aren't tenants funny!

[wylie]

Wylie,
How are things going for your hubby?
Is he going stir crazy, or has he found "retirement" more time consuming than he thought.I'm just starting my third week, and absolutely loving it. We always seem to have something to do.
Today we were rednecks. We bought a second hand couch on the other side of town and carried it on the roof of our Toyota Rav 4. Got a few funny looks

We are enjoying "semi-retirement". Hubby is busy fixing fences, doors, anything..... for anyone who mentions they have something to be fixed. He is working with my brother one or two days a week, chopping down trees and doing landscaping things. He loves the physical aspect and it keeps him occupied.

He always loved renovating when he was a desk jockey and still loves it. Youngest son had two friends over on the weekend. One said "I saw your dad in a skip bin up the road from home this morning." Other boy said "I saw him
in a skip bin in MY street." He is quite the talk of the local boys who are used to seeing his legs hanging out of a skip .

He loves skip-diving and has saved us (literally) thousands of dollars over the years through picking up things from skips. Builders throw out perfectly good lengths of architrave, mouldings, doors etc. They don't care as it is not their money.

Hubby would give you the shirt of his back, but he hates to see good stuff dumped. Very often we have used "found" things in renos for our own places.

We are very happy, pottering around doing "our thing", going to the movies, etc. We'll see where things take us as time goes by. We may travel in a year when the youngest is a bit older.

I don't know if he will look for another job if he gets bored. I don't think so. We are looking forward to doing some renos on houses we already hold, and those of my parents, possibly with a view to selling, taking a profit and looking for another reno, or holding but getting higher rent.

We are still pondering on where we are headed. It is all good .

 

[jaycee]

Well.....you kinda were, by default, since Bargain Hunter is my husband.

I was giving an example of what we would term a good investment, which I realise is not the same as a good tenant, but I believe the two go hand in hand. You want a good tenant residing inside a good investment. Which is basically what you said here:


I can't fathom why someone would own a property that is worth around 3m and be satisfied with a paltry $400pw unless it is a landbank of some sort for future development or they have an emotional attachment to it. But, if that is their wish and they have the good tenant mentioned in the above posts, well, if that is the market rent for the property (I can't understand why it would be so low, but I don't live in a vaccuum either and realise that some of the well-to-do areas do have low yields) I would presume they are happy. And at the end of the day, that's what matters, dosen't it?

Sure that's al lthat matters, how happy an investor is.

What Dazz was saying was possibly that what makes an investor happy is not necessarily the same as what is defined as "good" I'm happy with the lower yie.ld than expenses from my 2 investmetn proeprties too, but that doesn't mean my tenants are fantastic cause they are paying less than what it costs to provide.

 

[itinerantotter]

Heck, maybe WA land tax is triple the rest of the country.

We'd be up there .

cheers

 

[lizzie]

I can't fathom why someone would own a property that is worth around 3m and be satisfied with a paltry $400pw unless it is a landbank of some sort for future development or they have an emotional attachment to it.

i agree. i started putting the figures out for our ppor, as it's in similar bracket as dazz's "2 houses down" - a $1.5mil property - only to find out that the weekly income after expenses was over $500/wk if no debt.

that was including land tax (which we don't pay as consider it as our ppor) of $3800.

not a great return for the value as is our ppor that we rented out during a work transfer - but certainly not $100/wk for a property half the value of the one dazz used in his example.

 

[Lil Skater]

As much as I hate to admit it, I may not want to increase a "good" tenants rent as quickly as another tenant.

Certainly, I agree. I'd still up the rent, but for a good tenant I may up it by $10 per week rather than $20 as an example.

Ah no, it was based on a real house, two doors down from mine.

My apologies, your other post wasn't there before I posted, and at $400 per week for a $3mil property, you can understand most peoples disbelief, no?

I mean, sure, I could see it happening, but I wouldn't be letting it for $400 per week

 

[Lil Skater]

I guess. It also depends on if it's the house that's brilliant for great rent or it's purely the land value. However, I don't see why anyone would spend such an amount on an investment if it's obvious it isn't going to be worthwhile.

