Investing in the Anchorage Estate at Rockingham-Shoalwaters Suburb
- Thread starter Kennethkohsg
- Start date
Kennethkohsg said:
Hi Ken,
given the above senario and your subsequent postings about your concerns and feelings of the perth market, the eastern states market and the global economy how about you put both properties on the market, under a 3 week Expressions of Interest arrangement with the same agent. Pricing 17 Broughton for offers over $320,000 and pricing 21 FitzGibbon at offers over $450,000. in three weeks time see which property produces the best *crazy* price and sell that property, keep the other one.
Cheers
Paulie
paulie said:
well as there is no CGT reduction, I hve assumed top tax rate of 50% (although most people would park that in a company I guess). the other 5% is an approximation of the GST under the margin scheme.
buy for $200
sell for $300
GST = 1/11th of $100 = 9
tax on $91 = $45 plus 9 = $54 tax
Realistically the top tax rate would be 30% of the 91 = $30 plus $9 = 39%. still not as good as 24%.
**********************************************sparky23 said:
Dear Sparky,
1. Thank you for your kind words.
2. Yes, I was happy to receive the offers as I now have a choice to decide;- to cash out and improve my own cashflow or to further hold onto the properties for more capital growth and remain highly leveraged.
3. At the basic minimum, at least, my properties are now highly sought by the market proactively and this tells me the "hotness" of the market fever intensifying further. It does encourage me and made me feel good to personally know that our own properties are highly sought after, even before they are being advertised for sale.
4. Yes, I do agree with you that you are very likely to see the prices for your newly completed houses reaching some A$450,000 in due course, probably even before by the end of this year/early 2007. This is because we are likely to see the market paying some $420,000-$430,000 for Lot 1753, which is likely to be completed in about 2 months time upto the Final Completion Stage.
5. For your kind update, please.
6. Thank you.
Cheers,
Kenneth KOH
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*****************************************sparky23 said:
Dear Sparky23,
1. I agree with you.
2. Please just ensure that you do have sufficient cash reserve back up as a contingency fund to meet any unforeseen financial crisis that may suddenly simply just evolved out in the near future.
3. If you choose to be prudent and safe in your property investing, I think the risks will be minimised even if you so decide to hold the properties long term, using the "buy-hold-never-sell" strategy.
4. For your kind update, please.
5. Thank you.
Cheers,
Kenneth KOH
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************************************sparky23 said:
Dear Sparky,
1. Thank you for your kind feedback.
2. I'll go and check out the website link myself in due course.
3. Perhaps, you may want to view the houses here at
http://www.somersoft.com/forums/gallery/showgallery.php?cat=500&ppuser=2794
4. Looking forward to your continuing support,please.
5. Thank you.
Cheers,
Kenneth KOH
***********************************************sparky23 said:
Dear Sparky,
1. Yes, I am so happy for you too, having made your own investments at the Anchorage Estate. You, too, have also invested well indeed!
2. My heartiest congratulations to you as well as to all the other members who have similarly invested into the Anchorage Estate.
3. Well done! Please keep up the good work!
4. Thank you.
Cheers,
Kenneth KOH
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******************************************sparky23 said:
Dear Sparky,
1. Based on the bank valuations received earlier during Jan-Feb 2006 period, the difference between these 2 properties only amounted to A$110,000 ($435,000 VS $325,000) then.
2. For your kind update, please.
3. Thank you.
regards,
Kenneth KOH
****************************************asdf said:
Dear ASDF,
1. I know and I do agree with you on that.
2.... In fact, I find that my own thinking is getting a bit "muddled" today and that I am not thinking well or clearly myself.
3. That is why I decide to throw out my present situation for all to discuss and to re-check my own inner hunch and my personal thinking on these matters, having heard and truly learn from what the other members have to say about the current hot market fever and their views on its immediate near future outcomes before I made the decision in due course.
