Hi gang,
I have been reading the forum with great interest for the last week or so and have been very impressed with the quality of information on here. I have already confirmed something concerning my family trust that I wasn’t previously certain about thanks to this information, which is excellent. I am also very thankful for a lot of the information on US investment which I happen to be interested in (particularly British Buyer post re: Miami which i stayed up until about 4am last night reading – yes I lead a very exciting life
) I read 0-130 properties in 3.5 years maybe 12 months ago and got a fair bit out of it, but at this point I do not believe I am ready to commit that amount of time into properties)My situation is as follows:
Personal:
30 yrs old
Engaged to a wonderful girl
Currently in PerthFinances:
Employment Income ~150k pa + bonuses, WG working part time and studying ~40k pa
PPOR in Brisbane bought in 2008 for 475k – Recently valued at 672k, owing 371k. Currently rented for 500 pw while I am away so around 8k negative pa but comfortable with that.
ASX Investments (through DF Trust primarily) 260k..100k IO Line of Credit invested in whole through DF Trust (Thanks for confirming my suspicions about having to draw up minutes outlining loan – while not being able to claim all of the interest is annoying, the tax differential saved by being able to distribute the solid gains made since investing it to WG by far outweigh this annoyance)
40k IO Line of Credit for personal use (30k balance owing)
~10k of non deductible Credit Card debt in a balance transfer 12m 1.9%paGoals:
Financial Freedom by 40-45. Nice car, nice house, nice lifestyle etc. I don’t need to own a 50mil yacht for the sake of it, freedom is what is most important.
I enjoy my job and would be happy to continue to do it, but knowing I could walk when I felt like it, to spend more time with family etc would be ideal.I recently spoke to my Branch manager back in Brissy and it seems I am able to access around 300k on top of current borrowings. I am not particularly keen on increasing my exposure to the stock market, but after reading all the doomsday articles about the housing “bubble” etc in the media there is a slight concern about purchasing another property at this point as well. After speaking to a number of local people over here believe the Perth market is still quite undervalued in places leaving potential for good gains in the coming years so I think if i can find a place that is close to neutral as possible without an enormous amount of stress i wont be worried if the market fluctuates etc.
So based on this I am trying to find something within 5-8k from the city to limit risk of market fluctuations. I don’t believe I have enough for a house and land so a sub 300k 1/2 bdr unit might be the way to go, provided I can get something as close to neutral as possible.
I have settled on Victoria Park for a couple of reasons. It doesn’t appear to be that expensive relatively considering its distance to the city (within 5k), it doesn’t appear to have had much development or money spent on the area (yet) and most of the places I am looking at have room for small improvements (painting, new kitchen bench tops etc). Some of the places I have seen (granted they are under 50sqm) are pretty close to, if not positive from a cash point of view but these appear to be a dime a dozen.
By now I’m sure you’re wondering what the point of my ramblings are, so I will get to it.
I am looking for:
a) General feedback on the structure of my finances so far and if there is anything I can do to improve this..
b) General thoughts on investing in a unit – knowing land is infinite, but unit blocks can always go up. There seems to be a fair bit going on at Northbridge with the rail going underground etc, and also a bit in East Perth. There is also that massive chunk of land near the WACA that looks like it has potential for a billion units to go up.
c) Thoughts on investing in a sub 50 sqm 1bed unit that would be cash flow positive (even though i may have to put a little more than 20% into it). Future sales potential etc.
d) Alternative areas/investment ideas?
e) Suggestions for structuring a new purchase. It will be interest only for cash flow purposes. My only purpose for the trust was distributions. I have no need for asset protection. Me? Trust? WG?I sincerely thank you all in advance, and congratulate you on a fantastic forum! I hope this is not too much to ask for a first post.
