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  • Profile photo of KevmanKevman
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    @kevman
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    I’ve lived in Geelong for most of my life and know many of the suburbs quite well.

    Norlane – originally back in the 60s and 70s was a housing commission suburb but since then many home owners/investors bought out the housing commission houses and have cleaned up the suburb mostly. There are still bad areas in Norlane though.

    I’d rather put my hard earned in Norlane rather than Corio

    Profile photo of KevmanKevman
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    @kevman
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    We’ve run a rooming house for a couple of years as one of our IPs.

    We cater mostly to non-students/working singles. Some of these people can’t budget and love that one single payment a week pays for everything – rent and utilities and they only have to pay for their food.

    One idea for student accom would be to include cable internet as part of the rental package. This could make your accommodation more desirable and thus cut down on the transient factor. Obviously the closer to the uni/tafe/etc the better.

    Regards

    Kevman

    Profile photo of KevmanKevman
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    @kevman
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    My parents did it a few years ago when selling their business.

    You don’t necessarily have to charge a higher interest rate for the risk. They charged slightly less than the banks AAPR for a business loan but was able to sell at full price. A slightly higher interest rate may mean that the buyers will try to discount the price.

    Just a thought on how everything is negotiable.

    Kevin

    Profile photo of KevmanKevman
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    @kevman
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    Just a couple of questions

    Would you be renting this out on a room by room basis or a student holding the tenancy agreement? If on a room by room basis you may need to increase the rent to cover utilities.

    One option to make it more appealing is to add cable internet to each room. Set it up on a unlimited download plan and include that price in the rent. An IP investor has done that with a similar style house in my area and doesn’t have any shortage of tenants. Students love “free” high speed internet connection.[thumbsupanim]

    Gardening costs could also be included into the rent – either you or someone else does it. Students aren’t into gardening much.

    One con with student accom is that the end of year break is quite long and many go home. One option for keeping tenants coming back is to offer half rent for that end of year break to save them having to move their stuff back home and then looking for a new place. Another IP investor does that. Better to get 50% of something than 100% of nothing.

    Swimming pools are a lot of maintenance and could have some public liability issues eg student party and someone gets drunk and drowns in the pool.

    Just some thoughts.

    Profile photo of KevmanKevman
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    @kevman
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    Just been reading some books by Robert Allen – talking about “nothing down” deals. Just wondering if this would be possible in Australia.

    Ideas such as vendor financing. I could see this being of value to say retirees who are worried that taking a large lump sum now may affect the assets test for their pension. So these people may be amenable to taking 50% now and say 50% in 5 years time. Could be a possible way around bank LVRs. Any thoughts on this – seems to be big in the US.

    Profile photo of KevmanKevman
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    @kevman
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    I think one of the problems is the definition of insider trading. It is very hard to prove in the courts and most of it doesn’t even get detected.

    When should you be charged with insider trading. I mean are you charged with it if you got a hot tip and invested in a company and lost money?

    If someone from inside a company rings a mate that’s a share broker and the broker recommends you buy the shares, you do and make a heap of money could you be charged with insider trading?

    I think John T Reed has a touch of jealousy about Kiyosaki’s success. Maybe rather than rip into Kiyosaki he should figure out what Robert did to get his books on the bestseller lists. Robert does say he is a best selling author not best writing author.

    Profile photo of KevmanKevman
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    @kevman
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    Don’t discount Franston North we buy in that area but then those houses fit the market niche that we are aiming for. You just have to know where to buy in the suburb to avoid the really bad areas.

    Maggie – yes that property was a Frankston North property.

    Every time there’s negative press about Frankston North I cheer. Less competition for houses [:)]

    Profile photo of KevmanKevman
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    @kevman
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    We’ve invested in Frankston for a while but +ve cashflow propeties have been hard to find. So have renos.

    The last property we bought, in Mar 03, was a 4br concrete ex housing commission home for $165k that we have rented out for $450 per week.

    I think in Frankston who your managing agent is important as they can handle problems quickly and also ensure that any bad tenants don’t rent your properties. We have a very low vacancy factor as most tenants, once they settle in, seem to stay for years.

    The prices in Frankston seem expensive to us when we started buying houses there we were paying $70k and renting them out for $140+ pw. Nowadays the same houses have been bank valued at $140k.

    Profile photo of KevmanKevman
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    @kevman
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    I think blanket statements such as the Melbourne or Sydney property markets are going to plummet 30% are so nonsensical that they belong in the newspapers. The statement implies that all properties in those cities will fall by 30%.

    Probably the top quartile price of properties will fall by 30%+. The bottom quartile will probably plateau or gain slightly to tighten up the pricing differential that exists in these cities. Even when interest rates were 17%, people still bought houses – they just bought the ones they could afford the repayments on. So now people are buying $300k houses at 6.5% if interest rates go to 13% they’ll buy $150k houses. The demand is now for these houses rather than the $300k houses.

    Profile photo of KevmanKevman
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    @kevman
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    Actually I checked out the storage company that was advertising in Melbourne mainly as an exercise in analysing a deal.

    They are called Strata Storage Investments and their website is http://www.stratastorage.com.au

    They have the numbers including for analysing the deal. Interestingly enough the management fees is almost 25% of gross return so the real rate of return is closer to 6% rather than the 8.5% they advertise.

    Profile photo of KevmanKevman
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    @kevman
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    Minimogul

    Just a quick question – Is this your first Investment Property?

    Many of the strategies mentioned are if you happen to have a few IPs already and the pressure is off to get the runs on the board.

