Forum Replies Created
s2ss,
There’s no reason I can think of why a bank should lend you money on 5 untis as 1 purchase rather than 5 places over time.
It is true that they will say “how on earth are you going to pay it off if you already have two other outstanding loans?” but they will also take the rental income into account – so as long as the rent stacks up well, you’re OK.
Also, assuming you get capital gain somewhere along the way (either a rising market or you create it through renovating etc.) you should be able to borrow against the existing houses to cover deposit/costs to fund subsequent ones, so maybe no need to ever save a deposit after the first.
I recommend you talk to a broker, and get them to recommend lenders who will be most favourable to your plans and situation.
Cheers,
MickB&E,
I have 1 DHA property – my first IP. I’ve been really happy with it as an entry into investing, because it was so little hassle.It has worked very well for me: I am fairly happy with their rent valuations, and they always pay on time. There are very few costs for any kind of maintenance.
I had a quantity surveyor do my depreciation schedule; no reason why you can’t depreciate carpets – even if they will be replaced later is there? I get some pretty massive tax deductions on my IP’s.
Would I buy another DHA place? Probably not, but mainly because most of them now are yielding too low – things were different 4 years back. I prefer now to be a bit more specific in what I buy. But I have absolutely no regrets about buying the one I did – it’s been completely hassle-free, CF neutral (after tax deductions), and some great capital gains. And I can be fairly certain to get it back in top condition when they finish the lease.
Cheers,
MickRudy,
This is an age-old question that really only you (or your accountant) can answer, because there’s lots of variables to consider. But a few things to keep in mind are:
– People often get scared of getting pushed into the next tax bracket, but this is really not an issue: since you only get taxed at the higher rate on the extra income, it’s not like it puts you in a worse position or anything.
– Consider the long term: it may be tax-advantageous to have properties in your name now, but in 10 years when they may be quite CF+, you may regret it.
– Also consider Family Tax (including the new bonuses) – can be a good reason to keep one partner’s income at $0.
Cheers,
MickNick,
I reckon you’ll find you can only claim tax against the original 450k you borrowed. Even if you refinance for more, you can’t claim it as an expense (unless the additional borrowings are for some other investment, then they’re claimable against that).
Cheers,
Mick$825k for a 2 bedroom appt. – I’d be concerned if the market went downwards if I just paid that; glad I moved to QLD!
Mick
Hi dan_76,
Yep, I’ve got a DHA place in Waikiki WA. It was my first IP, and I wanted to reduce risk.
It’s been great; there are no repair costs (except a tree fell down and had to get removed), and no worries about vacancy, tennant damage, etc.
I highly recommend them if you want a hands-off investment that you don’t have to worry about for 6 or 9 years.
Cheers,
MickMarc,
BTW, a fibreglass pool 9.2mx3.2m cost me $17k, including salt chlorinator etc. That’s excluding fence and surrounds, but $20k should do it easy.
I’ve found the fibreglass pool to warm up quickly. Also, the construction speed is great; kids were swimming 3 days after they started building.
Mick
freaky,
I reckon you’ll find the answer is yes and no: yes, you could refinance that way, but no, you couldn’t claim the tax deductions so there’s no point.
The tax man doesn’t let you do this: he essentially only lets you claim deductions on the money you borrowed to finance the purchase. This is one of the big downsides to turning a PPoR into an IP – tax-wise, you really want max borrowings against the IP and min against the PPoR, but once you start paying it off you can’t “top-up” the loan and claim deductions.
Cheers,
MickMarc,
Consider a fibreglass pool too. As long as you have a standard size, they are a bit cheaper, much quicker to install, look great, and easier to clean, etc.
Mick
I bought my first IP interstate; I only had a few hours before work to drive-by a list of candidate places, so I didn’t see inside but was glad I saw outside.
One place that looked good from photo actually had a vacant block next door (with huge cyclone mesh fence) and the back wall of KMart towering next to that. Really glad I got to see it first!!
Cheers, Mick
zippys,
5 years ago I very nearly bought a studio in a great Sydney location, but I bailed out when CBA told me they didn’t lend on studios at all at the time (regardless of size; that may have changed though, or maybe I was wrongly informed).
However, in hindsight it certainly would have had significant CG, but the finance thing certainly bothered me.
Mick
For me, it means borrowing the full purchase price plus the fees, and taking into account all costs and also tax deductions.
So I consider my cashflow to be positive once the income plus tax deductions outweigh the costs.
Cheers,
MickGlobe,
I just refinanced 1 property with Homepath. They take ages, so I don’t think they could ever be used for a purchase, but for refinance they are pretty amazing: 6.15%, no fees, IO.
You have to apply through their website, then it’s all by mail and phone. Really a bit of a painful process compared to dealing with a friendly broker, but rock-bottom prices!
Mick
I thought that article was cool, but overplayed the situation a bit. The thing is, she quit her job but on the strength of her husband’s income, i.e. it’s not quite the same as someone quitting the workforce and investing full-time – it’s someone going from 2 incomes down to 1.
Cheers,
Mick
Use the equity! Just make sure you can track it separately and you can claim that bit as a tax deduction. Anything you can save, pay back onto your own home because that’s not a tax deduction.
Keeping things at 80% LVR, you really only have about $50k – you could use that to buy over $200k worth of IP plus all costs and stay under 80% LVR.
I say go for it
Cheers,
MickHi goldenchild,
Yep, I’ve got a good place at Waikiki that I bought back in 2000. The first couple of years it didn’t do too much, but the last couple of years that area has outperformed the Perth average and is forecast to continue to do so as the railway comes on line, and as new development at Rockingham happens etc.
When I bought, the rent was about 5.2% gross, but now it’s lower but certainly climbing – just went up $20. The area wouldn’t meet the CF requirements of many on this forum, but if you are after good CG and a reasonable rent return it’s worth looking at. I initially lamented buying there rather than QLD, but I will be hanging onto that one for quite some time now.
Cheers, Mick
lalonga,
I also recall that one or two websites of home relocation companies in QLD had fairly detailed descriptions of this process, checklists etc. I think I found them through the online yellow pages at the time.
Regards,
MickI’m not so sure it’s as predictable as that from past cycles, for at least 2 reasons:
1. The Brisbane inner city appartment market didn’t exist last cycle – it’s a brand new thing.
2. There is so much migration into SE QLD right now, and so many people who live here are from southern states, so the whole demographic is different.
I’m not saying that your figures won’t prove correct, just saying that previous trends may no longer be reliable indicators as the market is substantially different as of the last few years.
Cheers, Mick
Gatsby,
I’ve got one IP in Waikiki (Rockingham region, southern part of Perth).
It was CF+ when I bought it a couple of years ago, but CGs have meant that would be hard to achieve now.
The Rockingham area is doing very well because of increased infrastructure (railway extending, freeway widening, etc.) and I would still recommend you look at those suburbs – a recent API article forecast lots more growth there in coming years.
Mick
Hi,
I used a kit years ago in NSW; I found it a little stressful when something didn’t turn up day before settlement. Since then I’ve had some settlements get delayed etc., and was glad to have lawyers sorting it out.
So I would only use the kit if you were really skint (like we were the first time) and don’t mind the possibility of some big-time stress. It’s always good when it all goes smoothly [cap]
Mick
