Hi dereksam,

As you alluded to in your initial post – you will get conflicting comments. Most of the ‘conflict’ arises because there are many different ways to invest in property and as such different strategies may need different techniques.

In saying that – in you situation I would wear the costs and pay LMI as it means you either have to save less or ‘borrow’ less from your parents.

Using your $200K example (and allow a further $14K for purchasing and borrowing costs and a little extra for a buffer) means you will only have to find $34K instead of $54K. I for one would more comfortable being indebted to my folks for $34K than I would for $54K.

Do not forget the LMI fee is tax deductible over 5 years or the length of the loan whichever comes sooner. So the final cost is less than it first appears to be.

In my case we chose to pay LMI for the last two properties and have gained enormously by having two, rather than one, extra property. For us the additional costs were well and truly outweighed by the benefits.

I would also keep your $8K and put it in an offset account so that you still have acess to it should you need the additional funds in an emergency.

There is little to be gained by using this towards the purchase of this property and it will provide you with greater sleep at night.

Whether or not you start investing now is ultimately up to you. However you do have time on your side provided you make some conscious decisions (save more, educate myself, more research etc) to really work towards your goal as opposed to continually ‘going getting around to it tomorrow.’

Why Hobart? – If it is because you have thoroughly researched the market and the signs are right or you have found a good deal then that is OK. Most investors get seduced into buying property in their local area when the ‘local area’ is not necessarily a good investment decision.

Investing in property is all about making money and as such you need to utilise different selection criteria to that used by home buyers.

Similarly do not buy interstate based on the mistaken belief that you will have an annual tax payer funded holiday.

Any travel and accommodation expenses incurred will be apportioned based on the amount of time spent doing investment related work. In this regard the ATO will expect some justification for two nights accommodation and airfares when in reality a property inspection is a one or two hour event. The need to make required repairs can extend your ‘holiday’ – but proff may be required.

And finally – a trip interstate to buy is not tax deductible – this would be considered a capital cost and can used to offset any CGT liabilities should you sell futher down the track.

Derek

derekjones1@bigpond.com

Hi ET,

Ultimately the purpose for joining a ‘club’ will determine whether or not they are useful to you.

If you want to create a group of likeminded people to share ‘war stories’ then you have a club here.

Alternatively you may find there are people living in your immediate area who have similar goals to you – these people can become your ‘club’. Sure the may be located in a different part of the world – but the desire to ‘improve one’s lot’ can be found anywhere. So in reality you may have untapped ‘wealth’ next door.

If however, you are wanting a ‘property location service’, as suggested by your second question, then that is entirely different.

Whichever ‘locater’ you use will invoke divergent opinions as many investors here are DIY investors and are happy, capable and have all the encompassing resources they need. You will also need to do your own ‘checks and balances’ to ensure the property suits you.

Additionally the focus of your investment strategy will determine the suitability of the locaters. Some locaters orientate themselves to their investing beliefs, which while perfectly legitimate, may not suit you. Hence it is important for you to identify what your focus is going to be.

Being an overseas investor can create some peculiar taxation implications depending upon your country and the tax relationships in existence between Australia and your current home. Another ‘curve ball’ in your whole situation will be how long you are going to be overseas and what impact this will have on your investment journey.

I recommend a surf of the ATO website to assist in this regard. http://www.ato.gov.au to help you in this area.

A good accountant will help you get the foundations of your journey right. A bit like building a wall – spend some time getting this right and you will increase your chances of long term success.

Some accountants for you to consider are;

Dale Gatherum-Goss http://www.gatherumgoss.com (Melb)
Nick Moustacis http://www.strategicwealth.com.au (Syd)
Patrick Thatcher http://www.rmgaccounting.com.au (Perth)

Sorry cannot help with other accountant references.

Hope this helps

Derek
derekjones1@bigpond.com

HI all,

Having attended Steve’s course in the past I can highly recommend it. He is a growth focussed investor and has a number of key strategies to assist with property selection. He advocates property as the core asset in your investment portfolio and he has a share fund he encourages investors to use as a means of balancing out their portfolio.

Steve has a very eloquent and well researched explanation of why growth is more important than income – just as Steve Mc can lucidly argue the contrary. For thos of you who have disregarded a growth focus I suggest it would be $180 well spent.

My only concern would be what has happened to the second day – what’s missing from the 2 day coourse I did in August?

