Buying an apartment?

[FIGJAM]

If you have 80k and borrow 320k, does stamp duty come out of the 80k or the 320k?

Stamp duty is paid on the purchase price of $320,000.

It's why "investors" (aka. "wood-ducks") think they are getting the deal of the century buying 'off plan' apartments with (deceitful IMHO) advertised "stamp duty savings".

It's like "I just saved $18,000 in stamp duty on this $400,000 one bedroom, no car park apartment in Southbank...I am an investing Ghod!!!". Nevermind the fact the developer's overpriced the property by 20%, leaving said 'Ghod' $62,000 down and scratching around to find a financier who can somehow find a valuer naive enough to sign off on the purchase price.

My property advice; You don't get high (investment-wise) on your new supply.

 

[bunsen burner]

Stamp duty is paid on the purchase price of $320,000.

It's why "investors" (aka. "wood-ducks") think they are getting the deal of the century buying 'off plan' apartments with (deceitful IMHO) advertised "stamp duty savings".

It's like "I just saved $18,000 in stamp duty on this $400,000 one bedroom, no car park apartment in Southbank...I am an investing Ghod!!!". Nevermind the fact the developer's overpriced the property by 20%, leaving said 'Ghod' $62,000 down and scratching around to find a financier who can somehow find a valuer naive enough to sign off on the purchase price.

My property advice; You don't get high (investment-wise) on your new supply.

All due respect, I know plenty of people who have made huge money on off-the-plan developments.

Right now, buying used is a better option, but in a boom, people make killings out of off the plan.

 

[w00dy]

Stamp duty is paid on the purchase price of $320,000.

It's why "investors" (aka. "wood-ducks") think they are getting the deal of the century buying 'off plan' apartments with (deceitful IMHO) advertised "stamp duty savings".

It's like "I just saved $18,000 in stamp duty on this $400,000 one bedroom, no car park apartment in Southbank...I am an investing Ghod!!!". Nevermind the fact the developer's overpriced the property by 20%, leaving said 'Ghod' $62,000 down and scratching around to find a financier who can somehow find a valuer naive enough to sign off on the purchase price.

My property advice; You don't get high (investment-wise) on your new supply.

FIGJAM, what would you recommend to be the best way to enter the market?

I believe the best way to go would be to get an apartment in an inner city suburb. Hopefully something quite cheap, so I'm not locked into something that's going to take me too long to pay off. Not looking to live there, purely use it as an investment property, and hopefully get it paid off in a reasonable amount of time. Inner city the key in that, the value of the property is going to hold much better than somewhere further out.

What are your thoughts?

 

[bunsen burner]

FIGJAM, what would you recommend to be the best way to enter the market?

I believe the best way to go would be to get an apartment in an inner city suburb. Hopefully something quite cheap, so I'm not locked into something that's going to take me too long to pay off. Not looking to live there, purely use it as an investment property, and hopefully get it paid off in a reasonable amount of time. Inner city the key in that, the value of the property is going to hold much better than somewhere further out.

What are your thoughts?

tip: you don't ever want to pay it off.

You want to hold it for the minimal cost possible and profit from the capital growth. That means getting an interest only loan. If you ever pay an investment property off you're not maximising your investing. Paying off is old-school. No matter how many 40+ year olds tell you to pay stuff off, don't listen to them. It just slows down what you are trying to achieve - making money from investing.

 

[FIGJAM]

All due respect, I know plenty of people who have made huge money on off-the-plan developments.

Right now, buying used is a better option, but in a boom, people make killings out of off the plan.

We've had this discussion before, and I promise you it is extremely rare except if you time the market perfectly.

Of course, my knowledge of off plan sales is confined to Melbourne/Victoria, although I know other valuers in Sydney and Gold Coast who say it's the same shit, different weather. The whole concept of 'two-tier' marketing comes from the Gold Coast where a myriad of people were ripped off.

This explains what 'two-tier' is pretty well. I could write a thesis on it:

http://www.jenman.com.au/news_article.php?id=42

I guess long term as a vehicle to dump money, you'll probably be fine. I look at it as though why would you want to lose 10-30% off the price as you 'drive it off the lot' and require a growth spurt to recoup your initial agreed outlay. Depreciation allowances and stamp duty savings will fade into obscurity pretty quickly.

I've had some people complain to me that they bought their apartment in say 2001 for $300K, and it's now 2008 and it's now worth $350K. They lamented the fact that they could have bought a dump in Albert Park in 2001 and it'd now be worth $800K. I just go, "Yep!".

But I take it on a case by case basis. Royal Domain Tower in Melbourne is for mine the best high rise residential in Melbourne and they were selling the pads for $7K per metre in 2006 and they ended up being $9K-$10K psm almost instantly. There's one in East Melbourne at the minute where the original purchase prices seemed a bit light on and most valuers have come in higher.

But these are a rarity. Most developers and money hoarding twats who will try and screw you every which way they can. That's about the one certainty in property!

