Melbourne on call to find out what needs to be done.
Ratio consulting

Privatepoint.com.au

To sell a property privately, and to advertie online without listing fee untill it's sold.

http://www.privatepoint.com.au/how-it-works/

Both PrivatePoint and Old Listings are powered by SuburbView.
http://www.suburbview.com/

Check the blog page for new sites they have developed:

http://www.suburbview.com/blog

http://www.oldlistings.com.au

Are property seminars and publications tax deductible?

Source: July 2008 Australian Property Investors , page 83

 

Tax related books are deductible, as they're to help you manage your taxation affairs and not to provide advice on buying rental properties. Investment magazines such as API and newspapers such as the Australian Financial Review are deductible, providing there's no private use (tax case T96). Less specific publications such as general newspapers are less likely to be deductible because it's difficult to argue that there's no private use. Seminars are only tax deductible if they relate to producing income from the property, so when a seminar teaches you how to find a good property or renovate it you can't claim a deduction against the rent for the cost of the seminar. If it also covers how to manager the property and how to buy or improve it then you can apportion the expense on the basis of the percentage of the time spent on that topic (Interpretative Decision 2003/324). You may be able to include the remaining costs as part of the cost base of a property under section 110-25(4) or (5) if you can link the seminar to that particular property.

Google Planimeter

To measure the size of a property on Google Map

 

http://www.acme.com/planimeter/

Council valuations vs. independent valuations methods

 

• By Greville Pabst
• Published 18/10/2007

 

The valuation low-down...

There is no doubting the confusion surrounding the differences between a council rates notice valuation and an independent property valuation. Some property owners swear by their rates notice valuation, even though they may not realise they are conducted every two years. Whereas, some are property savvy and understand the property market is prone to fluctuation.

To paint a clearer picture on how local councils determine the value of a property, councils peruse three tiers of employees who collate this information consisting of students/administration, permanent staff who are CPV qualified valuers and contracting companies.

The council classifies the properties within their municipal area based on various features including type of construction, use, building size and land area.These features are then weighed and analysed against sales of each type of property from 3 months before and after the re-valuation date (the next one being January 2008), within the same municipality to determine the market value.

The purpose of a council rates valuation is to divide the whole budget of the council equitably between the rate payers – being owners of commercial, residential and industrial properties.This is done by applying a rate in the dollar by the capital improved value of the property.Other information gathered by the valuation process is used by other government departments for the collection of say, land tax.

The final analysis of each subject property ends up on a rates notice issued to the property owner and is broken down into three different values:

1.Site Value

2.Capital Improved Value (Land Value & Value of Improvements)

3.Net Annual Value; which under the relevant legislation is calculated at 5% of the CIV.The NAV is meant to be an indication on the rental value of the subject property.

The accuracy of the valuation will depend on the diligence of the council valuation staff.Some councils pride themselves on delivering up the most accurate valuation possible, whilst others are happy to appear equitable between all rate payers.

It must be noted that these valuations are done every two years but can only be accurate for a short period of time after the relevant date.For example, the last valuation was 30^th January 2006, hence being valid for only a short time thereafter. As at today's date, areas close to the CBD (inner circle), have seen the market values of property drastically understated on their rates notice; whilst areas in the outer circle such as Werribee, may be overstated – purely due to the direction the market has moved since the last valuation date.

Other important things to note are that only approximately 10% of properties in a given municipality are inspected on a rotational basis for a re-valuation and there could be 40 -50 thousand homes in only one municipal area.

Contrary to council rates notice valuations, properties valued by an independent property expert are conducted for different purposes such as refinancing, investment portfolios, family law, body corporate to name a few.

The independent valuation process starts with a physical inspection of the property. The valuer walks around and through the property taking measurements and note of the number and type of rooms, fixtures and fittings, and improvements. The valuer then employs three methods to further analyse the property in order to come up with a value range: direct comparison, summation, and capitalisation of net income methods.

The field of property valuations is often described as an art and not a science, as it takes into consideration so many tangible and intangible aspects of a property and its surrounds. Valuations are a professional opinion based on available evidence; valuers do not set new benchmarks. They must be guided by what has sold recently, that is, within the past six months.

The direct comparison method involves researching recent sales of similar properties in the immediate surrounds, referred to as 'comparable sales'. The subtle and not so subtle differences are taken into consideration to determine the extent to which these comparable sales can be used as a guide to the value of the subject property. In this way, apples are compared with apples and necessary adjustments can be made for the bruises.

The summation method is the land value plus the depreciated value of improvements, which comprises the dwelling plus ancillary features such as garage, pergola and swimming pool. Land value takes into consideration size, shape, topography, slope, location and surrounding infrastructure and amenities. The value of improvements incorporates the style, age, architectural features, layout, number and purpose of rooms, and renovations in addition to the overall appearance and condition.

