ripple effect

Nov 07: Middle Park and Port Melb had 50% and 30% growth in the previous 12 months to Nov 06?

Nov 08: The adjoing suburbs on the bay Elwood, St Kilda and Elsternwick  had 18.2%, 35.3%, and 24.2% growth in the 12 months to Nov 08. All 2 suburbs's 10 year growth rate lie between 10-12%.

 

Sought after public school:

 

McKinon secondary college

Frankston high school

 

Reno value add tips:

 

 

1. Extra storage space:  BIR (double height hanging space and to get as compartmentalised as possible), vanity with cupboard, drawers into bathroom, cupboards under stairs, storage in attics, loft in garages,

2. put laundry in cupboard or under bench, and convert existing laundries into bathrooms with all the plumbing in place 

3. substitue or create a wall with shelving to separate two spaces

4 Shed: blend the shed in with the home and create a concrete based floor while installing suspended platforms in the ceiling for better storage and to keep as much off the floor as possible

5. The lighter the house feels, the more spacious and applealing it will seem to prospective buyers and renters (add skylight, or open up the back of the propert on the backyard with French or Sliding doors)

 

 

 

 

 

 

 

 

Room by room rental agent for Croydon

Benchmark Real Estate
03 9877 0555

I found a rental ad from them for a room by room leasing in Croydon.

sound proof walls

We are looking at a property that backs into a railway line. Apart from the concern for noise, everything else looks perfect.

I looked up online for a cheap and effective sound proof wall. Here is the search result:

http://www.modularwalls.com.au/

They don't just do sound proof walls, the Ali wood fence makes the outside of the house so much better looking, and masonry looking "garden wall" certainly make the backyard with swimming pool now look million doors. Hm, fencing is a great cosmetic reno item - so, buy house with ugly front fences! (with a discount of course).

It says the garden wall is ideal for noise reduction from a main road too - must check it out!

Their victorian agents are:

* MelbourneModular Walls - Victoria Ph: 1300 556 957 Mobile: 0434 218 801 Email: gardenwallsvic@optusnet.com.au
* BendigoHeuron Screenline Pty Ltd Ph: 1800 001 653Email: sales@heuron.com.au

contacts

Insurance broker (commercial, business, residential) - James Germantis 03 94694673

international investing- US

If you invest in America, there are 2 structures available: LLC (limited liability company) or C-Corp, the shares of the company is owned by the trust in Australia.

 

Because US is a broad tax country, you can quarantine the income in US. If it's not a broad tax country, you have to pay tax there as well as in Australia, no credit for the tax you paid over there.

 

How to bring back money:

 

1. money initially sent over for investment can be brought back tax free

2. I can charge a consultancy fee to the LLC there, so the LLC get a tax deduction there but I'll have consultancy income in Australia

3. Different to Australia, the cost to go over there for inspecting future purchase is deductible under US tax law.

4. LLC lend money back to Australia

 

The US insurance companies don't normally have landlord insurace equivalent. Only normal building and content insurance is available.

 

To get a credit rating with the banks in US, apply for a credit card and start using it. Generally >4 units are regarded as commercial over there.

 

Same as any investing, sensibility analysis and opputunity cost analysis should be performed. For the additional risk investing overseas, you need higher return (for yield or growth) to compensate it.

 

house relocation

1. rule of thumb - it cost about $40k to relocate and reconnect a house

2. make sure the relocater has adequate insurance - say if the house got damaged during transportation

3. finance - banks usually only lend on the land. After the house is relocated and reconnected, and got the permit from the council, then the house&land could be refinanced as a package

4. permit - check with council and town planner before relocation whether the house would ok to put on the land. - We don't want neighbour objected after relocation!

 

 

Transitional Growth

• Look for properties in areas of growth lag
• fundamental analysis: industry, population,infrastructure (new hospital, new schools,new shopping centers-where are the big boys spending money next? employment, transport, building trends
• adverse public perception
• Media attention
• look for emerging economies - do you own micro economic analysis
• prime location- water views, proximity to amenities
• rise in renovation and new constructions
• stage one of new developments with big marketing budgets - it's vital to get in early
• cost of living of the city reflects housing price level of the city,
• display homes - get on the waiting list of the big developers for their next display home
• due diligence

 

oppurtunities are often disguised as hard work and most people dont' recognise it!

 

what to pay for a business

buying business, target return is 20% after paying wage to owner, to cover the extra risk of being in business.

20% equals 5% term deposit return, 10% for risk, 5% for illiquid asset risk

 

normally when you buy a business, you ask for a few year's tax return to look at. Normally you are given 3 years.

