[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

May 6, 2023 - 9:04 am

Hi Charlie,

That’s interesting as I am in the final stages of winding up my USA affairs after investing there since 2009.

The best tip I can give you is to remember that money follows management. Deals might stack up on paper, but unless you have strong, reliable and trustworthy management, you will struggle to put bucks in the bank.

The taxation consequences are complex and expensive, and insurance is getting very expensive and difficult to source in some areas (like wind in Florida).

Think about what you are hoping to achieve, and then consider whether the opportunities closer to home might be less risk and aggravation.

Bye,

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

January 14, 2023 - 12:08 pm

G’day there. This is a question of whether the improved value exceeds the cost of acquisiton and improvement (rezoning) by enough of a margin to justify the risk and aggravation. You’ll need to do your numbers to find out.

One thing I would be trying to figure out is whether there is demand for such land, and if so, at what price. Pre-sales would be important to de-risk the deal, so chatting to an agent would help. Start with end sale proceeds, deduct costs, and see how much profit is left over.

Bye,

– Steve

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

January 11, 2023 - 12:29 pm

Hello Charlie,

This has not been my experience, nor the experience of all other’s I know.

I will do an update on the matter via a webinar soon.

Remember that the structure only works for +ve cashflow property and you will need to use business bankers. Contact Chris Berry from http://www.PropertyInvestingFinance.com for more assistance.

Bye,

– Steve

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

January 11, 2023 - 11:29 am

Hello Jon.

Thanks for your post and sorry to read about your situation.

I am confused about the insurance policy. Whose name is it in – yours or the bordy corporate (BC)?

I would expect the BC would ensure for public liability and for structural matters for common areas, but that each owner is responsible for their portion of the building (strata title), and public liability of the same.

As for what is and isn’t covered, you should read the relevant policy carefully and even seek legal advice in order to get an expert opinion. Given the dollars involved, (up to) a few thousand in legals seems to be well worth it.

Sometimes insurers will disclaim out of the gate and need some further ‘encouragement’ to reassess and pay out. Hence a good lawyer is where I would turn to for help.

Sincerely,

– Steve

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

December 19, 2022 - 11:46 am

It can be hard to get loans based on business income Charlie. Let me explain…

First of all, the business is its own entity, and if it already has debt then that will count against further borrowings. The business will likely need several years of financial statements and tax returns to support profitable operations, or else will require a director’s guarantee to support the debt. Furthermore, most borrowers will only take a portion of the net income, and possibly a conservative portion!

What happens in practice is that business profits usually flow through to the owner, who then has that profit reflected on their income tax return, and who will then use that income as evidence to support borrowing capacity – either in their own name, or as a guarantor. Again, a lender may discount this income to some (or all) extent depending on their assessment of its reliability.

Re: the specifics… get in touch with Chris Berry and ask for his assessment. He can be contacted at http://www.PropertyInvestingFinance.com

Bye,

 

 

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

December 8, 2022 - 11:51 am

Hi Charlie,

Perhaps your lawyer has a view I haven’t heard before, but my understanding of trusts, companies and corporate law is that trusts separate ownership and control. Can your accountant contact your lawyer to confirm their opinion and perhaps provide you with a summary?

All the best,

– Steve

 

• This reply was modified 5 months, 3 weeks ago by  Steve McKnight.

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

November 10, 2022 - 9:57 am

Hello there.

What’s the address please? Let me do a little bit of searching.

Do you have any marketing from when you purchased that says the larger land size? Can you demonstrate that you relied on the real estate agent’s representations(perhaps by communication pointing to discussion about land size?)

Most advertising material does come with a disclaimer on it saying, essentially, all care and no responsibility. Indeed, checking land size ought to have been done during your due diligence. Sadly though, that’s now a bit like saying don’t eat that 10th course at the Chinese buffet.

That said, you may have something to discuss with a lawyer if you feel the agent engaged in false and misleading advertising, or if the Vendor falsified their Section 32.

Note – this is NOT legal advice as I am not a lawyer. Just thoughts on what I would do if I were in your shoes.

Bye,

– Steve

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

November 7, 2022 - 9:21 am

Hi there,

I wish I had better news, but the stamp duty laws are pretty tight, and I understand options to purchase are caught in many instances.

