[Tom@SadhanaConstructionsParticipant@spartantomJoin Date: 2015Post Count: 18]

October 2, 2015 - 2:29 pm

Agreed. I think you’ll find the majority of high rollers on this forum and in general buy and hold property.

The pay off from flipping a property can be huge but then you need to invest that cash somewhere else that will earn you more than you would have earned had you stayed in the current property. Plus you need to account for exit and re-entry costs.

Take a look at your reasons for selling and then you can determine the best course of action.

Have you considered keeping the unit, refinancing and purchasing another property? Talk to a mortgage broker about this, they will be able to provide specific guidance tailored to your situation.

• This reply was modified 8 years, 7 months ago by  Tom@SadhanaConstructions.

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October 2, 2015 - 2:22 pm

Regarding moving the money out of the offset account, you’ll need to weigh up where the funds will be better utilised.

Personally I find that too many people get caught up in trying to preserve the negative gearing position. Sure, negative gearing is a great tax benefit but this shouldn’t be an end goal. It’s a tool to use as part of your overall investing strategy rather than the focus of the strategy.

Look at your other options, canvass some opinions here when you have $$$ figures, talk with your accountant and then make the call.

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July 24, 2015 - 6:30 pm

The general consensus from those in the know? Steer clear of rural.

Should you hang onto the property and wait for it to be in the black or sell now at a loss? Only you can decide that, but you’ve held the property for less than a year so unless you were in this to flip the property that’s a very quick turn around.

Can you afford current payments? If there are no tenants are you able to service the debt? If the infrastructure doesn’t go ahead how long until it does or something else happens? If the Coal Seam Gas industry doesn’t take off is there something else to substitute it? Are you better off cutting your losses now so that you can move onto another more lucrative deal?

There are lots, lots more questions to ask. It seems like you need to perform some due diligence on the area’s prospects over the next few years, determine what your goals are and narrow down your options about what you can do with your current property.

It’s important to remember though don’t make any emotional rash or hasty decisions. People who are in a rush rarely make money.

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July 24, 2015 - 4:36 pm

I doubt many people would suggest investing rurally at the moment. With the economy as shaky as it is I think most would agree capital cities (as always) are the safest bet.

The question then is are you happy investing in a smaller flat type property with a smaller land component or would you prefer to wait until your deposit is larger and you can then afford a unit (or similar town house etc) with more land component?

Are you chasing capital gains or cash flow? Cash is king but capital gains will give you more leverage to grow your portfolio at a greater rate! Or you can walk a line down the middle with more modest capital gains and a more modest cash return.

Keep researching, asking questions and talking to knowledgeable people and you’ll figure out the strategy that suits you best. You have to pull the trigger at some point though otherwise you’ll be 45 posting on here about wanting to get into the market…

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July 10, 2015 - 5:46 pm

This is a very general question and it depends mostly on your situation and what you want. You need to determine what it is that you want first. Do you want a quick and easy buck, more bucks but not so easy or do you want a long term investment?

If you want a quick buck, sell now, pay the capital gains tax and walk away with your cash in hand.

If you want a higher return but more time, more investment and potential downside then develop and sell. You’ll need to qualify for the finance to build and service the progress payments for the duration.

If you want an easy long term investment then sit on the block as I assume you’ve been doing thus far and wait for the capital gains.

For greater long term gains develop, rent the places out and use the rental to service the debt, wait for capital gains.

This is general advice only, you’ll need to speak to an accountant or other professional for advice tailored to your situation.

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July 10, 2015 - 3:50 pm

Without knowing the specifics $50k would in most cases cover all costs with a buffer for any unforeseen circumstances

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June 12, 2015 - 12:54 pm

It’s not the cheapest option but I suggest you get in touch with a project manager who deals with subdivisions. It will cost you a chunk, not sure how much, but potentially could save you a whole lot more or even save your deal if you get into strife.

Subdivisions are not the simplest projects for the uninitiated and having a good team on hand is imperative to your success. Councils being what they are there are a lot of hurdles. I’m not sure where you’re located but some of the bigger builders even offer this now such as Dale Alcock (I’m not sure if he’s only in Perth?).

And most banks will finance a 3 unit development as a residential deal.