The combination of these two methods allows the valuer to arrive at a valuation range. It is then up to the skill and experience of the valuer to consider any risks associated with the property or its location to be able to refine the valuation figure.

The valuer may also check these values by way of capitalising net income. This involves applying an investment yields to assessed market rental of the property to derive the current market value. This method is commonly used when valuing investment properties.

When refinancing or selling a property, one may ask - which is the preferred valuation to rely on?Given the fact that council rates notice valuations are conducted only every two years, and only 10% of properties within any given municipality are physically inspected, it is no doubt that an independent valuation is the way to go.Independent valuations are conducted on an as-needed basis and are reflective of the 'present'.Furthermore, banks and lenders will only accept valuations performed and signed off by an independent property expert listed on their panel of valuers.

Building & pest inspection - www.buywiseinspections.com.au

source: www.homeiown.com

Pre-purchase inspection: things that go wrong and how to get it right

I recently had two building and pest inspections done by two different companies. The price was almost the same – but the difference in quality of service was amazing.

The first company responded to my booking promptly and arranged for the inspection to be carried out on the next day. I was promised that in case they find termites I will get a call immediately. Of course I was hoping that they wouldn’t because I really had my heart set on that property, but guess what – they did. Their inspector called me and let me know that there were signed of infestation and that the report will have the details.

Naturally, I was anxiously waiting for the report, checking my email every hour. At 12 in the afternoon I finally lost my patience and called the company only to get “Yes, we’re working on your report, it will take another hour to get it ready and, by the way, we have lost all the pictures taken during the inspection because of a faulty camera”. Can you imagine how furious I was! The only reason why I hired that company was because the sample report they had online looked really good, many large pictures with all the problematic spots circled to be easily seen.

Of course after such a fiasco I wasn’t going to hire them ever again. Luckily I found another company – and this time I will mention a name because I would recommend them to anyone: BuyWise.(http://www.buywiseinspections.com.au/) They are real professionals. The inspection was quickly booked for me by a very friendly lady, I got to choose the day and the time, they let me be present during the inspection and they were actually half an hour earlier on site than we scheduled! Pest inspector had a specially trained dog with him - what a brilliant idea to train a dog to detect termites! The building inspector didn’t leave any of my questions unanswered and only left when I was completely satisfied. I got the report early on the next day, great pictures and even an estimate of costs for all the repairs needed. I would definitely use their services again.

What's cheaper than building your own house

source: www.homeiown.com than building your own house

If you are on a tightest budget and even building your own house is too much for your pocket, there is another way. You can buy a block of land and relocate someone else’s house – how’s that for an idea?

The advantages are obvious – it’s cheaper than building a new house (you can save up to 50%), it’s faster – removal can be finished within a couple of weeks, and often the quality is better because many of the older houses were built using higher quality materials than those used today.

Apparently there are many people who sell the houses they own for removals - to avoid paying demolishing costs. I saw several houses for sale in the Trading post (http://www.tradingpost.com.au) for $1000 – $2000, plus the removal of a house costs, about $30000 - $35000. The way it is done, you hire a removal company and they handle everything – remove the roof, cut the house in sections of transportable size and then move the house to your site where they install and re-join it, as well as put a new roof over it.

Here is a couple of links to house removal/relocation companies I found:

http://www.khr.com.au/relocating
http://www.drakehomes.com.au
http://www.davidwright.com.au

 

6 types of houses in Australia you must know about

Houses in Australia - different periods and styles:

Victorian 1840 - 1890
Federation 1891 - 1913
War 1914 - 1945
Post-war 1946 - 1959
Contemporary 1960 – present. There are 2 types, “project style” – meaning a house was built from a common plan and “custom built” - meaning a house was built using a unique design.

6 ways to sell your home for more

A recent Sydney Morning Herald article points to this recent report from Archicentre - the results from a poll of over 800 architects to see what the trends were in renovations. A look at this report could help you decide which home improvements will increase the value of your home, and which will not necessarily break even.

A few other ideas that don’t involve costly renovations:

1. mow the lawn; tidy the outside of the house - in times of mortgage stress, a photo of a house where the backyard is untidy suggests that the vendor is desperate to sell, and that they would take a lower price.
2. clean and tidy the bathroom - it’s a room where someone who is inspecting the house will quickly sense how well the rest of the house has been looked after.
3. remove clutter: rent some storage if you need to - a house that is full to the rafters gives a sense of being smaller than it actually is: if you clear out some of your belongings, you will instantly create more space.
4. clean the house thoroughly - in keeping with tip number 1, this will present your house in the best possible light.
5. air any rooms that need airing - though it won’t come up in the online listings, someone who inspects your house in person will be able to tell that some rooms have a musty odour. This is especially worthwhile if you have pets.
6. add some energy-efficient light globes - with so many people looking to save the planet, it doesn’t hurt to send the message to potential buyers that you are interested in doing your part.

