[kattanMember@kattanJoin Date: 2003Post Count: 31]

February 19, 2007 - 3:27 am

Guys,
Whether it is national Builders or any of the other big builders; they all just process your contract and get their %. they are just the front.

the job is assigned to one of the “actual” builders and there it comes down to luck. if that builder is good, you end up having a good experience and good outcome.

In the late 90’s we built our first house [SE suburb Melb] via “Barry Plant” who promptly assigned our job to one of their Panel of builders. lucky for us he turned out to be good [and we still have a good relationship with him!!].

in 2003 we went to “Brimbank Homes” for our 2 IPs [ West Suburb Melb] and were promptly assigned our job to one of their Panel of builders. lucky for us he turned out to be good too [and we are building another T/House in Melb inner city through him direct !!].

I think we have been lucky, but IMHO an appreciation of the following has also helped us.

1. start dealing with the “actual” builder. forget about the Front [ie NBG/ Brimbank/ Burbank/ etc…] for day to day operational issues.

2. Treat the “actual” builder with respect. He/She is there to make a honest $. most of them are not there to rip you off; but they can’t do things for free or they end up going belly up.

3. maintaining a good working relationship and taking a reasonable approach will see most of the issues being resolved in an amicable manner.

4. There is no such thing as free lunch. any variation will cost you money. if you dont want to pay don’t vary!!
A standard building quote typically will NOT have a lot of profit built in [as competition in the market is rather fierce] but the builder is hoping for better margins through variations.
Any thing non-standard will cost you heaps. this is because the builder/front buys standard items in bulk and at rock bottom prices. your non-standard item will have to be bought at retail rates

And it is also the best opportunity for them to make better profit.

But inspite of good relationship and a reasonable approach the process will still not be problem free. Creating wealth was’nt meant to be easy; was it!! [biggrin].

Regards
Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

February 13, 2007 - 5:01 am

Originally posted by rpbrown:

Another thing which puzzles me is Yardney’s article ‘The Keys to Building a Substantial Property Portfolio” where is says you can use the equity in your property for the 20% deposit. I have naively thought that the bank required the deposit to be in cash not equity.??? If the former is the case, in my circumstances I could buy multiple properties today??[blink]

N. Brown

Brown,

1. refinance/ramp up your loan on your property to 80% or more as necessary. preferably establish this as a line of credit.
2. take out the $ required for the new property deposit from this line of credit.
3. preferably buy the new property with a new lender [don’t put all your eggs in one basket, cross collaterilisation, etc..]
4. MOST IMPORTANT: talk to a good mortgage broker who will explain these things and will guide you towards a proper structure.

Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

February 8, 2007 - 9:30 am

Originally posted by investToSurf:

Hi all, I’m a virgin poster and just read this thread and sounds like i could be half way through an investment that might not stack up. I’ve listed the details below and can provide more if needed. In a nutshell, I’ve just bough a big block 900sqm with a 3 br house on the front, community title hammerhead devision (small costs), 3br, double carport 141sqm house on the back.

Cost of land 280k + 15K in buying costs
Build Cost 130k + 15K landscaping of both
renovate on existing = 10K
Value on completion 270K front
350K on back = 620K
Int rate 6.8%
To Build 12 months
current retun of $8800 from existing house’s tennents.

Inially I wanted to buy and hold but after reading steves book and some posts I’m not so sure.

My loan broker and i have done the sums and, with tax benefits, it’ll cost 5K to hold each year

Grossrealiastion, it sounds like your the man, can you work these figures?

Though this deal is marginally CF-ve why would you want to sell?

assume the property goes up by 5% [conservative] each year . that equates to 31k added equity in the first year. refinance to new value [80% of 31k = 24k approx]. take your 5k out of this 24k.

sure your loan increases but the available equity outperforms your increased loan amount and you end up holding the prop and being CF neutral as a minimum. .

In subsequent years your loan as % of value [LVR] drops.

[kattanMember@kattanJoin Date: 2003Post Count: 31]

January 12, 2007 - 6:59 am

Few yrs back we were DINK with good income in Melbourne.
we bought a block of land with potential to subdivide into 2 units. had no idea about value add or even neg gearing. so we built a 4 Br house [stretching ourselves].

Transferred to Brisbane and rented our brand new house in Melbourne. sold it just before the 2000 boom to repay a minor [10k] debt. no idea about refinancing!!!

Lost job and moved to sydney at low money. scrapping the bottom of the barrel. hand to mouth existence. lowest part of our life. this is when we opened our eyes and realised that we needed to do something.

Lost job in sydney!!! mioved to melbourne. got a job. started looking at IPs. now have 2 units and an almost complete Townhouse. also exploring other business opportunities and some look promising.

