Peter,

You’ve missed out on the boom- ie having property before the boom- but so did many people. the best time for you to purchase property is now AFTER the boom- in a flatter market. so don’t panic- there’ll be many opportunities around, but I am not sure prices will be pre-boom eiother- so you might get less bang for your buck these days.

At 40, you sound a bit resigned to being on a low income and having few funds- wow- you’ve almost retired when this could be your prime! If you have a poorer income now, it doesn’t mean in the future you won’t earn more. I’m 38 and a bit schocked at your feeling that yours is a fixed state. You also have two incomes, and presumably your kids will be growing up so you and your wife can both get better jobs.

Many of of us (who started with nothing and saved for that deposit) would have started off with cheapy crap properties. Not that your first property will be a cheap crap one [blush2] but it means that some people will see where you’re coming from- out of little things big things grow.

My conservative approach would be a P&I loan (as others have said) to be paid off as quickly as possible. As a low income earner, tax breaks won’t be a large concern to you- just get the bugger paid off so you can do other stuff with built equity.

kay henry

hehe baloo [lmao]

dmichie, that’s a pretty good article, I think- sums up the different groups pretty well. I think a lot of people got in over their head in the last couple of years- 105% loans, LMI, deposit vouchers, multiple properties, henry kaye seminars worth 10’s of thousands of $, no money down, etc etc- I wonder how much negative equity exists on PI.com. This place has been so bullish, and anyone who has mentioned caution has been called a naysayer.

Thanks for the article, dmichie.

kay henry

I have always supported the vendor/exit duty- it subsidises first home buyers’ via atamp duty exemptions and the FHB grant- go figure- it has to be paid for out of something.

As to valuations… it might be a different story if people get their properties valued now… I was reading an article in the Age on the weekend about mezzanine finance and speculative investment in unlisted property trusts. It was discussing sites that were valued at a particular amount in 2003 and were now valued at 1/3 of that amount post-boom. The marketers of these sites are still using figures of the boom time… and are paying returns of 9% or whatever to the first investors via NEW investments- very risky business.

Of course the sydney market has gone down in some areas (but as many would say on here- there are many markets in sydney). As for immigration to sydney- both internal and external… from my memory, it used to be about 52,000… and is now about 35,000 when one takes into account those leaving sydney for other places, in particular Qld.

If people are in for the long haul… market fluctuations are not really gonna make much difference. I’d be interested to hear though, about people’s newer valuations- anyone buy property in 2003 and getting valuations done now? In sydney?

kay henry

Kelly,

You’d me more likely to get 10-20% LESS than your asking price in sydney in this market, rather than 10-20% ABOVE your asking price in a wrap. Most first home buyers are flat out getting into the market in sydney as it is. Not sure how they’d be able to afford a wrap with a higher premium and a higher interest rate.

kay henry

Michael,

On your “real job”, I calculate (on a vanilla taxable income of 100k with NO deductions- this would be unlikely for RE investors, as all would have deductions unless pozz geared…) that the tax to be paid for 2004 earnings would be $33,807 plus 1500 for medicare allowance. The figure paid for tax would be even less for the 2005 year and less for future years if the Govt gets through the taxation cuts mooted in the budget. So basically, all up, tax paid would be about 35,300- and that’s with NO deductions. Superannuation on a “real job” would be paid by the employer- not oneself in a PAYE situation.

I’ve seen you use the 50k figure in another thread- but it’s not quite the case. It would be better if your example was based on the remaining 64,700 net actually received, rather than the figures you have used.

kay henry

Yesah, Terry- oops @ me! Here’s some info below from the Tax Office (www.ato.gov.au) :

Records relating to inheriting an asset

When you inherit an asset as a beneficiary of the estate of a person who died on or after 20 September 1985, you may need to obtain information from the executor or trustee.

