Hi jfk

Yep, well aware that is the question.  Can anyone answer it?  Maybe, maybe not.  What I do know is that people ask me or the forums questions every day.  Questions about which house they should buy between option A and option B.  Questions about should they invest in a house or in shares.  Questions about whether a unit is a better choice over a house.  More often than not it is not really the question that needs to be asked and answered that drives the decisions.  It is important to know what destination you want to reach in order to be able to answer the question of whether a particular property or asset is aligned with that goal.

Cheers.

Hi Paul

I'd be wary of having tax minimization as a plan … better to look at whether the property stacks up by itself or not.  Tax breaks are a bonus – not the reason for buying.

You're probably going to need to speak to a financial advisor and/or accountant regarding what is best to do with your salary (ie put it into an offset account or give it to your wife to invest in other things). 

I stand firm on my opinion that you want to clearly define your end goal (eg "In retirement, we want an income that is the same as $x in today's terms") and work backwards from there, ensuring you are gathering enough assets to enable such an income.

Hope this helps!

Hi Paul

It might be less confusing if you first define your end goal.  Then work out what needs to happen in order to achieve it.  For instance, if the end goal is to have enough assets to generate an annual income of $50k in today's terms, you then ask yourself "does this unit achieve that, with what is left of the rent after paying the bills and assuming there were no mortgage?"  If the answer is no, then you would need more income-producing assets.  In this regard, paying the unit off quickly might not be the right approach.  Instead, using spare funds to acquire more property or other income-producing assets might be a better approach for you.

Why not get the rent paid twice monthly?  That way your rent money is holding off some mortgage interest rather than sitting in the real estate agent's account.  It also means that you have visibility of any payment issues your tenants are having, sooner rather than later.

If you get paid twice monthly, I think the most convenient time to pay mortgage interest is around the 20th.  A few days the mid-month payment, but not so few that if the rent roll is processed a day late that your rent hasn't still landed in time for the mortgage deduction.

I think start-of-month mortgage payments are a bit disruptive because you are dealing with them at the same time as two big events every year – tax yearend (the time when you are also probably at your busiest in your day job) and the xmas/new year holidays (when you should be enjoying yourself rather than remembering to login to your internet banking to check everything is in order with sufficient funds in the correct accounts before the mortgage payment day arrives.

There will be a million different opinions on this topic – nobody is wrong or right – it's largely a personal preference thing.  A lot of it has to do with convenience.

It depends what you plan to do with it.

If you intend to hold onto it and pull equity out, it is worth less to you as single title (since the overall site value will likely be less, but you'll likely find the LVR the bank will give you on a multi-occupancy site will not be as high as the LVR on a site with a single dwelling.  This is because if the bank had to liquidate it, they have less buyers to trying and offload it to, because only investors would buy a multi-occupancy site.  They couldn't sell it to the owner-occupier market.) 

Generally it would likely be worth more subdivided, but be very sure you will not lose money in the process of making that happen.

All in all, you should choose whichever option makes the most money.  Cut the numbers and let them answer the question for you

Ahh good tip Dave!

Just bumping this thread because there is no shortage of people out there losing money on backyard subdivision projects at the moment.  Be sure to due your proper due diligence when considering this sort of thing.  For example, chat to council to understand minimum block sizes, how much "private open space" each lot must have, minimum driveway widths etc.

Among the flurry of Christmas shopping and such, I believe I've sent the article to all those who contacted me asking for it – if I've managed to somehow overlook anyone who requested it, please accept my apologies – just drop me a line and I'll email it through to you. 

I don't give reasons.  I simply do not respond to the request, which is essentially saying no. 

Be aware that (in Victoria) once a contract is "unconditional" (ie finance is approved, you are happy with your building and pest and any other conditions that apply to the contract), the vendor can request early release of the deposit.  You can respond to this request, or not.  If you do not, they get the deposit after 28 days by default (so long settlements have the potential to be dangerous if you have a big deposit on the table).  You can decline to release the deposit, but there does need to be a valid reason.

I never release deposit early.  Once it is in someone else's hands, there is no control over what may happen.  If they were unable to settle for some reason, you may not see your cash again.

With this said, I must say I find it ridiculous when I am presented with the argument that a vendor supposedly wants a bigger deposit (since they won't be getting any of the money till settlement anyway).  A more rational argument is that the selling agent wants the deposit to be of a size that at lease covers his/her fees, so that if the deal falls over, he/she can still get paid.