Moral of the story: sometimes you need a serious jolt in life to get you moving.

if we hadn’t hit the low in our life, we probably would have had
our own house and maybe one IP. we certainly would not have explored all other options to get out of the rut.

kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 31, 2006 - 7:53 am

Originally posted by smoothsatin:

“….but Yarraville has “gentrified” and Footscray shows little sign of doing so. Simply put, and not being racist, but “Australians” like every nationality i have encountered are pretty racist. They dont want to go down to their local shops and see Minh Phat bakery, they want to see people (looking) like them,

it is probably time to scrutinise the value of that perception.

There is (still) a fair level of asian presence in yarraville and that certainly didn’t stifle the cap growth. Another example is Glen Waverly.

Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 23, 2006 - 5:04 am

Hi Leo,
I presume that you are looking at Tarneit as an investor with a view towards:
1. Capital Growth in your IP OR
2. Rental returns and CF+ OR a combination of both.

Cap Growth is likely to be below average for the next few years in this area:

Construction activity [H&L packages ] is heavy along the Western corridor from Hillside [west of taylors Lakes] in the North, to Tarneit in the south [just north of Werribee].

In such a “green field” zone capital growth is a casualty; ie if you put your house up in the market for sale, a potential buyer will always favour a brand new house [H&L package] that is available nearby, at a better price. so you will have to drop your price to make it attractive.

This means your property is not unique / exclusive and there is a lot of fresh stock [new houses] coming into the market = low demand for your property.

the prices will start rising when the developments have been established and there is no other construction activity [H&L packages] available in the vicinity. that might take a few years in this case as there is heaps of undeveloped land in the area.

Typically the developer has made his money in the land development and it takes a few years for the premium to be diluted. it is only after this that you will start seeing any capital Growth.

Rental returns will be below average as potential tenant can buy rather rent [H&L package], location is not close to major arterials and area is typically first home buyers market.

with all this development happening the infrastructure is likely to suffer. .

IMHO this area is best suited for first home buyers.

as an investor try to focus in areas that are developed / unique/ exclusive/ have good access to transport and amenities. that is where you are likely to get CG and decent Rental returns.

Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 17, 2006 - 5:31 am

For example, he argued until he was blue in the face one night that if you insure your $200K house for $100K and it burns down, the insurance company will pay out the full $100K. I tried to explain about under-insurance but HE KNEW BEST.

Hi Wylie,
what is the deal with “Under-Insurance”.
could someone clarify the issue.
Checked it up on the net. seems like if he had his house insured for 100k he will get 100k when it burns down.

http://app01.ica.com.au/help/homecontentsguide.jsp

Insurance Council of Australia Limited

What can I do to minimise my risk of under-insurance?

Under-insurance is a serious problem in Australia, with many people not realising they are under-insured until a significant loss occurs. Many policyholders gamble with their property for the sake of saving a few premium dollars. In most cases, doubling the amount insured will not necessarily double the insurance premium.

In the case of under-insurance, most companies will pay up to the sum that the policyholder has insured (eg if a $200,000 house has been insured for $100,000 the insurer will only pay $100,000 if the house is destroyed). A small number of policies may involve “averaging” or “co-insurance” clauses. (Check with your insurer for further details).

Thanks
Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 17, 2006 - 5:05 am

For example, he argued until he was blue in the face one night that if you insure your $200K house for $100K and it burns down, the insurance company will pay out the full $100K. I tried to explain about under-insurance but HE KNEW BEST.

Hi Wylie,
what is the deal with “Under-Insurance”.
could someone clarify the issue.

Thanks
Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 13, 2006 - 12:52 am

Originally posted by kattan:

Heading back to oz to warm the bones for a few weeks around the holidays. Is it time to buy yet

sorry mate, just testing the post functionality.

• sorry mate, just testing the post functionality.

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 13, 2006 - 12:49 am

Heading back to oz to warm the bones for a few weeks around the holidays. Is it time to buy yet

sorry mate, just testing the post functionality.

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 12, 2006 - 4:50 am

Richard,
The following are the reasons why I would prefer not to buy:

1. Funding limitations: this way my total funding requirement is limited to construction only; not the land portion and hence gives me the capacity to do bigger projects.

2. Risk minimisation: if the permits don’t come through I can get out of the situation with minimal damage; will not be burdened with the property.

3. Transfer cost [stamp duty, owner to me] reduces overall project profitability.

let us assume I have 20% of the Construction Cost.

what is the best way to structure this relationship between the land owner and myself ?

Is it possible to raise this construction loan without providing the land as collateral [higher LVR, etc]?

Regards
Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 12, 2006 - 4:16 am

Banks have a reason for what they are doing – risk management [theirs not yours].

