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Old time historical returns used to be about 10% of the property value as payment for rent … per year.
As you might guess in the modern era .. with much more flexible monetary practises for borrowing … there has been a new standard of acceptable returns allocated to the property market.
The return/value equation seems to make 5% the new acceptable return. As far as accounting goes its easy. At 5% return on a 360,000 dollar property .. you would be expecting a rental of $360 per week (roughly). And that seems to be the accepted standard that is used at the moment.
This of course varies with risk levels and area. As you move into higher risk areas .. the level of return goes up .. but the chances of either longer term capital growth or rental increases .. is significantly less.
So as you move into inner city areas .. with a good chance of achieving a rental .. the rental rate drops .. and continues to drop the further in you are. In some suburbs they accept as low as 3.2% return just for owning a perceived solid asset.
Whereas in Mildura and Horsham at the moment its possible to get 8% or higher. And thats balanced with the current risk levels.
From someone who knows Noble Park backwards .. North of Heatherton Rd is not where you want to be for either investment or the long term.
Know all the Sudanese issues they have in Noble Park? They exist mostly in the areas of Noble Park North and the areas just off Kelvinside Rd.
Your spot in Jeffers St is a 'quiet' area of Noble Park. Its got the hospital close by .. and bus transport for most directions. But it remains miles from the station .. miles from shopping (Douglas St in Noble Park is a reasonable shopping strip with a Coles supermarket on it.)
3 Train stations exist in Noble Park .. Sandown .. Noble Park and Yarraman station. If looking for longer term value and purchasing in Noble Park .. aim for the areas south of Douglas St with proximity to any one of the stations. There are always a couple of townhouses being built in that vicinity .. its very popular and they sell quickly.
All I can say is that I've now become a property millionaire twice now .. once when I was also an entrepreneur in the early 90s when everyone else was pouting in high inflation, and lost in the dotcom boom and bust.
The prevaling wisdom after my first dive into debt and loss was that I was a licentious overspender and I was too much of a risk taker. Some elements of my family even rejected me as a 'gambler'.
I picked my burden up in 2002 gave myself no excuses .. and went back to doing what works.
I actually purchased the second of Steve's books .. first because my local library had all the other titles .. and the other reason is it had a couple of insights that I sort of knew .. but didnt quite know how to implement at the time. Even with a solid understanding of how property works .. respect other people's insights .. you just may learn something.
I stopped listening to the negative crowd a long long time ago. I surround myself with postive people .. run around creating good karma .. and dont let anyone tell me what i cant do. Because I do it .. i challenge myself when doing it, and I make sure that i continue to brighten my knowledge base to make sure all my decisions are either based on my experience or .. someone else's insights.
My mother had a stupid saying .. that the lightbulb had to WANT to be turned on .. before you saw its brightness. I hated it as a kid but as an adult it now makes sense. You cant MAKE people rich .. you cant make them challenge themselves or succeed .. unless they want to. And no book will make a difference .. no lecture .. no pamphlet … and no amount of money goals unless you have the will and effort to implement them.
And yet as soon as you do .. you will fly.
kong71286 wrote:(The rest of the quote appears above without being quoted directly)
However, over the past decades the landscape and rules of money has changed considerably.
Our system today is no longer based on sound money, but is based on fiat currencies and debt.
Fiat currencies that no longer place any restraints on government spending.
Fiat currencies designed to lose purchasing power over the longer term.
Simply following the advice of saving may not yield the best outcome.
In an inflationary environment one's focus should be towards making more money and getting into good debt.
Ok .. I'm going to get angry on this one. Briefly .. and reasonably.
Listen to yourself spout the garbage straight out of the press. I hear it .. i listen to it .. and it bloody annoys me.
Name a period in history where currency wasnt FIAT.
When Australians arrived in this country .. they had the holy dollar minted by punching a hole in one, creating two coins with the original being worth 15 shillings and the central punched out 'dump' being worth a shilling. Creating a significant market markup on the original mexican and spanish dollars, it was australias first currency. Yes .. australias currency was created on a markup on old spanish silver dollars. A huge FIAT markup that was incredibly profitable for the colony.
Oh .. then you must have been talking about the time when it was gold and silver? Sure it was, but at the time your average sovereign was worth anything up to a couple of weeks wages. So it was not the regularly traded commodity that a copper penny or silver shilling was. And even at this period .. the main accreditation for the penny or shilling was a heavy markup on the initial metal price. Effectively making the coin FIAT for all its intrinsic metal value.