I know I would never spend $3mil on a property to return $400 a week, then again I know I wouldn't get $3k a week for it, so it's just not worth it.

 

[redwing]

Just had a look at Mt Pleasant, cheapest rental is a 1x1 for $200 p/wk

There's also the cheaper range for 3 x 1

$365 p.w.
3 Bedrooms, 1 Bathrooms, 1 Carspaces
Lovely 3 bedroom 1 bathroom unfurnished single level villa, has been freshly painted, installed with brand new carpets, new curtains, with built in robes, ducted air conditioning to lounge, gas bayonet, full security screens and doors, slate floors, front & rear courtyards with minimum maintenance, single undercover parking. Sorry no pets.

Two Weeks Rent: $730.00 Bond: $14600.00 00 Total: $2190.00

or

$380 p.w.
3 Bedrooms, 1 Bathrooms, - Carspaces
Close to river, great location, 3 bedrooms, 1 bathroom, Evaparative air conditioning, Gas bayonet
Carpeted lounge, lounge/dining, which is tiled.
Kitchen no dishwasher, gas hot plates and oven.
Family room with security door and large windows.
Master bedroom with built in robes,
Bed 2 no bir, bed 3 built in robes, sep toilet, Linen press
Air conditioned, Small courtyard and shed at rear.
Rear patio, brick paved, Gas hot water system
1 x car port 1 parking behind.
Drive past check out the location please do not approach the property without a property manager,

I like the comments below by Olly NEWLAND

"If only'' is the mantra of the would-be property investor who never got off the blocks. What successful property investors have in common is that they've done it, says serial investor Olly Newland, who has bought and sold more than $2 billion of property during his investment career.

"By all means read and attend workshops, he says. "But don't believe everything you hear in a seminar because often the people behind them have something to sell and will paint a rosy picture.''

Commercial property, Newland says, produces a better return and is less subject to the whims of the market. What's more, commercial property values are easier to manipulate irrespective of what the market is doing. Typically, Newland alters the leases and makes improvements. In the past, he concentrated on buying commercial properties with structural, lease or other problems that could be solved, fixing them and increasing the value rapidly.

Of late I have been concentrating on ones that require less management so I don't have to wake up in the morning and wonder what the next letter or fax will say.''

Newland, author of The Rascal's Guide to Real Estate and The Day the Bubble Bursts, buys a mixture of retail, office and industrial property as well as some residential.

He has been very heavily into retail because "it has more knobs and switches to turn'' to improve the yield and capital gain, but is now turning his attention to "quieter'' industrial property and has just completed on a "goof proof'' industrial unit in Ellerslie that he says won't keep him up at night.

Newland also likes to have a sprinkling of residential properties in his portfolio because of the "zing'' they provide when the market goes hysterical.

Money begets money

 

[JamesGG]

Some astute investors also buy gold and silver, or shares in companies that don't return dividends.

I wonder if the $3m residential property is perhaps more akin to those type of investments, rather than those of the $300k variety?

 

[jaycee]

Even 5% gross would be $ 2,884 pw. Get real. You wouldn't even get that a month. They simply won't pay that much. I don't think that crucial point is getting through. No I do not accept that disbelief. You don't seem to accept the harsh realities of cr@p yields yet on high value RIPs - no ??
---------
Another example is our house on the riverfront in Mt Pleasant. 3 x 1 B/T with a triple brick garage.

Bank valued at 2.0m in January of this year - when the Lease commenced.

Bought for 925K in mid 2004. Total in cost was 983K.

Compound annual appreciation rate over the six years is 13.7% pa. Pretty good.

Rent is $ 550 p.w. Tried for $ 700 for 2 months - no takers. Tried at 650 for 2 months, no takers. Tried for $ 600 for 2 months - no takers. Frustrated - Tenants simply won't pay a decent rent. Tried at 550....hooked Tenant after a further 3 weeks.

Gross yield of $ 550 pw = 1.43% on value of property

If capital gain stops....like it has for the past year, the place is a deadweight.
but the previous yeqrs of good growth blance this year balance this year out - no ?

