Howdy,

The things you describe are pretty normal for a residential property manager to charge.

From my experience:

Management: 6 to 10% of rent
Leasing: 1 month’s rent
Inspections: $100 to $200 per inspection

The cost, while important, is incidental to the service. A good manager – one who is diligent, attentive and responsive (proactive not reactive) will be a godsend.

Be careful not to make the common mistake of buying a premium property, but choosing a budget property manager. As I have said and written many times: money follows management. A good property manager will turn a bad property good, and a good property great. A bad manager will turn a great/good property to poor or worse.

All the best,

And further to my last email, to provide more clarity, imagine:

Sam has a $500,000 mortgage on his home.

Scenario 1 – Sam has a mortgage offset account that has $200,000 in it. Sam uses that $200,000 to finance the purchase of an investment property. Is the interest deductible?

No – the money in the offset account is savings, so using it for investment purposes is not borrowing. Because the initial loan is for private purposes, the interest will not be deductible.

Scenario 2 – Sam has a line of credit against the mortgage. While the facility is $500,000, he currently owes, $300,000. Sam uses $200,000 of that facility to buy an investment property. Is the interest deductible?

Yes – the line of credit is a debt facility, so the borrowing for investment purposes would be deductible. However, Sam will need to apportion the interest between private and investment purposes according to the use of the funds.

Sam has a $500,000 mortgage on his investment property.

Scenario 1 – Sam has a mortgage offset account that has $200,000 in it. Sam uses that $200,000 to finance the purchase of another investment property. Is the interest deductible?

Yes – although the money in the offset account is savings, and using it for investment purposes is not borrowing as such, because the initial loan is for investment purposes, the interest will be deductible.

Scenario 2 – Sam has a line of credit against the mortgage. While the facility is $500,000, he currently owes, $300,000. Sam uses $200,000 of that facility to finance the purchase of an investment property. Is the interest deductible?

Yes – the line of credit is a debt facility, so the borrowing for investment purposes would be deductible. Sam would be wise though to keep track of what portion of the loan and interest relates to what property.

Scenario 3 – Sam has a line of credit against the mortgage. While the facility is $500,000, he currently owes, $300,000. Sam uses $50,000 of that facility to finance the purchase of a private car. Is the interest deductible?

No– the interest on the portion used for private purposes (i.e. interest on $50k) would not be deductive. However, the remainder of the interest (i.e. interest on $300k) would be as the loan was for investment purposes.

• This reply was modified 4 months ago by  Steve McKnight.

Hi there,

You’re in a solid starting position but before jumping to a strategy, the key is to define your investment objective. What outcome are you aiming for: more cash flow, early retirement, long-term wealth building?

As I teach, “the clarity of your outcome determines the clarity of your input.” Right now, you’re mixing lifestyle and investment goals, which can muddy your thinking. Your apartment is a lifestyle asset—you’re living in it—but you’re trying to treat it like an investment. The key is to separate emotion from economics.

Option 1—selling and leasing back—may give you capital and borrowing power, but you may find the capital you receive is compromised by the lease terms you require. That is, perhaps an owner-occupier would pay more than an investor?

Option 2—renting it out and living elsewhere—I worry about the impact on your borrowing ability, and if the cashflow is negative, the impact on your ability to scale. The goal is to reduce risk and increase serviceability which this seems to contradict.

Option 3—waiting—may feel safer, but opportunity cost can be real. Procrastination is not a great destination.

Your next step? Do the numbers. Start with your end goal, work backwards, and look for investments that are profitable from day one. Focus on income-producing assets—not just capital growth. Don’t invest to impress—invest to succeed.

If you can make it to Melbourne on the 16th August, I will be running a 1-day seminar which would be beneficial for you to attend. Details will be released soon.

Bye,

– Steve

I have a 1-day seminar spot locked in for Sat 16th August in Melbourne, which I plan to call the 2025 Property Summit. I haven’t worked out speakers and syntax yet, but I expect a spot on commercial property to be definite.

I will send out more information in due course.

– Steve

Thank you for your post.

The question here is does the shoe shape the foot, or does the foot shape the shoe?

I prefer the latter, so I would make a list of what operational requirements are needed, and then set a budget to see what you can source.

