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property investment technique in oz

fishbuff

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Perfect property plays
If you're someone who is very suspicious of investing in shares, here's my Property Manifesto, which outlines what you should know about trying to build your wealth by speculating on bricks and mortar. Of course, I think both shares and property are great ways to get richer but I understand why many normal people simply don't trust shares.

I will convert those on another day but for now let's talk property.

Standout strategies


There are two standout strategies to build your wealth. Both cash in on the nice parts of the tax system, but there are few fine details that every investor should understand before laying their hard earned income down.


The first strategy involves buying a home you live in, which can be improved and which has lots of potential for capital gain. The second strategy is to buy investment properties, which also will bring capital gain.


(There's a third, which involves properties that might not bring great capital gain, but still can be a nice wealth building strategy.)


Keep these in mind


Before we look to the strategies, let's get a few property maxims or rules of thumb in your head:




Buy the worst house in the best street


Buy where rents are solid and where tenants want to live


Research the price and rent history of the suburb


Buy the kind of property expected in the area


Remember sometimes the suburb next to a really popular suburb might have great potential


Buy the best books on property investment.


Don't forget these.


The first strategy


Let's start with a favourite of mine: this is where you buy the worst house in the best street in a suburb that has real potential. If you see a trend of people moving in and renovating and house prices are rising, that's a good sign the suburb has potential.


You renovate wisely, tastefully but economically. You have room to expand and capital gain grows on your house and this is tax free.


Over time you can trade up and eventually you have a great home that you live in until you retire. Along the way you bank your leftover income into your home loan but have a redraw facility in case you need the money.


This is a tax effective strategy that will save you tens to hundreds of thousands off your total home loan repayments.


The beauty of this play is that you could easily end up with a home worth $2 million, which then could be sold and used to have a nice retirement. Some smarties actually have an investment property, which they rent out but eventually move into as their retirement abode. While capital gains tax applies to this property, as it's a second home that's rented out, if you live in this place until you die, then it will be your kids who will have to pay the capital gains tax bill.


The second strategy


The second strategy can be good for a young person who can't afford to buy a home or apartment where they wan to live but could if they could use the tax system by becoming a landlord.


Imagine someone wanted a two-bedroom apartment at Bondi for $650,000, but couldn't make the repayment as an owner-occupier. They could buy it as an investor and rent it out for five years and in that time their income grows and/or they might get married, which not only brings love but also a second income. The landlord could then move into the rented home.


Investment properties


Some people simply acquire investment properties and this is how they do it. The first place is bought for $500,000. They use interest only money to reduce the repayments and the tax deductions also help. After five years the apartment is worth $600,000 and the bank will give you a loan on that $100,000 equity and so the investor buys a second apartment for $400,000.


Each time the income has to support the repayments. They might have income only and a fixed rate of interest. Also their income is growing and they expand their portfolio of properties accordingly.


As long as the properties are in well sort after areas, you don't lose your job or a great recession doesn't come along, then you can do this getting wealthy strategy really effectively.


The third strategy


The third method is a variation on the one above. While the latter home accumulation relies on negative gearing, this one relies on positive gearing.


Here you buy cheaper properties where the monthly repayments and other costs are less than the rent you collect. These properties generally are slow to rise in value but sometimes their prices can rise a lot faster than many experts predict.


Get experts in


I work on the idea that good properties can rise by 10% a year over five- to 10-year periods, just like good shares. Always be careful about over-capitalizing on renovations and make sure you get an expert to work out all of your deductions you can claim as a landlord. Great accountants and better still quantity surveyors can stagger you with the

deductions they can legally claim.

Click here to visit Peter Switzer's website
 

axe168

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Perfect property plays

Click here to visit Peter Switzer's website

Bro glad that most of us are in the property game.. Money just comes easy for a highly geared investment..

I remember when I arrived, I had so much time watching the ceiling fan rotating, until I decided to take on a hobby.. property ! :smile: I spent weekends reading books after books.. subscribing weekly/monthly magazines.. attending inspections, auctions.. learning Integrated Planning Act, town planning and submissions.. looking into the Act/Regulation for claims.. finally, put my big balls to the test.

3 cheers for all quitters aka money makers !
 
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axe168

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WHATEVER YOU DO, BE VERY CAREFUL IF YOU BUY OFF-THE-PLAN.

http://www.reba.wa.gov.au/DataStore/files/Categories/Media/Buying off the plan_30_11_04.pdf

Once you stop using a standard contract, eg standard Joint Form Of General Conditions For Sale Of Land contract, the govt agency, eg REBA, may find it difficult to help you.

Yes, the next stage of the development process is "Contract". Not sure about WA, in general you will have Master Builder's Contract, HIA contract, AS2124.. often guided by Domestic Building Contract Act..

