Tuesday, December 9, 2008

"Look to your credit cards..."

"Simple!" everyone says when I say this to them. "I've eradicated my credit card debts. My cards are clear."

That's all well and good, but if you're trying to get a home loan, the banks don't so much care about whether you have any credit card debt, as how much your credit limit is. Yep, that's right!

A friend often proudly announces he used to be able to buy property in WA without breaking the limit on his cards. But these days that is not so easy. And so many people think that just because they don't have any debt on their cards, they should still be able to get a loan.

Unfortunately, the banks regard the credit limit on your cards as a major liability. So there might be nothing on them now, but there's no guarantee that your $20,000 limit won't be blown in one big spending spree. And they can check this with the credit reporting agencies as well. So before you go and get another CRA hit on your card applying for another loan, look to your credit cards again.

It's worth phoning your bank and asking for a reduction in your credit limit to as low as you can get it while applying for a home loan. Dropping everything to $500, even for a few weeks while you get the loan sorted out, should be sufficient to make sure you get over the line in some cases (of course, it's not always the reason they won't lend to you, but that's another story for another day!).

There's no reason why you can't get most - or all - of your card limits back later.

If you really want them that way...

Friday, October 24, 2008

Research and research again

Whether it's your home or your investment property, research is key to making a good buy and there are lots of ways to find out if you are paying above, right on, or below market value.

Don't be fooled by cosmetics in a house - if it's the best house on the worst street in your chosen suburb, it's got a huge chance of not being worth what you are paying for, and in some places, a greater chance of being damaged by the locals.

Remember the rule: it should be the worst house on the best street. That way, if you're not afraid to get your hands dirty (and for some reason, so many people are these days!), and of course if the house is sound (unless you plan to knock it down), you have the chance to value add.

For those wanting to find out more about values in the area they're looking, and avoid a rip-off, here's a great article on places you can look: Less Emotion Better Value

Again, it's Australia-centric, but it should give you ideas for where to look in your own country as well!

Friday, September 12, 2008

Help for the needy.

You might think that people who own there own home aren't really needy, but the Credit Crunch, inflation, fuel costs and the SubPrime crisis in the USA have had a worldwide effect on household budgets.

Thankfully, there's a little-known secret for Australians who are finding it difficult to keep up their repayments on their homes in these times of rising interest rates (yes, I know they came down last month, but that's the first in a long time, and many of you are still hurting from the last rises!).

So, here's making sure that as many people know about it as possible: The Mortgage Assistance Scheme is a loan of up to $20,000 from the government, designed to be zero-interest and to be paid back at a later date when the situation improves. You have to be able to prove that you've tried every other avenue to keep your house, but already there are over 680 people using it, and it is making a difference.

Thursday, September 11, 2008

The other benefit of moving the bins...

It might just put another 17 metres between most of the cockroaches an us!

Joint Venture - creative investing

I read a brilliant article in this month's Australian Property Investor magazine this week...

The investor in the case study had built a $23M portfolio, not by buying and selling, or renovating... he'd done some of that, of course, but the majority of his money came from joint ventures with people who had big properties.

In this market (which is a buyer's market, and house values are declining), you will probably come across a few people who have to sell, but who are sitting on big properties. Subdividable properties, if you look in the right places...

So this guy goes up to the owners, and offers to put in the money to subdivide the property (which generally doesn't cost as much as buying them and holding them, let alone holding them while you organise the subdivision!). The deal is they "donate" the property for subdivision, and once the property is divided, expenses taken out and sold off, the profit is split 50/50.

Not a bad way to make a buck if you can pull it off!

Tuesday, September 2, 2008

What not to buy - solving the Part 1 problem

A few weeks ago, I complained bitterly that the tenants of the property next door were leaving their bins out the front of our house for a week at a time, knocking them down, spilling stuff everywhere and generally making a nuisance of themselves.

Now, we think we're found a solution to the problem: the first stage has so far begun (slowly) to have an effect.