18 Jul 08 Webinar - renovation due diligence

Renovation due diligence

Cosmetic reno; getting in and change the look and feel
Advance reno: change structure

Add value for as little money as we can

Buy100k + 30k reno, revalue @160k, and borrow against the new value to get new capital for the next project

End sale value: the biggest mistake is overestimate the end sales value
The selling agent of the property you are buying should have an idea what the end price is, then go and look as many house as you can to confirm the end price.

Go to another angent, pretend to buy the end property in the area, then you get truer picture, as agents talk differently to seller and buyers. If it’s a small town, get yoru friend to do it.

Dean doesn’t factor in any decline and growth in projecting end price. However he is conservative in budgeting the end price.

It’s difficult to find reno proj with profit in it. Need to be very careful.
Because there is a trend of people doing reno, people are starting to pay premium for unrenovated houses. Therefore you need to be able to negotiate better deals to ensure there is a profit in the end. Though now there are people who are willing to drop the selling price a bit.

Some reno proj are better than others. A perfect reno project is somthing not too old in a decent area.
Something quite old with structure prob that needs new stumps or have invisible prob such as wiring is no good.

Look for where you can add a room w/o extension.

Emotional area of property cause greatest value appreciation. Kitchen and bathroom are major areas where you can spend money. The danger in reno is ppl spending too much inside and little outside. You need to get ppl inside first. Dean only buys units if they are a block so he can change the outside.

Get building inspection to find things that you can’t see.

Restumping, rewiring, reproofing does not add value. Be diligent ,detailed and thorough in the costing . Make decisions about what you need to change before you buy.

Q:How to separate the ones will truly add value from those just “nice to haves’?
A: It comes down t research. Before you buy, decide who is your market and target that what is needed. Keep in mind what’s selling fast. Look for the style of the house in the area that’s selling fast and look for something that’s similar. Ask REA what price range sells best.

Q:What are the ways of cutting down unnecessary reno cost?
A: If you know the target market well and look at other properties then you know what’s needed. Determine what you need to do to fit that target market. For every dollar you spend, you need to get a greater value back. You don’t have to replace the whole kitchen and bathroom.

Some reno work requires permit. Cosmetic reno does not need permit. Structural change such as stump, roof, and walls generally need permit. Painting, change tiles and carpet does not need permit. Rules and regulations are different in every area. Best to check with local building surveyor.

Unexpected holding costs are the biggest blow to reno prj. Early access is an advantage. Minimise the down time in the project. As soon as one tradesman finish, get the next one in . Plan the time for the trades people.
Some times it is hard to get to finance reno prj. Renos are cash intensive. If you can get a permit for a structural, then you can get a loan from the bank. As soon as you finish reno, trying to get the value.

It’s important to know how it hinges together. It’s good to do it first time yourself to understand how every job hang together.
For people who plan to do multiple projects at once you need a system to manage it.

Q: How to estimate material cost?
A: Go to bunnings;

Q: How to estimate labor cost?
A: For most trades like tile carpet, painting tile you should be able to get accurate quote. Plumbing labor is hard to estimate. It comes down to the complexity of the prj. Get a plumber through the property and let him know what needs to be done. He should be able to give you an idea how much it costs. Then add 10 to 20% for unexpected things. You can use your home as a test case to get an idea what everything costs.

Dean budgets Cosmetic reno on 10% initially. Later he based it on the profit that can be achieved.

Q: How do you separate emotion from the numbers in reno.
A: Make sure to meet the requirement of the target market.
Factor in a handy-man’s time for bits and pieces. Get a quote from a handy man re hourly rate

Current market:
Mixed messages out there. We are at a point of change. Uncertainty needs to be factored in when you buy.

Do your due diligence and be prepared to walk away if the numbers don’t stack up. Know your market, know your target market.

Property sub-division and capital gains tax

Source: Wealth Creator Magazine January/February

Subdividing land – will you have to pay capital gains tax?

If you own a block of land and are thinking of subdividing it into two or more separate blocks, remember this can affect the amount of capital gains tax (CGT) you pay when you dispose of the subdivided blocks.

The process of subdivision will not result in any capital gains tax liability as long as you continue to own the subdivided blocks. However, you may make a capital gain or capital loss when you sell or give away any of the blocks.

You also divide the costs incurred in acquiring and subdividing the land across the subdivided blocks on a reasonable basis.

You may know that your home is usually exempt from capital gains tax due to the main residence exemption. If you subdivide land surrounding or adjacent to your home, it does not qualify for the exemption if you sell it separately from the home.

Example

Kim bought a house on a 0.2 hectare (or 2,000 square metre) block of land in June 2003 for $350,000. The house was valued at $120,000 and the land at $230,000. When purchasing the property, Kim incurred $12,000 in stamp duty and legal fees. Since the purchase, Kim lived in the house as her main residence.

