Investment property

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ShanDog said:
Cheers for the thoughts!

1. I haven't tried working out how much those rates and interest payments would be yet, but am aware that will be an ongoing cost that will add up to a noteworthy amount over the 12-18 months this would take. I know that the construction loans are provided in portions which helps reduce it, but it's something I will definitely be seeking solid figures on through the bank before signing my life away.

2. We do have some cash reserves which should see us through paying interest on the loans, but it is definitely a consideration.

3. I'm aware of how much the property pre-knockdown is worth in rent (roughly $275 p/w, so $250 into my account after agent fees), and the two properties would be significantly more than that once built.

The area I am in is a very old suburb with mostly retirees and young families as residents. It's going through a change at the moment where every fourth or fifth home has been either completely renovated/expanded or knocked down for subdivision with new homes built. The rest of the homes are generally 1970s or earlier builds. The new, larger homes on 800sqm+ are still around though, and they sell for in excess of $600k comfortably. Rent for newly built 3 bedroom homes is in excess of $380 per week; most are well over $400, especially if they have a fourth bed. I'm not quite sure how this will all translate if immediately selling doesn't work out, but overall, there is scope for cash flow with them for sure.
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Re: point 2.

On the flip side of having to pay the 10% GST on sale of the properties, to help with the cash flow during construction, you're able to claim back GST on expenses related to the project that are GST inclusive (demolition costs, subdivision costs and construction costs will be mostly GST inclusive). You can do this yourself by lodging your own business activity statements or having an accountant do it for you - should be able to get this done for between $150-$300 per quarter (don't know what accounting fees are like in Adelaide) if you don't know what you're doing and want a professional to do it or don't have the time.
 
ShanDog said:
Lyyynnnchy - help a brother out.

My wife and I (and <1 year old daughter) are home owners in Tea Tree Gully, SA. House value is around the $315,000 mark, with a little over $200,000 left on the mortgage, purchase in 2010.

Our neighbour is looking to move out and will sell his property when he finds a place. Has already indicated he would be willing to talk to us for purchase directly. My estimate is the cost would be around $275,000, plus roughly $10,000 in stamp duty.

My aim is to purchase the home, knock down and rebuild two homes on a subdivided lot (400 sqm each). The builder is able to manage almost 100% of the process, requiring us to effectively pony up the cash, make the final decisions and watch it all unfold. According to the builder, the costs would be:

$300,000 purchase of property
$30,000 demolition and subdivision
$425,000 for both homes to be completed (max cost)
Total: Approx $750,000

There are homes in the same area that are a good match to what we want to achieve that are advertised for $420,000+ each. I need to investigate the actual sale prices closer, but going off that, it's reasonable to aim for selling both for $840,000 total.

My question: Is this something you reckon is worth looking into for a $90,000 profit (minus selling fees and reduced by capital gains income tax)?
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Hey Shandog, back from holidays on Tuesday so will have a look at it then, first thoughts are that margin is too skinny though once you factor in holding costs and contingency. Any idea if you can possibly create 3 lots from the dual lot?
 
Got something in the mail from City of Cockburn about re-zoning in Bibra Lake. Think we might try and snag a potential R60 or a corner R40 before vendors/agents start factoring it in to prices.
 

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Lyyynnnchy said:
Hey Shandog, back from holidays on Tuesday so will have a look at it then, first thoughts are that margin is too skinny though once you factor in holding costs and contingency. Any idea if you can possibly create 3 lots from the dual lot?
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It's a possibility due to seeing one or two others like that in the area (one on my street), so I might look at the figures. Cheers.
 
Deliverance said:
Living OS presently and pretty much ignorant to what's going on back home. I heard a bit about changes to negative gearing laws. Thoughts from the brains trust in how this might afffect property prices in OZ?
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I have been looking in QLd and keeping an eye on Perth however will hold off now until the changes come in (if they indeed do). I think the changes will have an affect on prices, pushing them down. Having a look at propertchat.com.au and a lot of them are really worried
 
Can anyone recommend a good property manager? They are harder to find than hen's teeth it would seem.
 
Bluesque said:
I could recommend an agent in the Essendon area .. Not southern

Having a good real estate agent is the key
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Sorry I'm in Perth mate. Probably should have mentioned that. :$:oops:
 
I have a rental property that i am moving into. For tax purposes i was looking to say had the property available for rent for a couple months after i moved in so i can claim more pro rata (interest, water, rates, insurance) while having less income. What lengths does the ATO go to or want your to go to prove it was available to rent and that i hadn't moved in? Want to cover my tracks a bit. Also what guidelines do they use to say that is too big of a loss? Any thoughts would be good. Cheers
 

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ShanDog said:
It's a possibility due to seeing one or two others like that in the area (one on my street), so I might look at the figures. Cheers.
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Lyyynnnchy said:
PM the street if you want me to have a look
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Don't just base it on surrounding neighbourhood character.

Surely you will be looking at zoning, overlays and any relevant PSPs or Planning Scheme amendments?
 
Hey guys, seeking some help here for my situation.

So I work away on a 4 and 1 roster (Perth based). I don't want to do it forever, but I'd like to have something to show for my hard work. Now I don't have much interest in building a big portfolio, but I'd like to buy my first/only investment property sometime soon before my job ends (construction work not being eternal and all that).

Ideally I'd like to get something positively geared, in the hope of it having a tenant the majority of the loan life, giving me the opportunity to resume working at a lower wage or going travelling, basically trying to live my life after sacrificing a lot of my time to save money on this roster. I plan on putting a deposit down somewhere between $130,000 - $150,000, to try ensure that the repayments are low enough to cover if I am out of work and the house/apartment is not tenanted.

