Forum Replies Created
- streamlineinvesting wrote:I know what you mean about pressure from other family members and that was a big concern, especially since she has 8 children who will all have their own ideas of what should be carried out. I made sure I talked to all of them about this before we got too far and they were happy enough for the works to be carried out, all they are looking out for is what is best for grandma, and they realise now that we are looking out for her best interests as well.
Be VERY careful. I have seen families fall apart of inheritance money. Just because they said OK today doesn't mean they will be ok with it if the market shoots upwards and you end up pocketing a lazy $300K or something. They will get jealous and some may want some of that pie.
When you say "looking out for what is best for grandma" – If the property is already worth $1.5 mil and you could sell it for that and that is all she will get…what is the benefit to her of you doing it up?
Sure it might take a little bit longer to sell, but if youre spending time doing renos it might take longer to sell anyway.
Truthfully it sounds like you want to snap up this opportunity for yourself, not so you can help out grandma. Apologies if this is incorrect, but better to hear these arguments from some forum member than a family members with lawyers
Ryan McLean | On Property
http://onproperty.com.au
Email MeSome banks will revalue properties in under 12 months (from what I hear) but if you don't own the property yet then Jamie is right. They will take the lower valuation of the two…they like to play it safe.
You will also need to source a construction loan if you will be building a property. Different from a tradition home loan so you will need to look into that.
Ryan McLean | On Property
http://onproperty.com.au
Email MeSounds like you have to do P+I on the guarantor loan so that it removes your family commitment eventually.
Generally speaking most accountants (of which I am NOT one) saying that interest only loans with offset accounts are a great way to go.
Being interest only it minimises your expenses, giving you more cash flow to continue investing. It also maximises your tax deductions because your interest isn't going down as the principle is paid off.
I know a lot of people who do interest only on all their investments and use the extra cash flow to pay off their home loan (which isn't tax deducible).
That way their home becomes secure (no loan) and they still have maximum tax deductions.
Obviously seek financial advice on this. There is a fine line between "tax reduction" (legal) and "tax evasion" (illegal)
Ryan McLean | On Property
http://onproperty.com.au
Email MeHey Danny,
There is a company called "Positive Real Estate" they offer a mentorship program (expensive…aka thousands of dollars to join) but they run free investor nights and will often take you out for a free coffee to discuss your investment plans.
Obivously they are going to try and sell you on their service, but there is no such thing as a "free lunch" so it comes with the territory.
I found the South Australia mentor for this company and put his details below. Ps. I am not affiliated with them or a member but I know some employees there and so from what I can see they are a pretty legit company.
David Neradil
Phone number 0412 357 411
Email: [email protected]
Ryan McLean | On Property
http://onproperty.com.au
Email MeThanks Benny, good article!
For those who can't be bothered clicking the above link here is what it says
Overland flow flooding
Overland flow is excess rainfall runoff from homes, driveways and other surfaces. Overland flow flooding is water that runs across the land after rain, either before it enters a creek or stream, after a creek or stream breaks its banks, or after rising to the surface naturally from underground. Overland flow flooding tends to affect localised areas rather than the whole city at once.
What you can do to manage overland flow flooding
Overland flow flooding can be unpredictable and its severity will depend on the amount of rainfall.
You can understand overland flow flooding by looking at the natural overland flow path through your property and taking appropriate steps to prepare and protect yourself and your home. Consider these natural flows when you are looking to renovate, build a fence or put in a shed. Remember where water will flow.
Ryan McLean | On Property
http://onproperty.com.au
Email MeTerryw wrote:This has happened because you have crossed the properties as security for the loans. ie cross collateralised.
Not much you can do now.
But, if there has been no CG in 10 years wouldn't you be better off selling the other unit as well?
Terry is right. By having your loan both with the same bank you have got yourself in a pickle.
The bank now has the right to force you to pay down some of your other loan. It is one of those clauses that no one really knows about and the banks don't discuss.
It happens by default in most cases.
If you haven't sold yet could you consider refinancing unit 2 with another lender (thus ending your cross-collaterisation) and then go on to sell unit 2.
I'm not a mortgage broker so I don't know if you can do this. Terry?
Ryan McLean | On Property
http://onproperty.com.au
Email MeOn a more practical note:
Consider 95% loans – Stretch your deposit further by purchasing more properties with the one investment. You will likely have to pay Lender's Mortgage Insurance but it will possibly mean you can buy more properties sooner.