    I sometimes encounter pressure tactics by agents such as putting an offer in immediately but I always state that I have to do my due diligence and it will take a while. If my offer price is tried to be increased I just state that my offer stands. I either get the property or I don’t – I know that there is always another deal.

    Don’t get discouraged. It took us 7-8 months of looking to do our first IP deal and then 2 weeks later we did our second.

    Profile photo of KevmanKevman
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    @kevman
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    I think private treaty sales are sales that are not listed with an agent ie FSBOs (For Sale By Owner) or individual to trust/company. I got one of those price guide reports and a property we had bought last year was listed in it and we’ve never bought at auction. So some of these reports may contain up to 95% of sales data depending on how many FSBOs you have in your area.

    Profile photo of KevmanKevman
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    @kevman
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    Most of the time when we are called by those offering a free seminar we ask if it involves negative gearing. Normally they say yes and we just say we’re not interested. However sometimes they do offer cheese and wine tasting as well as an investment seminar. My wife and I decide that we might make a night of it and have some cheese and bikkies and a few wines and sit in a seminar for an hour just to have listen. Cheap night out really :)

    However we did have a consultant visit us once. He talked about getting a line of credit loan. We had already done that. Then using the equity in your house to buy IPs and we had already done that having 2 at the time. Once the consultant realised this, he at least stayed and asked lots of questions about owning IPs as he wanted to do what we were doing. Maybe we should have charged him :)

    Another time after telling a telemarketer that he couldn’t help us buy IPs as the ones they offer wouldn’t qualify for our 11 second solution. He was pretty persistent but about 15 minutes after I finished talking to him, he rang back and agreed that he couldn’t help us as they were helping inexperienced property investors. I presume inexperienced is a euphemism for “know nothing”.

    Profile photo of KevmanKevman
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    @kevman
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    I saw an article by a group that has had a good history of forecasting interest rates and they were forecasting that the rate will be at 10.5% in 4 years.

    They were also saying that when rates hit this level there will be blood in the streets for the housing market as people will be selling due to drawing down equity in this low interest rate era to fund doodads.

    At the end of the day it is up to you whether you take fixed or variable. You can pay more when fixed but think of it as insurance against rate increases. One thing I notice with mortgage brokers is that they will never guarantee anything in regards to interest rate movements. So if they recommend variable over fixed and you lose out due to an interest rate spike, there is no guarantee provided by them that they recommended the best product. Once they have sold you the loan, that’s the end of it.

    I use IO fixed loans because as Robert Kiyosaki says “Don’t Predict”.

    Profile photo of KevmanKevman
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    @kevman
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    I admit that it’s harder now finding +ve cashflow deals in my area of the outer SE suburbs of Melbourne.

    I recently read a property report on Tasmania which was interesting. The gist was that prices in the state cannot be sustained as there is still 8% unemployment and the net migration is from the state to the mainland. The article made some unsubstantiated allegations that vacancy rates are increasing. I don’t know as I don’t own any property in Tas. Has any Tassie investors noticed this?

    Profile photo of KevmanKevman
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    @kevman
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    Richard

    The uncertainty you have as to whether you are moving or not creates some difficulties. There are some options available.

    Option 1 Hold both properties in your own/you and wife’s name. The advantage with that is if you sell your principle place of residence (PPOR) its exempt from CGT and the IP is at 50% CGT. This way one property is always free of CGT. If your current house will increase greater than your new house then you can keep that house as your PPOR for 6 years. That way if you move back it is still CGT free.

    Option 2. Selling your house to a company will incur Stamp duty and no 50% CGT exemption. Stamp duty is the same for individuals. If you sell your house to the company for an inflated price and it is obvious this will raise the Tax office eyebrows. This is the worst option tax wise where you will pay the most tax.

    Option 3. Selling your house to a trust or buying your new house in a trust. You will have to pay stamp duty. The main reason the government and tax office is cracking down on trusts is people moving personally earned income through them and splitting their income. This is a big no-no by the tax office. Also your future plans in regards to IPs aren’t specified so I wouldn’t recommend a trust unless you are going to have 3+ IPs in it.

    From what I’ve read in your post I would recommend option 1. I’m interested in why your solicitor would recommend a company or trust for two properties?

    Kevman

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    @kevman
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    Another version of a trustee is to not use a company but a person as trustee. This option can cut down on the costs of maintaining the legal structure.

    I don’t believe that when starting out initially, properties should be bought in a trust as statistics show most people only buy 1 or 2 properties and the fees and time maintaing such structures would sap most of the cashflow profits for a couple of properties.

    Just some thoughts

    Profile photo of KevmanKevman
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    @kevman
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    Paul

    I did last years seminar. For $2195 you can take a friend and also it is a tax deduction.

    If $1100 is written off in tax then really the seminar only costs $550 per person.

    The next deal that I did after the seminar using what I learnt in the seminar I got 14% yield on a property and its not a wrap. The net cash flow $5500 per year. Thats over a 200% cash on cash return for the seminar.

    Profile photo of KevmanKevman
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    @kevman
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    Listed property trusts are treated like shares so it depends on bank on what % they will lend on depends on the trust.

    Unlisted property trusts – I’m not sure about.

    Profile photo of KevmanKevman
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    @kevman
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    I don’t understand what the scam is here? Can you explain further why if the deposit is transferred to a 3rd party you can’t settle on the property.

    Twice now when dealing with distressed vendors we have had to release the deposit early. Once was so their bank would release the mortgage and the other time was so the vendors wife could get an operation. Both properties continued to settlement with no problems and the deposit I presume was given to a 3rd party.

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