 

[bunsen burner]

We've had this discussion before, and I promise you it is extremely rare except if you time the market perfectly.

Of course, my knowledge of off plan sales is confined to Melbourne/Victoria, although I know other valuers in Sydney and Gold Coast who say it's the same shit, different weather.

Not quite true. There's rip-off merchants and there's respectable developers. There's tons of developments all over Sydney and Melbourne who are completely fleecing people like they were doing on the GC years ago.

http://www.jenman.com.au/news_article.php?id=42

Bwahahahahaha, Neil Jenman, bwahahahahahha haha.

Total nutjob. His first book Real Estate Mistakes was very good. His real estate system is very good. But all the other shit he talks is just that.

This is a guy who urges people to never sign contracts. This is a guy who spruiks that negative gearing is a trap.

 

[FIGJAM]

Not quite true. There's rip-off merchants and there's respectable developers. There's tons of developments all over Sydney and Melbourne who are completely fleecing people like they were doing on the GC years ago.

Agreed. I can name the developers for Melbourne. But even then sometimes they overshoot.

My reckoning is why risk it? At worst, why risk it without paying a measly $500 bucks or so to a someone like me to say "Yeah it's within reason", or "WTF are those pricks smoking...I've just saved you $100K!".

People rarely come to me with such a mandate. About 5 jobs a year I reckon! Yet I have to smack about 50-100 contacts per annum on the head for being far outside market parity.

I'm not marketing for the extra work either because I'm busy enough. It just guts me some of the stories. You never see this in the papers or on telly because the developers would withdraw advertising.

A prominent Melbourne developer has a showroom in Perth, and I've never had one person from Perth ask me whether or not the asking price is market value. Not a one! Then when I tell em they've paid over 25% over the actual value at settlement, the catch cry from the mortgage broker is invariably; "But my client is a very astute investor...".

Bwahahahahaha, Neil Jenman, bwahahahahahha haha.

Total nutjob. His first book Real Estate Mistakes was very good. His real estate system is very good. But all the other shit he talks is just that.

This is a guy who urges people to never sign contracts. This is a guy who spruiks that negative gearing is a trap.

I don't even know who he is and don't care. The linked article explains 'two-tier' as I know it to be true from direct experience and I can't be arsed regurgitating and expanding on it.

I don't read real estate books. Was force fed Graaskamp and he at least knows his shit. Anyone else is likely to be ACA/Today Tonight worthy fodder IMO, or alternatively a Steve Keen style uber-pessimist.

 

[bunsen burner]

I don't even know who he is and don't care. The linked article explains 'two-tier' as I know it to be true from direct experience and I can't be arsed regurgitating and expanding on it.

I don't read real estate books. Was force fed Graaskamp and he at least knows his shit. Anyone else is likely to be ACA/Today Tonight worthy fodder IMO, or alternatively a Steve Keen style uber-pessimist.

Funnily you mention that because ACA/TT trundle old Neil out every 3 months where he claims everyone is ripping everyone off.

He has become a crackpot.

 

[FIGJAM]

Funnily you mention that because ACA/TT trundle old Neil out every 3 months where he claims everyone is ripping everyone off.

He has become a crackpot.

Like Steve Keen. Still, some of the negatives the ultra-pessimist raise are often good points, they're just not balanced.

Hard to find realists within the property sector.

 

[Traces of Nuts]

A prominent Melbourne developer has a showroom in Perth, and I've never had one person from Perth ask me whether or not the asking price is market value. Not a one! Then when I tell em they've paid over 25% over the actual value at settlement, the catch cry from the mortgage broker is invariably; "But my client is a very astute investor...".

"Alice Springs assets minus liabilities" by any chance?

 

[FIGJAM]

"Alice Springs assets minus liabilities" by any chance?

You know it!

 

[bunsen burner]

I n'er was good at cryptic crosswords. Can I have another clue who it is?

 

[Traces of Nuts]

OK, how about those 9-letter "target" puzzles?

CLEAN TIT QUERY.

These guys take "2-tiered" marketing to a whole new level by having offices in places like Hong Kong and Singapore, targeting rich locals and expats who are (or at least were) living in a market where a $500k (value) apartment marketed at (say) $600k might be worth (in the eye of the "buyer") $1M+ if it were in HK / SG.

 

[Traces of Nuts]

PS - for the cryptic crossword lovers amongst us, an even more tricky clue could have been something along the lines of "Highly reputable property developer who raised question of cleansing breasts got all mixed up".

 

[FIGJAM]

PS - for the cryptic crossword lovers amongst us, an even more tricky clue could have been something along the lines of "Highly reputable property developer who raised question of cleansing breasts got all mixed up".

Jebus...it took me a minute to work out the Alice Springs one! I got no hope on that...

 

[w00dy]

tip: you don't ever want to pay it off.