Enjoy the course Summo – and I hope you get a good turn up.

Derek

derekjones1@bigpond.com

Hi Stingray,

You can get the QS report done at anytime – certainly in the first four years of ownership so you have time to review your past tax returns if you so desire.

As to whether or not you get and use one that is ultimately your call – I certainly would.

Derek

derekjones1@bigpond.com

Hi all,

“thats why i have been combing the internet for investment properties in nepal – just in case”

For sale – one cloud – solid investment opportunities. Good views. Can’t be built out. Current pest inspection report available.
Contact the owner – XXXXXXXXXXXXXX

Derek

derekjones1@bigpond.com

Hi Misty,

I can only give a ‘that depends’ answer.

Ultimately only you can decide what is right for you and you do have a number of other intangible assets on your side, you are enthusiastic, you have experience in property and you seem to have get and do attitude.[thumbsupanim]

If I was in your position – I would initially determine my borrowing capacity so I knew what I could feasibly achieve.

Depending upon this outcome then I would spend to the limits of either my finances or my reasonable comfort zone until I reach either of these limits.

Bear in mind I am a growth focussed investor and seek to find properties in large centres my aim is to have as many assets as possible working for me. There is no reason you could not do the same irrespective of whether or not you are growth or income focussed. Sure you costs are higher but your increased assets/income are working harder for you and at an earlier stage of your journey – hence the impact of compounding will kick in earlier.

My thoughts for you to consider.

Derek

derekjones1@bigpond.com

Hi Simon,

Absolutely correct – 40yrs X 2.5% = 100% – hence the structure is completely written off.

Traveller accommodation and manufacturing property is written off at 25 yrs X 4% = 100%.

There are variations in trigger dates depending upon its classification.

Derek

derekjones1@bigpond.com

Hi Misty,

Apologies for the delay but I have been away from home for a week.

Yes I am suggesting that you use your equity for deposits as this way you are maximising the leveraging capacity of your existing assets. For that reason I also suggest you do not sell either as long term growth will, in all likelhood, continue in the long term – why sell a growing asset – it’s contribution to your coffers stops the minute you sell it.

In addition any sale will incur selling costs and CGT liabilities and by default will ‘cost’ you some of your gains. Adopt a long term view and you should enjoy further successes.

The other reason for hanging onto these is that banks do a asset value and serviceability check when lending future money – these two properties provide considerable value to your portfolio.

If you have any other questions do not hesitate to ask.

Derek
derekjones1@bigpond.com

Hi Jeannie,

Rental guarantees can be used to distort investment reality and can make the cashflow figures look better than they really are as the guarantee is often above market rates.

Under these circumstances someone has to pay the above market figure – and don’t think the marketer is being benevolent – you are paying for the subsidy.

The easiest way to check this is to see what the market rate for similar properties is exclusive of any rent guarantees.

You will need to check who provides the guarantee. I have seen guarantees provided by insurance companies – some of which are no longer in business.

Ultimately the best investments are those that perform well in the open market.

Derek

derekjones1@bigpond.com

Hi Chan,

I appreciate that it is possible to buy a cashflow property and have growth – and the recent market of the last 3ish years clearly demonstrate that.

However in the main the recent growth in prices has largely been driven by people seeking cashflow positive properties and who are prepared to ‘go to the end of the earth’ to find them. To me it is no good looking at three years, or less, and believe this growth will continue over the following years.

My comments are based on 18 years living in many parts of country WA and seeing property prices remain ‘cheap’ throughout that time.

Compounding the problem, as I see it, is that Australia, by and large, has a very centralised population and the drift has been towards the city and/or coastal communities.

Sure an experienced and very well researched investor will get these properties but I don’t see them falling out of trees in the long run.

Growth is not guaranteed anywhere, that is true. But I base my investment decisions on long term trends over the last 10+ years and by investing in areas that have shown significant, and sustained, population growth my risks are minimised.

I wonder how many people do their ‘sums’ and do not factor in an extended vacancy rate – I am of the opinion country towns as such are more prone to this issue than a ‘city’ type investment where the potential pool of tenants is much larger.

But you are right it is about managing the risks and doing whta suits you – I like being a little contrarian when surrounded by cashflow investors [].

I am buying growth focussed investments which are neutrally geared as such I am not out of pocket – one of which is now almost positively geared with some addition of furnture and a suitable increase in rent.

Derek

derekjones1@bigpond.com