4. For your kind update, please.
5. Thank you.
regards,
Kenneth KOH
**************************************asdf said:
Dear ASDF,
1. If I were ask you to go back "mentally" and to recall what you were then seeing and feeling in Australia during late 1996/early 1997, prior to July 1997 Asian Financial Crisis, honestly what do you see and felt then?
2. Were there sufficient warning indicators for you to be forewarned about the impending July 1997 Asian Financial Crisis breaking out then?
3. The forward warning indicators that we got in Singapore that something was not going well for the whole Asia Region, was our Singapore Govt's frequent public warnings/reminders that the (Asian) boom is not sustainable as well as its one-off active housing market intervention through the introduction of the capital gains tax legislation October 1996 for the first time in Singapore history, in its desperate attempt to "force-cool down" highly speculative housing market fever prevailing in Singapore then.
4. All the other Asian stock and housing markets were also booming well then.
5. Housing prices were boiling hot and truly getting out of hand then, in Singapore, with its housing prices doubling within less than 3 years period! It's has never happened like this before in the whole history of Singapore!
6. Many bullish commentators said things similar to what you have said in your post too, then.
7. I was fortunate in that I have personally worked in the Singapore Civil Service and have some inside "inklings" about how the Singapore Govt actually ticks and works, as compared to an average public member in Singapore.
8. From the Singapore Govt's strong response, I "knew" and highly suspected then, that some sort of financial crisis is already fast-brewing as far as the conservative/prudent Singapore Govt is concerned, with its constant public warnings about un-sustainable growth rate and boom and easy credit access in Asia.
9. Such warnings were similar to what the public warnings and reminders being issued out by your Australian Govt during the 2002-2003 booming period.
10. Will median house prices in Perth eventually outgrow those in Melbourne and Sydney? Personally, I do not think so nor will it likely to do so in the near future.
10. Has there been an historical precedence for such a trend, in the past? I do not seem able to recall either;- however, I may be wrong on this.
11. Perhaps, the other more knowledgeable and experienced members can help us confirm/disconfirm these claims.
12. For your kind update and further discussions, please.
13. Thank you.
regards,
Kenneth KOH
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+++++++++++++++++++++++++++++++++++++++++asdf said:
Dear ASDF,
1. You are quite right in that as developer, we are allowed to claim GST input tax credit on the house construction costs.
2. When the GST Margin Scheme is applied, the computation on total GST payable is = (House Sale Price - Land Purchase Price ) /11
3. Thus, assuming in my case, for Lot 1667, the total GST payable will amount to ($465,000-$121,500)/11 = $31,227
4. Less the GST Input Tax Credit claimed i.e $187,354/11 =$17,032, the nett GST to be paid = $14,195 ($31,227-$17,032)
~3.05% of the house sale price of $465,000.
5. So, what you have been told has been supported in this case.
6. Please note that this is true only as far as the GST Margin Scheme is applied for the house sale transaction.
7. However, it is definitely not true for those cases where the GST Margin Scheme could not be applied into the house resale transactions.
8. For your kind update, please.
9. Thank you.
regards,
Kenneth KOH
*********************************************Ausprop said:
Dear Ausprop,
1. Initially, my own thinking was that;- "If I can afford to, I will probably prefer to develop and rent them out for long term keeps."
2. If I adopt the a/m approach, I will be passively creating wealth and subsequently, my wealth creation process will also be slowed down to a certain extent as the property portfolio get bigger.
3. As the property portfolio gets bigger, more leverage is required, further borrowings become increasingly more diffcult and the cashflow more badly stretched.
4. Hence the need for a bigger cash/LOC reserve buffer to act as a contingency fund, so as to help balance down its increasing risks and to improve the debt servicing capacity.
5. On the other hand, if I were to adopt the develop and sell approach, I can quickly turn around my cash and enlarge my own capital base to go for more developments, quicker but in a safer and more prudent way without leveraging myself to the hilt.