You want to hold it for the minimal cost possible and profit from the capital growth. That means getting an interest only loan. If you ever pay an investment property off you're not maximising your investing. Paying off is old-school. No matter how many 40+ year olds tell you to pay stuff off, don't listen to them. It just slows down what you are trying to achieve - making money from investing.

Sure, increase your equity so you can borrow more and increase the capital gains your making by purchasing more property. Makes sense.

In this case, it's for my folks. Own their own home, have for years, but are looking at investing in some property right now. They're 10-15 years away from retiring, looking for something that's going to come to fruition around that time. So I'm not sure whether they'd be looking at taking on more property, I don't think they'd be into that, but they're looking at something that will turn into a nice little bonus when they're looking at retiring...

 

[flight23]

great read people

im about to but a place for around 300k-400k as well,

cheers for the advice

 

[superfraser]

Hey guys.

I've recently started working a new job.

Very secure - it's an industry that is recession proof, and my skills are especially well needed.

I also work a second job which SHOULD remain secure for as long as I want it.

So, anyway, I've gone from having virtually $0 and living week to week, to now being able to save $1000+ per week.

I've almost wiped out all of my debt except for HECS and I'm now thinking about perhaps saving to buy an apartment.

I wouldn't need anything over the top.

Bedroom, Kitchen, Bathroom, Lounge space, perhaps a small dining area.

Something like Jerry Seinfeld's place

Maybe a little more modern though.

I've no idea what something like this would cost, nor how much of a deposit I'd be required to save.

I'd like to live in the CBD or an Inner City Suburb.

I'm just hoping to build an idea of what is required.

Thanks for any help you can offer.

Since starting this thread, I have cleared myself of all debt except for HECS.

I've spent a lot of money because I had some unexpected things pop up. Car. Health. Etc.

But I also got my tax back and it was a few thousand more then I expected!

So now I'm finding myself with a fair bit of cash in the bank, still having a pretty decent income (though I'm not doing as well as when I started this thread - but I now have more security)

I'm really wanting to spend (invest?) $$ it feels stupid having it sit there in the bank.

Should I wipe my HECS debt out first? Or should I forget about it.

Where do I start when thinking about buying? Is there any good books/ebooks to get me started?

 

[bunsen burner]

Where do I start when thinking about buying?

Educate yourself first

Is there any good books/ebooks to get me started?

I'll save you some time.

There's probably 4 or 5 main strategies. Each have their pros and cons and suit different types of people depending on their circumstances and preferences.

The main strategy is the "capital growth buy and hold negative gearing pyramid" strategy. I just made that shit up by the way.

"Capital Growth" means you invest for growth as opposed to yield (rental return). The "Positive Gearing" strategy relies on yield rather than growth. Much easier to make big gains from growth rather than rental income. Definitely go for Capital growth.

"Buy and Hold" means you buy and (most of the time) hold forever as opposed to trade. The more places you own, the more equity you get when there is growth, and the more places you can buy using the already owned properties as security.

"Negative gearing" allows you to efficiently maximise the asset base you control. Going a bit negative means you can leverage at higher levels, can afford a place beter suited to capital growth, and that negative income is cusioned by favourable tax laws.

"Pyramiding" allows you to also build your portfolio quickly by accessing equity from an existing property in your portfolio and using at as a deposit on a new investment.

here's the simplified process:

1. Buy IP with 20% deposit. Borrow 80%
2. Wait for growth
3. Access new equity created from growth
4. Use that as 20% deposit on new investment
5. Borrow the other 80% (you're essentially borrowing 100% of 2nd IP)
6. When these two grow, repeat process for each IP.
7. Now you have 4 IPs. When they grow repeat process.
8. Now you have 8 IPs


This is the most efficient way of investing in property. The best book is:

"How to build a multi million dollar property portfolio in your own time" by Michael Yardney.

I've tonnes of books and this is the best. read it and then you will have a better idea of what to do.

 

[saj_21]

I'm really wanting to spend (invest?) $$ it feels stupid having it sit there in the bank.

Should I wipe my HECS debt out first? Or should I forget about it.

Where do I start when thinking about buying? Is there any good books/ebooks to get me started?

Its not the stupidest thing to have you money in a bank, there are government iniciatives to encourage young people to save for a house and they contrirube x amount per y amount you save in the account.

I was forutunate as when i was saving interest rates were at highs so i received the best interest on my savings from my bank and when i was seriously looking to buy (last 3 months) interest rates were at 50 year lows.

Remove your HECS as your lender will consider this as debt and will your capacity to borrow.

Start thinking bout buying now...even if you are 3 years away from buying. Continue to save and watch the market. I seriously started looking over 2 years ago and only brought my plce 2 weeks ago, but this partly due to wanting to save a bigger deposit.

As Busen said above try and save so you only borrow 80% of your total, t avoid lenders insurance. Look for areas close to schools, public tranport and shops whilst in proximity to the CBD 10-20 km.

 

[Frodo]

DON"T

Noise above, noise below, noise each side

arguments, body corporate hassles

get a unit or small house.