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Boom or recession I don't think property investors will be hit the hardest,
At the end of the day middle and lower income residential property is in my book almost defensive asset, When people run short of cash, they may cancel the family holiday to the gold coast, eat out less, buy less consumer products, but they will probally still be paying their rent, so in a resession your money is probally safer in property than in alot of other investments.
Property that can be hit hardest in an economic down turn is luxury apartments and top end homes as people will tend to trade down during a down turn there by leaving the homes at the top end of the market vacant or with much lower rental yeilds, Commercial property, if the small business renting your shop goes under, you are going to struggle finding a tenant during a down turn so it may be vacant for months, Property in areas with alot of first home owners if first home owners that have over extended them selves are forced into selling the price will fall it probally won't affect your rental yeild you just wont have any capitol growth for a while keep an eye out for good buys though.
Debt should be taken care of in this order,
All tax deductable debt placed onto interest only until all non taxdeductable debt is cleared,
make repayments on the non tax deductable debt first, focusing extra repayments on the loan with the highest interest, as you clear each loan add the repayments that you used to make on the loan you have now cleared on to other loans so you smash them down quicker.
once you have no non deductable debt left put all the money from your salary that you used to have to pay of your debts into a offset account link to your investment loan and start accumulating funds in there until you have another investment to take on.
I would like to invest overseas in the future, I think you have to have you investing skills at a whole new level to attempt this kind of thing though, as Winter tail said you have to have a full understanding of the market your investing in, and currency risk's,
I paid $450 each for my properties in brisbane,…. get "deppro" to give you a qoute
G'day barney,
subdivision and property development are positive cashflow stratrgies.
I think what got blogs back up barney was the way you basically said certain peoples investment stratergies were flawed and that the had no brains for even considering it, then in the same breath admitted to having little investment experiance, you may understand a bit of theory behind investing but until you have real world experiance and suffered real world profit and losses your opinion doesn't really have any weight,
How can you say such things and insult peoples inteligence like that when there are people on this website that have achieved wealth far greater than youself by using these stratergies.
the way you say things definatly has a tone of arrogance, as do alot of people with academic backgrounds, I have never liked the way alot these people talk down other people who are not so academic. I have copped this kind of attitude since I was in high school, from people who looked down on me because I didn't follow the path of chasing good grades through high school and then going onto uni, But i believe I am in a far greater financel position than my peers who did follow that path.
their are many different levels of investor, many people who call themselves investors are not investors, to be a true Investor you need to have a full understanding of all the different asset classes out there and how this assets classes relate to each other, you also have to have an understanding of the different stratergies available within these asset classes, you have to understand the different financing options and the pros and cons of each on, and the different structures available for holding these assets and there longterm pros and cons,
I hold about a million $$$ of property, a decent share portfoio, and run my own company. I have spent years building my investing knowleadge, and learned alot through experiance as I have build my wealth. But I don't classify my self as a sophisticated Investor yet, but I am on my way, that is why I don't take it well when a person with zero experiance gobbs off like you.
some things to think about,
A trust can only distribute a profit, so if your little venture ends up creating a loss you won't be able to offset it against your other income,
do you want to inject your trust with the added public liabilty risk, considering you may have started the trust for asset protection reasons,
G'day I own close to a million $$$ of property and I still rent, It allows me to be more mobile, and also allows me to live in areas I want to live while invest in areas that I believe have better investment potential. the most inportant thing is that you own atleast one property,
Owning one property weather it's your own home or an investment gives you an anchor in the market, it locks you in at a price, so that if the market goes up you won't fall behind, however it doesn't really get you ahead as far as financel freedom, because if you sell you may make a profit which looks good on paper but everntually you will probally want to own a family home so you have to buy back in at some stage at the new higher price, but when you own multiple properties that are all increasing in value it will provide you with capital growth over and above your anchor there buy increasing your true net worth,
Thanks for the advice Barney Jones
After reading your thead I have finally understood the error of my ways,….lolBarney I don't think any one on this forum believes that anything will get handed to them on a silver platter, But can you blame anybody for seeking cashflow positive properties, at some stage to continune growing your portfoilo you are going to need positive cashflow coming in,
How many properties can you own on a teachers wage, if each property has a negative cashflow of $100.00 a week, 1 or 2 maybe 3 if you really lower your standard of living. so what are you going to do once your in the situation where you can't afford to continue growing your empire because the bank doesn't want to lend you any more money, you are going to have to seek more cashflow from some where, this is where positve cashflow properties come in. because once you get that extra cashflow coming in you will be able to by more growth assets.
I know your a teacher but I don't think you should be providing a lecture on investing stratergy until you have a bit more experiance under your belt, It takes years to build up your investing skills, and just when you think you have a handle on it you learn a whole lot more,
Tatts,
I think you'll struggle to find properties with returns greater than 4% return after all maintance and property mangment costs are taken out, and remember there are rental increases in the dha leases,
The property seems quite heavily neg geared, I don't think the depriation will cover it,
Shane Law wrote:Thank you Bennido for providing examples for us new to this investing!!However when I look at the first property and apply the "11 second solution" that Steve McNight advocates it does not fit into this category. Am I missing something?
