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  • Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    I think the biggest distinction with the strategies is that you can qualify for the FHOG with a wrap but not a lease-option.

    I regard both strategies as very useful tools that have slightly different application depending on the exit strategy of the investor and the needs of the client.

    For example, for clients that do not qualify for the FHOG – a possible win-win outcome may be to lease-option a property to them. Provided they can save the deposit and they show a reliable payment history – you might like to wrap them the property when the option arises (if they can’t get finance elsewhere).

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Felicity,

    What did your ad say?

    Replicate it here using headlines, bold etc. and I’ll read it and provide some feedback if possible.

    Bye

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    This may not be the advice you are after at this point, but I feel compelled to say that I wouldn’t[/b[ be investing in property (or anything else) until you first addressed the issue of why you are broke in the first place.

    No amount of money will be able to solve a money problem if you alwys spend 101%+ of what you earn.

    Investing has much to do with discipline, which is the theme of my web site at http://www.wealthtipsonline.com.au note the Inner Circle is no longer available to new members.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Andrew,

    As I pointed out in the Wrap Library, I think that the best way to manage the risk with your client is to complete a very thorough qualification of their ability to repay.

    Follow the advice I outline in the ‘Vendor Finance All Wrapped Up Module’ and also on the PATTERN Templates (Tenant Application).

    You can help yourself in overcoming the fear by listing out what it is that you think you are afraid of as a reply to this post and I’ll help you to identify the worst case scenario.

    That’s what I did at the beginning to overcome the fear I had with investing.

    Andrew – I know you have worked hard to get to this point. Well done on your perseverance and remember that I’m here to help as a mentor when you need it.

    Keep going and working through the issues.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Peter,

    In your case it may be best to team up with someone looking to make a quick dollar and say to them that if they source a deal and you buy it then you’ll offer $$$$$.

    This is known as ‘bird-dogging’.

    Feel free to make this kind of offer here on the forum – provided you spell out the exact nature of your offer and your specifications for the property you are looking for.

    AD is right though… your only other option is to pound the streets, Internet etc. looking for deals as they don’t drop from the sky and land in your lap.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    OK,

    The tenant is not interested in buying the property under a wrap.

    Using the building report as leverage

    Earlier I mentioned that the vendor wanted a price with a ‘5’ at the front. This kind of comment is usually out of a preconceived opinion of what the property is worth and mostly based on the agent’s original guess as to what the house owuld sell for.

    But now we have new information that detracts from the perceived value since there is an issue with the roof. By paying for a building report and finding a few issues we have introduced an element of doubt and it may be that if the vendor is in any way motivated to sell, then a bit of worrying news may accelerate the urgency to sell and move on.

    More often than not I will use a building report as leverage to strike a better bargain and drive the price down, either directly or indirectly.

    For example, in this case with the roof it is expected that it will cost $2,000 to fix.

    Now I have gone back and said to the agent that I am happy to pay $50,000 BUT the roof must be fixed first AND I want a six month settlement AND the max. deposit I’ll contribute is $1,000.

    The extended settlement should give me enough time to find a lead (if I wrap it) and I can always bring it forward without penalty but it is harder to negotiate and extension.

    Accordingly, my extended offer is:

    Purchase Price: $50,000 (really $48k after roof fixed)
    Deposit: $1,000
    Settlement: 180 days

    What do you think?

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    A lot of research for the data that you require certainly can be completed over the Internet.

    If you are in Vic. / NSW, then I encourage you to read the articles posted on 19 Apr. 2002 as these contain a lot of great info. These reports come out 1/4ly.

    Most of the information that you require is available through the ABS too. You’ll need to pay for it online… but it is free at your local library.

    Finally, local councils often have business development / enticement programs that outline a lot of the demographic and infrastructure in the region. This may or may not be avaialble online, but a call to the council would be worth it to find out what is available.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Stuart,

    Some time ago I researched the foreclosure market here in Australia to see if I could apply the information contained in some of John Burley’s product, such as his ‘Fortunes In Foreclosures’ and also his book.

    What I found is that privacy laws here in Oz are a lot more strict than in the US, which makes some of the ideas somewhat unworkable.

    However the general thrust of buying cheap properties due to default is not an uncommon situation here too. Such sales are generally know as ‘distressed sales’ (use this term when dealing with valuers).

    Mortgage laws and fiduciary duties generally restrict a bank or financier from selling out under clients and in all cases I have come across the financier will go to auction (to go to the general market) rather than sell privately (and risk perceived conflicts of interest and alternative agendas – at least in the first instance).

    Australia does not have tax liens as such.

    The closest that I have come across is ‘sheriff sales’, where people who owe money and have court rulings against them have property seized and sold by the Sheriff to clear the debt.

    My research revealed that Sheriff sales are usually advertised in the general notices section of the paper and you can sometimes pick up a bargain (buyer beware though!).