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May 22, 2015 - 2:24 pm

If you’re simply chasing a better rate it may pay for you to consult with your broker about having the banks reprice your loans, or if you don’t have a broker talking direct to the banks.

The banks are very competitive at the moment so you may find that if you suggest you’re leaving them for another lender they may well match the rates or come close to it.

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May 22, 2015 - 2:18 pm

Whoa, I wouldn’t worry too much about trying to figure out the exact nuts and bolts of what they’ve worked out. Take it at face value that your rents will probably increase over time as likely will the value of the property.

As the value of the property increases, sure your yield may decrease if your rent doesn’t keep pace. For simplicity sake, if you owe $100k in year 1 on a property valued at $100k and your rental income is $10k, your yield will be 10%. If in year 10 you still owe $100k (assuming interest only), the value of the property is $200k and your rent has increased to $30k, your yield will have increased to 15%. If however your rent has only increased to $15k, then yes your yield will have decreased to 7.5%

It’s like anything though, you can analyse it to death trying to micro manage the details but the guys who are making money are out there investing not worrying if their yield is exactly keeping pace with the uplift of value in their property. Sure they probably have a good understanding of yield and growth rates etc, but more than likely they learnt this on the fly through actually investing. You’ll always learn better from a hands on experience rather than analysing an article.

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May 8, 2015 - 6:59 pm

Can you elaborate on the particular situation?

There’s lots of options but at the same time if you’re “exiting” you will no doubt be selling the place…

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May 8, 2015 - 2:33 pm

Jaxon hit the nail on the head. If you don’t have clear goals you could spend the next 10 years spinning your wheels and then you realise that you’re not where you want to be and BOOM your kids are teenagers and are costing you an arm and a leg.

There’s this book titled ‘Values-Based Financial Planning’ by Bill Bachrach. I’m not recommending that you read the book as it’s aimed at prepping clients for Financial Planning advice, but I WILL recommend that you check out his Financial Road Map that is an integral part of his process. It will definitely help you identify what you want and where you want to go. You should be able to get a copy on line easy enough.

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May 8, 2015 - 2:25 pm

I’ve no idea about the Destiny model. I’m not really a fan of paying for courses when as Richard said your professional advisers should be able to give you the same or similar advice. Any potential properties or ideas you have you can bounce around on forums such as this and to be honest, the guys on here such as Richard and Terry W probably have more experience and larger portfolios than many educators and they are more than happy to share their experience.

Basically you need a good accountant, lawyer and banker (mortgage broker). These are the 3 pillars any successful investor should have within their circle of advisers. A good mentor will definitely help you along the way but do you need to pay for one? It depends on what they are offering I guess.

Good luck and if you do go with Destiny let everyone know how it all works out.

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April 17, 2015 - 1:29 pm

Without generalising too much (although this is general advice only) the majority of property investors buy and hold with the exception of the renovate to sell crowd. I have no idea of percentages but this is generally what I come across.

The first thing you need to think about is what your goals are and what you hope to achieve by selling. You’ve already said that you want to take action in the next 6-12 months. This being the case do you simply want to upgrade your PPOR, buy a PPOR which you can then renovate to artificially increase the equity or would you prefer to stay in your current residence and buy an investment property. If you are seeking to upgrade your PPOR or want to renovate a new place have you considered converting your current PPOR into an investment property and buying a new PPOR? This is a very common strategy. If as you say you bought below market value and you have performed some cosmetic renos then it is entirely possible there is equity available for you to use as a deposit for your new PPOR.

If you decide selling is the best option for you right now then the entry and exit costs are the biggest concerns at this point. Real estate agents selling fees and stamp duty on your purchase are the biggest killers as CGT isn’t an issue for you. Is this outlay going to be offset by the gain you expect in the near term from purchasing the new property?

Of primary importance is where you think the market is going to go and how this sits with your goals and preferred investment strategy. Sure the risk of the market falling is very real, however will this fall by 5%, 10% or 20%? Given that exit and entry costs could be upwards of $30k for a $300k property (guessing as I don’t know the specifics) do you expect the market swing to be greater than this? You also have to factor in the hassle of selling and buying and the risk of storing cash in an account somewhere waiting for the “right” time to enter the market.

