[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, 11 months ago by  Steve McKnight.

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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

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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

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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

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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

 

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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.

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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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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,

 

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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.

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

November 8, 2021 - 10:13 am

Hi mate,

I am sorry to learn of your challenge.

Sometimes in the past I have found that it is easier to offer a carrot, than a stick. This means incentivising the tenant to move out, rather than paying money to force them out.

Perhaps “You’ve been a great tenant, and I want us end on the right foot. If you agree to move out by <date – which is a few days before the due date> , I’d be happy to offer you $x to help you settle in to your new home. How does that sound?”

I also note that there is a tenant dispute mechanism available in Qld, if you go down that road: https://www.rta.qld.gov.au/online-tenancy-dispute-resolution.

Next, you could put it in the hands of a rental manager, who will be happy to resolve it for you, for a fee.

Finally, you could make an appointment with a lawyer to act on your behalf.

Bye,

– Steve

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

November 3, 2021 - 9:22 am

Hey mate,

This sounds like a planning issue, and based on your username, I’m guessing you are a ‘Cuz from across the ditch…?

If that’s so, I recommend you contact the folks at https://planning.org.nz/ to see if there is a planner near you who can help navigate you through this tricky situation.

Sorry I can’t be of more help. I do think you did the right thing seeking permission though, as you wouldn’t want to risk illegal works compromising your insurance.

All the best,

• This reply was modified 2 years, 5 months ago by  Steve McKnight.

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July 26, 2021 - 10:14 am

Hello and thanks for your post. That is quite a gift that you have inherited.

Before answering your questions, I’d encourage you to think about the investing strategy you would like to pursue (income or growth), together with your available funds, risk appetite and skill. Once done, then consider how this asset fits into, and meets, your needs. The building ought not to become a burden for you, but rather be a blessing!

Reading your post it seems you are in ‘quite deep’, so to speak, re: property investing, without having the benefit of time and experience to ‘scale up’. You would be wise then to lean on qualified and experienced advisers to guide you over the next 12 – 24 months.

To that end, I feel your question also largely contains your answer re: advisers. Here are some further comments:

1/ Your strata adviser seems to be able to guide you, if you feel s/he/they are qualified and experienced. If not, perhaps go for a walk in the area and see if there are any signs on buildings saying ‘managed by’ and call them up for guidance and a quote. Have you googled ‘strata services + the area’? As to whether you have to employ one, I’d be surprised, but that is a legal question to ask a lawyer.

2/  A professional building inspection sounds like a good idea, doesn’t it? You can include in the scope an opinion about whether the building meets the tenancy law requirements in respect to qualify and safety.

3/ Any insurance broker worth a pinch of salt will tell you about your insurance options. Having the building inspection done first will assist insurers to understand the risk.

4/ You may like to consider getting a quantity surveyor to provide you with a depreciation report, or at least see if you qualify for depreciation or building write off. They can also provide you with a Replacement Cost Assessment to help you understand how much you should insure the building for.

5/ I would highly recommend using a professional property manager to help you ‘stabilise’ the asset both re: condition and tenancy. I wonder, what would you do if there was a substantial capital works bill of, say, $300k plus (roof, etc.)? As I teach, the answer needs to depend on your time, money, skill and risk tolerance.

All the best,

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

July 25, 2021 - 11:58 am

G’day,

I understand why you’d want to post this to a forum board to get some idea of the issue, but given the specific nature of the question, and its complexity, I would urge you to seek the help of a town planner as soon as possible.

Regards,

– Steve

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

July 20, 2021 - 11:04 am

Howdy,

Thanks for asking, but there are no certificates that come with these courses. I think you might be confused with my Property Apprenticeship that came with a Cert IV in Business (if completed). However, that course, and that certification, are no longer on offer.

Bye,

– Steve

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

June 30, 2021 - 11:01 am

Hey Peter,

Thanks for your question. Yes, there are heaps, and heaps, and heaps of questions to ask, and matters to address in due diligence… if you want to make an informed purchase that considers risks and rewards.

This has been the focus of the recent study groups I have been running (Inner Circle 1 and Inner Circle 2), where I showcased the DD I did for two commercial property deals, the questions I asked (with checklists), and the outcome.

If you’d like access to recordings of those programs, as well as joining up my next study group, read more here: http://www.PropertyInvesting.com/IC3

All the best,

– Steve

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

June 8, 2021 - 10:11 am

Not me mate. I hopped out a fews ago when the ones I bought were redeemed, or became ‘stale’ as they were not worth redeeming / enforcing.

Would I do it again? Probably not from afar without some presence on the ground to keep an eye on things.

Also, with investment yields  on the way down as investors chase return, tax liens have been popular, so the risk/return balance as reset.

Bye,

– Steve

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May 25, 2021 - 10:59 am

Pre-approval is an indication, not a guarantee. Finance will always be contingent on the lender’s risk assessment of what is bought. If the valuation comes back lower than the purchase price due to initial repairs, you will need to chip in more cash. If the house is a knock-down job, they may only provide a land-valuation.

If you sign up but can’t get finance and you can’t settle, then you can lose your deposit and be sued for any further losses. It happens!

– Steve

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May 25, 2021 - 10:57 am

Well, I normally do much, much better trying to buy at a fair price, rather than a cheap price.

A couple of times I have bought a bargain, usually because the property has been mis-marketed, its potential not understood, or just lucky. For instance, I once bought a property the next business day after it went to auction with no buyers making a bid. It was a mortgagee sale and the bank signed it over for a song.

I nearly bought a property with a letterbox drop, but after much back and forth, they took it to market.

Never bought via a sheriff sale.

– Steve

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

May 18, 2021 - 5:00 pm

G’day,

Perhaps rephrase what you are looking for and seek tomorrow’s value today. That is, get ahead of the value curve, rather than trying to find a needle in a haystack, that is… it’s unreasonable shopping at ALDI and expecting David Jones quality. Cheap is as cheap does.

That said, assets are ALWAYS being mispriced (over and under) and mismarketed. Look for the inefficiencies and then take advantage.

And remember… every property can make a profit, if you buy it at the right price. The art of investing is working out that price, and the validity of the assumptions that underpin your profit.

Bye,

– Steve

P.S. If you want to reach out to Richard, I believe he left his website address…

 

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May 18, 2021 - 4:52 pm

Oh golly. Now you are plumbing the murky depths of my memory.

I looked at this long, long ago in the hope of maybe picking up a cheap property, and here’s what I found:

a. Most of the things sold are personal effects (cars, household stuff, not real property)

b. I believe they must be auctioned, not sold privately

c. Auctions used to be advertised in the classified ad section of the paper (I told you it was long ago!)

d. The buzzards and opportunists come out at sheriff sales, so it is not necessarily bargain hunter’s paradise as prices can be bid up

e. It is BIG TIME buyer beware! I forget… does the sale extinguish first mortgage interests? Hmmmmm. I would want to check and check again with my lawyer.

– Steve

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