Hi everyone, first post, just wanted to give a few words of encouragement to those just starting/ thinking of starting a family.
Firstly I will tell you a little about us. Hubby (36) and myself (33) are the proud parents of 5 kidlets, ages are 13, 9, 7, 5, and 3! We brought our first house when I was 20 (the cheapest house available in Perth at the time) just after first child arrived, renovated and sold that one and then another in Tasmania, all while having a further 4 kids and 90% of the time on one very average wage (usually around $30k), but Family Payments help – no FHBG then either.
Then we made the best decision in 2002 to buy a block and move two houses, joining them with a huge extension, total cost $195k but now valued at $395k, this was intended to be PPOR but we were struggling to make ends meet in Tassie, so we packed up and moved to WA for better job opportunities. So we rented out that house for $310 per week (plus good depreciation), which is positive because the mortgage is low.
We also have a further 2 properties in Tassie (one is a JV), one slightly positive and one slightly negative – overall position positive.
Currently we run our own fencing business in Perth, but hubby works nights also as a truck driver. I work whenever I can now also, family day care is a great invention!
Fortunately for me I am very stubborn, and was never prepared to give up the dream of raising a family in return for the almighty dollar, but also not prepared to give up the dream of buying property and improving our financial situation – it is possible to have both! But be prepared to juggle!
Our goals this year are to purchase a further 3 properties.
I would like the opinion from some of you more experienced property investors, we are thinking about buying out the other partner in the JV property (all 3 are located in Launceston) and have two questions:1. We can purchase for $160,000 with a 7.1% gross yield (and receive $10,000 cash in the deal), but are worried about tying up too much “borrowing power” in the one state (market likely to remain fairly flat there for a while), what do you think?
Are we better off to purchase elsewhere in the immediate future( currently investigating Frankston, Eagleby, Townsville), and keep that one as is?
Should mention that we currently hold the properties in our own names and need to look into trusts.
2. Also should we sell the first property to release the $250k equity to purchase further property (no CG due to 6 year rule), or hold for the cashflow, as it is possible to spend $5k there and convert back to 2 houses returning $500 per week ?Any suggestions would be greatly appreciated. Cheers Angela.
Hi Angela
Firstly welcome to the foum and a big congratulations to you both to having the drive and motivation to get ahead.
Couple of questions I would need answered before posting a point of view.
1)Where you currently reside in WA is the property rented or do you own the home with a loan secured against or unencumbered ?
2) You mentioned that the house in Tassie was intended to be your PPOR after the extension. I am assuming you actually moved into the property as if you did not then the 6 Year rule may not apply and any sale would trigger a CGT event.
3) You mention that for you future purchases you may need to consider a Trust structure. I am assuming that you run your fencing business under a company structure with possibly a DT as the Trustee.Remember you are unable to claim any negative geared lnterest through a DT and an HDT maybe the way to go. However in saying this I would need a complete break up of your loan position to make a recommendation on loan structuring.
I cannot see why you would look to sell the first house in Tassie even if does free up some capital as utilising the equity on the property would have the same effect and save you money in sale costs. Certainly look at spending money and increasing the rental return.
As for the new properties I am not totally familar with the areas (other than Eagleby) so will leave it for others living in the towns or areas to give us more of an idea what is happening there.
Happy to offer a solution or idea on the loan side with a bit more information.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Thanks Qlds007, to answer your questions;
1. We are renting in WA, are delaying owning PPOR at the moment in favour of further investing, but also interested in knowing how others are able to “rent their own investment property?”
2. We lived in the TAS property 12 months before leaving there
3. We run our business as a partnership, our accountant didn’t think it was necessary to start a company at the time. Have since changed accountants and new one suggested a family trust to deal with the income side of things (5 kids), but my own investigations so far suggest that this is a less effective trust structure to deal with property investing, so I am just starting to read up on any info I can find on Hybrid trusts – hard to find info thats in basic english, if you know what I mean.
Would like more info on how a trust structure is viewed by the banks when purchasing property – in Steves book 3 he touches on borrowing in a trust with him signing on as a guarantor to secure multiple loans – wouldn’t serviceability still be an issue as a Guarantor, requiring proof of income – how is this different than borrowing in your own name?Thanks Angela.
Angela
It is unlikely you would run a business as a HDT but more likely to a DT with you both as personal Trustees.
This combines a simple asset protection structure as well as an opportunity to distribtute income to your children and other beneficiaries come June 30.
However when purchasing property assets you would mroe likely use an HDT. Many lenders have a problem when a Trust structure is involved but a good MB should get around that.
You are right that serviceability can still be an issue as the Trustees income still needs to be considered when assessing a loan. Certain lenders do however offer lodoc / nodoc loans when a Trist is involved.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Thanks Richard, still trying to understand all this trust info – If serviceability is still an issue, then how does buying in a trust allow you to purchase more properties, than buying in your own names?
I understand it provides you with more asset protection.
Would a trust still be beneficial if we sold the business and returned working for wages?have a look at Dale GatherumGoss’s book Angela, he seems to simplify the structures somewhat and the book iswell worth a place in our Library IMO
http://www.gatherumgoss.com.au
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating Calculatorsif you use the link it should be http://www.gatherumgoss.com
the book is at http://www.gatherumgoss.com/trust_magic.htm I thinkmight get myself a copy !
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