You are still eligible for the FHOG in South Australia, even if you already have investment properties. The specific rule is that you’ve never owned your own principal place of residence.
You do not need to make the purchase within a trust either. This is pretty common for younger buyers that we help finance in SA – they will get an investment property or two before committing to their PPOR, claiming the grant at the later date.
the yield isn’t that amazing for commercial so that wouldnt make me overly suspicious – the purchase price would suggest it’s a C-D grade tenancy, which isn’t a huge problem but worth considering what the other tenant tool is at this level.
You should be able to shave a fair few points of that interest rate however, unless there’s some specific finance issues in the background forcing you to pay for a more expensive product (location, servicing etc).
There are so many markets in Australia, some are currently booming, others declining, others going sideways. Each at different points in their respective cycles.
So long as you’re financially in position the time is NOW – generally there will be a market available which will have the right opportunities present. You cannot always guarantee you will be able to invest at a later time, so may lock yourself out unnecessarily. This happened with a lot of investors over the last 12 months with the APRA changes to investment lending – which saw some investors no longer able to borrow any further, so they have to sit on the sidelines.
Capitalisation of payments is the primary benefit – the one thing to keep in mind though is you still want your property to sell ASAP. I’ve seen some nasty cases where the property has failed to sell for an extended period of time, the interest keeps piling up and it all starts becoming an expensive proposition.
For a well located normal metro property this generally isn’t too much of an issue – just be sure that properties are selling easily within the market you sell in.
If you are to purchase a new property at this time – more likely than not it will be negatively geared – costing you money. There are markets which are exceptions to this, generally regional or outer metro Adelaide/Hobart. I’d be careful with regional as the supply/demand constraints are fairly low, so they don’t necessarily have the same capital growth drivers as metro property.
The idea of property is a long term proposition – that property values and rents will increase over a decade or more, not for immediate cash flow.
Funny, I was just doing some research and i also found some seniors over 50’s accomodation. The ownder is trying to sell with a cap rate of 10% (fund from operation / total cost of purchasing the property). However, I did some research and found that the owner is taking a 40% loss on his initial purchase price.
I have examine past sale history in the lot and found that some took 1 year to off load the investment, the current owner have been selling for a year.
Right now I am also thinking if if the cash flow is worth the risk.
And that is exactly why lenders don’t want to touch them. Cash flow return for lender’s is not a risk mitigant that they care about – if they foreclose they need the property to sell, not rent out.
Limited capital growth potential. If lenders don’t want to lend you money to buy them – it shows you how risky they view the investment. Let’s not forget they’ll happily lend on a lot of subpar investments, so you have to ask how bad the modelled results are for these types of specialised security.
If you’re purely focusing on yield at the expense of all else – there’s still mainstream residential properties with similar yields and capital growth potential, outer suburbs of Adelaide etc.
Else there’s other asset classes which provide the same yield and once again growth.
Consider that its gross yield, by the time you pay out strata fees, management and all other general costs, you’ll be lucky to pocket much over 4-5%.
There’s a reason why they’re cheap. Low if any capital growth (hence why they are cheap, they’ve been cheap forever and a day). Lenders also restrict their lending with them, which is always a poor sign as it limits the buyer pool, reducing competition for the values to rise.
They’re generally a joke amongst most serious investors as one of the biggest dud investments.
Dean – as above, it comes down to the local currency inflation rate. ANZ is lending in Singapore in the local currency and profiting on the margin between cost of funding and sale price. Cost of funding will not drop below the underlying inflation rate unless for distortion reasons (happened for a while with USD borrowings when EU funds were happy to push their capital at a guaranteed loss just to protect the majority of the capital in a stable environment).
Why do people lend money to others? For profit. You’re not going to lend out (especially at a fixed rate return) for a negative return (below inflation). There are some market distortions where this might happen, but for the most part this is the reality.
Effectively there is a margin between inflation and rate being offered – then lumber on the other costs of funding and that’s where the fat is.
Smart move Bjoern from the sounds of it. Never work with pushy people who are effectively trying to put on high pressure sales. As you’ve noted, investment companies which solely focus on new developments are working for the interests of selling their stock for developer commissions – which fundamentally puts their bias on pushing stock, not you pushing quality properties which help you reach your long term investment goals.
Consider an offset account just the same as a normal bank account – the only difference is you save on interest, than get paid it.
A REDRAW account is very different however – do not place funds in and out of there without understanding exactly what you’re doing. Every time you draw from a redraw account the ATO considers this ‘new’ borrowings – so if you draw out for non investment reasons you can cause serious tax issues which will affect your deductibility on loans.
Every council is different – no one can give you that advice without knowing any of the specific details and even then it’s unlikely anyone here will know the specific ins and outs for that council and neighbourhood zoning.
Speak with a local townplanner or surveyor who will let you know. As others have mentioned, with next door being developed it can actually be a hindrance as councils sometimes like proximity between developments.