Forum Replies Created
Hi Pitialv, the biggest con I see with buying land is that land by itself does not provide income, a house on a good block of land that you could develop further would have at least the rent coming in helping you with the repayments. It is also harder to borrow money just to buy a block of land. In regards to CGT, etc, you haven’t shared essential parts of your story for us to be able to comment, I suggest you check this with your accountant. Like Robert Kiyosaki says, the most expensive piece of advice is free advice. Your investment strategy is based solely on the fact that it would go up in value, risky. Having an exit strategy is always a good thing, for example if you buy a house with land that you can develop, you can always sub-divide and sell part of it , etc.
Happy investing
Hi there, I really enjoyed Ron Forlee's "Australian Residential Property Development" . It is a step by step guide for beginners, I read it a while ago and it gave me the inspiration I needed to tackle my first development project. Easy to read too. I bought a few years ago however I saw it the other day while browsing the RE section at my local book store.
Happy Investing
Hi there, propertypower makes a good point, have a clause that allows you to pull out, something like, subject to my partners approval…
Also, if you get more than a couple offers accepted, it means you are offering too much money.
Happy investing
Hi Robyna, if you can afford it and fits your investment goals, there are many ways to do it, i.e No Docs as Simons suggests.
Happy Investing
This is what I would do, I would keep the lot, wont sell anything, get a line of credit against PPOR, enough to use for 20% deposit + costs for the new property, negotiate well, double check that the numbers stack up nicely and lock another property into my portfolio. Not sure how creative this is, however it works.
Happy Investing
Hi there, may I recommend you do a plan, sit down and visualize where do you want to be in say 1,3,5 and 10 years down the track. Put all this down in paper, remember property is just a vehicle to get you where you want to go, so knowing what you want is the main thing. Your plan will tell you if that house on the Sunshine Coast is a good investment or not, your plan will tell you if renos are good for you or not, your plan will tell you if the cash flow mortgage is a good thing or not… I am sure you get the idea. Be bold, put down your dreams in paper, go for it!,,. BE – DO – HAVE… Robert Kiyosaki’s Rich Dad Poor Dad is a great book. Also Steve’s books are great. Lots of investors like Steve are doing Webminars, so you can listen from home while looking after the kids. There are a few in this site that you can download. Not sure how old are your kids, however get them involved in the planning too, kids can teach us a few lessons on how to dream and dream BIG. Happy Investing
L.A. Aussie makes a good point, tell your friend to do his due diligence, finding out what the property is worth is the main thing. I have this happened to me once. My IP was next to a motel, the owner was planning to extend his motel and offered to buy my property. I know my areas well, so I knew how much my property was worth. On the other hand there was not much I could do to develop myself, etc, (motel and park next door), so I decided to sell. Make sure your friend stays cool on the negotiation and REALLY gets a premium, I sold mine and got around $25K more than I would have if sold through an agent, etc. Developers know how to “negotiate”, staying cool is the key here.The beauty was also that the buyer/developer did not cared about the current state of the property (I had water damage in the roof and my tenant was starting to complain), so It was a great deal actually. Bought it for $92K 3 years ago and sold $195K… cheering! (without having to spend the $12K on fixing the roof)
ALL my properties are always for sale even if there is not a for sale sign at the front, I am sure you get the idea…Hi There, how about you include the exit fees as part of your strategy, in other words it does not matter how much the lender is going to charge you as long as you have contemplated this in your numbers, it is just another cost of doing business, simple as that. I do it all the time. Exit fees are no different than say paying fees to the selling agent, just another cost. I hope this makes sense.Happy Investing
Hi Stumunro, this is what I would do, if we have a bust, no worries, I will be buying more properties at wholesale. What happens with the ones that I own if there is a bust?, I know the market moves in cycles, I would sit tight, reduce debt, enjoy life with the family, and I wont try to change the sun and the sunshine…the interest rates, the government, the neighbors, etc, etc…If there is no bust, I would do the same…. Happy Investing
Hi Tugger, as a rule of thumb, to make money in renos, for every dollar you pay for renovating you should get three back (this is the 1:3 ratio thing), roughly, so in your case, think about the deck, is your $2,000 investment going to increase the value of the property by $6,000?In most cases this is a yes, just make sure it applies to your market/area/property, etc. It doesn’t always follows this ratio, what normally happens is that some things like adding an extra bedroom/deck/entertainment would give you a higher ratio (value for money invested), and other things wont, however it is a good way of quickly knowing if it is going to be worth your while. I hope I am making sense,
Hi AO, yes, I recommend you do a pest and building inspection for a new home. Building is very obvious, you need to see if the builder cut some corners, etc. If the property is part of a strata scheme, then you do need to do some more checks too, your solicitor should know about this.