The example may not be "realistic" for some, but I'm not interested in stooping down to be average and normal.

Would I buy what you did for the return yours get (the real market rate) ? Hell no man, I can't afford $26.5k holding costs for starters...

I think many of us get a better return than you;re talking about on our IP's, mine got just under 4.1% & 4.5% rent yield on purhcase price upon frirst rental. My growth's probably lower than yours but bugger, probalby all I can afford to invest in with my limited $ (?)

I'm thinking Dazz to keep trying to accumulate assets. Then as they grow enough to allow me to, I can get into a better class of investment as and if it suits etc. Is there a different / better way to learn about and get into other more fruitful options earlier ?

Or is the realisiation that investing itself is bigger than any one asset class enough ?

OR ar you jsut saying that once you get enough $ to ivnest, res i property doesn't attract you anymore ?

I've nver thought I had enough, to invest, maybe that's it

 

[jaycee]

So tell me jaycee..... did you NOT consider the figures he was quoting to be rather excessive ($8,200 land tax on one rental house to be taken from the gross rent, leaving a pittance)?

Lets make that figure, oh.... lets call it $15K per annum for that one rental house. How do the figures look now. Crappy?

Would the figures in any way resemble the REAL return for a typical resi property return? No?

I am not offended by Dazz. I just think it silly to pluck a figure from the air to make resi income figures look crappy, when the figure appears to be totally made up.

I might add, that I was NOT the first member to point out that the figures were "manipulated".

If someone other than Dazz had posted such "unusual" figures to support a particular point of view, I would have made the same comment.

Do you now think it possible that he wasn't making figures up or do you still dispute the detail ?

 

[JamesGG]

Oh, bye the way, land tax of $8,200 would be incurred on a single investment property in WA, with raw land value of a little under $2.1m.

With other properties in the portfolio, $8,200 could be accrued on as little as $380k of raw land value if the landholder was in the top bracket.

 

[wylie]

Do you now think it possible that he wasn't making figures up or do you still dispute the detail ?

Yes, from later posts, I now realise that in WA, land tax obviously is waaaay higher than in Queensland.

Do you dispute now that his property is not exactly "normal" resi that is rented out, and perhaps should not be used as a reason for people to avoid resi?

I cannot believe he still has the house, but he has explained his reasons, and if it is allowing a larger profit than the loss it is making, I understand that reasoning.

 

[jaycee]

Yes, from later posts, I now realise that in WA, land tax obviously is waaaay higher than in Queensland.

Do you dispute now that his property is not exactly "normal" resi that is rented out, and perhaps should not be used as a reason for people to avoid resi?

I cannot believe he still has the house, but he has explained his reasons, and if it is allowing a larger profit than the loss it is making, I understand that reasoning.

Where did I dispute it ? And was I not clear enough in my previous post when I posed the very same question to Dazz about it not being exactly normal resi tht is rented out ?

 

[Bargain Hunter]

Why do people get their knickers in a knot over a simple statement.

Rental returns have more to do with the property (quality, location... etc) than the tenant. Dazz gave an example of a poor return, Skater put up better figures based on our experience. Dazz will bang on that nothing compares with the returns on good commercial property and perhaps he is right but regardless of the returns which vary for a plethora of reasons, a good tenant pays their rent on time, looks after the place, and doesn't make unreasonable requests of the LL.

Regards

Andrew

 

[Dazz]

Why do people get their knickers in a knot over a simple statement.

Excellent question Andrew. I've gone back and unknotted as best I could. Apologies for any inconvenience so caused.

regardless of the returns which vary for a plethora of reasons, a good tenant pays their rent on time, looks after the place, and doesn't make unreasonable requests of the LL.

No worries. Any serious property investor that starts a statement with "regardless of the returns...." certainly doesn't, IMO, require further consideration.

 

[Bargain Hunter]

No worries. Any serious property investor that starts a statement with "regardless of the returns...." certainly doesn't, IMO, require further consideration.