I suggest engaging the services of a good property development lawyer to guide you through what might be able to be done, just in case your current legal team haven’t thought of something.

It might just be what it is I am afraid, and if the SD kills the deal, then it won’t be the first time that tax has ruined a good idea.

Bye,

– Steve

 

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https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

June 28, 2022 - 7:44 am

Hey Dallas,

Yes, the approach continues to work: for the right investor buying the right property.

You will need to go and get legal advice about the right trust and how to set it up. That will cost several thousand dollars.

I have a resource called ‘Buyer Beware’ that explains all the structures, but it is currently out of print and needs an update. If only I had more time…

Bye,

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

June 9, 2022 - 11:32 am

This sounds like a question for a lawyer or consumer rights service.

The only help I can offer is that most tenancy laws require the premises to be safe and habitable. Perhaps one could argue this is not the case if the property has not been properly authorised?

Bye,

– Steve

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

May 20, 2022 - 12:30 pm

Yes, there is and it is part of the STEPS program (excel spreadsheet).

We also released a Chrome extension (plug in), which is in development to turn it into a web app. All going well we will release it in late 2022, early 2023.

Bye,

– Steve

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

May 3, 2022 - 2:59 pm

The answer is inflation Benny.

All the cheap money is enticing people to spend, which is causing prices to rise. So too though are supply chain issues that aren’t related to consumption though.

The argument is that by taking money out of people’s pockets by causing them to spend more on interest it leaves them less to spend on other things, and so that relieves pressure on prices, because demand is diminished.

It’s a big political statement though to increase by 25bp, higher than the 15bp expected. I was expecting no change this month, but a change next month, as wage price data is not released until later this week, and the RBA could have sat pat with good reason, and not dropped an anvil on SocMo’s head.

It’s not panic stations though, as we are coming off the lowest cash rate ever, but, it is also true to say that there has been a 250% increase off the base rate (.1 to .35). I think that will hurt some people who are already struggling.

• This reply was modified 1 year, 1 month ago by  Steve McKnight.

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

April 8, 2022 - 10:05 am

Hey Benny,

Thanks for the post and it is an interesting topic.

We’re so lucky to live in a country where the government assists. Elsewhere you would need to have private insurance, or just pay the cost from your own pocket.

I understand the goverment usually ‘does a deal’ with drug companies to get them on the PBS, so no doubt there are some savings there, and I am sure there are some economics at play, as well as lobbying.

I don’t know how you put a price on a human life. I know economists try under some modelling called ‘value of statistical life’ (VSL).

You may find these links / articles interesting:

https://en.wikipedia.org/wiki/Value_of_life#:~:text=In%20Australia%2C%20the%20value%20of,AU%24222%2C000%20per%20year%20(2021)

https://www.themonthly.com.au/issue/2019/february/1549026000/richard-denniss/what-government-thinks-you-re-worth#mtr

https://www.nytimes.com/2020/05/11/upshot/virus-price-human-life.html

Bye,

– Steve

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

March 7, 2022 - 6:06 pm

Taking max rent and max PP, $6k per month rent = $72k per annum, against a purchase price of $1.3m (and that’s before closing costs) gives a gross yield of 5.5%.

As an income return against commercial property, where returns are typically net, this is not particularly attractive.

 

Still, I have sent your details to a couple of my WA based clients to see if there is any interest in following up.

All the best,

– Steve

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

March 5, 2022 - 4:50 pm

G’day. Out of interest, how much do you think a house that meets your needs, in the areas you indicated, would cost to buy?

Bye,

– Steve

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

February 1, 2022 - 11:14 am

Hi,

Owning land is a generic growth strategy. It usually delivers no income, other than agistment and storage, so because it is growth orientated, it tends to be speculative.

As investors, our job is to make the most money, in the quickest time, for the least risk and lowest aggravation. As such, what is right for one may not be right for all.

In your case, I would complete financial models on the returns of each, and of both, with the financial outcome strongly influencing which way I was to act.

Sadly, quite a large number of people don’t know how to crunch the numbers, and so make decisions based on ‘feel’ or ‘intuition’. The problem with that is that they are emotion based and so judgement can be easily clouded.