Then you must be worrying about the changeover from a backup of gold sovereign guarantee that was dropped from the money in 1932. That was due to the ongoing fluctuations in the 'stable' metal of gold due to demands placed on it. The government could not be producing sovereigns that were at any rate of markup over the gold value .. and effectively dropped the gold standard. This just meant that they were no longer offering a direct monetary to marked-up metals linkage.
Now that I've finished addressing recent history .. the Spaniards were complaining that they werent getting enough silver in their thinned down Reals back in the 16th century. The silver price was so great in the late 18th century with all the revolutions and wars that people were shredding the edges off the coins. This was the reason that 'milling' was introduced on coins (the rim edges of coins are milled explicitly for that purpose).
The weight of the coins of henry VII were so thin that people complained that the 'sovereign' was light these days, meaning the king.
I have more examples going all the way back to roman times. But please tell me .. you are so much wiser. At what particular time in history was the currency not FIAT?
The other thing to mention is that many a king and many a kings goverment were brought to the edge simply due to overspending and lack of effective mechanisms to stop this. It never had anything to do with the state of metals in the country or the intentions of its people. Traditionally .. a king and his bureaucracy were spendthrifts with the people's money.
So as you can see from the above .. FIAT money would have never made a difference at any time in history. It remains what the people assessed as the value allocated to the currency that gave the ongoing transactions any value whatsoever.
And historically .. no matter what the period .. goverments tend to overspend. That means that no matter how hard you save .. at least once or twice in your life .. you are destined to get absolutely SCREWED over by a period of rapid inflation which totally nullifies the value of any savings held.
In a modern western democracy over the last 50 years thats now happened at least 3 times. But in small South American countries and some parts of Asia and Europe it happened quite often in parts of the 20th century.
So historically .. holding onto a bank account and relying on an overspending government is a longer term russian roulette with your hard earned money. Even with investing it in a bank .. if the bank feels it can offer you 5% on your money (and you arent including bank and government taxes on that .. the 5% is GROSS), dont you think they must be making more on that money to offer you that 5% in the first place?
A savings account is a body of safety to stop you hoarding money under the mattress and give you easier access. It is not a point for creating ongoing wealth, but it does remain leverage for being able to create your own wealth.
I will never work on the basis that I save and have to compromise anything.
I learnt my habits from my father .. set an amount to take out .. from the teller/autobank .. and until that becomes too small to work with .. make that the SET amount you can withdraw at any time .. per week.
At the moment .. thats for him .. 380 dollars. Thats six fifties and four twenties. Runs out from that .. he goes back for more. But usually unless he's hosting a party .. that covers his needs and expenses for most things for the week without redrawing.
Anything left over from the previous spend .. gets carried across and left in the wallet. So it either builds up in your wallet .. or it builds up in the bank account. Either way you save money.
The amount has been adjusted over time .. but it remains usually a steady amount that you can do things with .. without overspending .. or restricting your funds for the period.
My amount remains 520 dollars per week .. but then i'm 37 years younger and I have a couple of depenancies that he doesnt. So for me that amount is fine.
This amount is spending money and not bill paying or credit loans or bank loans. Its a figure designated for personal use.
Not the first person who gets one person to apply for the lease .. and then finds .. someone else occupying the property.
If it happens .. and it happens more often than I would like to see, then you have NO contractual obligations to both the existing tenancy (breach of agreement) or the existing non authorised tenancy. Subletting often happens when the tenant who WANTS the place has a bad history or record so he gets a friend to let the place for him.
They pay their bills regularly and act like good tenants? Good. Opt for a negotiation of a representative tenancy agreement and a fixed lease period of 6mths plus. Your paying the loan off to the bank depends on them paying up .. get that on paper.
A new agreement and a new lease. It makes them the responsible tenancy they should be.
Despite the ease of dumping a tenant, unless its an absolute BOOM market .. you risk the wait of time in between a new tenant. Who pays for that?
You dont have to deal with poor non contractual tenancies. If they are causing trouble and they are not registered on the lease .. issue a notice to vacate as soon as possible. Bad unregistered tenants can exceed your expectations as to what troubles they can get up to.
If you know you will be possibly left out of pocket by issuing a vacancy notice .. then just prepare for it in advance and issue it when you are ready and able to. Make sure you have enough spare to cater for a 2-3 month vacancy. It means you wont be hard pressed when it comes to servicing the loan.
I can quote you Engelo Rumora circa early 2011
He was in the phase where he realised that he needed to do something smart to get ahead .. and he did it.
If you think the getting and maintaining and creation of property wealth is all in the past .. he did most of his heavy stuff between the start of 2011 and now.
Thats recent .. and validates that the actual market doesnt matter .. there are always deals to be had .. and money to be made.
