Forum Replies Created
Hi, retirement IS hard work!
I used to flippantly say I want to retire at 40. I actually stopped working at 42. Young & attractive still, enjoyed mucking around & found my money ran out very fast. That was when I started buying property.Managed to finally 'retire' at 52. Not so young & attractive but still …
I bought a property & redeveloped it, built 4 houses, bought 2 more dilapidated no one in his right mind would buy houses. Sold one, redeveloped the other.
Took 3 years, a lot of swear words & not so subtle threats.
I really enjoyed this phase of my 'retirement' even though there were moments of stress.
When the developments were finished, I was left with nothing to do so I bought a cafe. BIG MISTAKE. So Gloria Jean, take note & do your due diligence. I was happy to give up $50K. I could make it back much faster if I didn't continue with the cafe.
Then someone recommended a tutoring job. It was 2 hours a day x 4 and standard pay. It was a very very rewarding experience.
Now I play mahjong with my 87 year old parents, so that they have some activity to occupy their time.
I made some cotton tops and my cousin said that they look like designer clothes, she filched 2 of them, then bought a stack of materials for me. I'm happy to make more of them because the sense of satisfaction at designing & completing them is immense.
Will probably visit India or Russia this year or next.
Incidentally, my siblings are so relieved that someone's looking after my parents they pay me!
KY
Hi, one relative who retired on independent resources bought a 3BR house in a stylish retirement village. The first 2 years were good & then management costs kept increasing, shares kept dropping.
Their wealth dwindled and they decided to sell out. The buyers were scarce. In the end, they took a big loss and got out. Bought a 2 BR new house in a hills area and were happy to take the pension.
In the 80s, they were wealthy, their children went to private school & etc but in the 21st century, they've become pensioners.
Still good, their new house has increased in value significantly, but unfortunately, a long way below what they once were.
KY
Hi, Richard Taylor & Terryw are 2 of the best at what they do.
A buyer's agent [one goes by the name Propertunity is very good] will be worth his weight in gold in your case.
* Your savings rate is VERY low if you only saved $20K on a 190K p.a. – not being critical, just a comment on the numbers you've thrown out.
Can you review your PAYG situation?
Good luck,
KYHi, catalyst is exactly right. To be 21 again, ah!!!
Consider this: what would you do if your property went backwards for 10 years? You get 4.5% yield so fork out 2.5% in costs. Then price drops by 20% add to that, transaction costs, you have a deficit to answer to.
I bought my 1st house for $166200 and it rented for $400 per month. The house next door sold for $104000 three years later. My house would have sold for $120000.
I gritted my teeth & bore it for 11 years. Prices went up in year 9, 10 & 11. I sold for $310000.
It's rare but it can happen : we can get 10 years of flat or -ve growth. So be prepared.
KY
Hi, I own 5 student accommodation units, all in NZ.
If I were given a choice to go back 7-8 years & with the info I have now, I would not choose to invest in student accommodation.
My investments aren't bad, as such. The NZ managers are very good.
I calculated my position yesterday & it looks like this: I'd put in around 175 thousand. I have equity of 300 thousand without any re valuation. 2 of them have gone up about 25%
They're far better for cashflow than for resale. The reason is they're so cheap that transaction costs eat away a big % of the profit.
The cash on cash return is around 18% p.a. so far. Net yield around 9.4%
I'm considering student accommodation in Australia because I need some depreciation to offset some cap gains.
If you do buy student accommodation, you need to be aware that the starting yield needs to be near 10% as the other costs can be very high. Insurance, strata fees, mgt fees, cleaning, maintenance etc etc
The manager can make or break your investment.
KY
Hi, a bit puzzling. 100K startup to buy 500K worth of property. Means loan of 420K. Yield = 20K @4% [if you're lucky] interest on loan = $29400 [7%]
To invest 96K p.a. each partner has to inject $2000 a month.
Is that what you're saying?
KY
Hi again, and that precisely is why I asked that question. There've been concerns about sustainability & current auction rates & high volumes of stock in Brisbane. So interstate where? Maybe Perth?
But from all accounts, it's likely to be flat.
So considering your LVR position, why rush to pay LMI when there's such a high probability that cap gain is going to be very slow?
Unless your tax bracket is so high that you need to maximise borrowing, you might want to consider other ways of achieving your investing goals.
KY
Hi Jlia, I presume you're talking about buying another IP in SA? May I ask what you've seen that makes it so urgent to buy immediately?
KY
Hi, finance is not an issue. How to minimise & capitalise on your PAYG is.
Do you realise you have some VERY savvy property investors in Melbourne? Steve McKnight, Michael Yardney, & a host of other investors who don't 'teach' but who post on these forums?
KY
Hi, check this carefully. I don't think you need to pro rate the depreciation.
KY
Hi, have you done a depreciation schedule? If your unit is new, you may get a LOT of tax deductions. And if you rent to 2 tenants, are you providing white goods [fridge, dishwasher, oven, etc etc]? Curtains, blinds, carpets, lights are ALL good depreciation items. Around 25%
It means that you can whack $5000 off your taxable income, which adds $1500 to your cashflow.