    However, any real estate seemed to be sold with mortgages attached and the first thing that needed to be cleared was the existing mortgage.

    Bottom line… ‘Foreclosures’ do happen in Oz but lenders, while trying to cover their backsides, seem to go to auction rather than offer a private sale. The closest I came to picking up a cheap foreclosure was to buy it privately below reserve after no one showed up at the auction (this was sheer luck!).

    Outside a mortgagee-mortgagor relationship, there are Sheriff sales / auctions, where property seized under court orders is sold – sometimes at a big discount.

    But be wary of what debt is attached to the property and understand that it will need to be cleared before you gain clear title. This might mean you have to ‘cash out’ and at least refinance the property – I can’t see how you could assume the debt easily given credit laws in Australia.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi again,

    OK – following on from advice put forward in this post it seems that I should go ahead with the building report, which I have done.

    The report concludes that there is a problem with the roof in that some of the old sheet iron at a cost of about $2,000.

    Other than that there are some other minor repairs, but the property is in otherwise good condition.

    Following on the the advice above I’ve submitted the offer to the agent at $40,000, but he’s not at all pleased and has pretty much dismissed it out of hand. “It needs to have a 5 at the front”, he said.

    Also, other investors have appeared now and are showing interest. I feel that I need to act quick or miss out.

    Can the community offer suggestions on how to phrase the offer or what other creative strategies are available if I can’t get 80% finance at $50,000?

    This is an important if not critical part of the buying procedure and again I encourage your participation by posting your thoughts.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    Just be careful not to become confused between investing and lifestyle decisions.

    If your goal in financial independence is to own your own home, then owning rather than renting might be appropriate.

    In my case, Julie and I chose to rent because we wanted to accelerate our investing success and weren’t planning to live in the CBD in our dream home anyway.

    I think Robert Kiyosaki is now the expert when it comes to acknowledging a source for clarifying whether or not your home is an asset.

    However, if you want a home and don’t think of it as an asset, rather as a lifestyle decision that is well in your means to afford and you have a structured financial plan, then what’s wrong with that?

    Ultimately I believe you need to distinguish between investing and lifestyle decisions and hope to strike a happy medium somewhere in the middle.

    Becoming financially independent is about solving money problems and achieving this balance – well, I think so anyway.

    Happy investing,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Watto,

    The software will automatically pick up what posts you have read and alert you to new ones by placing a blue folder as opposed to a buff or yellow coloured one when there are no new posts.

    You can also see who made the last post and when.

    The idea is that each post is logged or filed in sequential order (oldest to newest) so that people can see how the discussion transpires.

    I expect the key to success is for posters to start new topics, rather that change topics within the one forum discussion.

    In any event, your feedback is warmly noted and I imagine that as the forum gets more traffic many more issues will arise that have not yet been thought of.

    I’ll batch all the requests for changes and then see if we can do monthly upgrades to the software.

    Thanks for posting.

    Regards

    Steve McKnight

    P.S. A way around the problem you have identified here is to wait for the entire post to load, click the post and then go CONTROL & END. That will take you to the last post rather than having to scroll down.

    Edited by – [email protected] on 25/05/2002 11:57:16 PM

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi again,

    Thanks for your fantastic feedback – especially posters who have written about things that they do not like and would like to see changed.

    I share some of your frustrations – particularly the part about the cursor in the ‘Free Newsletter’ box and also posting when not logged in.

    I will pass these on to Eugene asap as areas to fix up.

    I expect this forum software to contain a few bugs too that will need to be ironed out… is a game of wait and see.

    As for receiving updates via e-mail. I think this is available but again I’ll need to check with Eugene (the webmaster of this site).

    Re: comments about the LHS navigation buttons. Any ideas about what colours or combinations would look better?

    Please keep posting your ideas and comments.

    Thanks,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Tara,

    I agree with Terry’s point.

    Why sell? You can always just redraw and use those proceeds to invest.

    Tax deduction is still available and you are not uprooted from your home.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Corey,

    Lots of questions here – what I plan to do is address them in the next newsletter that I write.

    However, for the time being I can say that there is a pre-GST lease in place until 2004.

    I have purchased the property in a trust / company structure, which is registered for GST.

    Loan is with the NAB based on either 70% or 80%LVR (still negotiating).

    I have gone into commercial real estate as it seems like the next logical progression for David and I in our investing pursuits. Yields are good and the competition for residential properties is making it harder and harder to find great deals.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    Re: Qld property

    I had to cut a chq for $18,000 for stamp duty on 21 units I purchased in Qld for $530,000 before settlement – which is not until October!

    This was news to me as in Vic. stamp duty is payable on settlement.

    Just another reminder about the different laws in different States and the everlasting education as a property investor.

    Re: calcs. In the ‘Links’ area there are links to several useful online property calculators. People who buy the Wrap Library also get access to several calculators that I have designed and published that are specific to wrapping.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi,

    I understand the nature of this uncertainty and cannot provide any hard and fast rules, except to say:

    1. There is no tax law that specifically deals with wraps, and as such the information available is subject to opinion based on other the nearest legislation and case law.