 

Adjust income that doesn't affect the purchaser, e.g extraordiary items, voluntary exp such as donation, motor vehicle 

 

average profit of last 3 years

 

how much do you pay for goodwill, it depends on the busines, some will be 3 times of the profit, some just 1 time

 

good will tax for seller: 50% discount, 50% discount to small business owner, can roll over.  Equipments tax is different. It's in the seller's favor to allocate more return to good will

 

Look at the business and look at how many of them incl. freehold. sometimes the owner got so fed up, they discount everything including freehold.

 

There are agents specialise in cash business, easy to managing business

 

keep investment debt and personal debt separate, split the loan!

commercial proerty etc

airspace

volume metric title - qld

zoning

 

location, size, resellable   

 

 

1st thing you look at how much you need to put in, and how you can borrow more so it requires less capital, and do your oppurtunity ROI

 

cbd service departments: high fee, borrowing 70%, if<50sqm, if it's just one room like a hotel room, it's hard to finance, hard to sell ,capital growth might be limited. If you have a poor site manager, you can't do anything with it.

 

big commercial property - vendor finance a very good possibility. other things to look at include if they are on market rentals; strata title possibility : ask the owner to strata title it and I buy some of them

 

commercial lease option is for the tenant to opt out. There might be  a clause to review the rent to market rental on exercise of the option; in terms of who pays for outgoings, it stays with the terms of the original lease,  you can't just change it

property data solutions

 

room by room rental property insurance can be  a big issue. If the property is not zoned for this type of use, your insurance is invalid

 

Property under managment:

check efficiency of management, how?

check all operational contracts and side deals

what's your control

what's your exit plan

what's your disaster plan

can you sell the managment only, and you keep the free hold

commercial proerty price and due diligence

commercial property price works on capitalised rate= rent/cap rate, if it's vacant, it still has some intrinsic value depending on the building material, time on the market, vacancy period

 

is there high vacancy in the area, high vacancy of this type of property in the area, zoning and permitted use

 

more abt Trust

A good trust deed should be able to be amended so the trust can continue after 80 years. Appointership and the shares of the corporate trustee needs to be passed onto the next generation in the will.

family court sees through structure, so you need to shift the interest of the trust to your children instead of yourself, and that would carry some weight.

Piggy bank trust owns all the shares of the corporate trustees. It owns nothing but shares, not property, not business, not equipment. Therefore that's the only trust can have a personal trustee.

not every benefitiary needs to be named in the trust deed. If they are, then bank require them to sign the documents when you borrow!

set up a testimontory trust within the will to quarantine the benefit of the children, children will then have tax free threshold just like an adult. It's very important to think who can be the trustee of the trust when there is minor children involved, as the trustee has all the power and can flitter all the assets away.

If trust is not doing anything, you don't need to lodge anything, so no ongoing cost if inactive.

buying more properties in trust cost more in land tax as they have a lower threshold. When the entities are grouped, only the entity that owns the property pays the land tax. If a corporate trustee owns a few different trust, each trust pays their own land tax

Appointership is a job not an asset, so it cannot be taken away from the bankrupt - a court judgement when the other side try to take over the bankrupt's appointership of a trust.

Gifting of assets to trust:

If you borrow money from family home and gift the mone to trust for purchasing investment property, you forgo the right to claim interest deduction. In the event of bankrupcy, they can clay back the gifting up to 4 years ago.

It's better to have a signed and witnessed Deed of Gift to record the gifting. Sometimes you can have a blanket deed to cover continuous gifting

Trust essential

In most cases it's not worth putting family home in a trust in AU as you give up your capital gain tax discount.

 

Have a registeed mortgage over your own property, so you stand 2nd in line behind the bank

 

To move from PPR 1 to PPR2 , and use PPR1 as investment property

 

PPR1 worth 600k, mortgage $100k, sell PPR1 to TrustNG for $600, Trust NG (Me the director of corp trustee) borrows $600k and use the property as investment, the interest is fully deductible, but we need to have income distributed from a different trust to take the tax benefit

 

I get paid $600k by Trust NG less $100k mortgage, I have net $500k to buy PPR2

• The settlor must NOT be a beneficiary, or it will render the trust invalid.
• Settlement fund ($20 or so) must be a donation and it cannot be invoiced for, or it will render the trust invalid.
• Trust CF+ or Trust business distributes profit to Trust NG, but the trust deeds need to allow income to be distributed between trusts.
• A good deed should also allow change of trustees
• Divorce courts will see through structures if the assets are accumulated during course of marriage
• no  more than 4 trusts under 1 company
• Don't put different risk class assets in same structure (not trust!), as liability can flow from Trust 1 to Trustee then to Trust 2
• Piggy bank trust owns the shares of all the non-trading trustee companys. I am the trustee of the piggy bank trust.
• I should be the appointer who can change trustees.

