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Kevreno … i set up an account for each single investment, though it may be several apartments within the investment. That allows me to keep precise accounting records for each investment, based purely on bank statements. It also allows me to enumerate who has paid and who hasnt paid based on the entry in the account.
For tax purposes it also provides a single set of entries that need to be chased down when looking for rents receipts and expenses.
For record keeping purposes i can go back over the statements and work out what was spent on what before i approach my accountant.
Opee .. the answer is a weight to judgement.
Now, people will say that a house is the obvious answer .. because it may have the additional land component that could lead to additional subdivision and further growth.
Thats all true .. but the overall picture is a house remains higher overall maintenance than a unit. It also comprises a higher additional purchase cost in most cases .. so it may take you longer to achieve an acceptable neutral or positive gearing on the investment.
What must be weighed up in the approach on the investment is the actual demand for a home or unit in the area, the ongoing costs for maintaining and upkeeping the investment .. and the chances of continual and uninterrupted use.
For a reasonable example .. a student unit in Prahran sounds like a cheap option into entry in the market for a unit purchase. However, there are serious possibilities that Swinburne Prahran (the local university campus) may be vacating that site in the very near future. Will there be an ongoing demand in Prahran for student living? Sure the students can go elsewhere for study. But does it change the need for using student apartments in the area? Will you find your student apartment empty for longer periods of time?
It might sound obvious .. but in Dandenong thats exactly whats happening. The new and improved 2BR apartments are of course the preference of choice for the fussy renter. And thats meaning the existing 2BR unit stock is having to resort to better finishes .. lighting and facilities to attract the renter at a good dollar.
Your weight to judgement should entail measuring whether there will be ongoing demand within the next 5 years for your property. As an investor .. no-one can really see beyond 5 years with any degree of accuracy. But you should be able to see ongoing trends that will validate your purchase and its potential growth .. regardless of property type.
Shared ownership costs (body corporate expense), Council Rates, expected rental achievement, ongoing maintainence and accumulated billing totals should be the factors you weigh up when approaching the property. The lower cost you spend on keeping the property sound and lettable .. the easier the property is to look after for the long term.
Developers will tend to pick the effective points in the market relying on ongoing trends.
An example .. Doncaster has proved popular with the creation of multi-unit sites … so the trend there is being extended to surrounding suburbs such as Templestowe and Mitcham. Developers are now taking that risk.
However .. you must remember that Manningham as such has four major shopping centres and some of the best retailing in Melbourne. Really .. thats what has solidified the attraction of Doncaster .. the sheer convenience of good shopping and commercial facilities.
Mitcham now looms large as a good shopping area (not GREAT) with easy transportation and .. being close to all Doncaster's facilities. And they are building OTP there. Now .. as i said .. for the previously stated reasons I loathe OTP. However .. the trendline to building major apartment blocks will bring a life not even calculated yet .. into the Mitcham area as the apartments bring increased street traffic to what was a 'quiet' area. How that all plans out .. is the only real gamble you take.
Please note .. i'm not making any recommendations .. just observations based on previous longer term trends. In that same breath .. Ringwood .. just down the road .. is taking a battering .. largely due to the loss of the car yards up and down the highway and the traffic diversion to Eastlink. Can it revive? Is that a gamble worth taking?
My observation .. and your investigation.
I avoid OTPs with a passion.
If I'm going to make a purchase .. I'll purchase what i see and feel and touch. And thats worth the stamp duty saving to me.
OTPs sell on hype. I dont buy hype in the stockmarket .. and I am not going to buy hype in the property market.
However .. to correct myself on the above .. I will purchase into up and coming areas with a market need for apartments.
Sounds contradictory? Not at all.
With an OTP you rely on pure speculation as to its finished product and potential. Thats a gamble, as you are reliant on developer following thru (not always the case), a trust in the quality of the finished product, and a guarantee of tenancies.
With an ongoing trend of an actual requirement .. the OTP is not such a gamble as you already know there is a need for the property approaching due to <insert need here> so all you are doing is matching the new demand with a property.
Dont make the assumption that just because there are apartments in the area .. yours will be desirable too. Make the enquiries and learn what people are asking for from the property managers .. make a better and educated judgement call.
Johann,
I've been lucky more times than not. And thats from the years of experience .. the bundles of books .. and learning what i've got into and how to operate it the best.
You win by trying. You may not succeed the first time around .. but you take a snapshot at what you've done .. and stick it up there on the wall as a prime example of what you are capable of. Its a learning experience .. and you need to realise that you only move forward by trying. And not being afraid to ask people for help along the way.