Forget about the 11 second soloution, it's obselete, read steves latest book.
Goal setting is extremely important, I am a big believer that if you write your goals down and the time frame in which you are going to achieve them in you are all ready halfway there.
what is it that you want to achieve from your investing,….. you have to think about that question and define in your head the outcome you want to achieve and then build a stratergy for your investing that will get you there.
Strive to become a sophisticated investor, and build your knowleadge of not only property but all the other assets classes that are out there, learn about different ways to struture your debt and gearing levels, and different structure's in which to hold your assets,
and the most important thing is to talk to and learn from as many people who have done or are doing the things that you wish to do, ignore people with negative opinions who say "you" can't achieve your goals, often they really mean "they" can't achieve your goals.
Your not a young investor,….23 years old your a late starter.
I was already looking for my third investment property at your age, but go for it any way. it's never to late to start.
yes if you claim depreation you will be subject to more capital gains tax because if you purchased your property for $100,000 and then claim $1000 depreation your capital gain will be calculated on a purchase price of $99,000 ( correct me if I am Wrong)
So some people look at say that they don't want to claim depreation because they don't want to have to pay it back when they sell the property, How ever remember if you hold your property longer than 1 year you get a 50% capital gains discount, so you only have to pay back 1/2 of it.
and also If some one gave you $10,000 Interest free and said pay me back in 5 years would you take, of course you would you can use the money to save interest on your loan, make improvements that increase your rental yeild, or buy some shares.
This reminds me of a situtaion that myself and a couple of my army mates were going to try at one stage,
When your in the army as long as you don't own any property within 50Kms of the base you are posted to you are able to claim rental assistance, when I was reading the fine print in the definitions part of the contract it stated the owning property within the 50km zone ment owning 51% or more of a property,
because the rental assistance package was based on a percentage of the rent you were paying me and 2 mates were going to buy a property each owning 33.3% of it so we were below the 51% ownership mark, then rent it back to each other at a highly inflated rent so we could claim the max amount of rental assistance which worked out at somthing like $220 a fortnight each.how ever we never got around to organising it.
I think DHA is a good start for some one who just wants a buy and hold type investment with no fuss, I probally wouldn't buy 2 of them though, there are alot of great ways to invest in the property industry if you take the time to learn the ins and outs of the property market.
I have lived in a DHA house and many friends are living in DHA accomadation so I know how the system works, but remember the biggest profits in property come from being really proactive and taking control of your investing which is the opposite to what dha is, they are really set and forget investments,
are the properties you are looking at in wattle grove by chance,
and about finance in my opinion you should borrow to invest, if you buy the properties out right with your $800,000 cash and they grow by 10% you have made $80,000. If you use your $800,000 as a deposit to buy $4,000,000 worth of property and it grows buy 10% you have made $400,000. this is what people mean when they talk about gearing.
One good stratery for saving for your own home is to have the IP interest only with an offset account but make the payments each month as if the loan was P&I with the component that you would normally be used to clear down the priciple accumulating in the offset account, so each month more and more money is accumulating as the interest charged is getting less and less becuase you have money accumulating in your offset account.
so when it comes time to buy your dream home you can use the money in the offset so your tax deductable loan reverts back to it's full amount and your home loan is reduced as you have been able to save a decent deposit.
An offset account is an account which instead of earning interest the money that is in the offset account saves you interest on your loan, for example if you had a $100,000 loan and you had $2000 in your offset account you would only be charged interest on $98,000,
below is an answer that I posted to another thread to answer "show me the money's" question on this topic, I couldn't be bothed re typing another indepth answer so I have just cut and pasted the responce I wrote for her.
To answer your question 'Show me the money"
using your example, yes your payments would stay the same if you had $10,000 in an offset account. So you would still have to make your payment of $1000 a month, However because you have your money in the offset account each month you will get charged less interest, so more of your monthly payment will be coming of your principle there by reducing your loan term.
for example say for the month of june you didn't have any money in your offset account and you were charged $970 interest your monthly payment of $1000 has only reduced your loan balance by $30,
But then in July you hold $10,000 in your offset account so you only get charged $920 interest, ofcoarse your payment will still be $1000 but this month your loan balance is reduced by $80 instead of $30,
as you can see it has had a big effect, simply by holding $10,000 in your offset account for a month, plus it works like compound interest in reverse. If you think about that interest that you saved has reduced your priciple of your loan, so you might look at it and say "oh, good I saved $50 worth of interest" but really if you loan term is 25 years you have not only saved $50 interest but you have also saved 25 years worth of interest you would have had to have paid on that $50 if it were still on your loan.Mortgage Hunter Is right
offset accounts are a powerful tool, with the right srtatergy you can knock years of your loan and maintain the maxium amount of your debt as tax deductable debt.
If it's property you want to invest in then hit the pavement, talk to a few loan brokers and research your loan options to find out what sort of loans suit your situation, deside on a stratergy,…. do you want to buy and hold,… renovate and sell,…. do small developments,
once you know your stratergy start looking for properties, it's free to look.
and then ultimately buy something, and most importantly never stop learning.