Something to consider when thinking about your goals and intended investment strategy is that for a buy and hold strategy, the entry point is very important, but more so is the exit point, i.e. for a true buy and hold there is no exit point. This would mean the down swings in the market “don’t” affect you as you just sit back and wait for the upswing OR (and this is the ideal) this is when you buy your next investment property. So timing the market will be less critical than if your strategy is strictly buy, improve and sell which will then be severely hampered if the market takes a dive.

• This reply was modified 9 years ago by  Tom@SadhanaConstructions.

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April 10, 2015 - 1:45 pm

An alternative is to refinance and access the cash that way.

If you’re partial to fixed interest rates they have come down a lot over the last 3 years so you could lock in a really competitive rate and access the cash you’re after. Or if you want to throw your dice with the variable rate then you could still refinance to access the cash.

This all depends upon the value of your property having remained steady or hopefully increased over the last 3 years.

Cheers,
Tom

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April 10, 2015 - 1:31 pm

It sounds like you’re doing the maths wrong. When Steve says 10% of pre-tax earnings, I assume all he means is 10% of whatever comes in, so really it’s 10% of net income. You’re right that if you use the pre-tax figures to work out your after tax expenses you’ll be in the red :-(

Say for arguments sake you’re earning $100k using the 2014 tax rates (bearing in mind this is general advice only)

Gross Income = $100,000
Tax = $$24,947
Net Income = $75,053

Steve says that 10% of pre tax earnings go to charity: Pre-tax = $10k, After tax = $7,505
10% of pre tax earnings go to reducing debt: Pre-tax = $10k, After tax = $7,505
10% of pre tax earnings go to investing: Pre-tax = $10k, After tax = $7,505
70% of pre tax earnings for ‘guilt free’ living: Pre-tax = $70k, After tax = $52,538

I hope this helps

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March 27, 2015 - 2:36 pm

All advisers receive commissions or fees of some sort and they all have their pros and cons. Buyers Agents receive a fee from the buyer for finding a house, Brokers receive commission from the bank for selling their product, Planners receive it from insurance companies and funds for selling their products and services, anyone selling investment properties would likewise receive commission for selling these products.

I wouldn’t necessarily avoid investment properties recommended by Brokers or Planners simply because they receive a commission. As with every investment decision you need to weigh up the pros and cons for yourself and definitely take into consideration the track record, reliability and relationship you have with the adviser. Do you trust them with your financial future? If not you probably shouldn’t be dealing with them in the first place.

Every decision you make should definitely be backed up by your own research and bounced off your trusted advisers.

• This reply was modified 9 years, 1 month ago by  Tom@SadhanaConstructions.

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March 19, 2015 - 7:44 pm

Hi and welcome Aaron, I’m new here too :-)

Note this is general advice only, you’ll need to engage a professional to receive advice tailored to your specific situation.

As with any professional take care of the charges they impose. Buyers agents may charge anywhere from $5k to upwards of $10k for an “average” priced property which you could potentially find yourself with a bit of due diligence and time simply invested on websites such as reiwa.com.au and this one. The benefit of course is that they will save you a LOT of time and present you with 2 or 3 options which will definitely fit your criteria or close to it. All you have to do then is make your selection.

If you go down the route of using a Financial Planner ensure that you choose one who specialises in property. Too many of them focus on shares and super, not something I’m overly fond of, nor others on this site I suggest given the targeted audience. Some are not able to give advice on property and some will push other investments on you. A Financial Planner experienced in property will definitely be able to point you in the right direction and will also have the necessary contacts to help you organise finance and a solid accountant to help maximise tax deductions etc.

Alternatively you can continue researching on your own and use this forum to it’s best potential and have others sense check your thoughts. Find the property that both you and your Mrs like and use a mortgage broker to help organise the finance.

Lastly, commissions paid to someone shouldn’t necessarily be a red flag to you saying “don’t take their advice they’re only in it for themselves”, the devil is in the detail. There is a big difference between property spruikers and sound advice with a disclosed commission.

Good luck and happy hunting!

• This reply was modified 9 years, 1 month ago by  Tom@SadhanaConstructions.
• This reply was modified 9 years, 1 month ago by  Tom@SadhanaConstructions.

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