Hi All,
I have had one IP for the past 11 months but my PPOR is about to become my second in a few month when I move out. I am so scared about this to the point where I’m currently having a drink to calm my nerves, very scary!
My tenant of 11 months is about to move out of my house so I have no tenant there, then this house I will have to find a tenant over the next few months as well. My PM says this is a real bad time of year to be renting out houses – so many people leaving town not many coming in.
My question is has any one else been in this situation, should I be a basket case of nerves? When I do move my new house work is paying 100% of the rent so I will have more funds coming in soon which will ease my mind.
My second IP will bring in $320pw rent but my repayments will be $328pw, I know not much differece but do you think this is a good investment? My first IP however brings in $270pw and my repayments are $212pw so this will cover both.
Please give me some confidence to continue. [confused2]
That sounds OK to be, but I am no expert. We had one IP, and then moved out of our PPOR, and rented it out too! We got a tenant within 1 week, which was marvellous ( in Sept). Our properties are in Perth. Where are you to have such a seasonal population, or is it the property type that makes it seasonal?
Hi Chris,
we’ve now had to look over the Christmas/New year period for tenants 3 times and have had no problem. I hope you have the same luck.
Landt.My second IP will bring in $320pw rent but my repayments will be $328pw, I know not much differece but do you think this is a good investment? My first IP however brings in $270pw and my repayments are $212pw so this will cover both.This is a BIG problem. You’ll have 2 vacant IP’s.
The way to resolve this is to buy 8 more tenanted IP’s with positive cashflow. The principle being that if you own 2 IP’s and one is vacant that’s 50% of your income. If you have 10 IP’s and one is vacant then it’s only 10% of your income.
Go for it.
Jeff
If you want to find a tenant over christmas, throw in some sort of gimmick to attract a tenant before Christmas.
………Santa will bring a Free Christmas tree and X-box for your family if moved in before Christmas….
or…
…..free school holiday entertainment vouchers for any family that move in before Christmas……
…….house available with BONUS lockable cage to imprison trouble making kids for any family that move in before Christmas…..
If the RE Agent baulks at this advertising in their system, just advertise privately in paper and direct applicants to be screened through RE Agent.
Live, Learn and GrowLifexperience
“…….house available with BONUS lockable cage to imprison trouble making kids for any family that move in before Christmas…..”
might try this one i have a IP going to be empty on 14 december as last tenant all of a sudden stopped paying rent some weeks ago, acted as quick as i could to get them out and re advertise and have now settled on paying off via small tribunals court
when the going gets weird the weird turn pro
Wow what a reply. I do feel much better this morning just got a bit on top of me yesterday.
I live in a small town of 28,000, xmas time people leave and with the new year they seem to start coming back.
Um thanks for the advice Jeff but I think at this point I think I’ll stay with 2IP and slowly work my way up.
Does everyone think that this is good rental I’m getting for my repayments?
Thanks
Hi Chris
I would stick with it. You are doing great. (Bad english, I know.) If your only outlay is $8 a week and you are covered by your other property, you will soon be +ve anyway. I would be happy with this situation. I think your returns are good. Feel the fear, and do it anyway (and have a drink for me). Another saying for you. Worry is interest paid on something that has not happened yet. Are we investors willing to pay interest on something we don’t have?
Regards
Calder.Cool gimmicks lifex
Inez
My partner is now very keen to sell our PPOR and with the profits use this to purchase 2-3 IP in the following few months. We should make around $70,000 profit so this is over $20,000 deposit for each IP.
Our PPOR has a swimming pool so we think we’d rather sell it off and not have to worry about an aging pool which may prove to be quite expensive down the track.
Decisions decisions![confused2]
Hi Chris,
I wouldn’t be panicing if I had the two IP’s described above. That said, is there any way of increasing the rent via minor/low cost improvements? This would start to take you closer to +CF.
With people leaving town at Christmas can I assume that you live in a “university” town? I ask because as a uni student I learned that the best deals on accomodation came along if you were willing and able to take out a lease some time around January.
If finding a tenant over Christmas is a problem in your area then consider putting your tenants on a 9 month lease (or 3 months with a 12 month option, or some other odd length) so that you can aviod the Christmas vacancy problem in future years.
Regards
SonjaOriginally posted by Chris2004:I have had one IP for the past 11 months but my PPOR is about to become my second in a few month when I move out. I am so scared about this to the point where I’m currently having a drink to calm my nerves, very scary!
Hi Chris,
The main thing to remember is that you shouldn’t be ‘jumping at shadows’ as the possibility of a period without tenancy should always be considered in your calculations.
The temporary loss of income shouldn’t be seen as the final straw in a properties existence. With a little careful management this can be partially minimised – for example having funds in reserve for moments such as this, manipulating rental agreements so they expire when you want them to, maintain lease agreements and do not let tenants go on periodic leases, regularly review rents so that you are getting your just rewards and if tenats are hard to locate consider a slight reduction and/or an incentive to get a tenant in.
Above all remember any loss of income is subsidised (by your appropriate tax rate) by the ATO and as such your end of year out of pocket expenses are not as bad as they seem.
On a similar note I certainly wouldn’t be selling off your existing PPOR as it is CGT free and will remains so for a further six years if you do not buy another PPOR. Whether you sell or not should be determined by your original plans and whether or not they still hold water now. Sure if things have changed considerably then maybe – but …..
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
Above all remember any loss of income is subsidised (by your appropriate tax rate) by the ATO and as such your end of year out of pocket expenses are not as bad as they seem.
What does this mean?
Originally posted by Chris2004:Above all remember any loss of income is subsidised (by your appropriate tax rate) by the ATO and as such your end of year out of pocket expenses are not as bad as they seem.
What does this mean?
Hi Chris,
A ‘loss of income’ due to no tenant also reduces your taxable income as a proportion of your costs of running the property.
So, in effect, the $1000 in lost rental income could potentially depending upon a range of other factors result in a marginal tax refund of $480 at the end of the financial year.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
Thanks Derek, makes sense![exhappy]
Originally posted by Chris2004:
Thanks Derek makes sense![exhappy]Hi Chris
Can I assume you’ve paid a Quantity Surveyor for a depreciation schedule on your IP? Crucial for tax effectiveness.
Also, DON’T do a depreciation schedule when your PPOR becomes an IP before speaking to your accountant. There may be some pretty serious ramifications down the track (click on Julia’s site http://www.bantacs.com.au and get to know an accountant who’s really property savvy).
Re your fears, you need to develop the stance of the FEARLESS INVESTOR if you’re going to build your wealth. My wife and I have 16 properties, and over the past 20 years have learnt that this game is so easy if you practice three simple rules:
1. When renting is easy, charge the market rent.
2. When the market slips a little, drop your rent 10% – 15% to keep full occupancy (it’s cheaper than having vacancies or high tenant turnover).
3. Be FEARLESS, but put financial safeguards in place and sleep well.All our IP’s are brick, and that helps, but by following these simple practices we’ve been able to enjoy a long term occupancy rate of 99%.
Go for it.
Cheers
Greg
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