So, my answer to your question is to proceed with the option that gives you the best return, for your time, money, skill and risk tolerance thresholds.

Bye,

– Steve

 

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

December 5, 2021 - 5:57 pm

At the heart of it, not much has changed in respect to the act of real estate investing, however, technology has impacted the way a property is advertised for sale (still essentially a classified ad, but online not in the paper, so now there can be photos and more text), transferred, and managed.

As for tech advances: perhaps block chain piecemeal ownership, more virtual auctions (COVID pushed advances here ahead amazingly), better information about income and expenses (ads are still geared towards home buyers, not investors), and better integrated management systems.

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

December 5, 2021 - 5:51 pm

LOL.

Terry makes a good point about banks not looking at links. They will have their own policy, and their own legal department.

The principle is this though: a mortgagor is different to a guarantor.

The mortgagor receives the proceeds for the loan and is responsible for making repayments, and adhering to the terms and conditions of the loan.

A guarantor does not receive the loan proceeds, but agrees to be responsible for repaying a debt owed if the borrower(s) can’t make their repayments.

(for more information on being a guarantor, see: https://www.commbank.com.au/content/dam/commbank-assets/home-buying/home-loans/docs/004-150-guarantor-information-sheet.pdf)

Having a guarantor usually allows a mortgagor to borrow when they otherwise couldn’t, or else borrow more.

Importantly, a mortgagor has the liability for the debt whether it is in default or not. However, a guarantor only ‘owes’ the debt if the loan is in default and the guarantee invoked. Provided the loan is not in default, there is no liability recorded on the guarantor’s balance sheet, although the existence of the guarantee would need to be disclosed as a contingent liability in the notes to accounts, if such disclosure is required. For this reason, providing a guarantee is sometimes known as ‘off balance sheet financing’.

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

December 5, 2021 - 5:35 pm

Hey Tony!

How are you? Well, I hope.

I see the RESULTS office is up for lease again. Are you guys moving somewhere else, or working from home?

I note that you only seem to post when you are plugging a workshop to feed into RESULTS sign ups. Why not start a discussion about the topics here, rather than simply advertising the workshop?

Thanks,

 

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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[Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763]

December 5, 2021 - 5:32 pm

Hi Steven,

Let’s look at each in turn:

Stamp Duty

You are right in that purchasing multiple properties takes advantage of the ‘stamp duty free’ threshold for each property, and this could add up to quite a lot of savings depending on your total investment capital.

Applying your example in Victoria to calculate stamp duty, 4 x $250,000 properties = $10,070 x 5 = $50,350 vs 1 x $2m = $142,500.

However, we need to be careful not to let the tax tail wag the investment dog. If the $2.5m property was to generate a higher profit, sooner and/or with less risk and aggravation, it may be better.

Land Tax

Grouping means all properties owned by a common entity are combined for land tax purposes. However as land tax is a State tax, not a Federal Tax, investors will get a tax free threshold in each jurisdiction.

Applying your logic, and assuming each $250k property is bought in a different jurisdiction, there will be considerable savings compared to buying one property for $2.5m.

However, again, don’t let tax drive your investment. It is one of many considerations. For instance, owning one property in four states will increase your management and aggravation footprint, and your accounting costs if they are all owned in separate entities.

CGT

I’m not quite sure your example works here, because in one scenario you are selling your whole portfolio, and in the other only a quarter. The example really needs to compare selling everything in the same year, in which case the CGT impact would be the same.

However, you do make a valid point that owning 4 properties allows you to sell piecemeal as opposed to ‘all in or all out’.

My Experience

I’ve owned lots of cheap properties in various jurisdictions, but found the management aggravating. Today I own a commercial property in Tassie, and two in Queensland (in separate entities), plus a large investment in my US Fund (no stamp duty on purchase in the US, but a small amount on sale). Being commercial property, the land tax is passed on to the tenant, or reflected via an inflated gross rent. In my case, a CGT discount isn’t very attractive vs the company tax rate given I am already on the highest tax rate, and trusts pay high stamp duty and land tax rates.

Good discussion though, and thanks for your contribution.

Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.com

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