ChatGPT might be able to provide some guidance for a checklist. Here’s what my prompt returned:

***

Choosing the right warehouse for your storage and distribution business is crucial for optimizing logistics, reducing costs, and improving service levels. Here’s a detailed checklist to guide your decision-making process:

1. Location
Accessibility: Check proximity to major highways, ports, and rail lines.
Market Reach: Consider how well the location serves your target markets.
Labor Market: Ensure there is a suitable workforce available nearby.
Safety and Security: Evaluate the safety of the area, including crime rates.
2. Size and Space Requirements
Storage Needs: Assess the square footage needed based on inventory levels and SKU counts.
Scalability: Consider whether the space can accommodate future growth.
Layout Efficiency: Ensure the layout supports efficient inventory flow from receiving to shipping.
3. Infrastructure
Loading Docks: Ensure there are enough docks and that they are compatible with your vehicles.
Ceiling Height: Higher ceilings can accommodate more vertical storage.
Floor Capacity: Check if the floor can support heavy goods and equipment.
Utility Services: Assess the availability and capacity of electrical, water, and telecommunications services.
4. Technology Integration
Warehouse Management Systems (WMS): Determine if the warehouse can support advanced WMS or other inventory tracking systems.
Automation: Consider the potential for integrating automation and robotics.
Security Systems: Look for modern security features including cameras, alarms, and access controls.
5. Cost Considerations
Lease Terms: Understand the lease duration, costs, and any included amenities or services.
Operational Costs: Consider utility costs, maintenance expenses, and property taxes.
Insurance: Check what insurance is required and what it covers.
6. Legal and Compliance
Zoning Regulations: Ensure the warehouse is zoned for your intended use.
Building Codes and Compliance: Verify that the warehouse meets local building codes and safety standards.
Environmental Assessments: Consider any necessary environmental inspections or risk assessments.
7. Additional Features
Climate Control: Needed if you store perishable or sensitive goods.
Waste Management: Check the facilities for waste disposal and recycling.
Expansion Options: Look for options within the facility to expand or modify spaces.
8. Logistics Services
Third-Party Logistics (3PL) Providers: Evaluate the availability and cost of outsourcing logistics services.
Transportation Links: Check the availability of local transportation services for distribution.
9. Visit and Inspect
Site Visits: Always visit the site multiple times at different times of the day.
Consult Experts: Consider hiring a logistics consultant or a supply chain expert to evaluate potential sites.
10. Negotiation and Final Decision
Negotiate Terms: Work with a real estate expert to negotiate lease terms.
Decision Metrics: Create a scoring system based on your priorities to help make the final decision.
By following this checklist, you can systematically assess each potential warehouse and ensure that the selected site aligns with your business requirements and growth strategies.

Some general observations:

1/ Sometimes council officers talk about what they’d like, which is different to what the regulations specifically require;

2/ A chat with an independent town planner about issues, and how to overcome them, is usually money well spent on deals worthy of closer due diligence;

Bye,

– Steve

Hello Aaron,

I don’t see why not, provided it is on an arm’s length basis.

For instance, Z Company P/L can rent from X Unit Trust, notwithstanding they are separate but related entities.

That said, it would be wise for you to speak to your accountant / lawyer about this to ensure the terms are appropriate.

Good luck!

– Steve

Hi,

In the circumstance you describe the benefit of the tax shield from depreciation does seem marginal, especially if the extra income could justify higher borrowings.

Not everyone has a tax-free beneficiary to distribute to, and hence the depreciation tax shield is more beneficial.

Some time ago I wrote an article on the deception of depreciation. Have a read of it here:

https://www.propertyinvesting.com/depreciation/

Bye,

– Steve

Hello George7,

You have identified an issue in your due diligence, and you are right to want to try to manage and mitigate it.

However, it appears you cannot do as the vendor will not wait.

If it were me, I would go under contract with a general 45 or 60 day due diligence clause and seek to do my own investigations. Perhaps you want to point to some other need for the clause though, perhaps to get your finance sorted? Once under contract I would approach a town planner for assistance.

Assuming you cannot cover the risk, you have to assess your risk appetite to proceed (or not) with the known risk. Does the upside outweigh the downside by enough of a margin for the risk. You also want to be paid extra for the risk.

Bye,

– Steve

Hi,

This is an interesting question and I would have thought something would be legally possible, I just don’t know how. As it is a legal matter, it is best to seek legal advice. You may also like to look into reverse mortgages (do your due diligence) as a way of unlocking equity.

I imagine there will be taxation consequences of co-owning, and stamp duty issues. Again, best to talk with a lawyer.

Bye,

– Steve