It is quite common for the developer to incorporate some design errors.. ie no insulation between walls, no doors to backyard, wrong orientation of wdws, if you signed the dotted line, ya sealed ! to change the minor design, it triggers Variation, it'll cost you an arm or leg. Happy Investing !! :smile:
 

fishbuff

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Yes, the next stage of the development process is "Contract". Not sure about WA, in general you will have Master Builder's Contract, HIA contract, AS2124.. often guided by Domestic Building Contract Act..

It is quite common for the developer to incorporate some design errors.. ie no insulation between walls, no doors to backyard, wrong orientation of wdws, if you signed the dotted line, ya sealed ! to change the minor design, it triggers Variation, it'll cost you an arm or leg. Happy Investing !! :smile:

aiya. i didnt succeed at one of the property's auction yet again this morning. that made about 6 in a rows liao. sian. :-(
 

axe168

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aiya. i didnt succeed at one of the property's auction yet again this morning. that made about 6 in a rows liao. sian. :-(

Bro, I tried for 9mths to secure one in Melbourne. I went for at least 50-80 house inspectionsand auctions. In this current climate, you have to offer at least 50k above the fair value, in order to secure a good ppty. A good location always worth its dollar..
 

fishbuff

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Bro, I tried for 9mths to secure one in Melbourne. I went for at least 50-80 house inspectionsand auctions. In this current climate, you have to offer at least 50k above the fair value, in order to secure a good ppty. A good location always worth its dollar..

nah, i did my homework. some property owners paid too high a price for houses years ago and they are trying to get rid of them now selling with little or no profits. base price is critical and location is important. take for example, yesterday's auction, a house by the main road, 20+ years, i believe there are signs of termite infestation, plumbing done half way, my estimate? $390k in today market condition. owner bought $350k 2.5 years ago and but was repossessed by banks.

another lady, bought this place at $450k in year 2004. now she is selling $470k. whole place was already run down with no maintenance.

affordability is one thing, financing is another.
 

scroobal

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Guess what? Most people at the auction have also done their homework. There is actually very little room to move. Auctions also have their "fair value" or price range advertised much lower than the reserve price to draw a crowd.

The price indicator for those on sale but not on auction are closer to reality as they need to draw people in to negotiate seriously. Its also cheaoer to get the engineering report when the negotiations are close to conclusion. I bet you don't seek engineering report for those that you seek at auctions.

By now you should have an fair indicator of value. As Axe pointed out - paying a premium is necessary in any deal. There are of course the odd exception or luck. The issue in economics term is called "opportunity cost".





nah, i did my homework.
 

neddy

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By now you should have an fair indicator of value. As Axe pointed out - paying a premium is necessary in any deal. There are of course the odd exception or luck. The issue in economics term is called "opportunity cost".

fair value? - it is in the beholder's wallet, esp China's wallet.
With poor macroeconomic policies in China, is it surprising that Chinese are outbidding locals at some of the more desirable auctions?

I was at Ikea last week, the number of Asian shoppers almost outnumbered the angmos.
 

axe168

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nah, i did my homework. some property owners paid too high a price for houses years ago and they are trying to get rid of them now selling with little or no profits. base price is critical and location is important. take for example, yesterday's auction, a house by the main road, 20+ years, i believe there are signs of termite infestation, plumbing done half way, my estimate? $390k in today market condition. owner bought $350k 2.5 years ago and but was repossessed by banks.

another lady, bought this place at $450k in year 2004. now she is selling $470k. whole place was already run down with no maintenance.

affordability is one thing, financing is another.

The issue is not about paying too high.. it is about "when" you are going to buy/sell the hse - the right time. These ppl without any knowledge about what's (economy) is coming ahead.. hence, they sell their ppty at a loss.

In every acquisition, there will be a time where you need to pay a premium regardless good or bad economy. I do not believe in "right price", quite often it will not be a right price for the seller. IMHO, the right time is when the economy is about to shoot up in full steam.. if you bought a hse, your waiting period (for profit) will be short term and easy..

Having said that, everyone has diff financial status and diff circumstances.. even thou you have what it takes to make a good profit or good research.. you also need to have a lender to back your acquisition. In my venture, luck plays a small part, but planning for the acqusition and having the bank support is the major issue..

I'm glad I m in the next phase following the aquisition.. :biggrin:
 

axe168

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fair value? - it is in the beholder's wallet, esp China's wallet.
With poor macroeconomic policies in China, is it surprising that Chinese are outbidding locals at some of the more desirable auctions?

I was at Ikea last week, the number of Asian shoppers almost outnumbered the angmos.

Whenever there's a good location & Chinese participates.. AngMo's chance is slim..

