[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 5, 2008 - 4:17 am

crashy wrote:

I agree that there are those who walk the walk and those who only talk the talk. you have to admire those who have built a large portfolio and dont mind sharing how they did it.

making money is easy. keeping it is the hard part.

I talked to a guy who had $3m worth of property leading into the early 90's recession.  he explained how things slowly got worse for him, cashflow drying up day by day even though he sold property (in a falling market) quickly, finally ending up $500k in debt with no properties left.

I wonder how many people here realise just how easy it can happen? There is only one number that matters……..how long can I survive when (not IF) everything goes wrong?

Why was his cashflow drying up?

Were the properties he owned tenanted?

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 4, 2008 - 9:47 pm

The mindset that to have lots of debt is bad, is the mindset of a saver.

Nothing wrong with being a saver, but it's been proved that saving money will not make you money over time after you include the erosion of capital through inflation and tax on interest earned. It's a very slow way to get rich, and not that safe or tax effective when analysed.

There is nothing wrong with lots of investment debt, provided you have a low LVR, and a high cashflow relevant to debt. It's all just zeros on the end.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 4, 2008 - 9:38 pm

Scamp wrote:

the bottom is hard to predict, but the start of it is quite easy.
All the fundamentals have been laid around Australia. Now, all is needed is a lighter to light up the fuel.
That is coming in September 2009. Yep.. only 1 month left

Mind you, it might take a while to light this incredible pile of crap. It could take 6 months before it's completely on fire. So you can safely say the start is September 2008 ( although January 2008 could also be named for putting down the basics in place ) but the real panic will occur later, when unemployment rises, and people start defaulting on their mortgages AND RENTS en masse. Then the fire will be lit. The bottom could be anywhere between 3 years from now, or 20 years from now, depending on how much the government will mess with the whole thing. If the government does things like USA, then Australia is in for a 10 year long depression at least.  At that point, the only thing that could potentially extinguish the fire is a massive world war.

Come on Scamp; even the most hopeless "end of the world" predictors can put a more accurate date on things than this. And they're always wrong, but I guess one of them will be right eventually.

Saying the bottom could be 3 to 20 years is like saying it's going to rain this year sometime.

Statements like that just make people not listen to you even more than we already don't.

Yeah, you may be right, but I can make money from property in a down market as well, so I'm not concerned by a "crash".

It's actually a good thing for us shoppers – bargains everywhere.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 4, 2008 - 9:30 pm

Scamp wrote:

bah I can't edit my post. September 2008 ofcourse…

What's going to happen in September?

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 3, 2008 - 9:56 pm

We pulled out a kitchen in one of our IP's.

Left only the floor and the walls.

Generally, everything is attached to the walls, so a small crow bar, grinder, screwdrivers saws etc.

Try not to put holes in the plaster if you can avoid it.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 3, 2008 - 9:52 pm

ummester wrote:

Qlds007 wrote:

C but it not about the numbers.

What's it about then?

It's about nett worth and cashflow.

We're B

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 2, 2008 - 10:30 pm

If you are a handyman, have the tools and more importantly; the time – then I'd consider it. Especially if you live close by.

Personally, we don't manage any of ours (even our own PPoR which is now an IP and only 1 mile away) as all our others are a fair distance away, but I also don't want the hassle.

I'd rather pay the 6 or 8% etc – it's tax deductible, so it's good value I reckon.

But, if cashflow is an issue (isn't it always??) then sure; go ahead. But get a copy of the Tenancy Act and learn it back the front.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 2, 2008 - 10:18 pm

The dog may or may not be the real reason. You will never know.

In Vic, if the landlord have it written on the lease (and even if they don't possibly) that the property is their PPoR , they can return anytime as long as they give the tenant 90 days notice. It's in the Tenancy Act. Ask the PM.

In future, if you want a pet after signing a lease that doesn't allow one, ask for permission in writing from the landlord first. And if they say no; obey their request – it's their property not yours.

Would you like it if a tenant disobeyed your rules in your IP?

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

August 2, 2008 - 10:14 pm

You could do a Bunnings kitchen, or ring a few kitchen companies.

Either way, they will all have to come and measure.

My brother did his own flat pack (not Ikea though) and it looks great, but he is pretty handy and has good tools. It took him a while – w'ends only.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 22, 2008 - 9:29 pm

If there is a rental guarantee, then what you are buying is a unit with the rent built into the asking price, which means you are paying too much, and when the rent guarantee runs out, you will probably get a lot less rent on the open market.

Don't forget; 20% of your rent is eaten up by holding costs such as rates, insurances, management, body corp, etc.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 22, 2008 - 9:21 pm

Have to agree with the above two posts.

