yuley7575 wrote:

Well originally I was thinking of just going Interest only and hopefully pick a great area that is going to grow in capital. Hold for 7-10 years and sell and do it again in another area. Do this with 3-4 properties spread out over 5 years so buy, hold, and sell. Instead of 10+ properties for 30 years paying them off slowly. I don’t work so were only on one salary and I rather not negative gear or lose money even if it might save a tad on the tax breaks. But yeh, tons of things to consider when buying. CRAZY!

Sounds like a good plan. Similar to what I do – buy properties that support themselves (but at 90% LVR) with an IO loan. I then intend to hold until I reach the stage where CG has put my port folio at a ~50% LVR, sell half and live off the rent of the other half. Need to be wary of CGT though. Aiming for this in around 10 years time for me.

A +1 for a knowledgeable broker. They wont (shouldn’t) show bias towards a particular bank or product and will find a solution to suit your needs now and for in the future.

Generally investors have an interest only mortgage that will allow them to maximise their tax deductions by not reducing the principal of the loan and assist with cash flow to enable them to purchase more properties if they wish.

As far as insurance goes – have a read of the PDS to know what you are and are not covered for. Generally I’ve found insurance policies that the banks offer a not all that favourable for landlords. There’s some specialist LL insurers out there like EBM and Terri Scheer that would be worth looking into as well but they may not cover building so you would have to source that elsewhere.

I’ve always gone about my PI with my business hat on but there was tenants I had who split up. She left and took the kids and he stayed in the property and gradually got behind in rent – the fixed lease was up in 6 weeks so was not going to renew his lease.

He gave a sob story to the PM about how he was in a bad way from the break up, got fired from his job and had no family he could rely on. He promised to get his act together and had found a new job and said the rent could be taken out of his wage and paid directly to the PM without him seeing it, much like the centrelink arrangements.

Rental vacancies at the time were a little high and he must have caught me at a weak moment because I agreed to it and he seemed genuinely remorseful. So I signed him on to a 6 month lease. All was fine for about 10 weeks then the rent stopped… He had gotten fired from the new job. Long story short, issued the NTV and the coppers had to remove him in the end. Place was a mess, broken windows and door locks. Luckily, had LL insurance in place and made a claim. All worked out OK in the end but was without rent for a good while.

I would stay away from Melton too. I built my PPOR and lived there for nearly 5 years. The CG was awesome to begin with as it rode Melbourne’s wave but soon went backwards and is only just staring to recover now. But… Like someone else mentioned there’s too much vacant land and house and land packages being released that are keeping prices down. To add to that all the vacant land between Caroline Springs and Melton which will be built up eventually will keep the prices down in the long term too. The rail line will be electrified eventually which *may* help prices but the electrification has been talked about a long time now. Will believe it when I see it.

Any particular reason you’re wanting to invest in Melbourne? What’s your long term goals? Is it 1 or 10+ IP’s? Do you currently have a PPOR? You have $100k to play with which is a lot more than what some can say. You have a good base to start with and can go a long way with it.

Might be worth seeking tax advice on this as even though it’s at arms length ie via a PM you (your employer?) are essentially renting from yourself.

Also a consideration would be insurance – is the lease through your employer or is it let more as a holiday let type situation? Some insurers don’t like it of there isn’t a set lease in place.

Higher than usual wear and tear would also be a concern to me too with the high traffic through the property.