Just keep looking .. and know what your markets are.
With $40 000 in savings, Engelo bought his first property in February 2011 in the regional town of Mildura, Victoria. He has gone on to purchase a further 7 properties in Victoria, NSW and the US and has built a portfolio which is now worth over $1 000 000.
Go to his website.
I love those Warner Brother cartoons where the father bear who is wrong turns into a first class heel as he gets embarassed.
Unfortunately in the real world .. when your investing turns you into a first class heel .. its because you didnt do your homework as to the risks involved and the trends that allow your property to either retain or increase its value.
Mining is a trend investment. Not only is it temporary .. its the type of investment that once the mine goes dead or broke you have a DUD. No-one will rent it .. no one will buy your property and the locals cant afford the rents.
Ask around. Dont take my opinion .. its a singular opinion. I do know people who have made reasonable fortunes from the mining industry. However that was then .. a lot of them actually got out in the past year.
Ask other people .. and do your homework. Its high return .. but extremely high risk.
Always arrange inspections. Until you are an absolute gun investor who knows the suburb backwards and what he's getting into, go in and check out the property and its surrounds. Sometimes the property might be fine .. its the position or the company it keeps that may be the problem.
Town research is fine .. but it wont tell you about termite issues in the area .. or bad housing commission within 100 feet of the property. The one that agents are really good at blotting out in photos is the overhead powerlines. Magically they disappear in sales photos.
Legwork .. even if its just a single day will make the difference in making a valued decision.
Buying a new home over an old home is like driving a brand new car off the car lot.
You drive the new car you'll get all the latest fancy gadgets .. fresh seats and that new car smell. And the price drops 20% as soon as you leave the car lot.
Buying a house is similar .. you may find that with older houses you might get a bit more room or older style features which might be attractive to you. You just may not get that new house smell.
The advantage with an older house is in context it should be cheaper and as your salary increases (which we hope it does) you can upgrade and adjust the home to meet your new requirements and budget.
I dont hang with fools for sentiment.
I've had friends of the family who I've chucked off jobs because they dont know how to do the jobs.
Since the only real relationship you have with the agent is the fact you used him to purchase the property .. you are pushing uphill to get a tenancy with someone who may not be doing the best for your property in the first place.
Its your property … if you dont get a tenant .. the agent doesnt care .. he's got a folio of anything up to 100+ properties he will be managing.
Shop around … dont go for one decision .. make it an interview like you would for a job. Because it IS a job .. its a job that you need done professionallly and done right .. and you need to have good people on your team to supplement your success.
Good fixit men (carpenters, tilers, plumbers) and good managing agencies (body corp and property management).
On the same note .. do NOT abandon the property manager until you have a better one. In smaller towns .. there is the good .. the bad .. and the ugly. And there may just be the ugly and the bad. Be careful. What looks like poor service can be outdone by worse.
And always part on good terms. If the other agent doesnt work out .. you dont want a property manager that wont take you back because of a temper tantrum.
All I can say is I have now stepped in a couple of times in other people's situations to assist them.
And like you, they made a choice of financial control and risk that led them to the inevitable conclusion.
In 2006 I had a friend who was nearing retirement and inherited from her mother. I suggested a block of units in a reasonable area of 4 units .. total cost at the time .. 440k (you can only laugh now at the old prices) estimated income about 23k gross. So all in all .. a very reasonable deal. She refused .. stating that it was too much of a risk.
The places are now worth about 260k a unit which pushes the price of the block over a million. And the income is more like 44k gross. And my friend? She's now retired .. and living off the dwindling remainder of the inheritance.
Thats a poor outcome off what would have left her a nice nest egg.
The other was my cousin. She wasnt given much of a solution .. but having previously talked about it I will just state the basics. She was laid out with an inheritance of about 100k in Jan 2010. Since her previous ventures have all involved spending money i camped on her back until she capitulated and allowed me to train her up in how to recognise a good investment deal. NOTE: For the same reason that Steve wouldnt just offload possibles to a client .. i decided she needed the SKILLS to pick a good property rather than just a selection from my knowledge. I trained her up and allowed her to quiz me on possible selections. We eventually arrived at several possibles. Then we enquired about one property and the owner needed to sell quick. Reducing the price for TWO units to 186k for the pair (a 50k reduction). Having got the news I told her to rush up and check them out (do all whats necessary to check its a good buy, even on a rushed sale). She borrowed from her family for the remainder (not a bank) and purchased two places .. returning about 15k gross for the pair. Not much i know .. but this was at 100% equity, full ownership. Once she was familiar with the places she could go back to the bank for more. And she did.
