Thanks Super
I did not calculate the deposit component but also did not add the closing costs which on that amount in QLD would be $7700. This changes it to cash flow positive $25.

And i do apologise for my brash statement that “in this day and age there is pretty much no such thing as positive geared property on a principle and interest loan” I was not taking into consideration having the 20% deposit when i made this statement.

That being said that was kind of by design because my thinking has been geared towards buying as many properties as possible and as fast as possible (Thanks 0-130) so my focus has been around much higher LVR to purchase more property.

No you would not be making money effortlessly because as far as i am aware (happy to be proved wrong) in this day and age there is pretty much no such thing as positive geared property on a principle and interest loan. What that means is if you do find a positively geared property your loan would be interest only. Your tenants would not be paying down any of the principle just the interest component which means the only way the property will be gaining equity is through capital gains which can take a long time (without things like renovations, development) OR by you putting your savings into an offset account so it brings down your interest payments as your money builds in that account.

To answer your other question then YES absolutely there is a CGT component but that is only activated when you sell. What i am saying is you buy a property lets say 210k after closing costs and its valued at 200k. You then renovate the property for 20k, so so far you have spent 230k (200k purchase, 10k closing, 20k renovate). You then get the property revalued and because you did such a good job on the reno :) the valuer says your property is now worth 260k. You now have equity in your property that you can access for your next purchase whilst you still rent it out.

Obviously during renos you have no tenant so that needs to be considered. I have not tried this strategy yet but you can do things like occupy during settlement to get around this problem i believe. From my understanding this means you purchase the property with your 10% deposit and whilst it settles you have access to the property to begin renovations. If your settlement is long enough you should be able to complete it and get a tenant straight in.
Also you have the added benefit of requesting more rent because the place is new :)

Hey Pat,
Welcome aboard! As i say in all my posts i myself am new to property and like yourself have been spending extensive time researching. The reason I mention that is because any advice i give is just my opinion and may not be the right advice for you, but i like to offer it anyways as it helps me as well :)

Firstly I think you are in an o.k position, you have a combined salary of around $115,000 and debt free. The only thing i would say holding you back at this stage is your deposit which you mentioned is only 15k. You did however say your parents have several properties and can act as a guarantor? I would discuss this in detail with your parents so they fully understand what a guarantor is as there is some risk to them if this is the path you take. But given your small savings then if you needed to save your own deposit you may still be a couple of years off being able to make a purchase. A guarantor will get you in the market now.

Let us say they do act as guarantor then the next thing would be the decision on whether to purchase an IP or a PPOR. Unfortunately as I do not know much about Sydney and the northern beaches it is hard for me to offer any advice here, i did a quick search though of some areas and the prices are staggering! It would seem as though a PPOR or an IP would be out of reach in these areas though. Also as i do not know your expenses it is hard to know your borrowing capacity, using a rough figure of $500 combined a week then I would guess you would be looking around the 400-450k mark (Happy for more experienced people to be more precise here)

So the decision then becomes do you compromise on where you are willing to settle (for now) and look for a PPOR outside of the northern beaches or do you stay put and buy an IP again outside of the northern beaches where you can afford. If you go down the road of an IP then my only advice would be to research long and hard and find a property that is positively or neutrally geared so your cash flow is not affected and it allows you to continue to build your savings.

If however you want my honest advice then I would personally be making a compromise on where you live and looking for a PPOR. It is great you know an area you love and that should be your goal, but you are still so young and for now its about building up to that goal. If you do not mind a bit of hard work I would be looking at other areas you do like that are in your price range and for a house you can renovate and add instant equity to. From my personal experience the sense of achievement you get when you see your run down home becoming something amazing and the equity builds is the best feeling.

Good luck :)

Without reading through all the pages in this post I just finished 0 -130 (LOVED IT STEVE!).
But the book makes endless mention of registering my copy along with some mentoring program that i cannot seem to find anywhere on this site?

Hey Granted,
Welcome aboard! I am fairly new myself and to property and this forum in the short time i have been a member has already given so much meaningful insight.

To answer your above question then on a parcel of land of that size I would be much more inclined to go for 3 or even 4 lots if possible. The reason for this is if you split into 2 500m2 lots then you are likely going to be building large houses, let us say for arguments sake 40sq each so total build of 80sq. Then let us say you sell these (I have no idea where you plan on developing) for 800k each then you end up with 1.6m. If however you were to build 4 properties at 20sq each and then sell them for 500k each then you have 2.0m or 400k better off.

Now the build costs will be slightly higher on 4 properties but the total build area is still equal to 80sq so it is not going to be drastically different.

If it also helps I am currently in the process of sub dividing my block. I am on 650m2 and have just had council approval to build a double story dwelling at the rear. I have decided to keep the front dwelling as my PPOR even though it is quite old and instead renovate it as i have limited funds.
My planning permit took me about 6 months to get which is actually really good for a first timer (Im sure Steve gets his quicker :)). I put that down to a good draftsmen though who was just very up with the local council standards. A mate of mine got a dud draftsmen and it took 3 years of back and forths.

Good luck!

Hey SuperAndrew,

I am really interested to learn more about your application. How far developed is it?

Also how did my other sums stack up? Would you say i am on the right path? Or am missing a few key things?

I am all very new to this and curious on this myself but can i just confirm is what you mean is if your home is valued at 500k and your loan is 380k then you have 120k equity in your home.

Then you go and take out that equity and use lets say use all of it for a deposit so there is now zero equity in your current property and let us say 90k in your investment property (- 30k for stamps). The market then falls over and your properties drop 100k in value and you are now on -10k equity.

Is this what you are asking? Or am i way off the mark?

If it is then i am no expert but my understanding is this would then affect your ability to borrow any further money from the banks and hence not be able to buy any other property until that equity returns.