Hi Rocksquad,

I doubt that this can be done, but we’re about to interview a SMSF expert on one of our podcasts. I’ll ask him if he knows anyone and let you know.

Cheers,
Den

Ultimately this concept involves living off borrowings and hoping that your capital growth will exceed your living expenses (and by a fair bit). A tax implication of this is that your living expenses aren’t tax-deductible so you slowly turn your investment (i.e. tax-deductible) loans into non-tax-deductible loans. Not necessarily a wise move. It’s an extremely risky strategy!

Capitalising interest involves paying the interest on your investment loans from the investment loans themselves. This strategy may mean you have to increase your investment loan limits (sometimes they end up greater in value than the property they secure). The advantage of doing this is that you can pay off your home loan faster. My experience is that you need to get a tax ruling to capitalise interest, and your primary reason given needs to be that you’re paying off your home loan faster. If you say you want to capitalise interest so that you can reduce your tax debt, it’ll be a miracle for the ATO to rule in your favour!

I hope this helps.

And good luck with your investing!

You're right mattsta, regional areas tend to offer a higher percentage of CF+ properties.

You do need to be careful, however, that the area you're looking in is a viable community. Some mining towns may be booming now but they lose their "boom" and can become ghost towns in a few years. It's worth checking to see that there are enough other industries to keep the town going in the case that the major industry busts. It's these single-industry towns that are very risky – some people invest there and do extremely well, and others fare far worse.

I'm too conservative to take such risks. I tend to look for certain indicators – a McDonald's, a Bunnings and an airport that offers passenger flights, and not because of my penchant for burgers, hardware and travel. Generally, I have found that if a town is good enough for Ronald McDonald to set up shop, it's worth investigating.

I hope this helps, and good luck with your investing!

Hi Big AJ,

Welcome to the forum.

I have advice for you:
1. If you want to get educated about property then go to a company or business that specializes in educating you about property.
2. If you want to buy property, then choose the property you want to buy yourself.

There ARE some great companies that will help educate you around property investing, who also can offer properties for you, but in my experience these are few and far between. I have encountered several companies who “educate” you to buy THEIR properties for investment. Their core business is selling property, not educating you. Therefore the purpose of their “education”, in my mind, is questionable. If you EVER consider buying property from a business like this, you MUST run the numbers yourself, independently (and I would advise with your (not their) accountant).

Read some books by independent authors. Listen to some podcasts (we make a free podcast – there is a link below, and you can also find us on iTunes). Read magazines.

If you have a considerable amount of money to invest, then there are companies that would love you to invest it with them. I’m not sure how you will do out of it, but I can assure you that they will do very well thank you very much.

Get smart!

And good luck with your investing.

G’day lilhazel!
Welcome to the forum.

You’ve a lot of questions and there’s a lot to learn. Have you done any reading about property investing? There’s lots to find out and there are some great books available for you (check out authors like Margaret Lomas and Steve McKnight – Steve runs this forum). There are also free podcasts you can listen to (we make one – see the link below) and there are two major property investment magazines you could buy, although they don’t necessarily help you make the first tentative steps into the property investment world.

I hardly knew anything about property when I started, and I was lucky that the I bought at the right time. I believe that the market isn’t going to boom for a little while, so you have a little time up your sleeve to get educated.

Nevertheless, I reckon it’s a good idea to start small. A portfolio with a few smaller properties is a far better way to spread your risk than one big property, and you can start earning faster with smaller properties. Often, smaller properties have higher cashflow than larger ones do too!

Hopefully this helps. Check out those books, our podcast (it’s free) or some magazines.

And good luck with your investing!

I agree with Derek, you need both cashflow AND capital growth.

Cashflow gets you into the market and keeps you there, but capital growth gets you out of the market in a profitable way. If you, like me, are looking at growing a portfolio and then selling a portion of it to pay off the debt then you need both. The cashflow will help you buy and build your portfolio while keeping you afloat and keeping food in the fridge, and the capital growth will mean that you need to sell as few properties as possible to wipe out your debts and live independently.

You can be more sure of good cashflow because you can do all the sums and work it out. The unknowns are future interest rates and future rents, but it’s a fair bet that if something is positive cashflow now, it will continue to be (unless interest rates rise significantly to push it into the negative).
Problem is, you can never be sure what capital growth will be – that’s crystal ball stuff. You can hedge your bets and do your area analyses, but there’s always an element of uncertainty.

Good luck with your investing!

Maybe the market has bottomed out – house prices have risen in November (0.1%) and December (0.3%). There are still relatively strong fundamentals (demand exceeds supply) and the lowering of interest rates will free up some more cash for those who are interested in buying (and for those who already have mortgages). I would expect mild growth for the next year – if we follow the December price rise (and this is just a prediction) then 12 months at 0.3% would give 3.6% growth.
Let’s say somewhere between 2% and 5% growth would therefore not be an outlandish prediction.
Remember also, by the time you realise that property values are heading upwards, you’ve missed the best buys!
Also keep in mind that there are MANY property markets in Australia, so more careful research might point you towards regional areas, or units, or god-knows-what… I’ll certainly be looking, and I’m focussing on capital cities.
Hope this helps, and good luck with your investing!

This is a toughie!

First of all, you need to sort out what is going to happen with the laneway between the two properties. You also need to get a good feel for whether development is going to be permitted. There’s no point buying them for development if you can’t develop them! Council planning offices are far more helpful than their reputations suggest…

Then it’s time to do some more due diligence and eventually make an offer. Tactically, I’d be more likely to let the agent know that you’re looking at buying both or neither. The agent wants to sell their properties (obviously – that’s how they make their money) and the commission that the agent actually makes won’t alter that much if you get them for, say, $10,000 less. (Remember 2.5% of $10,000 is $250. Once the agent’s company takes their share, it’s unlikely the agent will receive any more than a hundred bucks. Hardly something to squabble over!) Furthermore, you’ve said that the agent doesn’t seem to be great at looking after the owners, which could further benefit your position.

Finally, I think the biggest danger is that one owner says yes and then the other owner says no. You could then find yourself paying more for the second property. This being the case, make sure you have enough conditions in your offer to be able to pull out of this all-or-nothing deal.

Sometimes I think we over-think the tactics of buying a property – if you offer the right price, the sellers will take it!

Good luck! I’d love to hear how this goes

Cheers,
Den

Hi!
Geelong and surrounds often gets pretty good write-ups, so you could definitely do worse than Belmont. There is a lot of government spending going on there, so it’s worth taking a look.
Do your numbers (my website has a property cashflow calculator for free, if you’re interested) and make sure you do your due diligence too!
Good luck!
Cheers,
Den

Good stuff JacM, that’s exactly how to do it!

Get chatting with the real estate agent and find out what the vendor wants. I recently bought a place for $270k after being assured the vendor wouldn’t take less than $300k. Sometimes the last person to blink wins.

It’s also worth noting that any written offer must be passed on to the vendor, so if you start at, say, $290k and go to the trouble of writing it, you might condition the vendor to receiving considerably less than the $330k they say they want.

By the way, I’ve got a offer template which might help you when it comes to making an offer. Simply get in touch via the website and I’ll email it to you.

Cheers, and good luck!
Den