Thanks
B
Hi Quattro,
You have heaps of questions! I will try and answer as many of them as I can with the info provided.
a) Have you only spoken to your branch manager at the bank about the amount you can borrow? I can't give you finance advice, but from clients of mine with similar circumstance we've been able to get a little more funding. This will increase the options you have for investing. As a general statement, having your lending with one lender often causes them to cross assets. This has been known to hinder buying properties in the future.
b) Didn't understand this 100% (land is infinite – unit it blocks can always go up) I think you meant land is finite? I would say even buying a strata complex (townhouse/villa) always aim for land content above 50%. Land appreciates/and building depreciate. But some land increases faster then others – a $300K bit of land in Armadale will be bigger then a $300K land closer into city – buy what would generally appreciate faster?
c) Does the area of market demand for that? What is the land content? Is the complex owner occupiers or investors? How big is it? Unless it has something unique about it (Great uninterrupted view…) I would generally turn it down as an investment.
d) Buy old, target high capital growth and add value to increase rent/equity. The difference between just 1% consistent growth on a 400K property over 10 years is an extra $75,000. Multiply that by a few extra percent, a few extra properties and a few extra years and it compounds to many hundreds of thousands of dollars of extra net worth. Research is key, I see too many people skimp on this! You only get to retire once so always ask questions.
e) I don't know your situation well enough. From my dealings with clients trusts are great of people in business and not so good for people on salaries. Ask yourself, how high are your risks of litigation?
Send me a message, I can answer some more stuff once I have a bit more information.
Quote:……….PPOR in Brisbane bought in 2008 for 475k – Recently valued at 672k, owing 371k. Currently rented for 500 pw while I am away so around 8k negative pa but comfortable with that………..That's a very strong result in Brisbane over this time frame, well done! Must have bought very well if the valuation is close to market. In fact you must have added value somehow as that would be a strong result even in a boom market, curious to know a little more if you are able to share.
Hi Gents,
Thanks for the responses!
Sorry I haven’t gotten back to you but I have been busy the last week or so!!!
Andrew – Valuation is over what I believe market value is – shhhhhhhh! However yes, I spent about 15k renovating the kitchen, bathroom, putting a new timber deck on the front of the house (replacing the existing concrete/landfill) and also some painting, general cleaning etc. I would say market value would have been closer to low to mid 600s before the floods. Ironically I spent about 8k on fixing up odds and ends after the water subsided and now the property is in far better condition than before, but I expect the valuation to come in lower now. It is rented for another 8 months so I am not concerned really as I don’t intend to sell. Frustratingly enough my tenants were all able to access around 3k of government support, however I wasn’t able to claim anything
Kent – Turns out I can access quite a fair bit more than originally thought! After I “broke up” by email with my branch manager in Brisbane (Hopefully she wasn’t too upset
) I went down to my local branch and put in an application. I have put an offer subject to DD and the regular stuff on a property in Newman. Apologies – I of course meant land is finite.Thanks again for the responses guys. This is a top notch forum.
Re Trusts- A discretionary trust in your situation could be a good way forward. You have a high salary and your future wife is studying and likely to not be earning as much as you so being able to distribute future income to the lower earner is a massive advantage.
Another way forward is using a unit trust. You will still be able to negatively gear through a unit trust (as opposed to a discretionary trust which you will not be able to do), and unit and discretionary trusts have the advantage of being able to refinance to pay down non deductible debt. You can not do this if you buy in your own name.
I will not buy another property in my own name (apart from a PPOR possibly) now I understand the power of trusts a little more.
Cheers,
LukeBe suprised how regularly we hear that a client has outgrown his Bank manager.
Cheers
Yours in FInance
Richard Taylor | Australia's leading private lender
it wasn’t so much an outgrowth, it was just distance, I can highly recommend her for anyone in Graceville/Western Suburbs area.
As they say, long distance relationships never work out.
Luke,
I will catch up with my most trusted accountant very shortly and discuss the use of a unit trust, although I am a big fan of our current DFT. As you stated the only reason it is useful to us is the taxation differential between WG and myself. I don’t need protection. I will check out the UT.
Thanks mate.
Anyone care to comment on the future of Iron Ore? Terms of Trade? Etc?
Cheers,
Quattro
quattro4 wrote:As they say, long distance relationships never work out.I don’t know about that. I’ve got many clients from different states across the country. The vast majority of whom I’ve never met face-to-face – our relationships seem to be working out
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
East Perth & Northbridge are 'unit city' and some lenders/mortgage insurers were (are ?) reluctant to do +80% loans on those postcodes. For me step 5 km out and look at the next ring of suburbs.
You can do this and still retain ready access to infrastructure and features tenants, investors and home owners want.