Nothing succeeds better than success. And if you think rich .. even a bump on the road is just a learning blip on your road to ongoing prosperity.
The only thing i have to add on the subject of loan brokers is …
Avoid the YES men, people who are too willing to say yes .. are also the most likely to shuttle around for your business instead of directing it to where attention needs to be focussed.
On the same notion as above .. make sure the loan broker you deal with scrutinises all aspects of your applicaton. Because thats the same thing the loan providers will do. If you dont think you are getting the proper attention and focus .. how can you possibly expect a reasonable presentation?
Finally .. but in this competitive market its really minimal .. go with someone who knows the current range of market products that are on offer. As i said, with such a competitive loan market its not really an issue at the moment.
I think if i was 14 again .. and asked the question .. what would I do to get where I am . . . . in property ….
Find a mentor .. someone who has already made the good and the bad happen in real estate. Sit back and listen to what they did .. how they did it.
Go to a couple of open houses with an adult .. and look at what people are doing for solving problems. They may not be how you would solve a problem .. but they may lead you to innovative solutions and creating easy fixes for complex problems. Ask yourself how you could have done things better.
Learn what is available in tiles .. carpets .. blinds .. lighting .. stoves .. heaters and insulation. Become a little bit of an expert in each. Learn what a bargain is, as opposed to a cheap item.
Ask questions of the agent, or if you feel intimidated to .. ask your adult friend to pose some of the questions.
The ideal setup is … you turn 18 .. you've saved a little .. and you have a couple of goals for what you want to do next.
Do work experience for a developer .. you'll learn heaps. Even if its just carrying his lunch orders.
Its a caustic mix at the best of times .. to answer it properly .. you have to know the mix of what goes into the deal.
Your property is positively geared when you got something left over of any substantial value after paying maintainence .. property tax (if applicable), water rates, council rates .. and community fee (body corp or owner corporation). Balance this up against the interest only or interest plus principal loan you've taken out .. and if you've worked everything out nicely .. you may have a couple of spare pennies in the jar.
However .. each of these elements is very flexible. Sometimes water bills will be proportionately cheap .. sometimes loans will rocket into double digits or worse .. sometimes a government might add a tax or levy into the mix. There may be a year when no maintainence is necessary .. or a year where EVERYTHING needs to be changed.
You cant possibly look into your crystal ball and see a scenario for everything you want to happen at the lowest possible cost. You just have to accomodate most likely scenarios .. and prepare for future situations with a strategic plan.
The fact you have leftovers on a property means you have a positively geared property. No matter whether thats 15 cents or a couple of thousand .. once its in a postively geared framework .. the renters are producing money for you above and beyond your current liabilities. Usually if I have anything more than $100pw extra on any property .. i go back to the banks to refinance and try to get something else. At $50pw extra per property .. you have a little over a safety valve .. its just not enough flexibility per annum to be anything more than safe. But once you are printing gravy .. anything over $50pw is extra money thats just going to get taxed unless reinvested.
The ideal postive gearing scenario is one where you can borrow at a lower margin than the return. Thats why people will tell you that it all comes down to timing. If you can borrow at a lower rate than the GROSS property return and leave a margin of 1.5 – 2% of the property rental return for expense .. and leave it at neutral .. slightly negative .. or already positively geared .. thats a winning scenario. Slightly negative becomes neutral in next to no time. Neutral becomes positive. And positive just grows.
Listen to the market for your knowledge to where your property potential lies. Learn what to expect for your property before you purchase it. And understand your most likely customer. Knowing these three elements will allow you to pluck the gems from the market and leave the bad ones alone.
If you really delve into it .. there is only a grant of title on your property anyway.
The piece of paper or registry at the titles office just remains an acceptance of title as granted by the crown and the local land act as applicable. So if you wanted to play semantics .. the government run under the queen has always had the final word on whether you actually own the title of land you hold as purchased.
What they probably changed (without looking at the specifics) would be the reference to the queen or governer general as representative of the queen having anything to do with the grant of title. Instead of a royal intermediary issuing the grant .. you'd now be looking at the government being the issuing body to distribute grants and leases of title.
Its really the difference between a monarchial aspect and a republican aspect to the same procedure.
Kirsty ..
I would be repeating myself if I said that your current option for purchasing a unit under 50sqm is a bad idea .. i've written almost the same thing over and over on this forum regarding that option.
So I wont repeat myself on it.
