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I have both.
Well the city one is a TINY one bedroom. I bought the city one in 2008 so had a great price increase within a year. Strata is higher.
The Blacktown one has seen great growth the past year.
Both to me are set and forget.
With a studio though you may have more difficulty getting 80% finance. If it's 5km from the city check how many there are. What's the rental demand. Make sure it's not one of those Quest apartments or similar serviced apartments. Prices don't move much due to the amount of them. You need to be VERY careful with studios. There are a glut of them. I would e very careful when choosing.
A 2 bed in Blacktown ATM would be my pick but prices have risen lately and the demand is high. Owner occupiers and investors are pushing prices up. You'd be hard pressed getting a good price. Liverpool is similar with demand.
Check out the yields (after paying strata to compare cash flow).
Why not get a LOC for $90K then you can just draw on it as needed for deposits etc. As you PPOR price rises or as you pay down your PPOR you can top up the LOC to buy more.
Take out a new separate 80% loan for each new IP. That way they are not cross collaterised.
It's true that yields can be deceptive. For example a unit may have higher yields but then you have BC to add.
Some people add the interest on the amount you borrowed but if that is the case you could just borrow less and every property is positively geared.
I assume (even if I haven't) that I have borrowed 105% (inluding purchase costs, stamp duty etc).
So add interest on that + all other costs (rates, management fees etc). That's your outgoing.
Rent = your incoming. Then you know if it's TRUELY CF+
You can add in depreciation too which can make it + geared (even though not CF+).
munmun5.
What you are trying to achieve sounds great. I'm sure a lot of people will benefit from hearing about what you have learned.
As you said- there are all types. Some people will NEVER buy anything. I too have met people who have all the book knowledge but don't actually do anything. These people often frequent forums too and answer questions asked. That's why posters need to take care when reading things on forums. I've seen answers given that are totally wrong.
I've also met lots of young people who are keen and get in there and jump in. Some research first, others jump in blindly.
Takes all types. Hopefully your meetups will help steer some people in the right direction.
Good luck with it.
Adrian there may not be people that will sign up to be your mentor but there are a LOT of people out there doing it that are very generous with their time.
As you said- go to meetups and meet people, talk to them, find out what they know. That will help you along your way.
Always listen to people who have what you want. They got there and so can you.
There's a quote somewhere (can't find it ATM) about the fact that you shouldn't be the person in your team with all the knowledge. Surround yourself with people that know more than you. That's how you grow and learn. The thing is you don't know what you don't know!
I've met people who are so full of themselves and every sentence starts with "I" but really they are few and far between. Most people I've met are very humble and don't self promote. I've met people several times and found out later they have HUGE portfolios. So just get out there and meet people investing. Simple as that.
Yes correct info above.
When you redraw you are taking money from the loan. When you put money in an offset it's your money that you are lending to the loan. Therefore you can take it out whenever you like for whatever you like.
Too late now. You would be better now pulling out a lump sum and then not touching it. If you pull out bits and pieces after you make it an investment property t will be a tax nightmare.
How do you know the prices if you haven't looked? I think gauging prices by just the internet adds can be deceiving. I've seen houses on the net that look amazing and aren't. I've also see VERY poor adds and went out anyway and have been surprised (there are some hopeless real estate agents).
Wouldn't be my recommendation but if it ticks all the boxes, the price is right, and you're happy, go for it.
Hi, open homes are the quickest way to see a lot of properties. When starting to look into your chosen suburb you need to look at a lot. As said- make appointments to see others that look like they may appeal to you. Look at those below and above your target price too to gauge the market.
When we first started looking we typed up a checklist. We would write down asking price, address and info about the property. Eg is it brick, fibro etc. number of bedrooms- state (poor, graffiti, etc. Windows- wood (state they are in) aluminium. Staple the flyer that the agent hands out, to it. Check out how sound the property is. If on peers look under the house for termite mounds and signs of dampness. There can be very expensive things to fix. Poor quality timber windows are a turn off for me. LOTS of work. Look at the property with a view of- how much more do I have to spend to make it a rentable property?
Sounds like overkill but we found a few properties were listed months later again at a reduced price. We could look back on it and offer a lower price as we knew they could be desperate to sell. Also when looking a property may look like good value but have lots of problems. It just makes it easier to gauge what the real prices are in a suburb. It also helps in knowing which streets/areas get the better prices.
If really interested in a property at an open home make another appointment to have a more thorough look. Although some suburbs are too hot to do this. They are being sold before or at the first open.
If you are going to develop it, there's a good chance that you'll need to dig deeper than half a metre. I'd check that out further.
Is the $360k lend enough to buy the new house(assuming you pull the deposit from the current house)?
As you said, the rent will more than cover the interest (even including the money pulled out for the deposit.
So can you afford interest on $360K?
If you see house prices going up in your area, of course it will be advantageous to have 2 properties.
You need to work the numbers to work out what will be the better option in your situation.
If it's one property and you have split loans you don't really own one. You technically own half of the property. I'd check with an accountant to see if this is legal to claim that you have paid down the PPOR side of the loan with regard to claiming interest.
So how do you claim the PPOR exemption when it's half rented? How do you put that on the land tax exemption?
Also can you still claim the 6yr rule on the PPOR side?