Kim found the block was too big for her to maintain. In January 2005, she subdivided the land into two blocks. She incurred $10,000 in survey, legal and subdivision application fees and $1,000 to connect water and drainage to the rear block. In March 2005, she sold the rear block for $150,000.

As Kim sold the rear block of land separately, the main residence exemption does not apply to that land. She contacted several local real estate agents who advised her that the values of the front and rear blocks were the same. Therefore, Kim apportioned the original cost of the land ($230,000) equally between the two blocks ($115,000 each). Kim incurred $3,000 legal fees on the sale.

Kim works out her capital gain by adding together costs she incurred that form the cost base of the rear block, and taking this amount away from the sale price, as follows:

Cost of the land $115,000
50% of $12,000 stamp duty and legal fees on purchase $6,000
50% of the $10,000 cost of survey, legal and subdivision application fees $5,000
Cost of connecting water and drainage $1,000
Legal fees on sale $3,000
Total cost base $130,000
The capital gain on the sale of the rear block is calculated as follows:
Sale Price $150,000
Less
Cost base $130,000
Capital gain $20,000

As Kim owned the land for more than 12 months, she can reduce her $20,000 capital gain by 50%, after deducting any capital losses she made from other assets.

When Kim sells her home, being on the front block, she will get the full main residence exemption for it if she uses it solely as her main residence during all of her period she owns it.

Special rules

If the block you are subdividing was purchased or given to you before 20 September 1985, capital gains tax does not generally apply. However, if after that date, you had a building (such as a house) constructed on the land or made major renovations to the property, they may be subject to capital gains tax when sold.

You may make a profit from the subdivision and sale of land which occurred in the ordinary course of your business or which involved a commercial transaction or business operation entered into with the purpose of making a profit. In this case, the profit is ordinary income. If you need advice about this, you should seek help from a registered tax agent.

More info:

The Tax Office has publications and tools available to help you. The new capital gains property exemption tool is available on the Tax Office?s website http://www.ato.gov.au/ and helps you work out what proportion of any capital gain or loss is subject to CGT when you dispose of the property. If you have any questions relating to your circumstances, you can call the Tax Office on 13 28 61.

More information The Tax Office booklet You and your shares (Nat 2632-6.2004) is available at http://www.ato.gov.au/ or, for a paper copy, call 1300 720 092.

Renovation & Property Investing Links

Again from the reno king's website:

http://renos.com.au/links/

Bargain renovation materials

Check out this link on Reno King's website:

http://renos.com.au/bargains/vic/

Victoria planning schemes

Victoria
http://www.dse.vic.gov.au/planningschemes

Maroondah
http://www.maroondah.vic.gov.au/MaroondahPlanningScheme.aspx
http://www.maroondah.vic.gov.au/SubdividingLand.aspx
http://www.dse.vic.gov.au/planningschemes/maroondah/home.html

Process:

When find the land, ring the council to check the zoning to see if it can be subdivided

overlay(special planning controls for a local area) requirement: The minimum lot size for subdivision is 864sqm

Firstly get the block surveyed then lodge the application

The council will then refer the plans to various service authority which include Yarra Valley Water, Melbourne Water, Gas and Electricity suppliers, Telstra, VicRoads and CFA, and they will make comments to the council

If all ok, council will then issue statement of compliance for obtaining separate title

From the surveyor lodge the application to issuance of statement of compliance can take up to 6 months.

Application can be lodged before settlement after signing the contract.

The Tax Office is taking a tougher stance in a bid to keep self-managed funds in line.

Max Newnham July 4, 2008 - 10:55AM
http://smallbusiness.smh.com.au/growing/tax/now-you-can-dob-yourself-in-912280922.html

The Tax Office this week issued its long-awaited report on contraventions in self-managed super funds. The report lists the errors made by the trustees of SMSFs that must be reported by auditors of super funds.
Previously, auditors could use their professional judgement on whether they advised the ATO of infringements of the super regulations.

The contravention report is an indication of the tougher stance the ATO will take in performing its role as the regulator of SMSFs, and should be a warning to trustees to fully discharge their duties.

Auditors are now required to report all breaches of regulations in the first year of operation of SMSFs. The accounting and audit cost of SMSFs will rise with this requirement.

The ATO has said this step has been taken to gain a better understanding of how trustees are discharging their duties. They will use this information to better target educational and enforcement activities for SMSFs.

The contravention report is set out in a series of seven questions that, when answered in the affirmative, require the breach of the regulations to be reported. The questions are:Did the fund fail to meet the definition of a SMSF?

As at the end of the financial year, is the SMSF less than 5 months old?
Has the trustees previously received advice of a contravention that they breached again?

