Forum Replies Created
Hi ProtonEnergy
The challenge you will have trying to buy from afar without some sort of assistance will be the “buying sight unseen” factor, with nobody checking anything on your behalf. On one hand you could order building and pest inspections, but on the other hand the role of these inspectors sits within a specific domain. It is not their role to know or comment on whether the property you’ve bought yourself is in a pocket of town that tenants don’t like to reside, or in fact an area that tends to house problematic tenants. It is also not their role to know or comment on whether the road is a main road and noisy with traffic, whether it is insanely busy at certain times of day thanks to school traffic etc etc. Additionally building and pest inspectors do not fill the role of researching the area and understanding things like its growth, rental yield, vacancy rate, forthcoming infrastructure projects etc. In this regard, not being represented properly can turn out to be an expensive mistake.
We have quite a number of expat clients – with a fair chunk of them working in Dubai. They leave the research and acquisitions to our firm, and we look after all the dealings from here, thus removing the need for them to have to take calls during Australian business hours from the likes of agents, inspectors, solicitors, conveyancers etc. We keep them advised of what’s happening and tasks that need to be done via email/phone/skype at times convenient to their work schedules, which due to the timezone difference, generally means we’re chatting with when it is evening time in Australia. Most prefer to have any extended chats on Fridays which seem to be the day off work in Dubai. Other than that, Skype is easy to install on a mobile phone and thus shorter chats can be easily had in the middle of the Dubai work day.
It’s quite interesting to note that among our expat clients, the primary motivator for buying property is to stop themselves from wasting all their money on having a good time. Second to that comes the awareness that it is important to start building passive income streams.
Some buyers agents offer a broader presence, some are state specific, and some are area specific (eg a particular collection of suburbs). Some will offer communication with you only between standard Australian working hours (9-5) and some will accommodate your needs to communicate outside of those hours.
Solicitors and conveyancers will almost certainly not be on offer to chat to you when it is evening time in Australia, so it’s handy to have someone looking after as much as possible of all that for you.
Hope that answers your question!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Kristy
As already mentioned, and just to re-iterate what Redwood said – an accountant is for tax perspective, not investment strategy. It’s a bit confusing knowing who to talk to and who knows what when you’re getting started, but you will eventually find you’ve assembled a team you are comfortable with that are saying things that you are able to understand, and make sense when you sit down and validate the numbers and common-sense element of what they’re saying. When you have that, you’ll feel a great deal more confident in every step you take :)
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
8.3% is super high, and would be higher if rates went up on you.
If it were me I’d save a little bit longer till you have what you need to go to a conforming lender. You’ve just pulled yourself out of one hole… don’t deliberately jump into another hole that it would be difficult or impossible to climb out of.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi JM
By the way you appear to have stolen my initials!
What’s best for one person is not what’s best for another.
If all we humans were was a spreadsheet of numbers, then I guess that all our financial strategies would be the same.
However as you’ve pointed out, you have something a little different. Some health issues to cater for (ie pay for and manage stress about). And a personality to cater for. You know your limits. We can all handle a certain amount of stress, debt, etc, but we all have our limits. What happens when you cross that limit line depends on the individual.
You do not need to feel inadequate for feeling like you don’t want to feel “out of your depth financially”. Matie you already have 4 investment properties at a young age, and it sounds like those investments are covering their own costs. I’m not sure you have any concept of how far ahead you actually are. That is AWESOME. You said you are not a very mathematical person. I am (a mathematical person), and if what you need to feel some peace of mind is a bit of a chat on the phone with a mathematical person to look at the facts of just how well you’re doing and what it means, I’m happy to be that person. Feel free to give me a shout, the offer is there.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
does it fall under capital cost ?
Yes
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Nicely said Corey. That’s the part that is normally withheld from the “commercial property is a better gravy train” story. The fact that this would realistically only be true on a cash buy.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Never buy on assumptions. Stitch that contract of sale up with appropriate conditions.
Chat to your solicitor about an appropriate DUE DILIGENCE “special condition” that would allow you time to check on things that would be deal breakers.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Dean
In theory yes.
However imagine you take on an investment property that has a cashflow position that places you $150 out of pocket per week in the first year of ownership. Assume that the rent can generally be increased $10 per week in that area. That’d be a whopping 15 years before that property were covering its own costs, provided none of the bills went up in the meantime (eg council rates, insurance etc), which we know will not be the case. Bills go up.
Thus the importance of being crystal clear on available income to support mortgages, life circumstances, desired outcomes, timelines etc. Otherwise a property can be a serious ball and chain for an investor trying to hang on by the fingernails.
Most folks can afford to support a mortgage by a small amount each week, thereby allowing them to accrue some savings from the leftovers of wages to save for subsequent properties, or contribute towards debt reduction, thereby improving the cashflow of a property due to the debt reduction leading to less interest charged.