    2. In tax you need to establish a reasonably arguable position.

    As far as wraps are concerned, the key is to appreciate the uncertainty and create a reasonably arguable position.

    To this end I think it is important to:

    A. Bring to account the realised profit each year split, as Euge points out, between interest and principal.

    B. Apply your method of reasoning on a consistent basis. Swapping to get the best tax advantage won’t appear too good if you are audited.

    I know wrappers in Qld who have been audited by the ATO and passed with flying colours based on points A & B above.

    As an accountant, I regularly disagree with other people’s opinions. This is why it is important for investors to establish and consider the difference between fact and opinion.

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
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    Simone,

    It’s true… it is difficult to comment on what you are doing wrong when you don’t provide an outline of what you are doing.

    However, if it is of any comfort to you, I look for properties in regional rather than CBD areas.

    The question is not ‘do these properties exist’, rather it is ‘where do they exist’.

    Try searching the Internet at places like http://www.realestate.com.au.

    Build the network.

    Regards,

    Steve McKnight

    Edited by – [email protected] on 24/05/2002 9:17:47 PM

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
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    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Good morning,

    WOW! This forum is only a day old and already there is plenty of great information. Thanks to everyone who is already contributing.

    As far as the role play for this first post goes, here are the answers to some of the questions that have been asked so far:

    Light Industrial?

    When I inspected the property in the early afternoon the noise was not particularly noticeable outdoors and certainly quiet indoors. It’s a great tip though to inspect a property near an industrial zone in the middle of a working day though and not on a weekend [:)]

    Finance

    Bank has approved an open chequebook based on 80% finance. Wraps are OK in this postcode.

    Vendor

    Vendor is moderatley motivated to sell and has priced it at $50,000 to get out quickly if possible. Property has only been on the market a few weeks and inquries are starting to pick up. No offers have yet been made.

    Exit Strategy

    My exit strategy for this property is either:

    1. Wrap

    Sell it for $70k with a $7k deposit at +2% to my interest rate. Rough figures have the nett cashflow at $55 per week and a cash on cash return of around 47%.

    2. Rent It

    Rent it at $120 per week would see me derive positive cashflow – but it would not be as profitable as if I wrapped it.

    3. Worst Case Scenario

    I look that so long as I can cover my mortgage at $65 per week, plus ownership costs of about $35 a week, then I am covered. This means that I could offer the property for rent at a discount of 16% to it’s current amount and still break even.

    Tenants

    Tenants are friends of the vendor and are happy to sign a six month lease at $120 per week. There is no lease in place at the moment.

    Condition

    I would call the property ‘tired’ but still in reasonable condition. There are some maintenance issues that I observed during my inspection, but nothing too big as to cause a big problem.

    I have been quoted $350 for a building inspection… should I spend the money?

    Economy

    Unemployment is about 8%, but in reality anyone really looking for a job can find it.

    Local infrastructure is good and forecast capital gains in the current market is about 3% per annum.

    Similar Properties

    Other 4 bedroom properties are prices at $60,000+ and rent for $140+ per week. This places this property in the cheap range, partly due to the proximity to the industrial area.

    A 3 Br property two doors up and across the road just sold for $55,000.

    Next move?

    The bottom line is that the property is priced at $50,000 because of its proximity to the light industrial area and also because the owner would like to sell quickly.

    No offers have been made yet… what do you think my next move should be?

    In reality I have purchased this property already, but as a case study I’m interested to see what the community thinks… It’s an excellent learning tool

    Keep posting!

    Regards,

    Steve McKnight

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

    Success comes from doing things differently

    Profile photo of Steve McKnightSteve McKnight
    Keymaster
    @stevemcknight
    Join Date: 2001
    Post Count: 1,763

    Hi Mark,

    Congrats. You are the first one to the forum.

    This will be a good exercise for you since you haven’t purchased property before and I think you are on the right track.

    To answer your questions…

    Asking Price

    $50,000

    It is currently tenanted on a month to month basis at $120 per week. Tenants have good references, but there is no formal lease in place as they are friends of the vendor.

    Size

    I don’t have a title, but having been through the property I can say that there isn’t much street frontage, but the property runs very deep. There are two bedrooms at the front, two down the passage, and then a living room that runs into the kitchen with a bathroom / laundry out the back. The place has off street parking and a small to medium back yard.

    What’s nearby?

    House is on the fringe of a light industrial area. Some car workshops around, but residential area runs down the street away from the light industrial area.

    Generally a good location that would appeal to tenants aged 20 – 40, not a great family home though. More of a communal living type of place.

    Any other questions?

    Bye

    Steve McKnight

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

    Success comes from doing things differently

Viewing 19 posts - 1,681 through 1,699 (of 1,699 total)