6. The key challenge is how fast and how safe I can quickly turn down the cashflow ( "Money Velocity") to create more wealth through more development projects, without having to hold onto a big property portfolio, which is deemed to be highly risky.
7. Needless to say, I will have to paid out part of my profits for GST and other CGT and Company related taxes, each time I develop and sell.
8. Thus, each approach has its own pros and cons.
9. Depending on our own personality, we will adopt the approach which we are more comfortable with and hopefully also more profitable.
10. As far as my present situation goes, I can only afford to develop 2, sell 1 and keep 1.
11. Nonetheless, I am still learning which way will ultimately allows me to build up my wealth faster.
12. To my own surprise, my recent interim experiences has initially suggested that the "develop-and-sell" approach seems to be a faster way of creating wealth through housing developments as compared to the "develop and keep" apporach.
13. For your kind update, please.
14. Thank you.
Cheers,
Kenneth KOH
*********************************************paulie said:
Dear Paulie,
1. Sorry, I do not quite follow your idea in your post. Can you further clarify/elaborate the idea and its underlying rationale, please?
2. I have already received written offers for $465,000 and $335,000 for my 2 houses at 21, FitzGibbon Road and 17, Broughton Way respectively.
3. Why the need to subject both the properties to Expression of Interests arrangement for a 3 weeks trial? I may risk losing the present potential buyers who are offering above market price already. It has further been said that normally the first buyer's offer is the best price offer for a house for sale. Do you not agree?
4. Please note that I still have another one house at 26, Properjohn Drive plus one piece of vacant land at Lot 2012, 26 Eldon Street at the Anchorage Estate, together with a third house at Lot 1753, 8 OceanRunner Blvd which I have co-ventured with my own brother-in-laws and which is due to reach its Final Completion Stage in about 2 months time.
5. Am I missing your point by my present response?
6. If so, please clarify further.
7. Thank you.
regards,
Kenneth KOH
"10. Will median house prices in Perth eventually outgrow those in Melbourne and Sydney? Personally, I do not think so nor will it likely to do so in the near future.
10. Has there been an historical precedence for such a trend, in the past? I do not seem able to recall either;- however, I may be wrong on this. "
not many of us can recall it because it was the early 70's I believe when the Perth median outstripped Melbournes. And when you think about it, it doesn't make sense that the median price of a house in one city should be markedly different to another, even more so when the average earnings is higher in the city with the lower median price. Perth's median is about 6 times earnings, I think Sydney's market peaked when it hit about 9. for this reason I am thinking the current median could run to about $450k before the Perth market starts to slow down, particularly in the absence of a coolant such as a hefty IR rise.
10. Has there been an historical precedence for such a trend, in the past? I do not seem able to recall either;- however, I may be wrong on this. "
not many of us can recall it because it was the early 70's I believe when the Perth median outstripped Melbournes. And when you think about it, it doesn't make sense that the median price of a house in one city should be markedly different to another, even more so when the average earnings is higher in the city with the lower median price. Perth's median is about 6 times earnings, I think Sydney's market peaked when it hit about 9. for this reason I am thinking the current median could run to about $450k before the Perth market starts to slow down, particularly in the absence of a coolant such as a hefty IR rise.
Hi Ken,
For your decision on whether to sell or not, perhaps you should first decide what you'd do with the funds. If you sell the properties (or refinance), is there something else you could put the funds in that would grow faster than leaving them where they are?
In your opinion will the properties continue to grow for a year or 2 longer? Will this be at a better rate of growth than putting the money elsewhere (combined with the costs of doing so)?
Cheers
For your decision on whether to sell or not, perhaps you should first decide what you'd do with the funds. If you sell the properties (or refinance), is there something else you could put the funds in that would grow faster than leaving them where they are?
In your opinion will the properties continue to grow for a year or 2 longer? Will this be at a better rate of growth than putting the money elsewhere (combined with the costs of doing so)?