Your accountant may not do the depreciation for you, mine certainly didn't.
KY
Hi, I thought you were talking about the other block of land.
So, $110K x 2 = $220000[say $250000]
$28K rent p.a. can support a loan of $320000
Seems quite comfortable without having to sell. You need to factor in holding costs – the faster you can do it, the less the cost but in your case, it's really not difficult because you can use the existing equity in your house.
Re the trust, I'm not conversant with family trusts but I'd suggest you find out the accounting costs. Your income [pardon me] doesn't seem high enough to warrant fancy structures.
I'm excited for you. Good luck & I hope you prosper.
KY
Hi, some fantastic ideas there, Susan & the sooner you start, the better. The reason is very simple: raw land has far less value than improved land.
I'd suggest comparing the pros & cons of selling or holding for rental. The agent suggests $150K sale on a $110K house? Who would enrich more, you or the agent or the govt? Profit = $40K, $4K to the agent, $5K to tax? You end up with no land, and only $100 thousand in hand.
On the other hand, if you have the rentals, $150 pw [you'll nett about $6K p.a.] from each house.
You're barely breaking even.
Is there a way you can lower the cost of putting the house on the block?
KY
Hi, not to be taken as advice but your wife might have an instinctive feel & knowledge of her own backyard.
I'm Asian and I have NZ properties. I've been thinking that it's a good time to be buying older or even decrepit houses on big land to rebuild. Stacks of -ve gearing with depreciation = +ve cf. All the 5 units I have are set up like that. I bought them in 03 and haven't had to pay tax for 8 years but the rent is more than enough to cover expenses. I haven't even bothered to revalue them.
I keep the 2 incomes & tax separate but because it's a carry forward "loss", I've not married that to the Aussie part of the tax yet. If I wanted to, I could but it's hardly worth the hassle.
The NZ managers are very good. We did have one [a young inexperienced fellow] who absconded but that's all been settled.
On a high income, you might want to consider building [look for old houses or shops] in Australia. You may even find some young investors with no money but who can spot properties with potential.
Good luck with it,
KYHi,
a) 25-30% of total project cost
b)constantly, especially when interest rate goes up!
c)surprisingly none, the actual profit was $75K per house, same as what was estimated/hoped for when the block was purchased [the initial assessment was each house would make a profit of $60K] However, the deviation in the actual cost was 25% [originally thought $200K per house ended up costing $245K]d)the feasibility study is a must before the commencement of any planning/application. I did mine on the back of an envelop.
e)Yes, but it will cost you.
KY
Hi, I'll take it with a big spoon of salt. No need to spend so much to find out what he says. Just go to the library & borrow his 2 earlier books. The Roaring 20s and the Big Boom Ahead, something like that.
He way way overshot in predicting the Great Boom [said Dow would pass 20000, which it never did] and got the time frame not right either.
So if he was out by 25% [Dow near 15000] then his 4000 prediction for the Dow should be 25% off as well. So, 5000.
I don't buy it.
KY
Hi danviv1, losty & young guns et al,
I'm not sure that you all have considered the super issue in depth. The reason your super went -ve is because your fund is weighted heavily in equities. And fees march on regardless of whether the fund makes any profit or not. What I'm suggesting is that one who earns enough to be in the 30-40% tax bracket has enough reason to just contribute cash into a smsf & let it roll & roll. The govt is doing a lot of the pedalling, why don't we take advantage of it?It's the same reason why -ve gearing works. That's why our property investments have been so productive. It's the very reason why I bought my 2nd house. And the 3rd. And the 4th.
The fact that you can't access your super until another 30 years should not deter you. And when the funds are withdrawn after 60, there's no tax. At least for now.
What I suggest is, do the numbers in a detailed manner first.
KY
Hi, while I'm a property afficionado, I'd like to caution you about the downside to property investing. Tenant & vacancy problems, + management costs, maintenance etc erode yields.
Your problem is going to be that you need the income to live on & depending on the amount of cash you have in hand [if you still have a home loan, that amount is going to be lessened still] and your reduced income means that you don't enjoy the tax benefits that high income earners get. Which begs the question why you didn't buy earlier but that's beside the point.
Property yields @ 4% so if you have $600K cash, you get $24000 a year to live on, maybe less.
Sorry to be the bearer of not so good news but you really need to look at your situation carefully.
KY
Hi, you've answered your own question, basically.
I didn't look at the 2nd part where one income stops.
The best financial outcome is not necessarily the lifestyle choice.
In the present scenario, the best outcome is achieved by making current PPOR a rental. Can you bear the pain & inconvenience of that?
KY
Hi, Richard Taylor's going to jump on you!
Why is the IP loan less than the PPOR loan? And why oh why is the IP loan P&I?
Ideally, it should be IP loan $350000 and PPOR loan $330000
Look at the discussions on debt recycling. Try to work your PAYG down as low as you can.
KY