We keep putting their bins in the middle of the driveway, so they're having to move them and they're starting to get the message.

Going to the next level takes a bit more effort and a bit of money too, but if your council is okay with the idea, they may thank you for beautifying the street while you're at it...

What am I talking about? We have an automated garbage truck that picks up bins on a huge arm, so they need to be left on the edge of the kerb every week. If you're not averse to a bit of extra garden space, and the council isn't either, plant a garden on your nature strip by the kerb where the bins go!

This is now on our "to-do" list for the future (because we're really darned busy doing other things to our property at the moment!), but basically, a good sized tree to grow up and shade the street will add to the ambience and property values in the area (up to 30%, in fact, over the long-term!). Add some beds and plants around it (leave enough space for, say your one or two weekly bins to sit), and you're not only beautifying the street - you're stopping the tenants next door making the front of your property look like a garbage dump week-in, week-out.

Remember that, just like the grass you already have there, it's actually your responsibility to maintain the garden beds out the front of your property, so be prepared for the extra work that that entails (or ensure it's a really easy-care bed!).

But there you go: Problem solved, value added!

Monday, August 25, 2008

The boundary minefield - Replacing Fences

When it comes time to replace a fence, at least in Australia, there's a very clear-cut law that says owners of the property either side of that fence are jointly responsible for the cost of its replacement.

If you want to see the whole thing, go to the Department Of Land's Dividing Fences Act 1991

There's no getting out of it - if the fence is falling down and one party decides enough is enough, the other party has to pay for half of a basic replacement fence (in this case, either timber - nearly unheard of these days - or Colourbond steel, which is cheaper and more bushfire-proof). If you want something more expensive and the neigbours don't agree, you have to pay the difference between the cost of a basic fence and the swanky one.

It doesn't matter if the owner is a landlord, owner occupier, or even a Mortgagee... they still have to pay.

(Note that in the UK and the USA or elsewhere, the laws may be different - in the UK, the different sides of a fence are designated as being the responsibility of a particular property, the idea being, I think that you are only actuall responsible for maintenance of one single section of fence)

This doesn't mean, of course, that you won't have problems.

When we bought our house nine months ago, the property next door was owned by the same bloke who sold us our place. As a landlord, he'd never bothered to replace the fence between his two properties because he didn't care that they were hanging off their posts at and angle of 45 degrees, letting large dogs from one yard into the next to maul the neighbour's children... you get the picture? This guy was so lazy that when the house next door took too long to sell, he let the bank take it off him and sell it for a song and, of course, continued until then to ignore our requests for him to help fix the problem.

Thankfully the neighbours no longer had the big dog... we have a toddler!

When the house sold, however, we had a new owner who spent time and care doing the place up and was enthusiastic to replace the crappy fence. The big hold-up at that point was that the house behind (two sides actually needed replacing) was also a mortgagee reposession, and the bank was flatly refusing to take any part in the expense. You'd think they would have had more sense.

This can be a real holdup to a project if you don't quite have all you need to do the job yourself. Of course, you can do the lot and take them to court, and they'll lose, but how can you make them pay costs?

One genius friend of ours who had seen this before finally told us to slap a legal caveat on the property behind us. No-one could buy the house there unless they agreed to pay for their half of the fence!

Of course, this didn't solve the immediate problem of the cost of getting the thing replaced, but it *did* make the bank's life very difficult because it makes the property doubly hard to sell. The caveat has to be presented with any contract of sale!

We'll see how long it takes them to cave...

Monday, August 18, 2008

Tenants, Rental Arrears and Bond

Okay, it's time to get a bit more serious. No more frivolous posts about whacky solutions to common irritating housing problems (at least for now!)

It's easy to get caught up in the excitement of the actual purchase when you're buying your first investment property, but this is the time when you should be completely on your guard. If you're a first home buyer, it's also important to note things like this. I've made this mistake once, and so has a friend buying her investment - all within six months of each other!

