Hi there
several years down the road from a separation, and with an average PAYE income and child support that fluctuates with the amount that I earn I’m now thankfully in the position of being able to return to the real estate market. It’s my one chance. I’ve been reading the books that talk about houses as financial liabilities unless they’re positively cash flowed. I am confused about my direction ie. to persist in renting and start building an investment tree of positive cash flow houses (which will be the low end of the market, low capital growth and with a long time between purchases as I have to save up for the next deposit and costs.) Or, to buy a PPOR house/townhouse/unit in an area of SE Qld (where I live) with probably higher capital growth and wait until I can borrow against the PPOR for the initial positive cashflow investment. Do most people starting out borrow against their house to get started? Also, Rolph’s book says that it’s much harder to get a loan for a commercial property if the loan amount is >50-60% of the value of the property. Why is this so when the commercial properties I’ve seen are often cheaper than the residential homes in the same area?
Hi Skeeta, welcome to the forum! Renting vs buying must always be a personal choice, depending on how much you value the feeling of owning the place you live in, and being able to hang whaterver you want wherever you want. My wife would certainly never have it any other way, but I wouldn’t care if I were renting my home. I would take comfort in knowing that I didn’t have to worry too much if termites started munching the walls (as they have done here!). It will usually be much cheaper to rent a house in SE Qld than it will be to buy it, but you don’t get any capital gain by renting your home. You would probably be better off financially in the long run, by renting and investing into IP as early as possible. (Will and Del sold their own home to do this, which is a big commitment).
You would need to stay cash flow positive as much as possible, as negative gearing for tax benefits are far less attractive on an average wage.As for commercial property, I assume the ratio reflects the bank’s perception of the saleability of CP, ie with a more limited market.
Just a few thoughts on this Sunday morning when we both should be staying in bed a bit longer.
Jim.Hi Mosquito, glad you’re getting started. From what I read, eg API magazine, net, forecasts etc. SEQ continues to go up. We have a unit there as well and I think it’s a good area to buy but do your research and get all the info you can. Don’t forget the body corp with the units. Check your prices on the real estate sites and pick up all the real estate books from agents – the ones that are out for the taking – so you’ll have an idea of prices.
We have used several ways when purchasing property, borrowed against our home, used equity line of credit for deposits and then financed, borrowed the deposit and paid it back after finance has settled, and have an equity L/C available to purchase to a certain amount if we see a property to buy, renovate & sell. The latter we’re doing at the moment. Research and read everything on the forums & elsewhere, work our your strategy, set your goal and go for it.
AnnaCould you not set up a family trust and claim rent on the property you live and rent as a tax deduction?.Providing you have Ip’s in the trust [
]So how would the rent be deductible if you had a family trust???
Aportion of the rent could be tax deductible if you had set up a home office to manage your IP’s howver not sure you could claim all the rent.
Hi Mosquito,
This is one major problem with positive and negative cash flow when you are paying child maintenance.
You have probably already experienced the calculation for every extra dollar you earn. $1 at the marginal tax rate (say 50% with Medicare), then 18% of gross paid from nett for the first child leaves you with 32 cents in your pocket. So, $50 passive income a week, leaves you $16.
If you buy a negatively geared investment, the loss is added back to your income for the purpose of child maintenance calculations.
I still like the idea of positive cash flow, but it needs to be substantial in this case, as you can’t afford a marginal income in a low growth area. Your break even point will be realised sooner with an interest rate rise. So what does that leave you with? Say, neutrally geared and no growth? Don’t sound too good to me.
It’s a tough one, but perhaps the answer lays in the long term ownership of a PPOR in a growth area. Your work commitments may restrict where you wish to buy also.
Your child or children are being cared for and you can look forward to building equity to use once your child maintenance commitment is nearing it’s end.
Regards, Phil
Hi Mosquito,This is one major problem with positive and negative cash flow when you are paying child maintenance.
You have probably already experienced the calculation for every extra dollar you earn. $1 at the marginal tax rate (say 50% with Medicare), then 18% of gross paid from nett for the first child leaves you with 32 cents in your pocket. So, $50 passive income a week, leaves you $16.
If you buy a negatively geared investment, the loss is added back to your income for the purpose of child maintenance calculations.
I still like the idea of positive cash flow, but it needs to be substantial in this case, as you can’t afford a marginal income in a low growth area. Your break even point will be realised sooner with an interest rate rise. So what does that leave you with? Say, neutrally geared and no growth? Don’t sound too good to me.
It’s a tough one, but perhaps the answer lays in the long term ownership of a PPOR in a growth area. Your work commitments may restrict where you wish to buy also.
Your child or children are being cared for and you can look forward to building equity to use once your child maintenance commitment is nearing it’s end.
Regards, Phil
Jim, Anna and Phil
thanks for the comments. Have a good week.
Mosquito
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