Ok. We are all young property investors. But one day we would all like to own the dream house. Double storey, four bedrooms, study, movie room, spa bath, near beach, station, double garage, near good schools etc. A home to be proud of.
How do we get there?
This is my stategy. Live in a median priced home nearby with a value of approx $300k. As your equity grows buy a house nearby or a unit in the area you want to live in, at say another $300k. Then a few years later buy another house or unit in the area for say $300k. Then in say 5 years you sell those three homes for $1.5m and say owe $500k and are left with $1m which is what the $700k home will cost in 5 yrs time. These are rough figures and may vary depending upon how much and how often you can make extra repayments.
Sure there are capital gains tax consequences but that will only effect the final amount you have. But surely thats better than paying alot of non deductible interest.
Any thoughts? Or should I just buy it and struggle with the payments and hope that over time the property and my income will increase in value and the mortgage will not seem to be so high compared to the property value. Is that not what 80-90% of the population does.
Am I the only one doing this? Any others?
Bought a house (PPOR) say $300k with decent land size for future built. Buy 4 IPs (2 -ve, 2 +ve). After 5 years sales 2 -ve. Knock down your PPOR and rent. Used cash from sales and build your dream home. if you have some cash left over buy 2 +ve. if you don’t draw down equity from your 2 +ve and buy another 2 +ve.
5 years Results:
1. Your dream home (PPOR)
2. 4 +veYour thought please
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Hi
That sounds good. But thats assuming you can afford to buy an old house on a good piece of land in the area you actually want to live in.
Old houses still go for around $500k in the area I want to live in. So its not possible for me to do that. Having a family and kids, its a bit hard to live in an old house. They still want some comforts.
Yack,
Your strategy is great as well. The one I posted above is the one I am applying at this moment. Might change in the future who know?
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Kool
What about somethign slightly different.
Buy your $300,000 home, pay down as fast as you can, then buy your dream home using the equity. Rent this dream home out, keep saving, paying down your PPOR and maybe even buying more property.
Then sell your PPOR, CGT free, use the money to pay down your dream home which now becomes your new PPOR. So far no capital gains tax. Then maybe you could sell one of your other properties and use that to pay down the loan on your PPOR. Then use equity to buy new IPs, and keep going.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Sounds good to me. Any other ideas? Anyone doing anything like these ideas? Surely you must reach a point one day when you think you deserve to live in a nice house.
I want to keep my eggs and eat them too.
Originally posted by yack:Ok. We are all young property investors. But one day we would all like to own the dream house. Double storey, four bedrooms, study, movie room, spa bath, near beach, station, double garage, near good schools etc. A home to be proud of.
…..and are left with $1m which is what the $700k home will cost in 5 yrs time.
You obviously don’t live in Sydney yack! My single story, 3 bedroom (two small ones), one and a half bathroom, pool, no spa, no study or movie room, single carport, 20 minutes to beach etc etc is worth close to 7 figures now.
For what you are proposing, in Sydney would be worth close to $2m now and in 5 years – $3-5m who knows?
But I must say I do love the idea.[
][]‘Eat rich food, barbeque a yuppie’
Well, I am talking Melbourne. We have not yet really embraced the beach concept yet. I live presently in a beachside surburb about 25 kms from the city (50-60 mins drive in peak hr). My home is only 10 mins from the beach pushing a pram (about 400m) and the houses go for $360-$380k. We are even closer to the railway station. But I want to live a few surburbs closer to the city where the good schools are. (Mentone).
Anyway in comparison to Sydney, these Melbourne beachside surburbs are undervalued. I cannot work out why. I have 2 kids under 5 and we went to the beach the other night after dinner and had the whole area to ourselves.
I better shut up before it gets discovered. And just in case you gunna say its the weather – it rains less here than Sydney and our winters maybe a little colder but I have had some great walks along the beach during the colder months.
Anyway – I believe that these surburbs will catch up in price with other surburbs around the world that hug the beach.
Sounds like a good spot to look at. Are you one the Peninsular or are you west of Melbourne.
‘Eat rich food, barbeque a yuppie’
South – just a little over half way between the city and Frankston
Let’s be honest, Melbourne’s beaches are crap compared to NSW and Qld… to get decent beaches you have to go down Torquay way or the back beaches on the Mornington Peninsula… the speccy water views are down Mount Martha way, but I must admit Yack, your area probably has the pick of the bay’s beaches IMHO. The ones, even around Beaumaris etc, aren’t much chop.
cheers
rYeah – your view is shared by many. But I still dont understand it.
As a kid the beaches here were a little dirty with the dredging. Thats stopped so the beaches are very clean now.
I drive along beach road to work, so I reckon I have one of the best scenic drives to work in the world. It certainly beats the drive I used to have to work in san francisco along the 101 freeway.
But things are turning. Aspendale used to have a caravan park accross the road from the station and on the beach. Thats gone and they are currently building $1m townhouses. You can still see some houses along beach road that did not even face the beach. Its almost as if they were embarrassed they lived accross the road from the beach.
Yack,
I like the fact that you have a plan[
], but I reckon there are some flaws in your logic[]. They relate to the growth assumptions built into your figures.
It seems your proposal is something like:year 0 Buy PPOR at $300k
year 1 Buy 1st IP at $300k
year 3 Buy 2nd IP at $300k
year 5 Sell all three for $1500kIf that’s right, then I make the implied capital gain about 14.5% each year.
Most people would doubt that the next 5 years would deliver this level of growth after the high levels of recent years.
Worse still, even if you do get this sort of gain, the dream home itself will appreciate at the same rate. It will be worth $1380k, so you won’t have made much of a dent in the mortgage you’ll need to buy it. I figure you’ll still owe most of the $900k you borrowed because you’ll be servicing two reasonably heavily negatively geared IPs. That means you won’t be paying down the debt too much, so you’ll have $480k equity (ignoring capital gains tax). That leaves a new PPOR debt of $900k, for a house you could now buy for $700k
I know I’ve made assumptions about your situation. That’s because there wasn’t much detail in your proposal. If the assumptions are wrong the numbers will be wrong. But the principle will be right
Quoted From Terry:
…Rent this dream home out, keep saving, paying…I agreed with your strategy, but by the time you return to the quoted above It will look like an ex housing commission. I could be wrong, but if you don’t try it you never know.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Raymondo,
I suppose you’re right, but what is your strategy then?
You found the problem, but what is the solution?
Many people can find problems but not many can find solutions
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]
][
], but I reckon there are some flaws in your logic[
]. They relate to the growth assumptions built into your figures.You must be logged in to reply to this topic. If you don't have an account, you can register here.
