Also check your insurer will cover you as this is a style of subleasing really…

Hi @jodyt

I mean when the tenant leaves. There are two different styles of Dept Housing tenancy. One being Dept Housing is the tenant and they sublet to whomever they please. The other is an individual applying directly for your property and Dept Housing paying their bond and possibly also their rent.

Be aware that (at least in Victoria) it is virtually impossible to succeed at tribunal in keeping any of the bond if it was paid by the Dept of Housing.

If it is of such recent construction, council may have a record of it. Or the draftsperson noted on the council plans might recall who the builder was.

As @mikesonthemic has mentioned knocking on the door would be a good idea since chances are, if it is an owner occupier they are probably still living there. Alternatively, neighbours may recall the company names on some of the tradie vehicles and you could hunt the builder down that way.

Great post @terryw . The asset protection question comes up a lot and that’s the best summary I’ve seen yet. :)

Thanks @aperry

@rsco I hope you don’t now feel as if we’ve stomped on your ideas and that you’re stranded. Chatting to a savvy broker will be invaluable for you and help steer you onto a path that enables to you grow your wealth as time goes on rather than stunt it. They will likely have suggestions relevant to your scenario that you’ve not yet considered.

Hi @rsco

Taking a step back… you will want to give very serious consideration to the dilemma of “purpose of borrowings” which was discussed extensively here ; http://somersoft.com/forums/showthread.php?t=29734

The moral of the story is this:

Unless you are a person that cannot resist the urge to spend money that is sitting in offset accounts, it is generally better to put spare money in offsets rather than physically putting it in as a payment off the loan. That way if you want to move to another PPOR you can whip the money out of offset account of the old PPOR and use it as a hefty deposit on the new PPOR, thus leaving the debt on the old PPOR.

Some folks instead opt to sell the old PPOR to free up the cash to spend on a new PPOR. The nuisance is of course that you don’t get the stamp duty you paid for the old PPOR refunded, and you have to line up to pay stamp duty again on the new PPOR, so $$ pros and cons of each course of action have to be weighed carefully.

Again, best to talk to a savvy broker before you get too far down the track of taking action.

Hi @rsco

Righty-oh then let’s see if we can help you steer the ship !

First and foremost, let’s address the idea of the units you mentioned.

Based on the pricepoint and rental return I’ll assume the units you’re talking about are in a regional location. It’s really important to check on holding costs because councils and water authorities like to hit unit owners with big bills that are more in line with 5 bedroom homes. It can really chew into your rent money. For instance, a one bedroom unit will be slogged with the same service charges for water and sewage as a 5 bedroom home, despite the fact there is less showering, dishes-washing and toilet-flushing happening in the 1 bedroom dwelling than there would be in a fully occupied 5 bedroom home. In regional Victoria, the councils and water companies can issue rates per dwelling, even if the dwelling is not on its own title (for instance, a unit in a block of units that is not yet strata-titled). The water company can indeed also rate dwellings separately even if they do not have their own water meters. They can, and thus they do.

Another thing to consider are whether it is possible to get residential finance for such a purchase. If the units are still all on the one title there will be very few lenders that will now do a 4-pack at residential loan rates. Commercial rates are more expensive.

I personally wouldn’t acquire something that fetches less than circa $200 per week in rent. This is because regardless of how high or low the rent is, you must still provide and maintain an oven, hot water service, electrics, toilet, shower etc. Just talking about the oven, if the oven blows and the rent is $165 per week, it is many weeks of rent gone just on replacing the oven. The hot water service would hurt even more.

You didn’t mention whether you would intend to use savings or equity release to fund the deposit on the proposed units purchase. Most lenders would only go to 80% lend on a block of units, and if you do an equity release you would normally still have to leave 20% aggregate equity on the table with the bank (aggregate being total of your home and the units). I looked at a very similar set of figures to yours only last week, and in order to comply with leaving 20% on the table in an equity release situation, the PPOR (home you live in – Primary Place of Residence) loan needed to be down to $200k (yours is presently at $240k).

Now for ownership structure

An investment property that is cash-flow positive may not be best purchased in your name while you’re working, since you would be taxed relatively heavily on the cash-flow positive component. If your wife isn’t working, ownership in her name might be a consideration. These sorts of things are best discussed with the family accountant to nut out pros and cons of each ownership structure scenario.

Another consideration is superannuation – many folks now set up SMSFs (Self Managed Super Funds) and use their super to fund deposits and buying costs on investment properties.

Questions

Are you able to fill us in on how you plan to fund the deposit money on the investment property so we can ponder your case a bit further?

Also irrespective of whether you intend to tread down the SMSF route it is always important to have an awareness of how your superannuation is going and be proactive in ensuring it is performing.

Hope you found some helpful thoughts in the mix there!

Hi @ragnar

Pleasure.

Maybe they’ll at least let you tarmac over it so that you can have a parking bay. As you’ve mentioned they won’t allow a structure but might allow the ground surfacing. Perhaps you could then put up a shade sail over it.