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Figures based on Melbourne only which is a state reliant on manufacturing and services. QLD and WA are still moving and SA will if they get the infrastructure to capitalise on the emerging mining industries they have.
For the record property prices in Australia have achieved 12% average growth for 120 years.
In the UK average property growth is 8% dating back over 1000 years.In 2000 when I bought my first property for $200,000 on a $26k income everyone thought I was nuts. 7 years later it is almost 4 times that value. I would not expect such short rapid growth like that again for a decade or more but it will still go up. I am a cups half full sort of guy so call me crazy for seeing the positive in things.
Thanks for the input guys. Michael I will be getting that book as it is exactly what I need. Yes I am sorting out the structure on the deals this weekend. Basically I need to build a portfolio over the next 5 years as I will need to spend 4 to 5 million on a factory for my own business so I can look at owning my own factory rather than renting. Prefer to have some leverage than trying to do it without something behind us by then. I want the cashflow more than the property growth but I just want to understand all that I am getting into.
Hang on is there a cycle happening? Returns are crap generally and people cannot afford to buy so they need to rent. Rents will need to increase to cover a return of investors to supply more housing for rental. In the past 2 years rents have started trending upwards sharply and will continute to do so with vacancies in many states below 1% now. Probably another 2 years though before they reach close to decent returns in many areas. Then we have another reinvestment cycle of srious investors jumping in then the sheep then the rapid increase in property prices again and it all starts again.
Affordable rentals is something the government needs to look at and sort out because at the end of the day it all comes down to making a dollar and people are not going to be generous and lose money so people can have affordable rent. Property is already starting to plateau and the outer lying suburbs are all starting to down turn as wages have not kept up with the increase in prices and it looks like it will take a few more years for that to happen again.
Australians need to wake up as the Australian Dream has definitely bolted if you want to live close to the city that is. Europe is a classic example of where now people rent generally their whole lives or it takes a couple generations to pay off the family home. Australia probably also needs to look at longer rental terms as it will give renters stability, landlords permanent tennants and less costs for changing tennents frequently etc etc. Similar to commercial where the tennant and landlord lock in the rent and the increases upfront so everyone knows what they are in for. Not a $50 per week hike very 6 months cause that what the house down the road is now let for.
borrow more. The more you take the lower the rate generally. It is still all within guidelines. Especially now with the credit crunch they are not really going to be too flexible.
Thanks guys. Called the bank manager and thankfully is fully on the ball with this stuff as his brother does it. 5 minute chat and everything is sorted. Also need to go sleep with my previous bank manager as when he refinanced my property loan he fixed it until 2012 on 7.09%. Thanks for the help I can see a few IP's heading into my portfolio in the next 12 months.
Palermo Chartered Accountants
Lvl 1/ 284 Oxford St Leederville 6007 (08) 9242 1624I have found to be very good.
"Have you looked into debt recycling? You could pay the rent to yourself and capitalise all investment costs, including interest, within a new loan account (or your existing investment loan if the limit is high enough). "
I had thought about this but was not sure about the legality of such as structure using rental funds etc to pour into my home loan instead of the investment loan. I would love to achieve this as the PR is obviously not deductible so wasted interest. The equity in the investment property would allow this easily.
Can someone comment on legality of such a strategy?
Qlds007 "thanks yes only joined up Monday" my main aim is the equity growth. The IP was my primary residence and I have only owned it for 8 years and it is now 3.5 times the value of what I paid for it. On my new PR we borrowed the lot including stamp etc and it is already now 47% growth across 2 years. Thinking of getting a third property as an IP and using a loan to fund the interest payments across 4 years as rental increases in current IP and future one would close the gap on my out of pockets plus will give enough negative gear to ensure I pay small amount of tax if at all.
Perth market has very little number of rentals within 5k of the city and with rents starting to achieve $450 per week for anything with 3 bedrooms the rent returns are quite good. Especially given these areas will keep growing very well.