While Perth market hasn't grown significantly in terms of value in recent months/quarters there have been some recent decisions made or undertakings made which tend to indicate Perth will be solid for the medium/long term, If you are chasing 2006 growth – I can't see it. But if you want a set and forget for 10 yrs – do it.
Autralia is on its best terms of trade of all time at the moment- our economy is booming and is fueled by the hunger for our resources from China. I think Iron Ore is a boom industry- there are billions of dollars worth of projects going ahead in the north west of WA which will only add to wage and inflation pressure Autralia wide- good news for the property market IMO.
Luke
Hi all thanks for the great responses again! Well my offer for the property in Newman was turned down unfortunately. To be honest I am not too disappointed. I did have concerns about the longevity of investment and its a little outside of my risk appetite. I decided to focus on Ashfield as i have been looking around that area recently. I found a decent deal and have got a contract on it. To be honest i did not expect the owner to come down to my offer but he did and I’m quite pleased.
I believe Ashfield has quite a good potential for growth in Perth. Lets hope I am right!
Cheers,
Quattro
quattro4 wrote:c) Thoughts on investing in a sub 50 sqm 1bed unit that would be cash flow positive (even though i may have to put a little more than 20% into it). Future sales potential etc.I wouldn't go anything less than 50sqm, I think the capital growth would be lower than something that is a bit larger in size. The reason why some of the properties are positive cash flow is because the rental price has increased but the value has stayed flat.
I like Ashfield too. 13-14 years ago I was wanting to purchase on the river. One house came up for sale for $250,000 but I wasn't quite ready to buy yet. Nothing came up for sale when I was ready a year later. I ended up purchasing one street back from the river instead. Pity!!
Hi again,
Well its been a little while since i posted here and a bit has happened.
I bought an IP in Ashfield back in March with a 2 month settlement, which went through Mid May. The place was an 18 months old It was a 3bed 2 bath 2 car on about 530 and had not been completed by the previous owner. The walls were still only plaster, no skirting and no landscaping, with opportunity to put in a 4th bedroom easily (enclosing the “study”) leaving a good sized “theatre” room.
In a couple of fairly solid weeks we gave the entire place a coat of Dulux antique white USA, installed Click n’ Stick skirting round the place, and walled in the study, which turned out fantastically, looking as if it was designed in the original plan. All in all we spent under 3k on the interior, including about 500 bucks worth of tools, and I was very pleased with the rental tenancy we snatched (mine are all still in Brissy!)
The original rental appraisal was 370pw when we bought it. After about 25 enquiries, we took a deposit and bond 15 days after settlement for rent of 495pw!
I am spending about 5k on the yard, including a side fence (which half of which will should be reimbursed when the neighbour builds), and turfing and retic out the front.
It was a great project and once again we learnt so much. Now that is done, we are onto the next one, looking at a place in Burswood.
I am looking to get a valuation on Ashfield property once the landscaping is done, and wondering if i should go through the bank, or through a valuation company external to the financier. I was surprised with my last valuation because we waited to do all the renos, then they didn’t even come to the house. Given its a different situation in this case (the house in the previous situation was lower than median price, and the previous sale was more than 24 months earlier. I’m expecting the valuation on this place to be 50-70k over median price, and it was only sold a couple of weeks back) I want them to actually come to the place and look. What would you think is the best way to go about this?
Also, given I’m new in Perth, can anyone suggest a reputable and experienced builder and plumber?
Thanks,
Q
quattro4 wrote:I am looking to get a valuation on Ashfield property once the landscaping is done, and wondering if i should go through the bank, or through a valuation company external to the financier. I was surprised with my last valuation because we waited to do all the renos, then they didn’t even come to the house. Given its a different situation in this case (the house in the previous situation was lower than median price, and the previous sale was more than 24 months earlier. I’m expecting the valuation on this place to be 50-70k over median price, and it was only sold a couple of weeks back) I want them to actually come to the place and look. What would you think is the best way to go about this?Also, given I’m new in Perth, can anyone suggest a reputable and experienced builder and plumber?
Thanks,
Q
Hi Q
If you’re looking to access the equity you’ll have to get the val via the bank. If you’re doing it for your own personal reasons – you can use anyone you like.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
) I read 0-130 properties in 3.5 years maybe 12 months ago and got a fair bit out of it, but at this point I do not believe I am ready to commit that amount of time into properties)
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