If the property is tenanted, you need to be mindful of a few things:

1. Ask the agent if the tenant has their rent up to date. If they are hedgy about telling you, make it a condition of the contract that you find out before the purchase goes ahead. You have two ways to go with this: if the property is to be leased, you have good reason to request vacant possession. The tenants are not worth keeping if they won't pay their rent. It's also important in the case of the following...

2. Ensure that all paperwork relating to the tenancy is held by the agent, as well as a second set of keys. Again, if they are hedgy about it, make it a condition of the purchase contract that you see the lease, and get a copy of the incoming inspection report.

We made the mistake of not checking these things when we bought our first home. We naturally required vacant possession, but we didn't realise that they were in arrears on rent. What we also didn't realise was that their bond, all its related paperwork, and the inspection reports were all missing because they had taken out the lease with a previous, very dodgy agent who had done a runner with everything. We hadn't minded that the landlord waived the arrears rent in order to get them out early for us (our lease was up and we'd already given notice), but there was a catch:

With no paperwork to back us up, the tenants had left and not cleaned the house. There was rubbish hidden down the back of the garage and shed, and the carpets had not been vacuumed, let alone washed. It was a cleaning nightmare. In Australia, you're expected to wash down the walls as well, when you vacate. In this case it took me three buckets of water to clean the walls in each room... Of course, when we went back to the agent to discuss the bond, they couldn't do anything. This was the condition the house had been handed to them in (tenanted), and they had nothing to back them up or even to retrieve the bond.

3. Whether you are buying to live in a house, or buying to let it out, and the tenants are going, make it a condition of the contract that the bond comes to you for cleaning if the state of the house doesn't match the inspection report they came in on. This puts the onus on the landlord to make sure the house is clean, and effectively gives you a discount off the price that can save you the costs of cleaners, or even debris removal if the tenants have trashed the place.

This applies equally in the case of the tenants being in arrears on their rent. Under normal circumstances, their bond returns to the vendor if the tenants are in arrears. This leaves you with a gaping hole in your budget (especially if you're renovating before you re-let the property, or after you've spent your last pennies on the move and the paint to freshen the place up) when you have to spend a week cleaning, or paying $500 for a one-off full-house clean by professionals, or, indeed, hiring skips!

In the case of the friend's investment property (where I project managed the renovation), time was wasted and costs raised immensely because the tenants were both in arrears, and they trashed the place. We had to clean, hire skips, replace damaged doors (because they were annoyed at being evicted...but we could see before we bought that they were trouble and had to go.). The lot!

Avoid the trap, and check your facts.

Sunday, August 17, 2008

On the problem of people parking across driveways...

Got an issue with people parking in front of your driveway?

An old friend and flatmate (when we lived in Manly, which is one big parking issue in itself...) had a solution:

Y'see, when he complained to the police about it (thinking, as you do, that parking across people's driveways is illegal), he found that, actually, in the State of NSW, it isn't. People can block your driveway as much as they like.

Rude though it is...

Just gently let their tyres down for them. No need to use a knife. Just make it inconvenient for them to get the tyres pumped up again. Do it as frequently as you need to.

They'll stop.

And the police won't complain. They think the law in this case is dumb too.

Friday, August 15, 2008

What to do about the last post...

Of course our new solution, at least to tackling the bins-in-front-of-house problem, is to get a big broom, and pile all the bins and their disgorged garbage in the middle of their driveway. Maybe then they'll go pick on the house on the other side. :)

Thursday, August 14, 2008

What not to buy: Part 1

I've just figured it out. I will never buy next to a block of apartments again...

Two reasons:

THE BINS: 20+ bins every week don't fit along the front of their property, so they wind up spilling over into the front of your property... and then they get left there long after collection day. They also get knocked over by the garbage truck, or by the hoons driving out of their apartment block, and the filth left all over the nature strip, driveway... gross...

and also

THE BINS: This is where it really hit me. If you're in a cockroach-prone area (and most people aren't lucky enough not to be...) they are attracted to the 20+ bins etc... And then they come into your house...

And that's if the hoons in their hotted-up cars aren't enough for you.