Cheers
dtraeger2k said:
***********************************
Dear Traeger2k,
1. Assuming that there is no major global financial crisis occuring within the next 12 months, I strongly beleive that the Perth property market will continue to go up strongly over the next 12-18 months, all things being equal.
2. In this case, as astute investors, we should all be sitting back and let the profits and house price runs further up by itself, all things being equal.
3. Furthermore, I also believe that at or near the market peak, the last burst of capital growth is quite significant and dramatic depending on the strength of the market fever and momenteum. I would not like to miss this part of the exciting game myself, if I can help it.
4. Having said this, I cannot help but have this inner feeling "nagging" me over the possibility of an impending financial crisis occuring within the next 12 months. And I am not quite able to shrug off this nagging uneasy feeling within myself.
5. Thus for safety and prudent property investing, I still feel come comfortable to cash out the profits/equity from the 2 houses at this point in time, even though the market is presently moving quite strongly, from the outset.
6. While on one hand, I may appear to acting against my own rational thinking mind, on the other hand, I am also respecting my inner hunch and practising my own safe and prudent investing, in case of this eventuality occuring.
7. Personally, I still think that it is better to lose part of the last profit run than to be caught in a highly leveraged position with a big property portfolio during a prolonged crisis period, should such an unforseen eventuality should occur within the next 12-18 months period.
8. Once I have cashed out, I will proceed to beef up my cash reserve buffer immediately and further strenghten the contingency funds, to meet any untold eventuality in the near future.
9. No, for safety and prudency related reasons, I do not think that I will immediately re-invest into other properties once I have cashed out, given the stage of the current building industry and the Perth property market fever. This is much unlike what I have done previously in 2004 and 2005.
10. Since you ask, I think that I am likely to take a break and stay at the sidelines for a while before proceeding to do my due diligence into the Melbourne and Sydney property markets in the near future and to re-invest there.
11. For your kind update, please.
12. Thank you.
Cheers,
Kenneth KOH
*************************************tropic said:
Dear Tropic,
1. In general, "No!" for safe and prudent investing related reasons and given the situation where the building industry is already running at full capacity and with more building delays occuring.
2. However, I might still consider and yet be daring enough to jump into one of the off-the-plan "land and house" package with Ventura whose house construction is presently in progress up to certain advanced stage, if I seriously want to and still believe that good monies can still be profitably made there under today's hot market position and with myself, fully cashed up.
3. Why do you ask me this, Tropic? Is there any specific reasons why you want to ask me this question specifically?
4. Thank you.
Cheers,
Kenneth KOH
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Dilemma
Hi Kenneth
I am interested to know what is your current LVR?
Can you set up a LOC and still hold on to all your current IPs?
If the market went pear shaped would you still be infront?? What is the worse case scenario?
Have you considered what the expected CG will be over the next 12 months?
I always look at what my combined properties are making me p.a. that always puts it in perspective for me.
Hi Kenneth
I am interested to know what is your current LVR?
Can you set up a LOC and still hold on to all your current IPs?
If the market went pear shaped would you still be infront?? What is the worse case scenario?
Have you considered what the expected CG will be over the next 12 months?
I always look at what my combined properties are making me p.a. that always puts it in perspective for me.
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Just a quick note on the question about median house prices in Perth exceeding those in Melbourne. I question this a few months ago (when I read an analyst say this would happen) and have since done a little digging around, and it is almost certain the median price in Perth will exceed Melbourne in the next 24 moths. Most expert analyst will confirm this.
One thing to keep in mind in this equation is that the average size of house and land in the Perth market is much bigger than in Melbourne, so even if both had the same median house price Perth is still effectively cheaper.
Cumown
One thing to keep in mind in this equation is that the average size of house and land in the Perth market is much bigger than in Melbourne, so even if both had the same median house price Perth is still effectively cheaper.
Cumown
