Forum Replies Created
Hi Pete the Builder,
I posted another topic today regarding finding a builder in Sydney to undertake the construction of a dual occupancy development in the Bankstown area in Sydney. My partner and I are both town planners and I actually worked for Bankstown Council for quite a number of years approving many dual occs. Anyway, we have all other aspects sorted out, but the difficulty seems to be in locating a good builder in Sydney to undertake the work for us. Do you do this kind of work or can you recommend anyone who could?
Thanks for any assistance.
Santariniwalk,
The general concept of purchasing properties on a negatively geared basis is a long term wealth strategy adopted by many Australians. You do not, and should not, go through a company offering a one-stop-shop service as you will be paying for it all the way, and they are usually a developer trying to sell their properties at inflated prices.
However, what you should do is read as many books as you can on the topic to gain a thorough understanding (but it is a fairly simple process when you break it down) and approach your broker/bank manager to talk about borrowing money to purchase an investment property, they will guide you along and make the process fairly easy. Choose a property that you think is in a good location and likely to receive good, solid rental income and experience steady capital growth.
JXF,
As TerryW suggested, this occurs where the income from your collected rent on your investment properties exceed you expenses on that property. Try reading Steve McKnight's books, he essentially buys cheaper properties in regional areas where the rent covers the costs of owning the property (mortgage, rates etc) as soon as he buys the property. these can be hard to come buy or create (through developing properties) so a lot of investers pick up a number of negatively geared properties and simply wait until the rent increases over time so that it covers all your costs, and what's left over is yours! Alternatively, you could sell half your portfolio after a ten years (for example) and use the money to pay down the loans on the remaining half of your portfolia, in which case the rental income would comfortably cover your cost and put even more money in your pocket…..potentially enough to replace your day job.
Hi Rod,
I am a town planner in NSW. If you are in NSW you can order a Section 149 Certificate for a small sum which tells you the zoning of the property and any affectations on the property, like if it's flood affected etc. The Certificate is generally fairly clear, but even if you don't understand all of it, every council has a 'duty' town planner who can help explain it to you. Sounds to me like the 'town planner' report is just a polished and rehashed version of your Section 149 Certificate. (I am assuming a similar certificate can be obtained in other states). You would also need to get a copy of the title of the property (ask the real estate agent) and check that there aren't any easements or restrictions on the title of the property, as you can't generally build over easement.
Cheers!
Hi Shanshan,
I'm from Sydney so I don't know the market in Adelaide. Itis generally a good idea to just get in the market asap, however, there is a property cycle which occurs usually every 7 to 10 years and sometimes it is better to wait. For example, I bought a house about 2.5 years ago and it hasn't gone anywhere at all, so if I had been aware enough to know the market was flattening out, I would have been better off to just keep saving…..which is exactly what I have done in the meantime (as well as keeping the property) and I am looking at buying again at the end of this year, because the market will have been flat for quite sometime and I expect should start to warm up again so it's a good time to get in. So, try and read up on the market there and find out what stage it is in the cycle, if it's flat or in decline, just keep saving, but if it's hit the bottom and starting to warm up, definitely get in as soon as possible.
As far as your research for prices of property and the rents you can expect, realestate.com can be very useful, just jump into the 'for sale' section to get a good idea of property prices etc (the agent will often mention what rents they would likely achive), but then jump into the 'for rent' section and have a good look through as if you were looking for your own place to rent, and you will soon get a very good idea of whats an appropriate amount of rent for any given property in a suburb.
Good luck with you venture. One more thing I would suggest is reading Rich Dad Poor Dad and not actually moving into your property in a few years time, but rather keeping it an investment property and just renting your own place whereever you want to live. This gives you much greater tax benefits and heaps of flexibility to chose where you want to live in the short term i.e. you can move every 6 months depending upon your life circumstances, like closer to work for example, or even a cheaper place (i.e. if it's just you, perhaps you could live in a cool one bedroom or two bedroom unit closer to the city – do you really need three bedroomms for yourself). If you do your sums, you will see that this is financially much smarter than moving into your own house, it's what I do.