In regards to the pest report, see what happens is that timber sits in yards, warehouses, lawns, etc, before going in to the structure of a home and there is a potential here to get “infested” with white ants, termites, etc. These inspections only cost a couple hundred bucks and can save you thousands, this is what I call good leverage. Happy investing
Hi Tugger, 20 m2 is very close to what I normally do.
It costs me around $1,800 including materials and labor. It may cost you a little more maybe; I do this full time and have “built “economies of scale. However, $2k for a nice, elevated, entertainment deck area, always does the job, they key is to work out if this $2K investment is going to bring you income on a ratio of 1:3. Happy investing
One real life example,
Purchase price $722,000
Repayment: $45,000 per year, $3,750 per month (20%) deposit.
Reno cost: couple of fridges, internet, a few more kitchen cabs, walls: $10,000
Rates + Insurance: $1,500 per yearThis was a 5 bedroom, turned into a 7 bedroom, with rooms renting @ 160p.w. Total rental income (1st year): $160 p.w. x 7 (tenants) x 52 (weeks) = $58,420
You work out the rest of the numbers.
Ahh, the property is on the northern beaches of Sydney, bank valuation after 14 months $860,000, line of credit ready to buy another one.
Happy investingHi Dubb how about you buy a 4 bedroom house (close to transport, uni, etc, etc), turn it into a 5 bedroom house , rent it to 5 students (by room) , work the numbers/deal so you can make it at least break even. Manage it yourself for the learning and the savings in management fees, and repeat process every couple of years, or every six months J
…depending on how hard you look, you could even make it +CF… in good suburbs too…
Happy Investing
Hi there, costs may vary from area to area, are you thinking on DIY, buy the materials and have a handy man to do it for you at say $40 per hour, or call a small job builder/plasterer to do it for you? Because I am running a few renos at the same time, I use the handy man option, I have an account (15% discount) with the materials supplier, so I get the wood, plaster, glue, door, frame, etc, etc… and then my handy man does the job, including picking it up from the supplier. A job like yours would cost me around $500 all up, doing It my way. Not bad for the leverage of adding an extra room… works every time… Happy Investing
Hi Karl and Rita, how big is the area?,
On my last reno, I had an entertainment area that was basically a 6 x 3 mts concrete slab in very bad shape. I got my handy man to do a “deck” on top and for $385 in wood it went from an ordinary look to a beautiful entertainment area. Obviously this wont work if it is a larger area, a drive way, etc, etc. Happy investing
Hi Tugger, I do add an entertainment area to all my properties, and yes they do add some $$$ when selling/renting. What I have found is that you should keep it simple/small, etc. I don’t know your area, but in my area, the summer is really hot and winter is really cold, so an entertainment area is good and a must have, however the interior of the house is the main focus, for example adding a 4th bedroom would bring more $$$ than a deck. Talk to the agents in your area and shoot the question, also walk around the area and see what the neighbors have, etc.
Happy Investing
Hi AO, the Sydney Morning Herald on Saturdays.
Also, you could prepare a little flyer/letter and drop them on the houses/sites that you think could be developed, BEAT THE AGENTS, reap the rewards…
Happy Investing
Hi Tugger, you know the answer already. A well managed property portfolio needs cashflow to provide serviceability.
Happy investingHi there have a look at my site, I have an example there on how I do it.
You just have to factor the holding cost into the mix, you cannot have a tenant while you knock down walls, paint, etc, etc. Same with the “break”fees.In regards to working full time and doing the reno work yourself, you got to ask yourself, are you a handy person?, would you be neglecting other areas of your life during the time it takes to do the reno work? (kids, wife, exercise, etc.).
Renovating is a “cash intensive” strategy; and requires some level of property experience. Maybe you would be better off making a plan, like most investors do:
– Buy an income producing property, manage it well, and wait for the appreciation. (3-5 years)
– Track your expenses, get a pocket size pad and for a full month, write everything you spend your money on, the trick trying to “steal” some of that money back to you, I am talking about the Coffees, cigarettes, beers, take away, etc, etc, you will be surprised with this exercise. I still do it once a year. Great way to build up some cash reserves.
– In the mean time, start planning about your business and keep your day job till you have the cash, the bullet proof plan, etc.
It sounds like the “boring” way to do it, however this is how property works, there is not quick money in property without putting the years of work, planning, learning, etc, etc.
Hope this makes sense,
Happy investing