I went for one auction.. the locals bid like crazy.. once it hits 500k (the limit to 1st home buyers grant) the bidding stops .. One chinese came in with 501k.. the rest shutup and moved on..

High class China-nese will often import one container of goods.. far cheaper than IKEA :wink:
 

neddy

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Asset
Whenever there's a good location & Chinese participates.. AngMo's chance is slim..

I went for one auction.. the locals bid like crazy.. once it hits 500k (the limit to 1st home buyers grant) the bidding stops .. One chinese came in with 501k.. the rest shutup and moved on..

High class China-nese will often import one container of goods.. far cheaper than IKEA :wink:

Blame the banks. They will not lend out too much. I will limit my loans too if my loan books are overloaded with a single asset class - properties!

My banker reminds me that they will only loan 80% max, 90% if the customer pay for insurance for the lender.

Those lucky Americans ... they have Uncle Freddy Macs with 30-year low interest loans.

But analysts are already predicting the next American peoperty clash within the next decade - read - more foreclosures.

So, let the china-nese bid. They have to spend the excessive China money.
 

fishbuff

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Whenever there's a good location & Chinese participates.. AngMo's chance is slim..

I went for one auction.. the locals bid like crazy.. once it hits 500k (the limit to 1st home buyers grant) the bidding stops .. One chinese came in with 501k.. the rest shutup and moved on..

High class China-nese will often import one container of goods.. far cheaper than IKEA :wink:

i told my colleagues here; whenever u see asians in the auction, u can almost forget about winning it. especially the asian men, very aggressive when it comes to bidding. of course, the sellers have their reserve prices but it usually depends just how desperate they are.
 

scroobal

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Bro, I worry about your "homework". Already your homework about your job is an issue.

Never ever buy a house built by an owner-builder and never build your home as an owner-builder. There is a reason why an owner-builder can only build such homes every 5 to 6 years.



here's the url to take your owner-builder course online, which is a requirement should you want to take on the project of building your own home. correct me if im wrong, axe.

http://www.ownerbuilderonline.com.au/CourseMaterial.aspx
 

neddy

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Asset
here's the url to take your owner-builder course online, which is a requirement should you want to take on the project of building your own home. correct me if im wrong, axe.

http://www.ownerbuilderonline.com.au/CourseMaterial.aspx

Have you checked if your bank will loan you money as a owner-builder?
Do you know how to handle the local council, cover your insurance, communicate/coordinate with your suppliers.

There are a lot more hard work involved, from making sure your rafters do not get into the way of the rangehood exhaust to where exactly you want your digital TV point.

Qualified builders know the local conditions, what to do and what not to do and know how to handle different materials.

If I build a house in Melbourne using WA method, the house will slide down the street in a downpour. :biggrin:
 

fishbuff

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Bro, I worry about your "homework". Already your homework about your job is an issue.

Never ever buy a house built by an owner-builder and never build your home as an owner-builder. There is a reason why an owner-builder can only build such homes every 5 to 6 years.

it is only a suggestion, not an absolute plan. can i suggest something here that i have come across?

why my job is your concern? u are a civil servant, not an IT professional, working in canberra, right? why should u be concern with us quitters? an u never talk about yourself but busy collecting info about others. are u a pappy?
 

fishbuff

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Have you checked if your bank will loan you money as a owner-builder?
Do you know how to handle the local council, cover your insurance, communicate/coordinate with your suppliers.

There are a lot more hard work involved, from making sure your rafters do not get into the way of the rangehood exhaust to where exactly you want your digital TV point.

Qualified builders know the local conditions, what to do and what not to do and know how to handle different materials.

If I build a house in Melbourne using WA method, the house will slide down the street in a downpour. :biggrin:

it is only a suggestion. but at least one can get started to know what building procedure is all about. else, they can buy it off those developers at a premium.
 

neddy

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it is only a suggestion. but at least one can get started to know what building procedure is all about. else, they can buy it off those developers at a premium.

Thankyou for the suggestion.

My 2 pence thought.

You do not need to buy off a developers.

You can get a quote from the builder and select one to build your house.

I find that it is a lot better going along with a builder than :-
- owner-building
- purchase land & house package
- buy off the plan

You will work with your builder on size of the house, the floor plan, etc. The premium paid is equivalant except that it goes into the personal taste / design of the home.
 

scroobal

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Owner Builder is a terrible thing to suggest. I am pretty sure you will be hard pressed to name one positive benefit.

At least suggest something is positive that will benefit others such as tips and guidelines that will help a migrant. You keep saying that you do your home work but I found that is not the case. Some people will actually take your word for it.

Name me one positive benefit under owner builder and I will name you at least 3 that are major negative issues.



it is only a suggestion, not an absolute plan. can i suggest something here that i have come across?
 
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