Town houses in suburb A may be the flavour of this month but 3 months down the line the Bank may have too many of those in their books – hence no more loans for Town houses in Suburb A.

The poor consumer [us] is obviously confused and bewildered. it was ok then but why not now.

another interesting observation: assume you have a 80k loan on a 100k property. due to market downturn property value drops to say 80k. the bank can get back to you and demand that you reduce your loan to 64k [assume 80% lvr]. they may very generously give you 3 to 5 working days to do this. if you cant you end up selling in a down market and losing money.

whether it be the Big C or X or Y the scenario would be similar.

Moral of the story:
1. Never put all your eggs in one basket.
2. Dont let your right hand [bank X ] know what the left hand [bank Y] is doing.
3. Dont even think of the term “loyalty”; when policy changes your friendly Relationship/Bank manager can’t do much.
4. Remember you are just a number to the bank. it is always better to be different numbers to different banks for different IPs [biggrin]

Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

June 21, 2006 - 7:36 am

FM,
hb is right. Buy-Reno-Keep will provide u with better figures [on paper] than BRS. the transfer just kills the numbers.
Anyway the bottomline is that u make your money when u buy.
u will have a great reno outcome if u had done ur due diligence [expected price after Reno, cost of Reno, Transaction Costs buy/sell, and your projected profit].
Once we have bought the rest of the journey is just trying to cover up for any mistakes in our assessment.
if none we may actually see that profit!!

Kattan

Originally posted by fatman:

So hb, you seem to be the expert on not doing renovations???

Whats your beef.

There sure is money to be made in doing renovations. And yep I think you have been watching too much TV as it has warped your mind.

[baaa]

TV is life, but they have not showed all examples of every renovation done in Australia, have they??? Maybe I just missed the last 10 years of lifestyle TV??

Why do people continue to do renovations on INVESTMENT properties?? You know, the ones you buy renovate and let out or refinance into purchasing further properties due to increased equity!! Because on the RIGHT property, there is good money to be made, the wrong property, yep they may B/E or not make any $$, agreed.

Investment properties are a bit different to your PPOR. Investment properties, get in, spend at max 5 – 10% of purchase price and get reno done ASAP.
Whereas PPOR, you tend to take more time as it will not produce cashflow or returns as it is your PPOR, hence the 2 years that your beloved TV show took perhaps?

See the difference?

I leave that to you to think about.

FATMAN

[kattanMember@kattanJoin Date: 2003Post Count: 31]

April 11, 2006 - 7:30 am

lets see some more details on the proposed development[atleast how many squares or SqM]

[kattanMember@kattanJoin Date: 2003Post Count: 31]

April 10, 2006 - 7:57 am

btw
whose responsibility is it to register easements?
if unregistered how is the prospective buyer going to be aware of the condition?
Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 20, 2005 - 8:52 am

The e’Book is OK. You always pick up something.

Feasibility has a few ommissions/events out of Sequence though.
1. Selling Cost: Commission on Selling Price (say 2.5 to 3%) is calculated after you have assessed the potential Sale Price.

2. No mention of GST & Input Tax Credit;This has a major impact on your feasibility now.

Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

October 19, 2005 - 4:16 pm

and have accesss to a lot more money than you think you will need

very valid comment.

Life’s little surprises are always around the corner and these ******** have a habit of coming and biting you when you have spent your last cent.

For my current Project [upmarket T/House in Melb Inner City Suburb]I have paid off for the Land (with Permit). Fixed price building Contract has been signed. Construction Loan should get approved in a weeks time.

Guess what? I am still going to the Market to borrow an additional 50k (@~20%interest) for the final few months of Construction as a contingency.

Crazy? Not really; I’ll Probably pay 5k as interest over 6 months[treat it as part of Project Cost] and hopefully will not touch the additional Funds.

But it provides me with some protection against those nasty little surprises and enables me to finish the project successfully.

Trust me! I’ve been on the other side when you are forced to make some poor decisions at the end of the Project just because you are short by a few Ks; NOT FUNNY.

Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

September 22, 2004 - 7:25 am

I did find a website http://www.homebuildingmanual.com with relevant Info but sounds American. will the building practices vary a lot?
Kattan

[kattanMember@kattanJoin Date: 2003Post Count: 31]

September 22, 2004 - 7:11 am

Geo,
The following is from the Dymocks website. looks like a book to me.
Kattan
AN INTELLIGENT GDE TO AUST PROPERTY DVLP – $29.95

FORLEE RON
ISBN 073140131X
Format Paperback
Category Real Estate

[kattanMember@kattanJoin Date: 2003Post Count: 31]

September 20, 2004 - 5:20 am

“Start here..an intelligent guide to Aust poperty developing

Has anyone read this book? any good?

Kattan