If I was going to pick either one, it would be no.2 – no pool and higher depreciation.

But the cost of finance at the moment is around 9%, and your ESTIMATED rent on no.2 will be 5.3% – ASSUMING you can get it for $370k and purchase costs of 5% are factored in.

Even with the depreciation deductions, you will have a pretty decent neg cashflow.

Don't forget; around 20% of the rent will disappear in holding costs such as insurance, property management, etc.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 21, 2008 - 8:54 am

Just keep on the solicitor's and the bank's back to get things done.

Call them daily if you have to to get updates and give instructions.

You want to get the finance approved and formally signed loan contracts etc done asap.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 18, 2008 - 12:49 pm

coon82 wrote:

Hi

I have been actively viewing this website for about a year now, but this is my first post.  About 4 yrs ago my partner and I built a house off the plan and still reside in it.  It is our first house. 
I'm not looking to move any time soon but am curious as to what people think about this topic.  A number of people I know (including a couple of real estate agents) have said they would never rent out a property that was originally their home because tenants will not treat it as well as you do (like a home) and you'll just be dissapointed no matter how good a possible tenant looks on paper.

I understand there are possible tax advantages, however are you better off buying properties only as rentals and only as PPOR and not overlap the two?

Thanks

We are on our 4th PPoR, which is now an IP.

After a while, it becomes just another property, and any superficial damage a tenant does can be repaired, repainted, recarpeted etc.

Once it becomes an IP, your PPoR is eligible for all the same tax breaks as any other IP.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 10, 2008 - 3:54 am

The deposit amount is whatever you can negotiate. The agent will try for 10%, and then hit you with a Section 17 (I think it's that) to get an early release of the deposit so they can get their commission.

I have bought a few times using only $1,000 deposit.

Agent wasn't happy, but the Vendor didn't seem to care.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 9, 2008 - 10:45 am

Scamp wrote:

http://www.news.com.au/business/money/story/0,25479,23961580-5013951,00.html

Read the comments. 114 comments. 2 comments say "yes, they're right, house prices will go up"
112 comments say "what a load of bullshit, houses will go down, everyone knows that"

That's about how the market is divided now. 99% of the people know the market is crashing.
only 1% thinks house prices will 'boom'. What do you think happens when 99% of the people offload their properties, or lower their prices in order to sell and get out of the property business ? It means more rentals ( lower rent incomes ) and more houses up for sale on the market.

It's not rocket science, it doesn't take a genius to see what is about to happen.

If you believe that stat as a sign of the times, then you really are an idiot, Scamp.

It is very easy to have one person, with 3 or 5 different names on the one forum, continually sprout the same message in different posts.

As you have been doing, and like a few others have been doing over at Somersoft.

In any case, I never listen to anybody else's fears.

That is a herd mentality mindset, and is a lack of Due Diligence by an investor to listen to it without researching their own facts.

I only listen to facts, and the facts are the numbers of the investment, the population movements in the area, the rental yields, the size of the block of land, the zonings, the location and so on.

If I had listened to every person I know who has put forward a reason not to invest in property over the last 8 years I've been doing it, I would not be in the great position I am today.

I've been buying property since 1985 (PPoR's until 2001, then IP's since), and have seen 2 cycles of boom and busts, and those PPoR's I've owned are all worth a lot more now than when I owned them.

Not that I'm Bill Gates by any stretch, but I'll be retiring way before the accepted age with a cashflow for life, that'll keep on increasing unless they make renting a crime.

And now that I've got some experience, I have every confidence that I can keep investing with utmost safety and the ability to hedge against loss in any market.

In fact, if the market does drop as you say, then I will be in position to make the biggest killing of my life, because the market will eventually go up again, and I will have acquired more cheap property before the next boom.

So, I'm here to help others do the same through the benefit of my mistakes and wins.

What are you doing – buying more gold with un-leveraged funds and no rental income or tax benefits no doubt?

The mindset of a saver, which is fine, but it's very slow.

Or maybe you've got an investment loan for it, but it's all after tax dollars which will service that loan – you are hoping the cap growth will occur.

Meanwhile, I've created a cashflow investment that costs nothing to hold, and has every chance of going up (has gone up) in value at least as much as gold.

I'm not saying this to brag; just trying to point out to you that your fears are grounded in ignorance of what is possible in property, irrespective of the state of the market (which I firmly believe will not be as bad as you predict).

