Hi there all,
I have been reading over these forums for a while now, and I’m pretty impressed at the level of know how and the creativity of people who subscribe.
I have a dream, but I’m not sure how to exactly put it into play. If anyone could offer any suggestions or real life experiences, I would love to hear them. I can get the negatives from the majority of people who don’t understand, I would like to hear what has actually worked for other people.
The Dream.
I want to quit my current high stress engineering / project management job, and work full time on my real estate empire. This empire currently consists of 3 houses in the Perth area that I have built up over the last 3 years.I would eventually like to project manage my own developments, but for now its gaining equity by adding value (renovating) a tired but well located house, after my full time work.
I am interested in anyone who has taken the plunge and quit their job, on the knowledge (hope) that they can make sufficient money (to draw an income) from renovating a house. My intention would be to work full time at the house, living and renovating from a pool of money, then sell the newly renovated beauty (maybe 6 – 12 months later) to realise the profit, pay myself and put the remainder (including deposit) towards the next venture. I would do this 2 – 3 time to build capital quickly, and then branch into developments when I am a bit more cashed up. Each house would be called my PPOR to reduce any CGT obligations.
I am a very handy renovator so I would do much of the work myself, I have already done bathrooms (smicko), kitchens, small extensions etc, and have the confidence to tackle any job, but I also know when to call in the professional help. In fact I would love the change of pace for a year or two, working with my hands rather than my head.
The thought of not having a regular income is a worry to someone who has worked all his life (so far). I am 35, and don’t want to be working behind a desk dreaming about “what could have become…” ten years down the track.
Thanks in advance,
Damo.
(nearly forgot to choose a smiley face)[comp]hi damo,
Can’t knock you for your drive and ambition!! Good on you!
I personally have not ventured down this path. Thats not to say that I would gleefully drop my high paying, highly stressful job at a drop of a hat if i had a string of ip’s making money!!!
I think it takes great big kahoona’s to chop off your only stream of cashflow to take up renovating full-time. Could you not do a couple/few reno’s first while working at your ft job??? Not sure about your comments about having multiple ppor’s too.
My advice damo is this. Start off small. You already have a growing portfolfio. Build on that. best of luck to you.
Cheers
Eric
Thanks for your encouragement Eric,
Sorry about the confusion, by multiple PPOR I meant, I would buy one as my PPOR and then sell it to buy my next PPOR, otherwise I would be slugged for CGT.
Damo.
the biggest problem with developing/ reno’s etc is cashflow. Typically people underestimate the time frames involved. When every problem has been ironed out, every consultant etc (except the REA) has been paid and assuming your head is still above water, THEN you can get paid (a month or so later allowing for settlement) – assuming you have made a profit that is!
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Originally posted by Damo:Thanks for your encouragement Eric,
Sorry about the confusion, by multiple PPOR I meant, I would buy one as my PPOR and then sell it to buy my next PPOR, otherwise I would be slugged for CGT.
Damo.
The ATo can still slug you with CGT if they think you are in the busines of doing this. It would take then a while to realise this though!
Terryw
Discover Home Loans
Mortgage Broker
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
And, don’t quit your job too soon. It makes it harder to get finance without a job.
Terryw
Discover Home Loans
Mortgage Broker
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
How can the ATO slug you for renovating your PPOR and selling before buying another if you live in each property while renovating?
Robert Bou-Hamdan
Mortgage AdviserHi Damo,
Congratulations on having a dream and being prepared to step outside the negativity of those that don’t understand. However, as you are probably aware, to be successful in addition to a dream you need to have a system that you can apply to an activity which will ultimately free your time through developing a residual income.
However, it appears that your thoughts/plans involve substituting one active, predictable & reliable income for another income that is unpredictable and still active in the short to medium term. If things go astray where will cashflow come from to allow you to complete your projects?
I admire your determination and have no doubt that you will succeed. All you need is to keep an open mind and look for the options, as there are many out there
As a professional I have spent many years deriving an active income working many hours per week, but now through some creativity have resolved that situation. Robert Kiyosaki’s book called Cashflow Quadrant was a great help.