Hope this helps!
Bangers68, TerryW is spot on! The debt on your PPR is not tax deductible, so you should definitely seek to get rid of that debt as quickly as possible, and then use a line of credit to access the additional equity for an investment property purchase.
Of course, if you wanted to you could probably purchase something fairly cheap, for say $180,000 to $200,000, and use your $100,000 for part of the purchase so that you're only borrowing about half the value of the investment property, and you should find that because the debt is relatively low in proportion to the property value, the rent would probably cover your loan repayment and maybe even be positive cash flow. I would recommend sorting out a deal which is effectively neautrally geared (becaue this will allow you to purchase the highest possible property value before it starts costing you money out of your own pocket) so that it doesn't cost you anything, and you are as highly leveraged as possible in the market (although thuis is a strategy based on capital growth, not necessarily cashflow). That's essentially what it's all about, if your $100,000 cash grew at 10% a year (in a term deposit for instance), you'd only make $10,000, but if you had a neautrally geared IP worth maybe $200,000 and the property market grew at 10% a year, you'd be making $20,000 a year. Simple.
I am also curious about the issues of GST. I am intending on undertaking a dual occupancy development next year and then using the equity in it to do another one and so on. If I undertake the developments in my name and do not set up a company for it, then do I still have to pay collect and pay GST to the ATO?
Also, I am intending on keeping each development for probably at least 10 years, whereupon I plan to sell some of them to pay the loans off. Obviously when I sell them in 10 years time they will be worth considerably more than if I were to sell them immediately on completion, so how is GST supposed to be worked out in 10 years time? Surely it's not just a straight 10% of the sale price?
Any assistance would be greatly appreciated.
Damian,
I would strongly suggest reading the book Rich Dad Poor Dad. The book talks about the concept of not buying your own home, but spending your money on 'assets' which are things which put money back in your pocket. You will probably find that you can afford two or even three investment properties of the same value as one property that you live in. This is because the rent and the tax breaks will help cover a signifcant proportion of the loan repayments, allowing you to buy more properties. Naturally you would need to rent a place yourself to live in which needs to be factored in. The more properties you own, the greater exposure you have to the market and therefore the quicker you will accumulate capital growth and equity, and the more equity you have, the sooner you can buy additional investment properties and accelerate your portfolia. It's all about achieving maximum leverage in the market.
Hope this helps, but highly recommend reading that book to change your mindset.
Good Luck!
Lausy,
I am located in Sydney, so I’m not sure if the rules that apply are the same, but here if you get the first home buyers grant, you have to move in within the first 12 months, for a minimum period of 6 months. When I bought my house, I put tenants in for the first 6 months, then I moved in it for 6 months, which was pretty tough without the rent to help pay the mortgage, but as soon as those 6 months were up, I moved back in with the parents for a while and put a tenant straight back in it again.
My position has improved considerably with a new job and I now live with my partner, but whilst it was tough in those early days for the 6 months I had to live in it, it was worth it for the first home buyers grant and stamp duty exemption – and would definitely be worth getting into the market now before it starts to rise again.
Cheers
Hi Tina,
Both my partner and I are senior town planners in Sydney. I have worked for five different Council’s over the years, and undertake some consulting on the side.
Richard is correct in that a town planner may be able to help you, however I think this is unlikely in this case. Contrary to Amanda’s advice, the counter staff are generally very knowledgeable and have an intimate knowledge of the controls for the Council in which they work, and I would suggest that the advice they are giving is most likely sound. Most of the planning controls can be found on the Council’s website and these documents will provide you with the answers that you are looking for.
I am not familiar with the planning legislation in Queensland, however, if the controls have a prohibition on battleaxe subdivision, I would recommend not taking a risk on buying the property with the hope that you may ‘get it through’. Hiring a consultant town planner will only help when there is a sound justification for variation to a development standard, and they can provide the documentation to ‘argue’ the variation – where there is a complete prohibition, I wouldn’t like your chances of success.
However, as I said, just have a hunt around on their website and you should find the answers yourself.
Cheers
Aaron