Is there an identified contravention from a previous year that has not been rectified at the time the audit is being conducted?

Did the trustees fail to meet a statutory time period by more than 14 days?
Was the total value of all contraventions greater than 5% of the total value of the fund's assets?

Was the total value of all contraventions greater than $30,000?

A super fund meets the definition of an SMSF if it has no more than four members, all members are trustees or directors of a trustee company, no member is an employee of another member unless they are a relative, and trustees are not paid for performing their duties as trustees.

The instruction guide issued to auditors on how to complete the contravention report lists 20 reportable regulations and sections of the act.


The breaches of the super rules most likely to be reported will be failing to segregate super assets from personal assets; buying assets from members; incorrect payment of benefits to members; and failing to provide documents to an auditor within 14 days.

This last regulation is the one that many trustees breach because of the low priority placed on providing documentation to auditors on time.

The inclusion of value limits on breaches of the regulations is a welcome refinement of the contraventions reporting requirements.

Without the $30,000 total value limit, and the 5% of total asset value limit, every simple administration error would have been required to be reported.
The combination of the audit contravention reporting requirements, and the declaration that must be signed by all new trustees of super funds stating that they understand their responsibilities and duties, should result in a greater level of compliance by trustees of SMSFs.

In the past, the ATO has preferred to have mistakes fixed, rather than classing the fund as a non-complying fund. When this occurs, 46.5% of the super fund's assets are taken as a penalty.

If the contravention reports provide evidence of trustees wilfully breaching the regulations, this penalty ay be imposed more regularly.

Questions can be emailed to max@taxbiz.com.au.

Tax for Small Business, A Survival Guide by Max Newnham, is now available in book stores.

Active Property Network monthly meeting notes

8-Jul-08

Investor vs Trader

Investor:

* 12 months CGT exemption applies on contract date. NOT settlement date
*Capital gain cannot offset other form of income
*PPOR exemption
*Capital Gain = Sale price
- selling cost
- Purchase price & purchasing cost
- Initial Repairs and other capital expenses
+ Capital allowances & building write off claimed

Property Trader-
*Tax applies on settlement date
*Property viewed as trading stock; It can be valued at cost or at market value
*Costs directly related to property get added to stock value
*Holding costs such as interest rate, rates can be claimed as deduction in the year incurred
*No PPoR exemption if deemed a trader

Change of intention is a trigger for events. ATO uses the intention on the loan document
When claiming property expenses as home office expenses, generally

< 25% claim – home office
> 25% claim – place of business

Discretionary Trust

Only need to name one primary beneficiary. Income can still be distributed to other family member.
Don’t name the whole family as banks sometimes require every beneficiary as guarantor

It does not matter whether the trustee is company or individual. Ideally the person named as director should be different person from the trustee.
To get 30% tax rate, the company needs to be named as beneficiary. When a company is named as beneficiary, it’s called a bucket company

GST

GST registration is required for entities trading as an enterprise, or where the turnover (excluding capital asset sales or input tax sales) > 75k

GST applies to
*Commercial properties
*Land
*“New” residential properties – If you build a property, then rent it out for 5 years before you sell, then it’s no longer a “new” property. GST charge is therfore not required in this case. However, you do have pay back GST claimed when you built it. It’s called an “adjustment”.
*“Substantially renovated” residential properties – to be “Substantially renovated”, every room in the property needs to be renovated
You cannot claim GST on expenses related to non GST taxable income.

Marginal Scheme

Marginal scheme applies if
* You bought a property from someone not registered for GST
* You bought a property from someone who applied marginal scheme

To apply marginal scheme, both parties must agree to it.
Just because you are not registered fro GST, it does not mean you don’t have to pay for GST.


GST on Marginal scheme = (Sale Price – Purchase price)/11
Ignore the purchase costs

e.g.,

Purchase Price 250k, no GST included
Stamp duty 12k, no GST included
Building cost 330k, 30k GST claimed
Sale Price 720k

In this case, GST payable on sale under marginal scheme is (720-250)/11 = 42.73k
If not under Marginal scheme, GST Payable would be 720/11 = 65.45k

Finance

What banks look at:
*Repayment capacity
*Employment history: same industry (usually 2yrs)
*ABN: usually 2 YEARS
*Credit history: any arrear or default, reasons
*Deposit: Savings/FHO grants
*Residential history: usually 2 years in the same address
*Property Type: Standard residential, warehouse conversion, vacant lands are commonly accepted; Rural residence may affect maximum LVR

To be a successful investor, you need to work on lasting relationship.

Every time an agent rings, it’s an opportunity to find out about the market. Ask “Can you give me past sales?”
Tell them “Thanks for ringing me. It’s great talking to you!”
Treat them like human beings, and they will treat you the same.