Good luck
pr
Originally posted by The Mortgage Adviser:How can the ATO slug you for renovating your PPOR and selling before buying another if you live in each property while renovating?
Robert Bou-Hamdan
Mortgage AdviserIf they think you are doing it as a business, they can. It would depend on how many times you h ave done it and how quickly, and possibly the reasons you give.
Terryw
Discover Home Loans
Mortgage Broker
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
Thanks to all who have replied to date,
To make the cashflow issue more bearable, we have the options of my partner returning to work (pity she is great with the tools), or drawing from a pool of cash set up for this purpose (which would need to be repaid on the sale).
I would only do this type of activity 2 -3 times so the ATO don’t see it as a business, which it isn’t. I’m really renovating my own home and selling it within 6-12 months.
I have heard / read about a number of investors that use low or no doc loans. What sort of proof of income do I need have ?
Thank for the feedback.[ears]
Originally posted by Terryw:Originally posted by The Mortgage Adviser:How can the ATO slug you for renovating your PPOR and selling before buying another if you live in each property while renovating?
Robert Bou-Hamdan
Mortgage AdviserIf they think you are doing it as a business, they can. It would depend on how many times you h ave done it and how quickly, and possibly the reasons you give.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]correct, you don’t want to get too carried away with claiming your PPOR exemptions. what is reasonable is the big question….
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Originally posted by Damo:I have heard / read about a number of investors that use low or no doc loans. What sort of proof of income do I need have ?
You do not need any proof of income. That is why they are called Low Doc or No Doc.
To use them, you will find you are usually restricted to a maximum 80% LVR (Loan to Valuation Ratio). Also, declaring an income you do not have may result in audit byt the ATO down the track, possible fines, jail time or bankruptcy. Talk to a mortgage advise first.
Robert Bou-Hamdan
Mortgage AdviserHi Damo
I’m getting a little confused here. You want to quit your job and you need to derive enough income to survive.
You want to renovate your PPOR and onsell for a capital gain and then purchase another one.
You will only do it 2 or 3 times so you don’t have to pay CGT.
What’s the difference between paying tax on profits from trading properties and paying tax on your wages. If you are going to make a business of renovating properties then do exactly that, otherwise remain in your job and do it part time only.
Cheers
JeffHi Damo
Love your determination, and encourage you to keep thinking of Steve McKnight’s advice to “Take Massive Action Immediately”.
HOWEVER, while doing this please reflect on the fact that Steve & Dave kept their jobs as accountants while they built up their “130 Houses in 3.5 years” property empire.
I know many property multi- millionaires who still keep their day jobs which have nothing to do with the property industry.
My wife & I have what we consider to be a modest portfolio of 17 IP’s, and we’re working on our first 30 x 1.5 acre block subdivision. And guess what?…
…To keep growing our portfolio into more SERIOUSLY impressive figures, I still need to keep my job as a schoolteacher.
Happily, I love teaching, and am quite content to keep doing it for another 5-10 years. In fact, we’ve deliberately set ourselves up to just need one more round of this new property cycle to retire very, very comfortably indeed. Will it take 7, 10, 12 or 14 years before the next property boom doubles the gross value of our portfolio? Haven’t got a clue, but one thing’s for sure, it’ll happen sometime, right? And when it does, you’ll hear our whooping YAHOO!! YAHOO!! all the way from sunny Qld.
You’ll get there too, Damo, just like we will. Be patient, and keep thinking outside the square.
Cheers
Greg
PS: Re doing your own renos, I remember my father’s saying: “Manual Labour’s a Spaniard!!” The really serious success stories on this forum and on http://www.somersoft.com.au hardly ever lift a tool on their own projects.I thought the whole concept of LEVERAGING was to use OPM and OPT [biggrin][biggrin][biggrin]
Oh, and by the way, have you read:
~ Peter Spann http://www.freemanfox.com.au
and
~ Steve Navra http://www.navra.com.auStrongly recommended. Don’t do anything until you’ve dived thoroughly into their worlds, okay?
