approaching vendor for private sale

[Brady]

Sydney is a boom bust market.

To test your theory lets do the math. Let use a couple on $150k (lets say 75k each). After taxes they will key about $115k. Lets say they buy a 650k home with a loan of 600k over 30 yrs.

At 5% they will pay about 36k in interest at 7% they will pay about 48k in interest.

Their disposable income crunches down from 79k to 57k that is a lot if disposable income. A lot of people would be going backwards. Pay rises over 2 years for a couple would be 10k but after tax they will only be left with 6k. So there is still a short fall and more than half of this would be taken by inflation.

So the opportunity cost of not managing is a bigger risk.

On an investment site you talk about a couple with a PPOR and refer that to opportunity cost??? What about someone with multiple properties, yes the costs are increased as the debt would be larger, but would likely come with a combination of increase rent and CG.

If no purchase of IP is made, there is opportunity cost as no CG made, and the ability to leverage is a whole another level.

 

[sash]

Yes...cheeky...isn't ...I guess an amateur like me needs to learn from the pros.

How are you doing it.... I take it you have a very large portfolio..what are you doing differently? Care to share?

On an investment site you talk about a couple with a PPOR and refer that to opportunity cost??? What about someone with multiple properties, yes the costs are increased as the debt would be larger, but would likely come with a combination of increase rent and CG.

If no purchase of IP is made, there is opportunity cost as no CG made, and the ability to leverage is a whole another level.

 

[Brady]

Yes...cheeky...isn't ...I guess an amateur like me needs to learn from the pros.

How are you doing it.... I take it you have a very large portfolio..what are you doing differently? Care to share?

Far from accusing you of being an amateur, calling myself a pro or saying I have a large portfolio.

I just can't see the benefit of waiting for people to go belly up for opportunities to buy. I think with good DD there are still enough opportunities to buy, which I will continue to do when I can afford to as long as I see value in the purchase.

I have 3 CF+ buy and hold properties (1 will have development potential in 5years+) and another settling in 9 days which will be developed in the next 12-18 months. So not a large portfolio, but its not going to get any bigger by sitting and waiting.

I'm will be buying property that will have current or future development potential that is currently close to neutral or +CF, I will likely lock in fixed rate until ready to develop.

As I mentioned I don't think you will find a whole heap that will be struggling at 7% as banks have assessment rates that take into account a higher rate then the actual. I think a rate increase will also come with better economy and higher demand on property, so if there was any exiting of the market due to stress I believe it would be outweighed by increase in purchasers either entering or upgrading in the market.

 

[sash]

Good stuff..looks like you are doing things and not sitting on your hands.

I have not been sitting idle either...as a matter of fact I hoping to bag property number 20 and 21 in Brissie this Friday/Sat. I also have 1 about to build in Wellard (have already settled on the land) and one about to go to council in Lakelands WA.

I just feel that there are better opportunities than Sydney at the moment...that all. Though CC, Newcastle and Wollongong are now looking to go off shortly. I already own some there. I like a diversified portfolio. Agree about the CF+...mine will hit about 90-100k by mid next year.

Far from accusing you of being an amateur, calling myself a pro or saying I have a large portfolio.

I just can't see the benefit of waiting for people to go belly up for opportunities to buy. I think with good DD there are still enough opportunities to buy, which I will continue to do when I can afford to as long as I see value in the purchase.

I have 3 CF+ buy and hold properties (1 will have development potential in 5years+) and another settling in 9 days which will be developed in the next 12-18 months. So not a large portfolio, but its not going to get any bigger by sitting and waiting.

I'm will be buying property that will have current or future development potential that is currently close to neutral or +CF, I will likely lock in fixed rate until ready to develop.

As I mentioned I don't think you will find a whole heap that will be struggling at 7% as banks have assessment rates that take into account a higher rate then the actual. I think a rate increase will also come with better economy and higher demand on property, so if there was any exiting of the market due to stress I believe it would be outweighed by increase in purchasers either entering or upgrading in the market.

 

[neK]

. Agree about the CF+...mine will hit about 90-100k by mid next year.

Just curious, when you say you are CF+ around 90-100k, does this mean that your properties provide you with 90-100k of rental income after all interest costs and ongoing fees?

 

[wylie]

Just curious, when you say you are CF+ around 90-100k, does this that your properties provide you with 90-100k of rental income after all interest costs and ongoing fees?

It must be because if someone is getting $100K before interest and costs from 20 houses then they must be cubby houses .

Jokes aside, that is impressive.

 

[Brady]

It must be because if someone is getting $100K before interest and costs from 20 houses then they must be cubby houses .

Jokes aside, that is impressive.

I would be assuming that its $90-100K after expenses.

From another thread I beleive he is looking to spend around $700k on two houses in QLD. And believe he has build properties recently in WA for around the $350k mark...

