For 1x PPR and 1x IP a Trust/Company is overkill. As you get more properties you can consider a trust for tax reasons as Corey mentioned.

It also depends on your profession and whether there is a high chance for you to get sued.

Andrew

Other than the financial benefits, another issue to keep in mind would be CGT.

If it is your PPOR then you are CGT exempt. However, if you rent it out then you will have to pay CGT when/if you do sell it.

Andrew

If your son is working full time couldn’t he just take out the loan himself and have you as guarantors?

Cheers
Andrew

Are you still working in Russia and when are you moving to Australia?

You could have purchased the property before coming to Australia and could have easily obtained a loan at 80%. You just need to show proof of your Russian salary.

Turns out all Chinese buyers buy without any mortgage in Australia! WOW!

I have many Asian friends, I helped purchase Australian properties. None of them used more than 20% of their funds. They could easily borrow 80% of the properties value. As long as you can proof that you have a salary.

Will you have a temp or perm visa when you come to Australia? This will determine what kind of property you can purchase?

Cheers
Andrew

Sorry I didn’t get the contract part.

Investors have difficulty estimating the value of a property today but you want to estimate it 7 years into the future. Any answer you come up with will be heavily reliant on your assumptions.

If your strategy is to buy this property with the contract at a discounted price and then sell it when the contract expires then you can:

1. Figure out the value of the property today without the contract using comparable sales.
2. Estimate an average capital growth rate for the next 7 years. (Here you can’t just take an average capital growth rate that includes houses, townhouse and apartments. It should be specific to the property type and number of beds)
3. Apply the cap rate to the value of the property without the contract.

Then you can use that value, the purchase price and holding costs to estimate the ROI.

Cheers
Andrew

Net Yield + Capital Growth = Return. Both are important but not equally probable.

You could get a 10% return in either of the following scenarios:

1. Yield: 5% and Cap: 5%
2. Yield: 6% and Cap: 4%
3. Yield: 4% and Cap: 6%
4. Yield: 8% and Cap: 2%
5. Yield: 2% and Cap: 8%
6. Yield: 10% and Cap: 0%
7. Yield: 0% and Cap: 10%

One thing we know for sure from day one is the Net Yield of the property (not exactly but close enough).

Capital growth on the other hand is just an estimation. Could be 10%, 7%, 0% and even in some cases -5%. Most of us like to think that our property will grow annually by at least 7% if not more. That’s normal. We are only human. We expect +7% capital growth and disregard the fact that it could end up being 0%, when we should be hoping for +7% but be prepared for 0%.

However it would be common sense to focus on what we know and what we can control to maximize our return and minimize our risk. We have limited knowledge and most importantly no control whatsoever over capital growth (renovations/improvements/additions can result in an instant boost of equity but they stop there and don’t continue annually and require more funding to begin with) so why place all our eggs in that basket.

REGARDING BANKS AND LENDING
A bank’s job is to manage risk and they are good at it (excluding US banks… :) maybe they got better now). Banks are better at managing risk than us. So if they don’t want to lend you money that kind of tells you that you are too risky for them, based on their lending policies. Of course you can go to another lender with less stricter lending policies, and increase your risk, but at a certain point that strategy will stop.

REGARDING LONG TERM INVESTORS LIKE STEVE
Investors like Steve accumulated dozens of properties, within a few years, 20 years ago when the property market was different. Now competition among investors is higher (who follow those strategies) and the economy and government policies are different. Those strategies won’t get you the same number of properties in today’s market.

Cheers
Andrew

@mushirkhan have a look at https://property-analyser.com.au.

It does all the calcs and shows you all the cash flows. You can vary between Interest Only and Principal and Interest and see how it affects your cash flow. It also take into account your tax rate given your income level.

Cheers
Andrew

Tristan1 wrote:

I was also very keen to learn the process of buying and negotiating for future investments. Everyone seems to say you need to do it yourself to learn.

You kinda need to try out things yourself to learn them. That is, if you want to learn and do this in the long term.

JBC wrote:

I’m interested to hear why you are both suggesting staying away from vendor finance? Because you’d ultimately be giving up a cash cow?

I wouldn’t want to become a bank. Not worth the hassle.