Great Post Greg and CONGRATULATIONS on what you’ve achieved so far[specool]
Damo..i’m also of the opinion that if you did this more than a few times the ATO would classify it as your business and that you were a “Property Trader” .. you’d also be putting your eggs in the one basket.
IMHO you’d have to go for the higher end of the property price range and essentialy look at finding the worst house in the best street scenario (think the RENO brothers the other night on TV) every time and as AUSPROP said, your holding costs would be painful..you’re eating into your cashflow untill you can sell the property (hopefully for what you want).
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorOn track to leave the job. Of course in the long journey there, I am but on the first few steps. But for everyone, every journey begins with the first steps.
Lachlan.I wonder if you have worked out what your value is per hour at work and whether you have actually quoted with tradesman what their rate is per hour. It may be that the tradesman may be able to complete the job quicker than you with their skill and trade accounts while you are earning the equalivant at what you do best. Perhaps this way may be the best option until you have the cashflow from your real estate to be able to invest full time
Last November I left my full time position (which was not rewarding) and took the plunge. Time is something we cannot have again. We can make more money, but we cannot make more time. You would be no further behind if you set a goal for yourself and set about a plan of what you need to achieve. Take a look after 3, 6 or 9 months and see how you are travelling. You seem to have it all worked out, but stepping out of your comfort zone is not easy. When I left work, I was asked what are you going to do. I told them I was going to be an entrepenuer.
Life is about choices, you have an opportunity to make a choice – it is up to you.
Worst case scenario – you could go back to what you were doing previously – but why would you want to. Do won’t know how you could of gone investing full time if you don’t have a go.
Take control of your life’s journey.
All the best in your endeavours.
A nice place to relax and enjoy life would be to go north of Perth to the Ninagloo Reef – now that is really heaven.
Ask the question – what do I want to do? –
Don’t ask the question – What does everyone else want me to do?
Emjoy the rewards from making the decision which is right for you.
Achiever.
Damo,
Good On YOU!
I’m sorry I don’t have any real experience at property investing full time however I must say that leaving my job to invest in property full-time is a goal I have for next year, so it inspires me to hear you talking like this.
My only advice I have for you is to keep doing your research and reading books or if you get a chance go to one of Steve’s seminars as he has some great advice.
Apart from that, if you want it badly enough and are willing to make sacrifice’s along the way then nothing is standing in your way!
I currently have 5 IP’s and own my PPOR and have been steadily growing my portfolio. I am turning 35 this year and my biggest challenge is I know if I want to get there quicker then I should sell my PPOR so I can inject this into more properties and I will achieve my goals quicker but it comes down to choice and I suppose I’m too comfortable in my own home right now. One day I may step out of that comfort zone.
I understand if you have fear about leaving your job because I too have thought of this and how I will feel come next year and its time for me to leave but the one thing that brings me back to earth is “Hey were only 35!! Worst case scenario you can start again but if you never give it a go, you may regret it forever”.
You have to be comfortable with your own decision, but good on you I say!
Be sure to let us know what you do!
Stay in touch
Cheers
Fluffy
Damo,
You sound like a kindred spirit!
We have built up considerable equity (>1.5M) by doing just what you are doing, and we’ve found in blue ribbon suburbs is easier (no glass ceiling for the finished product and more likely to be an emotional O/O buying) True, we did the first two around our jobs initially, and probably not best time leverage, but we kept doing it just because that’s what we love doing and who we are.
We are also 35, with two kids and about to take the “full-time” investing plunge. We fully expect that the time leveraging will need to improve on the development projects, but will continue to reno whatever we are living in…just can’t help ourselves. This will slow down the turnover of PPOR anyway and this gives us exactly the CGT advantages you were mentioning.
We don’t enjoy our PAYG jobs, so the thought of slogging it out for any longer is not palatable to us, and both currently cut back to p/t, but scary as all get out to finally make the break!
Without income, it seems we are forced into low doc, 65%LVR lends but the interest rate is not too bad (about 7.5%) and it gets us going with what we love doing and are good at.
We wish you all the best and will watch your posts with great interest.
Success comes from CANs not CAN’Ts! Tell yourself you CAN and you WILL!
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