All I will say is that you will be left with a bad egg. A bad egg is something that the next potential purchaser will turn his nose up at too, that the bank wont lend on because it meets poor criteria (less than 50sqm) and it will be hard to sell unless you discount it.
There are better options. I am invested in a certain area at the moment countryside where the properties are cheap but the banks are prepared to lend on them .. the size is just under 10sq (94sqm) and the position is comfortably close to town. In other words .. unless the whole town collapses .. I will always have a tenancy there. BUT .. if i want to sell .. the banks are prepared to lend money for the next person to purchase from me. Did i mention that they are 100k EACH? (there's your deposit working for you !) And returning an average of just over 7% (so the expense is on covering the rates water and owner corp rather than the loan)
There isnt a global secret to good investing. There is a simple rule. It has to be liveable for the tenant .. and attractive for the potential purchaser. If you cant see yourself losing your shirt and wanting to stay in that place .. why should anyone else?
The next time someone goes on a rant to you about how awful Capitalism is … hand them a sachet containing a teaspoon of sugar.
And explain to them this.
Capitalism has meant that you now own a sachet of sugar.
Free markets allowed people to compete on the best sugar prices and deliver to you as much sugar as you needed, possibly MORE than you needed.
With that sugar which is rendered to 100% purity thanks to competing capitalist markets .. you are able to receive cheap and affordable sugar to add to just about anything you eat.
In fact .. prices on sugar have been driven down to such a level that across most markets .. sugar is now available in most products to just about everyone. Pure .. untampered sugar .. available in large quantities.
That sugar is a fast easy release method of converting raw product into energy. So .. by having a competing capitalist market fighting for your right to achieve a market of pure unadulterated sugar … you have a fast method of achieving a cheap supply of energy rich food to your body. And thanks to the competition for price .. available to just about everyone.
Thats just one product. Imagine what real Capitalism is doing for you without your understanding of it everyday.
Now .. put that sugar into your coffee .. and then ask me about where the coffee beans came from. And i'll introduce you to the coffee shop. Pure capitalism at its finest.
Now inhabited by leftist trendies who sit there with their capitalist sugar .. and their cheap capitalist coffee .. and complain about how bad all this capitalism is.
I'm boring .. i went to an online site called Mozo .. it allows you to apply online.
I applied with legitimate credentials and got 7 cards.
Having now abandoned 3 of them .. it was TOO easy to get credit .. but a lot of fun.
They did however change the rules of credit card application and verifiction since … so it may be harder to do that.
But mentioning how I did it cant hurt.
Give your friend the keys to the liquor cabinet.
Tell him he's allowed a small glass a day .. and the rest is for everyone else.
And tell him he's in charge of it and its his responsibility.
You'll get roughly the same response you will get from any socialist government.
The liquor will be gone .. the excuses will be many and there will be no responsibility AS THERE IS NO INCENTIVE to act responsible. So .. nothing gets done.
The creative solution will not be how you can LIE to the mortgage broker .. but how you can best present your current situation OR alter your current situation to fit the right criteria.
I state this post after post .. the banks and the mortgage brokers look for gross income .. equity and rental income to make their decisions. If you cant fulfil any specific one of these directly .. find a way to improve your position so that any one of these three variables looks better on your next application.
You got a bad credit on your record? Clean it up and build a deposit ! You have the need to work outside the boundaries of those three requirements ? DO SO , but bring it back to the ability to meet these requirements .. sooner rather than later.
Time is your enemy, Innovation is your friend. And despite what people will tell you .. the banks are neutral in this regard. Neither friend nor enemy .. just providers of the means to get you where you want to go.
The answer of how to make money without money is to make it with someone else's money.
If you cant sell your property because you dont have it, sell the skills to make someone else's property better.
Negotiate to sell a property for someone for a better price by improving it or marketing it better. Ask for a profitshare from the arrangement.
The whole deal is to achieve a desirable win-win outcome from a property sale. And that requires proper negotiation.
Think outside the square. You'll still need SOME money to make a deal happen .. that part is inevitable. But again .. its how you swing that deal .. that makes it happen.
There are always people out there who need or want a better deal. If you know how to make or provide a better deal on a property then do so.
The sheer idea of a no-money down deal is being able to convince a vendor or a bank or a broker that you can make this deal work. Thats what the negotiation is all about.
Fix a deal and make a mint. Read up on how other people did it. It will never be the same twice .. but once you know whats possible you can be more flexible.
Lets put this investment idea into perspective.
The whole problems with the Greek crisis is the lack of ability to pay for anything.