Accountability Buddy

Be in contact once a week, tell you accountability buddy

*What you have done
*What you haven’t done
*What I found easy
*What I found difficult

Due Diligence - Webinar 4 Jul 08

Current Market:

Australia experiencing housing shortage
New dwelling approval falls by 6.25%
Population growing at fastest rate at 18years
Affordability and gloom is keeping the prices down

ANZ predicts price and rent explosion
Affordability Fear is driving the market at the moment. Price will not rise untill
1. Government intervention to free up money to buy,e.g access to super, government provide low cost housing
2. Interest rate fall; banks collectively feel int unlikely to all unless US mkt change and inflation in control. it takes 2 years for the situation to change
3. Income increase

Mortgage recession declared. New morgages experienced 2nd consecutive fall.

There will be a boom, but when? Short-term it’s going to fall. Better to get in when the market has just got off the bottom and miss a little bit of the initial rise.
The trend is not going to change rapidly. At the moment it is volatile.

Now:
invest in areas where there is a shortage; focus on shortage of supply relative to specific demand
Work hard on balance sheet so we are ready when the market changes
Be very careful about speculating in current market

What is the hot topic among graduates? JV


JV with friends and family members need legal document to protect all in case of something goes wrong
There is more at stake than money when JV with family.
Open discussion and decision made for if something goes wrong
What the expectations are for every member of the joint venture
What if extra funds are required as the project progresses?
Don’t rely on someone else in the group doing due diligence. Do your own DD on the deal and the people in the JV
Focus no exit strategy on worst case.

Due Diligence:
Due Diligence is to make sure you know as much as you can
It’s what you don’t know costs you money in real estate. Once you know it, you can take measures to mitigate it.
It’s the things that are left to chance sink the project.
The more things left to chance, the more chance things will go wrong.

Key areas of homework

numbers: real estate is a medium for making money; the numbers have to stack up
the physical property: most people who sell hide the flaws; It’s your job to find them
tenant
offer
finance and legal

When doing due diligence, make use of the templates on the website.

2. When doing numbers, take into account
· realistic time required for sale
· Time frames and holding costs
Get a definitive time frame, deadline provided in a document

2 Physical property:
a. land size ; boundaries are different; measure yourself
b. turn on the over, lights, tap, heating; see if the water is dirty ( the pipe could be corroded)
c. Cracking bricks, weather board
d. Evidence of termite, woodwork damage; look for odd new carpet
e. Talk to neighbour. What is the neighbourhood like and how is it going? (don’t ask the neighbour directly about the owner as people are protiective of their neighbours)
f. changes in the building without permit
a. Any extension, pergola, carport, ask for building permit. Section 32 in Victoria should provide info for permit; question anything added; ring the council see if they have a record
g. Age of the building.
a. old copper piping for plumbing are expensive
b. fire aid between apartments is a problem when subdividing
h. Roads: Don’t take what REA tells about roads going to be built. Check it out yourself.

3. Get a copy of the title for the property. It tells you the dimension, the boundary, and easement, covenant, caveats.

Easement is what you own but you don’t have authority over, sewer line, water line, power, gas, overhead easement say power line over the block

Covenant: an undertaking put in place to restrict the use of the property. It might restrict what you do with

Caveat: indicate there is debt or other interest on the property. Ask the agent to provide detail to ensure it’s not something to prevent you from taking possession

4. Existing lease: find out whether there was a bond taken, the rent payment history and whether rent was artificially inflated. Get a rent valuation by phoning a rental manager.

Investigate the rental management fee; It varies from area to area. In the country it could be a lot dearer.

Find out about vacancy rate in the area

5.body corp.: special levy, body corp. fee; order for maintenance (order by council for external maintenance)
6.finance options, exit fee, LMI, etc

Pre-purchase inquiries sound a lot. Do it very thoroughly once as exercise.

Asbestos

All houses built before 1984 have asbestos in some form. Because so many houses have it, it usually does not become a resale problem.

If the buyer knows an asbestos roof, they will use it to bargain against the vendor. It all depends on the condition of the roof-painted or unpainted, if unpainted, is the house in suburbs of near industrial area or freeway? Also the appearance and is a rain water tank attached?

If intact, asbestos isn't a problem. It is only a problem when it is disturbed/starts to deteriorate, i.e., when the fibres become airborne that you need to start to worry about asbestos.

Handling & Removal:

1. make sure that your contractor deals with asbestos "the correct way" , i.e, wets it downm, doesn't use power tools, wears the correct personal protective equipment and disposes of it correctly (i.e. not in the local river....its been done)

2. Informing the neighbours when you are removing it, because depending how media savy your neighbours are, and whether people are concerned about asbestos . It can get problematic after the fact, if you have a complaint.

3. The cost of asbestos is more like $10k. Make sure the removalist are licenced to do it and vacuum out the roof space.

Also a good idea to check with an asbestos auditor.