The outcome as of 2012? She now has 4 units .. a return of about 35k, a loan from the bank (she couldnt borrow before) and overall assets of just under 500k. Thats in just over 13 months.
And most importantly for her .. a belief in her own future success.
The point is … in the long run .. regardless of what a pessimist will tell you .. you will need to be steering the ship of your own financial future. This financial freedom is YOUR dream, and your actions will bear heavily on what your future will look like. Dont be afraid of taking the risk, be afraid of never having lived in the first place. Balance your risk level with your knowledge base .. and you should do just fine.
It all depends on where you start and what you end up with.
I'm prepared to take on LMI if i know that its not going to impact on my end price result that I want to achieve. In fact .. I started in Sale buying units at 65-70k because they were too cheap not to take advantage of. (same units now resell at 105-120k). The point is .. where they were .. and what they were .. they were too cheap not to be good renters. I paid my 5% per property (pre GFC) and borrowed the rest including payment for LMI. In other words i bought 7 units at about 5000 a unit (3500 for 5% deposit Stamp Duty and Transfer 1800) and made a stack on the Capital gains (about 40k a unit)
My initial assessment with purchasing in country areas .. was not to expect Capital Gains at all, just build up a bank and an asset you can borrow against (meaning extra contributions either from me or from the excess above the loan liability).
The one thing people tend to forget about low value property is .. its a lot easier to achieve a significant gain because the initial amount is a lot smaller. In dollar terms it might not be much but in percentile terms it can be huge !
Adjust your mindset to allow for what can be done .. not for what you are going to be TOLD should be able to be done. Once you know what can be genuinely achieved with doing the right things in property .. you can achieve amazing results in a very short space of time.
Grab a couple of property magazines. Grab Steve's books (free plug there). Inspire yourself and learn what works.
How does it ripen?
I've put together deals with properties that were 1950s and were spick and looked like they had just been built. And I've dealt with early 2000s properties that might as well have been condemned.
Its a matter of care and construction .. tenancy and long term love.
There is a property in Toorak that I went through with a friend and he was complaining that it was 1920s and all the piping in the showers and baths needed replacement. I pointed out to him that my observation was that the piping wasnt copper .. it was stainless steel. Yes .. in mid 20s Toorak .. when they spent a penny .. they got what they paid for. Whatever you replaced it with in the modern era .. would be inferior. I have the same deal with cast iron bathtubs. All you are going to replace it with is fibreglass or epoxy, so why not just re-enamel a bathtub that was designed to last?
Any property has the chances for ripening and having more problems.
There are a number of the recent concrete monstrosities that are already leaking due to poor construction in the beginning. Inadequate protection in the carparks often means that it floods easily, and water seepage .. results in cracking .. sometimes even structural cracking.
Well built and lasting is always worth purchasing. If you have any doubts about anything you purchase .. get an assessment by a professional pre-purchase or as a condition of purchase. It may cost you a little but its worth it for that additional piece of mind.
Half of the deal to make a loan work is in the presentation.
A broker has a vested interest in providing a competent presentation to get the deal through .. he gets commission for providing the deal.
Therefore its one step in your favour. A person who will provide a presentation to the bank or financial institution as an in-between ON YOUR BEHALF to provide the best chance of getting your loan through.
Otherwise its reliant on your personal presentation to the bank. And the broker .. he does this everyday .. for a living.
Who do you think is more likely to know how to get your loan through?
I can ONLY talk from personal experience .. and any people i have previously spoken to about their dealings.
However .. when you come into a deal .. bring more than enough security .. more than enough income .. start the deal because they are all affirmative .. and they come back with extinguishing my 190k of credit cards? Sorry .. my cards werent part of the deal .. they werent offered as part of the deal .. they ARE used by me on a regular basis and repaid, but they werent even considered because I had a borrowing position where i was only chasing less than 40% of the total value of the assets.
Yes .. i'm bringing my own situation into this. Simply because I have now done roughly the same thing with CBA about five times. And there has never been a person in ANY of the branches i've been to (i have dealt with eight separate branches) who has actually offered me a parity with what i actually asked for. In trying to organise me a deal .. they have offered to cancel my cards several times, tried to explain to me that i wasnt bringing enough income to the party (thats what effective tax planning is all about guys!) and then offered me a deal that really just reflected they were up for selling a package deal REGARDLESS of what I wanted.
If you feel that i'm making it a personal saga .. its not. Its an opportunity offered several times to a major bank .. and taken up with another one. The same deal .. the same statistics .. the same rents .. without a loss of my lines of credit or a shakedown of my total assets to produce a result. I'm sorry if that sounds personal or biased .. but thats what I want in the end. A bank that listens to me and produces a package to suit what my needs are.
