Forum Replies Created
Hi Ajago5,
As pointed out above, you can find data that the Australian property market is overvalued or undervalued, depending on what you look at. You are right to be cautious and not blindly jump in. But the obvious risks associated with such a huge investment in uncertain economic times like these can be mitigated.I would suggest the following:
– Go for a lower LVR than what you can get. This probably means looking at a lower priced property than what you can afford, but it will help if properties do indeed come down 10% or 20% (which I personally don't believe they will)
– In your calculations, factor in holding the property for the long-term (at least 10, better 20 or more years)
– Look for a positively geared property. This is obviously harder, but can be done through renovations, etc. That way even if the property falls in value, you are at least making a positive return
– Look for areas with high rental demand, that is likely to continue in the futureHi W0mbat,
agree with the above comments, however it could be a good opportunity to negotiate the price further down, as the seller obviously needs to sell desperately. Before you can even consider it though, I would suggest getting a very trustworthy builder in (a family friend, relative, or somebody that has worked with a family member etc), to assess the work that has been done. They would have to give you an estimate to complete the project and asses whether there are any issues with it.
If you don't have such a trusted builder, then the risk probably outweighs the upside in my opinion.
Hi scarecrow,
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Dogmersfield, your website appears to be a REA's website in Chicago, so why would you use gumtree to look for apartments (presumably in Australia?)?
Hi Property Investor1,
The area is definitely booming and worth a look in terms of investing. Just a word of caution on buying developments off the plan in that area, as we've seen and heard of a number of developments taking significantly longer (by up to a year or even two years) than originally planned.
Hi wisepearl,
Another thing to consider is the size of yor hot water system. If it is 50l or less, then putting in a bath makes little sense, as you won't be able to fill it with hot water. Otherwise a bath is something a lot of tenants will value.
Owners not paying their levies usually does not become a major issue, as there is a legal process for their recovery as mentioned above. You will find that most owners will eventually sell their unit when they are really unable to pay the levies in order to avoid bankruptcy.
I have never heard of a strata manager walking away from their job because their fees weren't paid, as their fees are a fairly small percentage of the outgoings of body corporate. For this to happen, all owners would have to stop paying their levies.There is however one scenario where levies in arrears can become an issue, and this is during a major building renovation. When significant special levies are raised for this, the arrears usually go up, which affects the cash-flow, so it is really important to factor this in and leave a significant safety buffer.
I would recommend the western suburbs in Sydney, eg Liverpool, Campbelltown and beyond. You get relatively high rental yields, low vacancies and projected population grwoth over the next 20 years.
The key to mitigating your risk of bad tenants is to add value to the property you buy (renovations) and create something that is better than the average property in the neighbourhood. That way you should be able to achieve a higer rent and attract above average tenants and insurance also helps, of course. We have a number of clients who have invested in the western suburbs and are doing well.
G0biin,
Why wouldn't you tile the kitchen? They are more durable than floor boards, washable and you can't burn a hole into them. Of course the tenants could crack them, but that is not that common, from what I've seen.
Floor boards will show scratches. Generally speaking, the darker you go, the harder the wood gets, but if it still gets scratched, then those scratches can be seen more easily then in light wood.
In-house auctions are fairly common in the Eastern suburbs of Sydney. They have their advantages and dis-advantages, but they are definitely very good for doing market research.
Even if you don't sell your property this way, it would be well worth your time to attand a couple of these auctions. In a couple of hours, you can get a pretty good feeling for how hot or cool the market is at the moment. Sitting there and watching 5 to 10 properties go through the process will tell you a lot. You will see the number of bidders, where the bidding starts and then ends up at, how many get passed in, etc.
I would highly recommend anyone thinking about buying or selling attend a couple of these to get an understanding of the market at the moment.
Everyday32,
If it's cash flow positive property you are after, then I think it will be difficult to just buy that in Sydney. You will most likely have to renovate or do other things to the property to make it cash flow positive.
Hi slowachiever,
A good starting point are magazines like 'Australian Property Investor' which is published monthly and has growth rates and yields by suburb at the back of the magazine. Quite a few of our customers (who are all property investors) read these.
Hi Terry,
I know of two cases in NSW where someone who was owed money by the owner of a property has gone and lodged a caveat. Neither of these two people were related to the owner or had an 'equitable interest'. One had a contract signed by a deceased relative of the property owner committing to investing funds in a business, the other was owed a small amount by the owner and had a court order to show that. Both were allowed to lodge their caveat, in Sydney, in the past 12 months. One was later removed, the other is still in place. So, based on my experience, even in NSW almost anyone can go and lodge a caveat.
Hi shoppingarigas,
Unfortunately, Terry is right, that you should not have exchanged with a caveat in place. Most buyers wouldn't. The whole point about putting a caveat (which by the way anyone can do) on a property is to prevent it from being sold. I cannot believe your solicitor didn't alert you to this and advise you of the potential consequences? Might be a good idea to change solicitors?
The best time to have a valuation done (subject to all the comments above and the banks willingness to do it), is when your property is looking it's best, which is right after the reno. So make sure you have completely finished the renovation (and don't have little bits here and there still to be done) and cleared out all the rubbish, tools, etc from the reno. There is no point in waiting a few months and having tenants move in and then be dependent on how their furniture and cleanliness makes the property look.
Hi Jason,
In case that you don't move back in and just keep renting out the unit, there is the following to consider. As the current valuation will be used as the base for calculating capital growth from now until you sell the property one day (if you do so), you should try to get the highest valuation possible now. This could mean getting a couple of different ones, or asking real estate agents for appraisals and get the highest one in writing. If you get a valuation (instead of an an appraisal) make sure you ask for a 'market appraisal', as that is usually higher than a 'bank appraisal'.
Hi MrProperty.
We provide listings on realestate.com.au as part of our rental package. You also get an ad on domain, and a number of other services for $199. Feel free to message me if you need more information
Hi Kelly,
Have they just offered you what you are currently asking for the property – $450k? In any normal option deal, the offer should be well above the current asking price to compensate the seller for the time until settlement, which is usually at least 12 months. I would think if these guys were serious, they would have to offer you at least $500k if not more. I'm not commenting on the potential profitability of the development, because others have covered that. It all seems a bit strange.
Hi Ben + Mina,
in principle, yes that is how it would work, but you would have to check with your bank whether they charge any fees for this or if there is a minimum re-payment amount, although that is unlikely. You would, however, incur costs for changing your existing PI loan to IO, so it is better to do this when you set up your mortgage in the first place.
A property manager is not going to be 2-3%. It is more likely to be 5 – 7% of your gross rent depending on where the property is located. The letting fee is usually 1 to 2 weeks rent, plus advertising costs.
Hi grantos_champos,
in a nutshell, an IO loan gives you more flexibility. You can still make extra payments and pay down your principal, but you don't have to, like you do on a PI loan.
