Initial Investment Strategy

hi zyleth,
nice in-laws!!!
If you are looking for quick CG then i would not be looking at sydney.
my advice to you is if you want to get into to the IP game then continue to rent while putting all possible cash from your income into positive cashflow property, if your goal is financial indepence a trip to europe thats going to set you back 40k will not really help things!!!
Travel europe in comfort when you achieve your financial goals!
all the best

[medieval]

Great post Calvin.
Methinks the folks are well meaning but may from the old country or at least thinking old I’d say.
Zyleth it sounds like there are 2 conflicting agendas here. The folks are angling to keep you in OZ while you want your cake and eat it too! (sounds like myself)
Is my radar working here or am I way off? Am I being too blunt about the family dynamics? Or too wayyyy wrong perhaps…..[ohno2]

Giddo
http://www.standrewsplace.com.au

KNOWLEDGE IS POWER

Big Z,
the maths isn’t that complicated, if you pay $370/ week on rent = NO TAX DEDUCTION!
if you pay $370/week on your Mortgage = NO TAX DEDUCTION!
BUT
if you buy an IP adn the mortgage is $370/week ALL bank fees and charges related to the investment as well as the interest accrued on the mortgage IS TAX DEDUCTIBLE! Meanwhile you rent a house and pay (up to $370/week) =NO TAX DEDUCTION!
However your cashlfow now looks a little different:
$ 370 going out for rent – no change here!
$370 going out to pay the mortgage – oops your down $370!
$370 coming in as rental income – woohoo back in neutral teritory!
Now your Taxable income is bigger therefore you’ll pay more Tax – oops loosing money again!
Now all the interest you pay, the fees and charges + Depreciation all come back to you at the end of the Financila year!

Now I have over simplified this, but any good Mortgage broker/ Accountant will show you how this will apply to your case. Depreciation Schedules are done by professionals and you’ll find all of them represented here on this forum!
Even if you come out neutrally geared (income = expenses) you will be in front in the long run!

Now about you waiting for equity to grow, from all of the posts I have read RE: NSW, you wont see any CG in the near future as the market is going thru a slow down (correction if you will) and itll take some time for the market to pick up again – just be aware of that!
All honesty, read, read some more, learn all that you can and in the mean time save a deposit ,together with the $20K from your family (that’s $20K more than most of us had!) you’ll be in a prime position to buy when you come accross THE property.

Any chance your wife can pick up some work – even if you only use it to save for a deposit? This’ll greatly asssit in fast tracking your investment progress!

Hope this has helped some?! See what you think.[biggrin]

Cheers
C@34

Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas Edison

Don’t let reality be the benchmark for your Dreams

Just reading this again, you’re getting a lot of advice about doing IP for tax purposes. But this guy (sorry if girl) has two dependant kids and is the single earner in the household. He’s only got enough income to qualify for $250k loan. I’m thinking tax deductions are the least of his problems.

IMO tax minimisation strategies only start to really be worth the financial engineering when you are deep into the top marginal rate of 47.5%. And you can bet on a change in the threshold level of this rate come next years budget anyway (or at least before the next election). Remember, you can only defer tax, not avoid paying it altogether. If you claim deductions on interest cost you pay CGT. If you live in the place you get CGT free. You can’t avoid tax, just move around the time when you pay it.

A property is an investment whether you live in it or not. As long as you are paying about the equivalent of your $370 a week in interest payments instead of rent you are about even but have an upside in being able to do improvements to the house and increase teh value. Sometimes a bit of gardening and painting can make a big difference.

If I were you I’d be planning to get that $20k and $7k FHOG while the money is on the table. Things change so make a plan to access the cash NOW. If someone was going to give me $20k but said I had to live in a pink house, I’d be down at the hardware stores picking out the particular colour shade. If they want to give you the money and say its for a PPOR, then that’s what you should get. You can moan about having conditions attached to the cash, but it is their money so take it or leave it, but it would be rude to try and negotiate with them.

Find yourself a good house with good rental potential, something a bit untidy that needs some minor work. Something that has been a renter and is now ‘tenant worn’ might do the trick. Buy it, move in, and do some touching up and fixing up. Stay there for 12-24 months, then either:
– rent it out and buy another PPOR
– rent it out and go to germany
– stay there, revalue it and use the equity and buy an IP.

Either way you have got the money from the in-laws, you’ve got into the property market, you are building experience and most importantly YOU HAVE TAKEN ACTION. Nothing happens until you start.

Forget tax manouverings until you are bringing in the cash in big lumps. Even then do it as the icing on the cake, not the cake itself.

_____________________________
We all need somewhere to live – but do we all need a CBD apartment?