Darren

If it is going to be your PPOR, I agree with J900 and Ynotnow that you should buy now because it is always difficult to pick the bottom market. You are going to live in it and your intention would be to hold it for a very long time, so what little difference is it going to make? My only advice is BARGAIN BARGAIN and low ball the vendor. Make sure you research average prices beforehand and do lots of comparison to make sure your offer is very competitive and you are not being unreasonable. I did this recently for an off the plan unit in the city and got a big discount as well as savings in stamp duty. It’s is still a buyers market so dont be pressured to pay what you think is unreasonable just because you want to get into the market. You are the boss, not the vendor.

I have a few IPs in Artarmon and Chatswood which was originally my PPOR for many years. In hindsight, it makes little difference now that they are rented out.

Artarmon has a lower yield simple because there are a lot of older units there which is holding rents down and mine is one of the newer ones. The average yield for my 2 units there is just above 4.3% gross which is poor, to me anyway. The average yield for my Chatswood units is 5.3% which is a little more respectable but still relatively poor compared to overseas.

It’s fine if you need flexibility and want to own more at the same time.

From my own experience, I didnt need the flexibility and found the fastest way to pay off PPOR is with P & I whilst buying other IPs.

SC, you’re right and thanks for pointing that one out. I have not done my own tax for a couple of years now.

XYA

1. Think about it – the fastest way to wealth creation is to pay off your PPOR ASAP, therefore always P & I. There are no 2 ways to it. Why pay interest only on PPOR when there is absolutely no tax benefit. You are only making your bank richer. The only time I would do that is to get a family member to buy the property and you rent it from the family member who is paying interest only which is tax deductible for that member – both parties win. Your family member will have no issues of tenant not paying rent or you throwing wild parties and thrashing the place

2. Using LOC is fine provided it is put to good use, ie absolutely required. If not you are opening another debt opportunity and this puts you further away from asset / wealth accumulation.

3. Unit trusts can be volatile depending on who is managing the trusts. You also have to pay management fees regardless of whether the trust is making money. I would rather invest in property shares some of which offer a guaranteed return eg Myers shares were offering 15% guarantee returns. This is a lot higher than most investment properties and you dont have the hassles of paying strata fees, property management issues etc. Only thing is you can’t live in the shares.

It depends on whose name is on the loan documents. Are both your name your mum’s name on the documents or is the 10% you own a private arrangement with your mum?

If documented, then your equity = 900 – 420 = 480 x 10% = $48k but there may be other legal issues which you may need to check with your solicitor.

Shane,

I’m saying that for certain developments, don’t just take the developer’s price and exchange terms as they are but negotiate hard with them. I just posted a thread on how I drove a really hard bargain for 4 weeks with AV Jennings and they eventually gave in which resulted in huge savings. I came across a few projects in Brunswick and Coburg in Melbourne which I believe there is scope to negotiate. Only problem was I couldnt find a unit which I thought would be an all round great buy, ie layout plan, location, strata levies, public transport, price etc.

Ironically, I found 2 brand new ones with my requirements back here in Sydney after a wild goose chase in Melbourne.

The ones I bought was cash positive with 20% equity but there are those which are also positive with only 10% deposit.

With $160k, I would put 4 deposits on 3 new units / older house worth $300k each in high growth areas. Add in acquisition costs, that would use up about $120k of your $160k. You still have $40k buffer.

You can use the negative gear to offset your $80k income but I would make a conscious effort to eventually get them positive either by increasing equity etc. I think Melbourne has a lot of opportunity from new apartments which are about 10 – 15km from the CBD. I have been looking in Melbourne coz Sydney is relatively a lot more expensive. But I managed to buy 3 properties in Sydney over the last 6 months due to some good fortune with the banks, interest rates and research.

Try look at Melton South, especially houses with about 600sqm land and very close to the train station. You have the option to subdivide in the future, build another house on 300sqm and sell the original. That would cut your mortgage time by half. I think it’s going to be a hot spot.

Commercial investment is a totally different kettle of fish to residential and may be more risky in certain situations. Generally, a bank will require at least a 25% equity for a commercial venture before they even consider approving the loan.

Calculate your equity in all your investments and the % exposure to the banks first and make sure you are able to service the loans if you do decide to go ahead.

CPI stands for Consumer Price Index and is an index used by the RBA to measure and gauge the rate of inflation. It is made up of a “basket of goods” which may include the usual everyday stuff that we buy such as milk, bread, petrol etc etc. so that when prices change, the index will record its changes to produce an overall, moderated figure.

A lease which is indexed to the CPI has both pros and cons. If the CPI is low, your rental review / increase will also be low. Australia’s CPI has been hovering around 2 – 3%. To me, this sort of rental increase is not worth the risk and return. Depending on the location and type of business for the commercial property, I would want at least 8-10% rental increase to justify the risk.

Hope this helps!

Mrs P

Depreciation allowance on the building has nothing to do with your income. Generally, capital allowance on building is 2.5% per annum. Furnishings are calculated separately depending on the items. Here’s a guide from the tax office which I have found to be very useful and ATO allows self-calculation per the guidelines.

http://wealthruproperty.com/Blog/?tag=tax-issues