Source: mentor.propertyinvesting.com

'prime stamped mortgage'

Most states in Aus when you take out a mortgage, the original signed mortage document gets stamped by an agent of the office of state revenue (this stamp shows how much duty you have paid on the mortgage/ loan size you requested). This is then referred to as the 'prime stamped mortgage'.

When you refianance and you want credit for the duty already paid, this document is needed at settlement as proof that you have already paid x amount of mortgage stamp duty. The refiancing institution will then only allow you to be charged duty on the increase portion. E.G. Your first loan was 200K, and the new one is 300K. The new financier will pay duty on your behalf on 100K rather than 300K minus any exemptions/ rebates applicable. They are said to have 'transferred' they duty that you already paid on the 200K in this instance.

source:

Quote of the day

• Management is where money is.
• Getting quotes is not just about price, It also includes, quality, start time & complete time.

From a post in propertyinvesting.com about renovation.

Copy writing a sales ad

Troy:

Go to http://www.reallysold.com/ and you will see how they help with titles, phrases, and alternative words to use in your copy. I am in the process of changing all my copy now & found it invaluable.

Use the 10 day trial, however through Active Property Network I have been able to obtain a 30 day free trial if you use the promo code of APN30 in the bottom box

Great tip ! Thanks to Troy from Active Property Network.

How to get the bank to say Yes

Source: DVD provided by RESULT program

2 great points:

1. Rather than trying to convince the bank to say Yes, you take away the reasons for the bank to say No.

That should be easier than trying to sell yourself at a job interview, right? Getting someone not to say no is easier than getting someone to say yes!

Banks have lending criterias , work on the things that don't fit into the criteria.

2. The person with the gold makes the rules.

You can't get the bank to change their bank criteria. You make yourself fit into their criteria. If not this bank's criteria, than another bank's.



Not sure about "Broker always says yes to get business". As a member of MFAA, we are not permitted to promise the loan approval until it's approved. Personally I have never ever said to any client the loan will be approved even when I was 100% certain.

PPR exemption calculator

ATO's website has an excellent calculator for dertermining whether a property qualifies for the Primary Place of Residence (PPR) exemption and the % subject to capital gain tax:

Shortcut


long way:
http://www.ato.gov.au/ - For individuals --> More: capital gains tax -->Basic :Real Estate (including your home) : Property Exemption Tool

or:

http://www.ato.gov.au/ - For individuals --> More: capital gains tax -->Basic :Real Estate (including your home) : Selling your home -->Treating a dwelling as your main residence after you move out--> scroll to the bottom and click on Capital gains tax property exemption calculator

Other Readings:

Is the dwelling your main residence?

Property inspection Video notes

Feature: 11rm student accom, 5 bath room
100m from uni
Not a lot of car park, so it needs to be within walking distance to uni.

Front of the property:
Drive way run off down the hill, concern: will the drain do the job?
Front grassy area: possible more car park. Even just rent the car park to students since it’s so close to Uni
Tree near house: branches trimmed back. Not so much a problem
Brick fence: rebuild will be costly in comparison to picket fence.

Look behind: there is a T intersection and no unit development nearby

Driveway Inspection: Ivy starting to peep over the fence from next door. If left alone, ivy will affect the structure of the fence. Need to ask next door to remove it.

Garage: Rendered wall, a false wall that converted double garage into extra room
a/c: looked reasonably new. Brand name of a/c is cheap brand name

Side of property inspection: new style and old style plumbing, which indicates recent plumbing work.
Cental heating unit: brand is Daiken , a good name; The area is hard to access and maintain.
Trees over gutter

Rear of property inspection: Small grassy area, couple of trees, not a lot of maintenance.
Basic and serviceable clothes line with marble steps
Student accommodation needs multiple exit point for council approval; the railing seem to meet council regulation.
BBQ plumbed into main gas – make sure it’s functional.
This kind of property Cannot be rebuilt today, as it’s intruding neighbour’s privacy

Rooms recently painted, is it worth the asking price
When we do a inspection, put ourselfves into the shoes of the tenant
Main br has ensuite, most of the has BIR, desk, telephone port for internet

Questions to ask agents:

Agent summary: 11br, 5 bathroom, ideal tenant: student, easy to find tenant

Q: How long has the property been on the market? Why is the vendor selling?
A: 1 month in market, vendor wants to cash up,

Q: Do you think it is going to be hard to sell it?
A: No, not really. We’ve got a bit of interest at the moment. We’re just waiting for people to do their homework.

Q: What’s the magic figure:
A: Looking at 700k+

Q: Settlement terms?
A: 30-60 days.
Q: Do you think the vendor will be open to slightly longer settlement terms?
A: Yes, yes, not a problem. And if the person buying it is looking for student accommodation, we can also help out with that.