Hope I'm not sounding critical. Just curious. We were thinking of building a duplex ourselves to live in when we downsized but went a different way.
Have you thought how this structure will affect future purchasing?
Sounds very messy to me and scary. But if it works for you and the tax man is OK with it why not.
If you have a non deductible debt (ie your PPOR) always pay that first. Park the extra money in an offset against your non deductible debt. You can use this later if you want for deposits (or a holiday, whatever you like).
OK just realised you are renting it out so it is deductible at the moment. But better to pay less interest and lose a little tax benefits than to havbe it in the bank (at lower interest) and then pay tax on the interest).
The way to reduce your LVR is to put extra money in and when prices rise and your properties are worth more, or if you manufacture equity.
You don't buy it AS a PPOR or an IP. It is what it is. You can claim 1 residence as your PPOR. So if you live in it you can't claim it as an IP (as stated).
Sounds like you want to have your cake and eat it too. If you claim it as your PPOR you will not pay CGT but can't claim interest etc. If you claim interest etc you pay CGT. Decide which way you want to have it.
If you pay out the PPOR (I'm assuming the duplexes are on 2 titles? otherwise it's not possible to own half) and use it as security for the 3 other properties you are cross collaterised to the hilt. A good way of losing everything should you have cash flow problems. This is the opposite of security.
It also sounds like you are mixing investment loans and personal (PPOR) loans. This will also make the tax man VERY unhappy.
I suggest you speak to a good mortgage broker before you do this.
It's not an IP if your are living in it. You can't claim any deductions while you live there but it could be advantageous from a CGT perspective.
If you live in it first then move out you can use the 6yr rule and rent it out for 6 years and not pay CGT (assuming you do not own another PPOR).
Too many variables- as mentioned.
It really depends on your individual situation. Some people prefer to own a PPOR first. You can pay down some then borrow to buy an IP. If you have the opportunity to get cheap rent (with parents etc) take that.
If you have an opportunity to buy an IP but cannot afford to buy in the area you want to live, then rent. It may actually be cheaper to rent than buy in the suburb where you want to live. My daughter bought a 2 bed unit but was working 2 jobs to pay the mortgage. She moved into a 1 bedroom unit and rented the 2 bedroom and quit one job. The tax incentives made it worth her while. Or you could rent out a room.
So there's no right or wrong as to which one to buy first. Lots of people have high LVR's when they start. Just make sure you have enough buffer to carry you through bad times. They do come and I've seen people lose everything due to poor cashflow. If you run out of money you need to sell and sometimes it's not the right time to sell. Know your limit. With a big mortgage even a 1% interest rate rise can hurt (let alone 2-3% rise which is not so far fetched these days).
Hi Rick. Good to hear you have a sense of humour.
I should have put a smiley as I realised it reads a bit rudely. I did mean it tongue in cheek. Damn writing. Never conveys emotion.
I agree with knowing where you are coming from is essential. My lack of confidence stopped me from investing for MANY years. I must say in my defense though that internet has made a massive difference to investing, especially in the last 10 years.
Networking was instrumental in getting me to where I am today. I met young people who had less money than me and had more property than me. That was a wake up call.
Anyone can write anything on the internet but when you meet and talk to genuine people it connects.
I know you don't want the world to know about your investments but curious- have you bought in Townsville?
Hi, search PRE and TIC on google. There are mountains of threads on both.
My opinion- don't do it. I almost signed up for PRE. Was very keen and had $$$ ready to spend. They were very sexist and completely ignored me and neglected to ring me back. I had my husbands name on the form as my spouse and they DID ring him. He kept telling them to ring me. In the end he told them how stupid they were. THEN they rang me.
Anyway that's nothing to do with their product. They did push their own properties which is a conflict of interest to me. They were pushing Coomera at the time calling it "boomera Coomera". It did nothing for many years. Not sure of growth lately. haha.
Be aware also that PRE has sold branches to people like yourself that have signed up to their service. I guess the quality is reliant on the organisers of your area.
I think you can do better by reading forums such as this one and Somersoft. You will gain invaluable knowledge. Ask questions and go to meetups to network with likeminded people. Where are you located? Go to meetups.com and search for meetings in your area. There is a good one in Sydney.
As mentioned above- different people have their own opinions and this is just mine.
Welcome to the forum. Some manners might help you get some answers.
eg Hi everyone, I'm new to this forum. Can anyone please give me some insight into how to set up a family trust. Thank so much. I appreciate any help you can give me.
You're welcome. Yes I'd suggest crunching numbers. Remember if you hold it though you can't pull all the equity out. You can borrow more to bring it to 80% of the value (maybe 90%) so you won't have $70K. Even if you sell you need to deduct selling costs. If buying something else there's stamp duty etc. It costs a fair bit to sell and buy again. Will this erode any gains made??
Work out your cashflow on the PPOR after ALL expenses (interest, rates, insurance). What is the projected CG over then next 5 years. If it's at it's peak maybe sell. Only you know these things so I can't comment on that.
If your aim is for cashflow look at what you need to do to get you there. If you do sell, what will you do with the money that will bring you closer to your goal.
What timeframe do you have for reaching this goal? In order to make it a reality you need to have a definitive goal. How much, when, how etc. By doing that you can start working towards it.
Enjoy your journey.