 

 

 

due diligence for cf+ properties

1. consistent strong demand for rental property
2. relative low purchase price
3. Make sure the regional area is large enough
4. population > 10000, except if it is within proximity to a regional town with large population
5. major industries
6. how seasonal are these industries
7. potential downturn in these industries
8. expected growth
9. historic growth
10. external forces that may affect the town
11. what demand is there for rental and what types of properties are in demand
12. historical capital growth rate for the town
13. is there an over/under supply of rental

 

 

street advisor

A resource to find out what others think of the street in the suburb;

not sure who made the comments - could be just the proud owners. aha

 

http://www.streetadvisor.com.au

 

How to rate a house on the street

When developing the rating ask yourself a simple question. Is the house better or worse then other houses in the street or is it similar? Don’t dwell on it, your immediate reaction is what we are looking for here.

If you say similar then we have the answer the property is rated as a 5 out of 10. If you say better then we now know it is rated at something greater than 5 and likewise if you say worse then it is rated at something less than 5.

Now let’s select a rating either above or below 5 based on your answer.

As the typical property in your street has a rating of 5, this is what we shall begin with. Add or subtract 1 to, or from 5 each time you answer the following questions.

If the answer is yes or no by a “country mile” then add or subtract 2. If it is neither better nor worse do nothing:

Houses

Does it look better than most properties in the street? Add 1 if yes, subtract 1 if worse

Is it newer or in better repair than other properties in the street? Add 1 if yes, subtract 1 if worse

Is the house larger then is usual for the street? Add 1 if yes, subtract 1 if worse

Does the house have more bedrooms then is usual for the street? Add 1 if yes, subtract 1 if worse

Is the land content more than is usual for the street? Add 1 if yes, subtract 1 if worse

Does the property have a better view or aspect than other properties in the street? Add 1 if yes, subtract 1 if worse

Units

Is the block of units better than others in the street. Better facilities and newer? Add 1 if yes, subtract 1 if worse

Is the interior of the unit in a better state of repair than you would find in the same block or others in the street? Add 1 if yes, subtract 1 if worse

Does the unit provide a larger living area than is normal for units in the area? Add 1 if yes, subtract 1 if worse

Does the unit have more than 2 bedrooms? Add 1 if yes, subtract 1 if worse

Does the unit have a better than typical view for the street? Add 1 if yes, subtract 1 if worse

Is the block of units situated in a better location than others? Add 1 if yes, subtract 1 if worse

Where the outcome of the above is more then use a rating of 10 and likewise a low rating can not be less than 0.

Premiumly presented property will always attract a premium price.

 

EPA register

A victoria state government site to check if the area is containminated:

 

http://www.epa.vic.gov.au

 

 

Under Lan, You can download the the prority site register to check if the land has been containminated.

http://www.epa.vic.gov.au/land/

How to spot a bargain

http://www.realestate.com.au/doc/Resources/Buy/fhbg/how-to-spot-a-bargain.htm?rsf=newsletter_rea

Everybody likes to get a bargain. Whether it is everyday goods, such as food and clothing, or more expensive items, such as cars and real estate, there are bargains to be had.

It is relatively simple to spot a bargain when shopping for food, clothing or even cars as all you need to do is compare prices and brands. It is not so easy when looking at real estate, but the rewards when you do find a good deal can be tremendous.

There are five tips to consider when looking for real estate bargains:

Keep your eye on properties for sale
Search the public trustee, deceased estates and mortgagee sale websites
Recognise any renovation potential
Understand the development potential
Ask the right questions

Keep an eye on the properties for sale in your area You need to keep an eye on the properties for sale in your area and, in particular, the time they spend on the market. The longer a property has been for sale, the more chance you have of picking up a bargain.

However, this is not always the case. A property that has been on the market for a long time but whose asking price has not changed is unlikely to be a bargain. This indicates that the vendor is not willing to budge on their price. On the other hand, if you see that the asking price has continually dropped over a period of time, your eyes should start to light up as this is a sign that the vendor is flexible and could be willing to negotiate as they have to sell.

Search the public trustee, deceased estates and mortgagee sale websites When people are forced to sell, due to a death or mortgagee sale, the property can often sell for less than it would under normal circumstances.

A deceased estate can be off putting to many potential buyers. The property is often not presented in its best state as it may have been vacant for a period of time and the house has a musty smell, the garden is overgrown and the faults of the house are very evident. In the end, the sale price will be determined by how quickly the beneficiaries are keen to receive their money.