So often we see people that thought that “getting themselves some negative gearing, you know, for the tax savings” is what they need to do. And their only plan is to hedge their bets that the property will go up in value and make a killing for them. The lack of the presence of a plan B is scary. There always needs to be a plan B. Plan B could be “I will hold onto the property and its rental yield will provide a portion of my living expenses requirements”. Plan B could be “I will renovate the property to place it into a higher priced market”. But if there is no Plan B things can get messy if Plan A doesn’t work well.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Dean
You have touched on a critical point with investment property selection. For a property at this price (presuming there is a mortgage over it) to be covering its own costs, it would have to have a pretty extraordinary rent price tag. Folks that can afford such a weekly rent would likely think “I’d be better off buying my own home than rent”. Thus why the yields tent to get paltry as the property price gets right up there.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Hoss
The commercial property will require a much higher deposit, since the lenders won’t lend as much against commercial buildings as residential, and commercial interest rates are higher.
Focus on the net rental yield (after costs and mortgage interest are taken out) as opposed to gross rental yield. It might turn out that the lost opportunity cost of having to sink a large deposit into the commercial building negates what otherwise appeared like a good idea.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I’d personally give it a tiny bit longer till you can afford a house. I’d imagine it’ll take you max 6mths to be in that position.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Pete / Tom
It depends on a few things;
– Whether you are interested in a particular area (because agents tend to specialize in certain areas)
– What job you need the property to do (eg capital growth, cashflow, renovation potential etc)
– Whether you have given consideration to your overall strategy (this has an impact on what role the property will play in the portfolio as a whole)If you have clear thoughts on some of the points above, it will help you determine if an agent is able to service your objective.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I’m going to say it. It is not “advice” as to what you should or should not do. However I would not touch this property with a barge pole.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Tiger
You’ve hit on a point that a lot of people struggle to understand. Indeed equity is not defined as your right to a cash donation from the bank just because your house went up in value (that’s right – some folks mistakenly think they get paid by the bank because their property went up in value, and do not understand that accessing equity is a borrowing event which must be repaid). It is also the case that just because you have equity, it doesn’t guarantee the bank will lend against your equity. There is indeed such a thing as “more equity than you can use”. In these situations, the only way to crystalize the equity gain is to sell. However if your objective was to amass a property portfolio, this would be pointless because you would then just need to sink your money back into the property market.
Possibly the only way to utilise more of your equity than you can presently afford is to sell your home and downsize your PPOR to something with a lesser price, and sink the remaining money into deposits on well-yielding investment properties.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Steve
While your intention is to renovate and sell, I wouldn’t have complete disregard for capital growth, because if after your renovation it turns out that selling is not viable to due insufficient profit or lack of buyers, you’ll have to go to plan B which is to hang onto it and rent it out. You want it to be a viable plan B if it comes down to it.
As a general rule house on land trumps townhouse/apartment, but there are sometimes exception to the rule. Also if you physically cannot afford to buy a house on land then there is not really any point pondering that vs townhouse/apartment as the decision is made for you (to go for the townhouse/apartment, or save more money for the house on land.)
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Can’t say it sounds enticing, and the “discount” you would be cancelled out by the lost stamp duty money buying into it and paying an agent to sell it if you wanted to offload it…
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi TM
Nobody on the forum can “advise” you. Only appropriately qualified professionals that you have commissioned for the task with appropriate payment can do so.
A forum is a place to share a series of facts and stories.
I’ll try and really simplify the SMSF trustee thing:
A Corporate Trustee is essentially a PTY LTD that is set up to be trustee of the SMSF. When a SMSF is setup, there are two choices for trustees: personal trustees (at least two “members” personally named as trustee) or corporate trustee (a PTY LTD). If someone wanted to sue the SMSF, then they’d really be suing the corporate trustee. Which is a PTY LTD. Not you. But it would have been you if you chose the personal trustee route. Thus why personal trustee is less popular from an asset protection perspective. You might be the sole member and director of a SMSF, so in a way the corporate trustee (the PTY LTD) is you, but it isn’t you from the eyes of the law in litigation. Hope that makes sense.
Yes superannuation is for retirement. It is possible to access it a bit earlier, though income tax would be payable (which it would be on income outside of super anyway). If there is money in super doing nothing it is a very enticing place to look from an investment perspective.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Ah, yup, Doctor. Highly litigious profession. Asset protection is certainly relevant. Have you looked into a SMSF (Self Managed Super Fund) using a corporate trustee?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Catalyst has a point (though Mark has pointed to both low yield and low growth). But in fairness, what is the definition of “low”? Mark can you share the numbers with us? ie value of property, its growth over say 3yrs, and how much it would rent for?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Lloyd
I agree and disagree in equal portions. I agree that many folks get obsessed with asset protection when they are folks highly unlikely to “need” to protect their assets anyway. Too often the words asset protection are thrown around to frighten people who don’t understand them into believing they cannot step outside their front door without the advice of a lawyer. However I am not convinced that buying a property in own name with intent to transfer it to another entity is the go, since CGT and stamp duty would apply. It would be an expensive exercise.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
