Forum Replies Created
I think I owe you guys some more details when I ask for your opinion, so here's particularly what I am looking at:
IP Acqusition Price: $340,000
Loan amount: As much as possible (95% if approved, if not 90%)
Weekly Rent of Comperable Properties in that area: $325-345
10 Year avg value increase: 9.90%
My income tax bracket: 37%So with the above, I would be working on a rental yield of around 5% in a fairly good historical growth area. So the way I look at it – I get a property in an area that I am comfortable with, has an ok rental yield and also has an ok historical growth.
My understanding is that at the entry point to investment (low equity / deposit), there are usually two strategies, first being high value growth (buying in a high growth suburb – usually expensive, thus providing fairly low rental yield and putting pressure on cashflow) or high rental yield (low risk with low pressure on cashflow, but the tradeoff usually is lower value growth).
Do you agree with my understanding or did I get it all wrong (note, i'm not interested in rural or interstate property).
Bluegrass – I have no idea what a NRAS is, maybe you could provide a brief outline. I agree with your 'Live Curious' sig.
Jamie M – you state that 4%+ is low yield on rental. Correct me if I'm wrong, but I thought 4%+ rental yield is reasonable for a property that is expected to appreciate consistantly at 8-11% pa. Please explain.
So in summary, I think that I need to do the following:
1. Meet with my current lender (CBA) to find out what my borrowing power is (I have little intention of actually going with them – but I figured I can waste their time since I'm paying for it).
2. Find and meet with a good financial adviser to clarify what the best option is for me with regard to owning the immediate and future IPs.
3. Confirm that my plan of buying middle-of-the-road IP first is indeed the right thing for me. (would love input on this from the forum community)
4. Start going to some open for inspections and feel the market out in chosen suburb by placing some horribly under-valued bids (just to judge reaction and thus get an idea of what the market is like for properties that I am looking at), if one of these offers gets accepted – great.Finally, does anyone have a link to a good reference point with regard to buying new (under 3 years old) vs buying established (10+ years old) from a taxation point of view (idea here is to get as much of my tax to pay for my IP as possible).
Thanks again to everyone who replied so far – much appreciated!
Jamie, fair enough. Won't I be able to offset losses made by trust owned investments against my personal income? I thought that as an owner of the trust I get to ultimately offset any losses against my personal income.
If the above is not correct, is there a way to include my personal income into the same batch as negatively geared investments whilst still providing seperation between my PPOR and any IPs that I have?
Thanks for the replies, definately confirming what I thought. I am quite comfortable with a 'higher risk' strategy of going into the 90%+ LVR margin (my personal finances have quite some room for servicing investments – but I am absolutely hopeless at saving).
Thus I would prefer to get into a situation where I have obligations to service, rather than be a good little soldier and save (which I know I won't do).
Having said that though, I am also somewhat curious as to how I am best to purchase my first IP. I obviously want to protect and isolate my investments (there will be several) from my personal income and PPOR. Is that possible through trusts? If so, has anyone got some knowledge on this – and could they post a skeleton outline of the basic outcome.
Also, having researched this topic some more, I am leaning towards our first investment being a middle-of-the-road investment. What I mean by this is a property with scope for a 4%+ rental yield and in an area that still appreciates reasonably (8-11% per annum historically).
The reason I am thinking that's the way to go with first IP is due to cashflow (I just don't know exactly what to expect). But at the same time I don't want to purely buy a positive property (since I also want the long term benefit of value growth as I am planning on revisiting my available equity in a year or so to purchase another).
Am I still on the right track or did I perhaps get off the beaten path somewhere in this process.
Once again – any advice is greatly appreciated, I'm like a sponge currently.