Q: I know you are nto the rental manager. What do you think will be a reasonable commission to pay a rental manager to look after the property.
A: Normal commission is 7%.
Q: “Plus GST or including GST?”
A: “Plus GST”
Q: “so 7.7%”
A: “Yes, but if you bought it, we would look after you.”

Roadside reconnaissance

Old tree has a limb on the ground, and the limb just broke off. , it’s caused by something: termite. Pest inspection is now very important for any internal signs of termite damage to this brick wall property.

Victoria Local Government Area populations

Local Government Area	Estimated Resident Population at 30 June 2007	Change over previous year	Change over previous year (%)
Wyndham (C)	123 163	7 162	6.2
Melbourne (C)	81 144	4 466	5.8
Melton (S)	85 613	4 702	5.8
Cardinia (S)	60 753	2 194	3.7
Surf Coast (S)	23 521	719	3.2
Casey (C)	229 080	6 844	3.1
Whittlesea (C)	133 156	3 631	2.8
Maribyrnong (C)	67 825	1 680	2.5
Hume (C)	157 145	3 416	2.2
Mitchell (S)	32 760	720	2.2
Bass Coast (S)	28 081	557	2
Yarra (C)	74 823	1 322	1.8
Warrnambool (C)	32 042	541	1.7
Golden Plains (S)	17 345	268	1.6
Greater Bendigo (C)	98 323	1 582	1.6
Port Phillip (C)	91 931	1 473	1.6
Baw Baw (S)	39 078	594	1.5
Mildura (RC)	52 576	752	1.5
Moorabool (S)	26 843	398	1.5
Ballarat (C)	89 665	1 228	1.4
East Gippsland (S)	41 954	593	1.4
Frankston (C)	123 315	1 728	1.4
Mornington Peninsula (S)	142 659	1 810	1.3
Bayside (C)	92 801	1 075	1.2
Glen Eira (C)	131 144	1 568	1.2
Greater Geelong (C)	208 395	2 466	1.2
Horsham (RC)	19 323	225	1.2
Latrobe (C)	72 905	830	1.2
Moreland (C)	144 015	1 690	1.2
Strathbogie (S)	9 733	118	1.2
Darebin (C)	135 262	1 446	1.1
Greater Dandenong (C)	132 237	1 486	1.1
Kingston (C)	141 550	1 572	1.1
Mansfield (S)	7 527	82	1.1
Mount Alexander (S)	17 851	195	1.1
Boroondara (C)	163 890	1 605	1
Moira (S)	28 223	277	1
Monash (C)	171 478	1 649	1
Stonnington (C)	96 221	986	1
Wellington (S)	41 998	407	1
Brimbank (C)	176 249	1 503	0.9
Campaspe (S)	37 763	326	0.9
Greater Shepparton (C)	59 730	528	0.9
Macedon Ranges (S)	40 353	364	0.9
Wangaratta (RC)	27 569	251	0.9
Banyule (C)	120 349	1 002	0.8
Hobsons Bay (C)	85 525	705	0.8
Moonee Valley (C)	112 481	928	0.8
Queenscliffe (B)	3 175	25	0.8
Swan Hill (RC)	21 459	174	0.8
Whitehorse (C)	152 368	1 135	0.8
Wodonga (RC)	34 776	272	0.8
Colac-Otway (S)	21 183	153	0.7
Glenelg (S)	20 664	139	0.7
Indigo (S)	15 480	113	0.7
Southern Grampians (S)	17 311	124	0.7
Manningham (C)	116 449	747	0.6
Moyne (S)	16 102	100	0.6
South Gippsland (S)	26 830	155	0.6
Knox (C)	153 151	763	0.5
Maroondah (C)	103 005	527	0.5
Nillumbik (S)	62 310	288	0.5
Benalla (RC)	14 024	56	0.4
Hepburn (S)	14 289	54	0.4
Yarra Ranges (S)	145 596	603	0.4
Murrindindi (S)	14 228	49	0.3
Ararat (RC)	11 671	18	0.2
Alpine (S)	12 592	18	0.1
Corangamite (S)	17 188	17	0.1
Towong (S)	6 256	9	0.1
Central Goldfields (S)	12 736	-3	0
Unincorporated Vic	767	0	0
Pyrenees (S)	6 763	-9	-0.1
Loddon (S)	8 077	-18	-0.2
Northern Grampians (S)	12 301	-29	-0.2
Gannawarra (S)	11 634	-31	-0.3
Buloke (S)	7 038	-42	-0.6
Hindmarsh (S)	6 190	-45	-0.7
West Wimmera (S)	4 578	-36	-0.8
Yarriambiack (S)	7 658	-84	-1.1
TOTAL VICTORIA	5 205 216	76 906	1.5
(B) Borough
(C) City
(RC) Rural City
(S) Shire