 

[devank]

If you are looking at the Pazzamatta market lots of South Asians pushing it up and paying silly prices.....I would wait. Maybe buy in Brissie take the profit and maybe buy outright in Pazzamatta when it tanks. N'est pas??

I agree with your observation but doubt the prediction. Most these people have double income and most are professionals.

 

[sash]

Yes after all expenses including land tax...this one is silly and getting bigger about 12k across all states..at the moment.

Yes....just got some of the silly clauses on the 700k on pre-approval removed or worked through..so almost a dead cert subject to vals.

I have one about to build in Wellard..total costs including stamps and holding is around 325k (maybe less if I don't spent the 5k provision) and 320 for Lakelands. The Butler one was completed last may for 357k and is now worth around $450k.

I would be assuming that its $90-100K after expenses.

From another thread I beleive he is looking to spend around $700k on two houses in QLD. And believe he has build properties recently in WA for around the $350k mark...

 

[sash]

Hey If can build Cubby houses and rent them for $300pw I would!!!

It must be because if someone is getting $100K before interest and costs from 20 houses then they must be cubby houses .

Jokes aside, that is impressive.

 

[MsAli]

Haven't heard from the vendors yet. I called the agent who was following up (late last year) for us and he said they may be ready END of 2014 or 2015. I don't feel hopeful, but I will follow up tomorrow.

In the mean while we picked two different agents and sent them the DD we had done on some other lots to follow up. Lets see if they come up with something....

 

[MsAli]

Quick update. I managed to get hold of the vendor on phone this morning. He confirmed I knew "it's a development site". I said yes and that we intend to build our family home on there. Then he followed on to say that he already has an offer of 800k and a bit more will cut it.

I doubt it though as when it was listed last the agent had told me that EVENTUALLY they had received an offer of $715k and no more. Clearly the market has moved on since. 800k is definitely premium and I don't think it's worth a dollar more.

I didn't really comment much on the price he was indicating because I need him on the same page and willing to sell for us to discuss a price.

So I asked him when he was thinking of selling? He said he was thinking July. So I said, what if there was a delayed settlement? That got him thinking. He said he would talk to his wife and I can speak to him next week. So I said, I would call you mid next week.

Funnily, I searched my inbox and I have a forwarded email from my mum which had the agreed viewing time with the agent and the contract from July 2013...

 

[MsAli]

Called the owner today. He said he spoke with an agent between Sunday and today and the agent will put it on the market for $870+ in July. So I said to him our absolute max was 800k and that if he changed his mind at any stage to let us know.

A tad disappointed. But obviously our letter got him thinking. If he manages to sell for $870k odd, that's a big improvement on the $715k offer he struggled to get in July 2013.....

It wasn't meant to be. On to the next deal!

 

[RetireRich101]

1000m2 corner block, nice if you could get subdivision into 3 blocks, say 2 x 300m2 and 1x 400m2 for your ppor or

500m2 for your ppor and 500m2 for dual occ where you could achieve about $1000/wk for the dual occ if rented out.

but $870k blows everything out of proportion I say.

8 Carinya St Blacktown on 1100m2 block (not corner) R4 proposed zoning only sold for $800k few months ago.

 

[MsAli]

Yeh 870k does make it out of proportion. Btw, this house is not in Blacktown.

Also..just remembered, got a call from our contact in Mt Druitt. I was told Mount Druitt R4 zoning is being reverted back to R2 low density residential. The agent was a bit concerned. The extra ordinary meeting minutes don't even mention this change!

 

[DaveM]

Called the owner today. He said he spoke with an agent between Sunday and today and the agent will put it on the market for $870+ in July.

Agent probably mentioned development site and the owner now has dollar signs in his eyes with the idea of townhouses and unit blocks and developers driving gold plated ferraris.

After all if someone will offer 800k when its not even on the market, imagine what will happen when its listed! Oh wait.... 715k again, but the agent told me I was sitting on a gold mine!

 

[MsAli]

He actually knew its a development site...market has definitely moved since then.

 

[abhishv]

Confused - Buy or No Buy (PPROP)

I am planning to buy a house (PPROP) in Baulkham Hill area but the prices are skyrocketted. Houses in the market have unreasonably high prices and surprisingly all being sold within a week of inspection (if not prior to that). After reading Sush's comment I am being double minded should I invest now or wait for the prices to come down.

One of the positive side of BH is it's a owner occupied suburb with good schools in the vicinity so demand for such sububs will always be in demand and prices won't go down.

Please correct me if I am wrong as I am a newbie in this space. Also advise can I quote below the asking price. For ex the publish price is 770,000 can I offer 600,000. Well I know I can but in this hot market will I get any chance of breaking the deal with lower price than asking price.