If the asset was acquired by the deceased person before 20 September 1985, you need to know the market value of the asset at the date of the person’s death and the amount of any relevant costs incurred by the executor or trustee. This is the amount that the asset is taken to have cost you. If the executor or trustee has a valuation of the asset, get a copy of that valuation report. Otherwise you will need to get your own valuation.

If the asset you inherit was acquired by the deceased person on or after 20 September 1985, you need to know full details of all relevant costs incurred by the deceased person and by the executor or trustee. Get those details from the executor or trustee.

Inheriting a main residence

If you inherit a house that was the deceased’s main residence, any capital gain on its subsequent disposal may be exempt. However, until this is known, you should keep records of relevant costs incurred by you, the deceased or their trustee or executor.

You will not need to keep records of the deceased’s costs if:

* you inherited the house after 20 August 1996
* the house was the deceased’s main residence just before they died, and
* the house was not being used to produce income at the time of death.

In those circumstances, you will be taken to have acquired the house at its market value at the date of death. If the executor or trustee has a valuation of the asset, get a copy of that valuation report. Otherwise you will need to get your own valuation.
___________

kay henry

Yes, you will, clueless. You’ll pay it at the usual tax rate- on the profit- given that you’ve held it for less than 12 months.

kay henry

Luci- don’t get me wrong- i am really big on education. One has to constantly update knowledge in this world as it’s so competitive and ever-changing.

A few points… not all university courses are tax-deductible- and certainly not forfull-time students. The govt stipulates that the course must be related to one’s employment. I can’t do any old course and claim it- i had to choose my course vgery carefully, and I did this one because I felt it would make me a better worker in my current position. It was not speculative.

Another thing- I do absolutely believe a 35k “course” is a waste of money, and I don’t believe most of those currently involved in RE did te HK courses- I think most people looked at the deregulated prices and wondered when it would all end – more and more “education” until you “graduated” with a PhD from HK’s courses haviung handed over another 100k?

I think books are wonderful- I love RE books, but how can you compare a $30 book that is a bestseller with a 36k course where so many people saw HK go down and wanted their money back? Talk about comparing apples with an ardmona factory.

kay henry

Yes, Scott, Glebe is between USYD and UTS- walking distance to both, whereas Marrickville is a bit more of a bus trip, but still

Anubis- that whole “Fusion” notion is massive in Architecture and Design Schools right now. I am amazed that people don’t view it more as the way things are moving- the old facades with the modern accoutrements. I must say it took me a while to get used to though- it’s not what one has been raised on, and it can be hard to keep up. Thank god for progressive architects though.

I am really amazed when people buy in sunburbs so far out of sydney. When I hear that there has been some new arterial road and it will make the drive to work now only 50 minutes… I cringe. You can pay similarly for a place almost in the city, with all the city has to offer.

kay henry

Marisa- bugger that that’s happened I feel for ya.

working with humans is always a risk- what can one do? property is a risk. I imagine pretty much every landlord here would have someone who was a problem tenant at some stage (c’mon- tell the truth, ‘lordies!)

Marisa, I like to insist that the tenant has their rent auto-paid into my account (I auto-pay my rent as a tenant or i’d always forget to pay!) Having said that, the tenant may not choose to pay this way- he obviously hasn’t. I guess you’re just gonna have to follow the letter of the law, or otherwise, it is gonna cost you more money.

Having a PM or not… well, I have PM’s- but evewn the best PM can only cajole/caress/plead- whatever- the money is still in the tenant’s hands, and it’s hard to get blood out of a stone.

In terms of mitigating risk, I try to work out what my situation would be if I had no tenant payments… could I still pay my mortgage from wages? If the answer is no, then it may be trouble, because one can never control tenants or ensure one gets rent- one only *hopes* to.

Remember the French Revolution? People got a bit annoyed at private property… hehe- could happen to us and there could be a bunch of “refuseniks” not wanting to pay our rents, and hitting us on the head with croissants when we approach them. Mitigate, mitigate… and keep your job!

Sorry Marisa- wish someone could help you get the blood out of that stone tenant, but really, these things can be tough.

kay henry