Get a good mortgage broker (who is also an investor) – A good broker will not only help you find and get approved for loans but they will help you structure your loans for the best chance of success
Buy under value or add value – You are probably going to need equity to continue expanding your portfolio. So if you buy under value (instant equity) or renovate to gain value you have a better chance of growing your portfolio faster
Positive cash flow – Properties that lose you money are dime a dozen and really easy to find. Spend the time to look for properties that generate a positive or neutral cash for if passive income is important to you.
Ryan McLean | On Property
http://onproperty.com.au
Email MeBefore you go ahead and create a strategy I would create clearer goals.
Defining short/mid/long is good but defining them as 1 year, 5 years, 10 years, 20 years goals is better.
Also be more specific
Year 1 – Buy one property in the range of $200,000-$300,000 that delivered $400-$600/week in rental income. I want to buy a property that is livable but has the option to renovate for increased value or increased rental yield.
Year 5 – Own 3 investment properties that generate $500/month in positive cash flow. (buy more than one investment property – link to an article I wrote on this topic which may be of use)
Year 10 – Own 10 investment properties that generate $2,000/month in positive cash flow
Year 20 – Sell off 2 investment properties, paying off my house loan. Have remaining 8 investment properties generate $10,000/month in passive income (rents have gone up in this time and we have paid down some debt).
Ryan McLean | On Property
http://onproperty.com.au
Email MeHey Joey,
I just want to say that 5 properties is a good goal. But a better goal is to understand why you want those 5 properties and what your short, mid and long term goals are.
Just "buying 5 properties" won't make you financially free just as "starting 5 businesses" isn't a guaranteed way to be financially successful.
Know exactly what you goals are helps you to look for properties that meet your EXACT goals and financial requirements.
Do you want to buy the 5 properties and have them negatively geared for 10 years and then sell them to access capital gains? This means you will be working your ass off for 10 more years for the hopes of a big payout.
Do you want positive cash flow straight away so your passive income goes up (maybe you achieve $500/month or more in passive income). Then you could take an extra couple of days of unpaid leave each month without noticing the strain to your cashflow.
Maybe you want a balance of negatively geared and positively geared.
Do you want to do work for renovations. If so what return are you hoping to get.
It sounds like a lot of work when all you want to do is "buy 5 properties" or "make money" or be "financially free".
But if you don't know where you are going is really hard to work out how to get there
Ryan McLean | On Property
http://onproperty.com.au
Email MeThanks Jamie M for clearing that up for me,
Didn't realise that desktop valuations were only done on sub 80% loans.
It makes sense though. When there isn't as much risk for the banks why would they pay more for a full valuation when history has probably proven they don't really need to.
And when the loan is over 90% they are taking much more risk so they probably want to cover their bases. Plus you are paying LMI so they probably can afford to pay more for a better valuation.
Ryan McLean | On Property
http://onproperty.com.au
Email MeIt all depends on how big the house is.
Is a second toilet really a selling point for a 1 bedroom unit? I highly doubt it.
But it you only have the one bathroom with a single toilet and it's a 5 bedroom house then it may make sense to keen the separate toilet.
It is all about making the most of the space you have. If people won't need a second toilet I doubt it will add value, but a cramped crappy bathroom that doesn't work might take away value.
If the bathroom is roomy enough as is with the toilet already in it would there be value in converting the current toilet room into something more practical.
For example, would it work well as storage or a laundry?
If you are in a unit and there is only an external laundry then adding an internal one can definitely add value.
So my question to you is.
Please give us more details! House or unit? Size of the house, location, demographic of who lives in the area etc
The more info we have the more we can help
Ryan McLean | On Property
http://onproperty.com.au
Email MeMAJOR BITCOIN UPDATE!
Yesterday Bitcoin HALVED in value due to the fact that China put major restrictions on the purchase and exchange of bit coins using Chinese currency.
It is a very speculative market. Many are calling it a bubble like the internet bubble of 1999
Also to do a transaction you are required to download the log of every single transaction ever done using bit coin. In a year or two this is expected to be 1TB!
Imaging having to download 1TB of data every time you want to send someone some money.
So be very careful!
Ryan McLean | On Property
http://onproperty.com.au
Email MeMay I just ask…what difference does it make?
I thought you do't get control over who the valuer is anyway? It is up to the bank to choose their own valuer
Ryan McLean | On Property
http://onproperty.com.au
Email MeIt's been pretty well covered but just wanted to note that sometimes (especially when the market is hot) valuers will simply do a computer valuation.
This means they won't drive by or even visit the property. There is enough recent sales data to value it using only the internet.
You can find previous sales prices through a property like Real Estate Investar (yes it's spelt wrong on purpose). They give you access to another tool (forget what it is called) which gives you past sales history and also comparable sales.
Its $250/month but you can get access to 7 days for $29 if you attend one of their webinars.