Rather than continuing to keep sprouting the D&G crap, start asking how you can make money out of property in any market and make yourself useful.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 9, 2008 - 7:52 am

Scamp wrote:

It's a shame that property investors gone wrong never bother posting here, it would certainly fire up the discussion. I'm not going to elaborate on why the property market is crashing, suffice to say that it will crash much harder and faster than anyone expected ( well.. except perhaps me ), and don't expect a minimal 10% or 20% drop, expect 50% drops all over Australia.

Unemployment will rise ( as I said months ago ), and with it, we're in for some heavy duty revamping of the housing market. 50% crash *at least*. ( sydney is already at 35% crash now btw.. , so we're well on our way ).

I think you'll find that there are plenty of investors here who have "gone wrong".

Not all will admit it directly, but some will, and have.

Oh, but you haven't been around long enough to know that, and you're too busy telling us all the sky is falling to read back through older posts to see who has done what.

Most will attempt to educate the less experienced in the dangers that exist, and guide them down a safer path using the benefit of their experience and mistakes without actually saying "don't do what I did".

I am one of these people, but I have fessed up to some mistakes in the past.

My mistakes are numerous, but have all been minor (thankfully), and I have come out the other end in a very good position and have learned from my mistakes.

You, on the other hand, are simply a nuisance, without any past experience that we are aware of, with nothing constructive to add other than wild predictions.

Oh, I forgot; you said to buy gold.

Thanks for that pearl.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 9, 2008 - 7:42 am

So, you "like" this apartment, do you?

What about the investment aspect of it? Before you start to look at ways to finance it, make sure it is a good investment.

If it is in the CBD, are you aware of the probable level of neg cashflow from it? Are you aware that 20% of the rent will be swallowed up in holding costs? Can you service the shortfall?

What size is it; anything under 50 sq/m will be very hard to get finance for, or will need a very large deposit – 40% or more in most cases.

Are there Council plans for more similar developments in the area in the next few years, which may cause an over-supply (happened in Melb earlier this decade). This will make it hard to get a tenant, or you may have to drop the rent significantly to get one (as happened in Melb).

What are the comparable values of similar sold properties in the immediate area? Be careful that YOUR cap gain is not already built into the purchase price (as is often the case).

Have they offered a rental guarantee? This is usually built into the purchase price, and is often above market rates, so when it runs out, your rent return drops.

What are the rental yields like in the area for similar properties, what are the vacancy rates for similar properties in the area?

How many apartments will be in the complex, what are the body corp costs going to be, what are the costs for such things as lifts, rates. These could be expensive if it is multi-level.

Is there a dedicated car park for each apartment?

Why do you think the development company has suggested a Bank guarantee for the deposit? It's to entice newbies to make the purchase without using any money – all sounds attractive as you use very little money of your own, so it's easy to buy.

Off -the-plan apartments are very dangerous "investments" – especially in a climate of uncertainty like there is now, where interest rates are going up and buyer sentiment is dropping off. You may find that at settlement there has been no cap growth, even worse – the value may have gone backwards, and you'll be stuck with a property you can't get finance for.

Sorry if I'm telling you to suck eggs, but it sounds as if you are new to this, and I don't want you to make a very big mistake.

Take a step back, and do a LOT more research on the area first. Be sure of everything.

There is no hurry; there will be another deal of the century tomorrow.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 9, 2008 - 7:09 am

If your current property is worth $300k, your useable equity is 80% of this = $240k.

This means the banks will let you access 80% of the property's value for more investing, less any existing loans, and this is subject to loan serviceability.

You currently owe $264k on it, plus another $15k on the car.

No Bank will lend you any money right now, as you have no useable equity, and no cash deposit to put down.

The best plan for you to follow is to get rid of the car loan asap, and start saving as hard as you can, and/or decrease the property loan as fast as you can so you can put together a cash deposit, or have some usable equity for the deposit.

This'll probably take you a good year or two, providing you don't do something in the meantime like take out another $15k car loan on a $40k wage.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 9, 2008 - 6:56 am

Politically correct way of saying don't lend money to family members – especially the ones who are hopeless with money.

[L.A AussieMember@l.a-aussieJoin Date: 2006Post Count: 1,488]

July 9, 2008 - 6:53 am

Scamp wrote:

Peaknik : I agree 100% with your post. Great advice.

Amazing how Peaknik can come in a first-time poster, and agree 100% with your point of view, on exactly the topic you wish to push, Scamp. Very fortunate for you.

Most first-time posters come in with some pertinent questions about how to move forward with their PROPERTY INVESTING.

My guess is either you are Peaknik, or you've roped in one of your GHPC mates to come in and give you a hand.

Pretty obvious that it's one or the other.