I have a few questions:
Am I way off the mark re: big deposit strategy?
Should I hold off another 3-12 months in Perth to see if prices continue to fall?
Is location less important than land?
Is West Perth a saturated market like East Perth?
Should I be starting off with something less than $400,000 to keep it simple?

I have been looking at a lot of options, am having trouble deciding whether to:

1.) Go for land in a place like Spearwood perhaps, with big blocks now gone or already subdivided in Coogee/Inglewood/Doubleview, anticipating some sort of price growth as people look for the 'beach suburb next door'?

2.) Nice apartment in an area such as Mt. Lawley/Vic Park (close to city, public transport, university, night life, cafe strips)

3.) A house in other areas such as Caning Vale, Thornlie, Carlisle, Rivervale etc .... something that has potential to rent out but could also one day be a family home for myself, saving on stamp duty in the long run as well as agent fees? (Admittedly mixing investment and my needs would be tiresome work)

4.) Take this as an opportunity to get into a market otherwise inaccessible such as Mosman Park, Cottesloe, Scarborough.

Any help would be appreciated, feel free to shoot me down and point me in the right direction.
 
A $130-150k deposit on a $400k investment property is a waste.

You seem pretty conservative, so if you want to start off with a property around that range and have it positively geared put your money into an offset account. That way you can access the cash at a later date more easily. Interest rates are low. $400k would be under $300 a week so achieving positive gearing wouldn't be hard.

If I was cash rich and looking for an investment in Perth at the moment I'd be looking at good areas/properties that have devalued over the last couple of years.
 
wce4premiership said:
Hey guys, seeking some help here for my situation.

So I work away on a 4 and 1 roster (Perth based). I don't want to do it forever, but I'd like to have something to show for my hard work. Now I don't have much interest in building a big portfolio, but I'd like to buy my first/only investment property sometime soon before my job ends (construction work not being eternal and all that).

Ideally I'd like to get something positively geared, in the hope of it having a tenant the majority of the loan life, giving me the opportunity to resume working at a lower wage or going travelling, basically trying to live my life after sacrificing a lot of my time to save money on this roster. I plan on putting a deposit down somewhere between $130,000 - $150,000, to try ensure that the repayments are low enough to cover if I am out of work and the house/apartment is not tenanted.

I have a few questions:
Am I way off the mark re: big deposit strategy?
Should I hold off another 3-12 months in Perth to see if prices continue to fall?
Is location less important than land?
Is West Perth a saturated market like East Perth?
Should I be starting off with something less than $400,000 to keep it simple?

I have been looking at a lot of options, am having trouble deciding whether to:

1.) Go for land in a place like Spearwood perhaps, with big blocks now gone or already subdivided in Coogee/Inglewood/Doubleview, anticipating some sort of price growth as people look for the 'beach suburb next door'?

2.) Nice apartment in an area such as Mt. Lawley/Vic Park (close to city, public transport, university, night life, cafe strips)

3.) A house in other areas such as Caning Vale, Thornlie, Carlisle, Rivervale etc .... something that has potential to rent out but could also one day be a family home for myself, saving on stamp duty in the long run as well as agent fees? (Admittedly mixing investment and my needs would be tiresome work)

4.) Take this as an opportunity to get into a market otherwise inaccessible such as Mosman Park, Cottesloe, Scarborough.

Any help would be appreciated, feel free to shoot me down and point me in the right direction.
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I believe I'm summarising someone elses excellent answer from a different thread, perhaps Scotland

But when it comes to whether you should wait, then yes its a good idea if you can. You can't time the market per se, but its far more likely to either steadily go down, or just kind of plateu for a while before going back up.

Its very unlikely to rapidly rise with no external stimulus like a mining boom.

So if you wait, you might see it drop further, and then you can buy in potentially saving saving tens (or hundreds) of thousands of dollars. If you don't wait, you buy now and probably won't see it rapidly rise anyway, and if it starts to rise it won't be by large amounts, so you might lose a few grand or so.

The property market is one that turns very slowly, generally speaking.
 
I don't remember making an excellent post but that does sound like me...

I think the next 'boom' in Perth property is going to be in properties simply re-inflating to previous levels.

E.g. houses that were sold for $300k in 2006, then sold or were just worth $600k in 2010 being sold now for $3-400k then going back up to $600k again.
 
I am quite conservative, only wanting one investment and furher down the track a house for myself.

I guess what I'm worried about is having cash flow at a consistent level, the higher it is the easier I can cover a property not being tenanted if I was to be overseas and not earning an income.

I am willing to spend more money than $400k, just unsure if it's a bit ambitious and perhaps surplus to needs for a first home.
I did plan on still having more money in ab offset account as well that I can dig in to if required.
 
Anyone done the buy the display home thing and get them to rent it back??
http://sadisplayhomesforsale.com.au/

We are getting our place valued on Monday to see what equity we have
Briefly spoke to our lender and they will only loan up to 80% on a display rental, after that it's mortgage insurance...which is around 10 grand
20000 is fees and bollocks straight up

Couple of big new developments going in in a couple of areas we know of (in sa) they will obviously have display homes.
They pay more than a private tennant would which covers the mortgage and gives a small profit.
We would like to use this small profit and add it to our savings to do some work to our place we live in now, if we can get them to rent for 2 years it would, when added to our savings, finish what we would like to do to our own residence.

We would then prob sell on once the display home company wanted out as a private renter is prob not going to cover the mortgage.
 

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