In a mortgagee sale, the bank has a duty to try and achieve the best price they can. This is so that it can recoup its money and then the vendor can keep any funds that are left after all debts have been paid. However, in a buyer’s market, which is what we are currently experiencing, it is the buyer that will determine the final sale price, not the seller.

As mentioned earlier, forced sales will often result in properties selling at lower than expected prices. However, low prices don’t always mean that it is a good buy. For example, buying bruised fruit at half the normal cost doesn’t represent a bargain. Nor does buying imitation top brand names at a fraction of the real cost. Buying something cheaply doesn’t always represent good value.

Recognise any renovation potential Bargains are often bought because other people don’t see the potential of the property. Most people will walk through an old house and only see the peeling wallpaper, ugly carpet and an old fashioned kitchen. Renovators will see an opportunity to paint the walls, rip up the carpets, polish the floorboards, expose the authentic fireplaces and put in a modern kitchen. Many people choose not to see the opportunity as they don’t know how to renovate and think that the costs of a makeover are too prohibitive.

Understand the development potential Most people will drive by a property and see a run-down house on a large block of land. Those who are familiar with property development and know the rules and regulations of the local council will see a unit site. To the novice it may seem daunting at first to contemplate building units, but it is just a matter of confidence. Knowledge will build your confidence. You only need to know a little more than the rest to be able to pick up a bargain.

Ask the right questions “Why are they selling?” is the best question you can ask. If they don’t give you an answer, continue to ask open-ended questions. An open-ended question will force the sales person to give you more than just a “yes” or “no” answer.

For example, you will gain a better insight into what price the vendor will accept if you ask: “If I make a cash unconditional offer with a short settlement, what figure do you think they will accept?” Rather than: “Will they accept $350,000?”

The first answer may reveal the lowest offer they are willing to take, whereas the second question will only provide you with a “yes” or “no” reply.

Peter Koulizos is a university lecturer and author of The Property Professor’s Top Australian Suburbs. You can buy Peter’s book at our online bookshop.

To read Peter’s other columns, visit Peter’s property pep talks

website to check vacancy rate

This is a great tool from SQM research.

1. To check vacancy rate by region or postcode:

http://www.sqmresearch.com.au/graphs/terms_vacancy.php

or

2. go to the following link directly to check by postcode:

http://www.sqmresearch.com.au/graphs/graph_vacancy.php?postcode=3000&t=1

Just put in the postcode or the name of the suburb.

If the % result doesn't mean much to you, check out a few suburbs you know and compare the result, it will make more sense.

3. You can check out other data too by going to the home link:

http://www.sqmresearch.com.au/graphs/

Choose the postcode and the type of graph at the bottom. Things you could check out include

• count of established properties: house, semi-detached, unit
• % of mortgage repayment to total household income before tax
• median rents
• weekly family income
• Occupant type (comparison by Owner Occupiers, Mortgage Holders and Renters)

You can check here other things too, such as:

What needs to be in an agreement

source: http://investinginproperties.com.au/

Any partnership, no matter how small or large, and no matter who it is between, must have an agreement that covers the interest of both parties.

It is best to have a solicitor draw up an agreement for you. When considering what needs to be in the agreement, work out the absolute worst case scenarios for all parties, and make sure those issues are covered.
Some partnerships are between friends or family. Regardless, remember that your relationship with your partner may be in jeopardy if something goes wrong, so it is important to cover everything you possibly can in the agreement.

Here are some of the areas that need to be covered.

Firstly, the agreement needs to state clearly who is involved – this could be individuals, or entities such as trusts or companies.

Make sure the agreement is dated, and beginning and end dates are clearly stated. If you are unsure of how long the partnership will take, cover this so that all partners are clear.

Remember that circumstances can change very quickly, so cover the possibility of someone needing to end the agreement quickly. How will this happen, what period of notice needs to be given, how will the partner be compensated.

The agreement needs to clearly state the terms of the partnership. If the partnership involves money, profit shares, bonuses or interest payments, make sure these are clearly stated with no room for misunderstanding.

You may be part of a partnership that involves something other than money – for example, knowledge, skills or time. Again, make sure that the terms of this agreement is clearly stated.

The agreement is a legal document, and therefore must be executed in a legal format. It will need to be witnessed and signed by all parties. Depending on the law, you may need to have a Justice of the Peace certify the document, and, in some cases, you may need to lodge the documents with some authority.

Agreements also need to be in place for when the partnership is dissolved. Make sure that all parties are released in writing from the partnership, and that all obligations of the partnership are met. Have each party sign off on the partnership.

There are many other areas that could be added to an agreement. The main consideration, however, is to make sure that you have covered all possible scenarios, and that you have a legal document drawn up for you covering all parties.