you can link sheets in so you know how each property is going, as well as your entire portfolio.
Good luck!
Cheers,
DenHi!
Geelong and surrounds often gets pretty good write-ups, so you could definitely do worse than Belmont. There is a lot of government spending going on there, so it’s worth taking a look.
Do your numbers (my website has a property cashflow calculator for free, if you’re interested) and make sure you do your due diligence too!
Good luck!
Cheers,
DenI think you can settle by the end of the year!
I often make an offer which gives two different prices depending on the settlement dates (I can give you a copy of the offer letter I use if you’d like – simply email me through http://www.everydaypropertyinvesting.com).
Thirty days is not out of the question – in fact I have bought two properties this year on thirty day settlements and they both went through fine. Let your broker know that you’d like a quick settlement. Just make sure everything else is OK and you do your due diligence regarding the property!
Good luck!
Cheers,
DenGood stuff JacM, that’s exactly how to do it!
Get chatting with the real estate agent and find out what the vendor wants. I recently bought a place for $270k after being assured the vendor wouldn’t take less than $300k. Sometimes the last person to blink wins.
It’s also worth noting that any written offer must be passed on to the vendor, so if you start at, say, $290k and go to the trouble of writing it, you might condition the vendor to receiving considerably less than the $330k they say they want.
By the way, I’ve got a offer template which might help you when it comes to making an offer. Simply get in touch via the website and I’ll email it to you.
Cheers, and good luck!
DenHi,
Depending on the profit, it may not be much to worry about so you might choose to pay rather than get too excited avoiding it. Otherwise there are other options which ultimately involve reducing your hubby’s income (I’d guess that he’s the person paying the most tax in this deal?). If you own other investment properties one of the options is to pre-pay interest for the following financial year which can reduce your income.
Sit down with your accountant and I’m sure you’ll get a clearer idea of how you can reduce your tax bill to an extent. Just make sure your accountant is someone who knows about property – not all accountants are the same!
Good luck!
Den