And they have just voted out the guy who was even half of the way toward austerity.
They wont pay their bills, they arent prepared to deal with their issue of debt on a rational market basis. Regardless of all the talk about evil bankers etc etc.
And, this is the governance body you expect to put your trust into for being able to profit from housing?
I can envision a rant that the foreigners are taking too much of Greek sovereignty and its time to take it back. So a tax would be placed on foreigners owning property .. a yearly levy to bring in revenue. Finally .. when not enough of the money is rolling in .. they pull back on the idea of foreigners even owning property .. marketed as a chance to return Greece to the greeks.
Yes thats right .. the very real possiblity of CONFISCATION OF LAND ASSETS is on the table until normality is restored.
Given a government of sanity and a bill of rights and a proper chance at righting the problems in Greece .. there may be a yes in the future.
But property is also a matter of timing.
And with the lunacy going on in Greece, the timing is certainly not now.
Boarding attracts usually the worst kind of tenancies .. simply because its a cheap option.
You'll get the smokers who have no problem falling asleep with a lit cigarette, the mentally ill who are just looking for a place to stay and the migrant who hasnt quite learnt yet how to live in a house without a thatched roof.
Your insurance company will love you (as the risk of something happening to the place trebles) .. your property manager will hate you (basically for the same reason) and your wallet wont be much better off because of both.
There you are .. from someone who took on a boarding hourse for eight months and sold it off at a marginal break-even just to get rid of it … the answer is NO.
Here is one for when you get professional.
I have an old lockup shop that I purchased many moons ago for a pittance.
Its no longer any real value as a shop .. since the area has a proper mall nearby. So i got it as a commercial space .. for a couple of bucks instead of a heap of bucks.
It has residential upstairs, so that has got rented out for a cheap but fair rent. I basically own the shop outright so as long as there is someone paying for upstairs thats fine by me.
But here is the kicker.
Downstairs is used as a storage compartment for everything i might need. Its got all the tinkery things I need for sprucing up a place .. a set of chairs, a cheap lounge setting .. a couple of vases … a bit of intricate lively carved bits of wood, a bookshelf and some blandish important looking books. Boxes of old documents and papers .. its like a storage facility without the ongoing hire costs. Cheap .. useful and brilliant. The renter pays the bills for me and the lot downstairs for storage is a freebie.
The shop has a professional looking frontage so it looks occupied the whole time. It has a business title and no business phone number. This is basically done to make it look occupied and prevent theft.
So to sum up, I have turned a useless old shop into a storage area for my sprucing up stuff and old documents, and have a renter paying my overheads on the place. Capital gains? sure .. but in the meantime its got a use too.
To scare you as to how cheap I purchased it .. it cost me 120,000 and I paid in cash. So eight years down the track .. its been not only a great idea .. but a hell of an investment too.
The question Dan42 that you should be asking is ..
Does it make the existing investment idea that I want to achieve .. more successful?
You cannot possibly predict which way the wind blows on interest rates. However .. both historically and in recent times .. the interest rates are exceptionally low.
If you find a project .. an investment .. a means to get your money moving better with the current rates then by all means take full advantage of it. Dont sit on the sidelines waiting for the train wheels to fall off the economy. Because that remains the most unlikely of the future scenarios.
FirstInvestment24,
The most important rule of investing wisely is timing. There is no point taking on a stock at its highest level ever .. and hoping it will go higher. And then complaining loudly when it resets its price to reality. And then waiting for a clawback so you can just break evens on the stock.
Your current issue is timing.
Thats where your best of intentions are the wrong decisions for the time.
Without bringing up graphs and statistics that other people on this forum have, the evidence is presented that MOST governments are printing money to stem this loss of movement that they are suffering at the moment.
Printing money causes inflation. And we are about to experience a whole lot of it .. in a very short period of time.
How does that affect your strategy? It means that holding or saving money is not only pointless .. but dangerous. That means term deposits and bank accounts become quick losses, not of written value, but PURCHASING POWER. That means you lose big if you are sticking money in a term deposit.
Whereas OPM (other people's money) works in the other direction. You borrow with bank or vendor terms .. you are taking what should be a high liability and thanks to this rapid inflation .. make money on holding an asset while the actual money depreciates around you.
You havent seen it happen within your lifetime, most likely. I happen to have seen it at least twice, once in 1973 and again in 1982. Its a rapid change and it devalues savings and everything ends up costing more.
You need to make choices that are related to this chance timing, to make smarter decisions for your long term fiscal health.