Thats why my summary of CBA remains beyond my personal viewpoint and a warning to people as to why I continue to find difficulty with them as a bank.
I would appreciate if you have a series of better dealings you can relate to me. But as such .. that remains my story.
The banks tend to switch and change in regards to their flexiblity with what they can do.
In my early years of investing i found the NAB very open .. very flexible and very willing to commit as long as I matched most of the criteria required. I have had dealings with them in the last 4 years and its really not the same bank.
CBA was always conservative .. no matter which branch i went to. In fact .. the most frustrating criteria with CBA was they would be all yes-men (remember how much i HATE yes-men) until they had me in their office .. writing up an application. Then they would start piling on extra constraints (cancel some CCards?) and offering me packages that were nothing like what i had actually wanted.
ANZ the last few years has been pushing for the business. However .. unlike the bigger two (CBA and NAB) ANZ doesnt have as much clout on the wholesale markets. A little worse on the rate .. but a little more flexible deal.
Westpac over the years? Clowns in a banksuit. Wouldnt know business if it walked in the door (several times) and asked for the business.
I agree with Derek.
First thing any bank or financial institution will do is check your credit history. And the number of times you've applied for a loan and been rejected will show up on your credit record.
Commbank is incredibly conservative on their lending practises inhouse. However .. going through brokers you may find that commbank issued funds indirectly are actually easier to get.
Brokers are getting the opportunities to stick together much more difficult deals now as the loan competition is heating up. They are at a point where the 'good' brokers distinguish themselves from the pack.
But .. every application for credit is taken into consideration by banks and financial institutions when considering your application. So do it once or twice .. and do your application properly.
I keep answering with roughly the same answer.
You have inflationary pressure that is building up like a shaken champagne bottle.
Now you have visible outlets for that.
Wheat and Corn both up heaps (they are blaming the poor weather but thats not enough)
As a result .. the local farmers are raising the prices of eggs by 50 cents. (anything that is made with eggs goes up)Petrol now at over 1.40 (what .. you dont think that has an ongoing effect?)
Supermarket prices moving up. Not small amounts either. Try getting a soft drink 1 lt under a buck now. Its getting a lot harder.The question is more .. how does inflationary pressure without wage growth and ease of access to bank funds allow for movement in housing and land prices? Because banks are tighter than ever on making deals and wage growth is stagnant.
So now we have an interesting ongoing mix.
Time will tell.
I've dealt with mould so often i have a series of correctional solutions for it.
If you are living in a subtropical climate FORGET ABOUT WIPING DOWN FURNITURE as a preventative .. its only sterilizing the item and once the vinegar dries off … they will be back in no time.
You need to look at constructive measures for keeping the internals dry. First .. if you have any flaking paint or damp ceilings .. strip them right back and use a high gloss anti mould paint on them. Then choose a color of your choice for the top coating. Mould has a habit of being painted over and being left behind old layers of paint. Its a recipe for disaster and can cause real health issues.
Mould has a self protection measure where it actually wets itself when it comes under attack. So trying to strip it with vinegar .. it just goes into a protective state and then spores into the air. Guess what you are breathing in?
Since you seem to be fighting a larger area moisture issue you are asking your dehumidifier to do overtime to get a half baked result. There is too much moisture and .. your humidifier is just doing overtime.
Look at ways that manufacturers take the moisture out of the air. Go out there and buy activated charcoal for your wardrobe (place in a prominent position not at the base of the wardrobe else its pointless). Make sure you have effective seals on your entry and exits within the house. Check the roofspace for what you have as insulation. And finally .. if you are living in a 20+ yr old house in that area .. you may need to check between the wallspaces. When mould forms there its usually undetectable .. and that protection effect of mould producing its own moisture .. it wets and rewets the air around it, keeping areas continually mould attractive.
Mould as a problem can go from just being unpleasant to severe and finally .. cause breathing issues that may be ongoing to fatal. There are tools you can use out there that well and truly kill the mould and produce long term preventative measures.
Do as much as possible on that stuff .. as quickly as possible.
I have purchased in subtropical areas before .. mine was a little further up in Cairns. And you just need to recognise that you do whats possible. With mine .. it had an issue with both termites and mould .. neither of which was directly obvious. But the correct measures were taken and it was restored to being a liveable house.
Just remember that not only are you fighting the mould .. you are fighting the RESPAWNING of the mould. And to do that properly you will have to get every possible wet area to dry out normally. Go to your local hardware store .. he'll probably have several bags of tricks. And most importantly .. he may just know what works in his local area.