Ryan McLean | On Property
http://onproperty.com.au
Email MeHey Gizzy,
I actually personally know some of the people who work for Positive Real Estate so let me indulge you a little bit.
Firstly – The company is legit. I have found the smaller real estate mentors and sales people to sometimes be cowboys taking loads of commissions and leaving the investor no growth in the property (one of my friends got screwed by a real estate cowboy).
Positive Real Estate have their training nights but what I like is that after the training night they invite you to a members night where the members get together to learn more about property, network and meet new people. So their members do a lot of the selling for them…which means their members need to have positive experiences.
So I think that says a lot about them
Cost – It is pricey…a 1 time 'mentoring' fee up front is required but after that there are no ongoing costs (I don't think).
Investment Strategy – From what I have seen their primary investment strategy is buy land and build houses on it. As a large wholesaler they get access to some pretty rare opportunities in places like Stocklands estates and then onsell them.
Obviously there are some commissions along the way but from what I have heard they aren't too extravagent and the borrow often gains instant equity.
They get external valuations done on the properties so their whole system isn't rigged selling you on false appraisals.
Truthfully, if I wanted to simply work a full time job and be a semi-active investor I think it would be a great option. Probably one of the fastest ways to grow a sizeable portfolio if you're not acting as a super active investor.
I know people who work for the company go through the company to buy property…it always helps if the employees believe in the product.
I have also been to an investor night and found them to be lovely and friendly and not shady.
I wrote a review on them and sourced some prices and stuff through other forums. But this was before I met some of the employees so I probably need to adjust it – http://positivecashflowaustralia.com.au/positive-real-estate-review/
ps. I'm not affiliated with Positive Real Estate but as you can tell I do like what they do and think its valuable so I may be biased there.
Ryan McLean | On Property
http://onproperty.com.au
Email MeBecause you relinquished the right to control your expenses when you bought the unit.
Go to the body corporate meetings and find out exactly what the strata is so high. Is it going into a sinking fund? Is it paying repairs or maintenance?
Before you buy a unit you are actually entitled to see the minutes of the body corporate (for the last 2 years I believe). Always worth checking this before buying a unit.
7 things to check before buying a unit – http://positivecashflowaustralia.com.au/buying-an-investment-unit/
Ryan McLean | On Property
http://onproperty.com.au
Email MeGive Terry a call. 14,000 helpful posts later he has proven that he knows his stuff!
Come to think of it I don't think I have ever seen an incorrect comment from Terry
Ryan McLean | On Property
http://onproperty.com.au
Email MeIf you organised the deal and analyses the returns yourself then that is probably the only case where this may be a good investment.
If the company is paying sales people to sell this to you the chances are that they have already taken all of the cream off the deal for themselves. Meaning its probably too good to be true.
I have seen many people break even or lose money after being promised certain rates of growth or return.
Do the research yourself. Don't rely on a salespersons words
Ryan McLean | On Property
http://onproperty.com.au
Email MeI don't know what everyone else's experience is but the Australian market seems to be a bit more "straighty-180" than foreign markets.
It would be hard to offer a standard vendor this "renovation JV" and have them say yes.
You would need to be able to prove your track record of success and make the deal very beneficial for them.
I am assuming you are only splitting the profits of the property, not the sale price? Meaning you would have to get valuations done at the beginning of the project.
What happens if the deal goes south and there are structural issues you weren't aware of and the property makes a loss? Then who forks up the cash.
What is the vendor decides not to sell after the renovation (as they probably have the power to do so).
Lots to think about. You would really need to understand the laws around it and be a good salesman to convince someone to do it.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI know Mandura boosted significantly a while back due to the introduction of the new freeway and trains to Perth. Is this market saturated? What is the supply and demand in the area?
Are people living that far out of Perth doing so because they want houses or do they want to live in units so they can be close to the beach?
Before asking "Is this a good investment property" first ask yourself "What are my investment goals".
Most investors look at property and fail to analyse it based off their investment goals.
If you want positive cashflow then as Catalyst said it might not be the best bet so it could be a bad investment. If you wanted capital gains and were happy with engative cash flow then it has the potential to be a more suitable investment.
Investment property is just a vehicle to help take us to our ultimate financial destination. First decide what your destination is before deciding on the vehicle used to get there.
(If you chose the vehicle "car" and then decided you wanted to travel to New Zealand my guess is you would have a lot of trouble getting there successfully)
An article I wrote about this exact topic: http://positivecashflowaustralia.com.au/assess-investment-properties-based-financial-goals/
In that article I assess different properties based on my financial goals and may give you some insight
Choose the destination then choose the vehicle.
Ryan McLean | On Property
http://onproperty.com.au
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