Dazz,

I have never said that returns are not important however they are not solely a matter of how much rent you are pulling in, you demonstrated this in your example.

Since the concept of a good tenant is causing such confusion I will add some clarification in brackets.

A good tenant is one who pays the rent (whatever level a LL can set and get away with), keeps the place in good condition (that's a given or they can push off), and doesn't make undue demands of the landlord (better still if it's a commercial lease they never call because everything is the tenants problem).

Regards

Andrew

 

[oracle]

I can't fathom why someone would own a property that is worth around 3m and be satisfied with a paltry $400pw

I can certainly think of a couple of reasons why some investors would accept low rental return for Resi. Property.

1) Benefit of higher % of leverage. Go upto 90% by paying a small LVR fee.
2) Benefit of the cheapest borrowing rate among all asset classes.
3) Favourable lending criteria in comparison to other asset classes.

Use the money and invest in other asset classes like shares or Comm IP. I have been investing in shares and can tell you there are so many companies that have healthy balance sheets and if you look at their dividend income growth over past 5-10 years it would make resi rental return growth pretty average. These companies have increased dividend payments by an average of 15%-20% per annum compounded for last 10 years!!!

Cheers,
Oracle.

 

[skater]

I can certainly think of a couple of reasons why some investors would accept low rental return for Resi. Property.

1) Benefit of higher % of leverage. Go upto 90% by paying a small LVR fee.You can do this with most resi properties. No need to have something that performs that bad.
2) Benefit of the cheapest borrowing rate among all asset classes.See answer above
3) Favourable lending criteria in comparison to other asset classes.See answer above.
Use the money and invest in other asset classes like shares or Comm IP. I have been investing in shares and can tell you there are so many companies that have healthy balance sheets and if you look at their dividend income growth over past 5-10 years it would make resi rental return growth pretty average. These companies have increased dividend payments by an average of 15%-20% per annum compounded for last 10 years!!!

Cheers,
Oracle.

My comments in red.

 

[oracle]

My comments in red.

Skater...I should have elaborated further that you might have bought in blue chip suburb few years ago when the rental yields was not too bad but over the years CG outstripped rental growth and now you are in a situation where the rental return looks awful.

But that doesn't mean you sell the asset. I would rather keep the asset and draw down money and invest elsewhere rather than sell the asset and invest the money elsewhere.

Just my 2c on what I would do.

Cheers,
Oracle.

 

[skater]

Skater...I should have elaborated further that you might have bought in blue chip suburb few years ago when the rental yields was not too bad but over the years CG outstripped rental growth and now you are in a situation where the rental return looks awful.

But that doesn't mean you sell the asset. I would rather keep the asset and draw down money and invest elsewhere rather than sell the asset and invest the money elsewhere.

Yep! I would probably do the same. Unless, of course, selling was the only way forward, however, given Dazz's example of his own property, purchased for $925k in 2004 and only just now achieving $550pw, there is no way I would have ever purchased this in the first place.

Now, I realise that the Perth market is a whole lot different than the Sydney market, and that his property is probably in the ideal location to acheive outstanding CG. All that aside, I would never have even considered it for an instance. My income levels just would not support something of this nature.

I'm just making assumptions here, so feel free to tell me how wrong I am, but I presume this was one of Dazz's first IP's. As a high income earner it was probably an attractive purchase, you know, to save all that tax, but as he grew as an investor he saw it for what it was. Something that was costing a huge amount to keep each and every week. Not only is the yield crap, but the management costs in WA are nothing short of daylight robbery. No wonder he looked to Commercial.

Our situation is completely different to Dazz's. We are not ultra high income earners, in fact, when we first started our income was (put into today's $$) roughly the same as what Lil is earning now. She will tell you that she is struggling and that it is hard to save/invest on such a low income. Well, we had a family surviving on a similar amount, with a lot more expenses than a single person. When we bought our first IP it HAD to make money, or we just could not afford to purchase it. Even now, we live on only one modest income. Even if we wanted, we could not ever delve into the same marketplace as Dazz, but like him (these days), we will not purchase anything unless it adds to our positive cashflow.