Hi all,
I am 21 and have just read Steve’s book. I have always been keen for property investment, as I have been brought up to make my smart decisions earlier, and have more fun later, rather than to blow my money now and to struggle later.
I am living with mum rent free (but paying my way – food, electricity, etc.) and am trying to take advantage of this.
I acquired a full time job last year and have since been saving as much as I can, whilst still enjoying a comfortable lifestyle.
Long story short, Steve’s book has really opened my eyes, although I can’t find too many +CP’s around (I am in Adelaide).
I have saved up about $11,000 and intend on saving for future months, but am also keen to get something by the end of the year.
Does anyone have any suggestions as to how I do so? Many people have suggested that I live in the property first for a year tax purposes. If I do this, I also get the 1st homeowners grant.
If I don’t intend on living in it, should I setup a family trust? Even though that I am not married yet, is it better off in the long run?
My “plan” (more so a sketched idea floating around in my head) is the have 5 or so investment properties paid off by the time I am 50. (Give or take). After reading Steve’s book, it’s obvious that Negatively gearing these properties is going to put a strain on my cashflow, so I would be looking for properties that are going to at least break even or give me a positive cashflow. I am just thinking forward to having 5 houses completeley paid off and that $1000+ a week coming in from rent. (Although the tax man might have something to say about that).
Sorry this post ended up being so huge, and sorry if I sound like such an amateur.
If anyone has anywhere to point me in the right direction, please do so.
Thanks very much for your time,
Jase.A home might be worth considering. You only need to live there for 6 months for the FHOG and there is no min to establish it as a home for CGT exemption purposes.
You can even rent out rooms to help with the repayments whilst you live there.
I think you will find Adelaide to be one of the more affordable cities in Australia even if you can’t quite find something pos geared – they are very hard to find outside of the more remote towns. These do not always promise capital growth as you may realise.
At your age you may find you can grow your portfolio faster using capital growth – esp if your contribution can be kept quite small – many people neg gear to the extent of $20 or so pw. That is prob a cup of coffee a day you are not buying?
Most of all I would advise you to learn as much as possible and start talking to other investors!
All the best,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks for your quick reply Simon!
Already I have learned something very valuable – the FHOG only requires me to live there for 6 months! I thought it was 12.
While I am living at home, I definitely intend on making more than the required repayment each month. It would be nice to pay off some extra on my first property, paying it off quicker, and then using the profit from that property for extra repayments on my other peoperties.
If you plan to pay extra then please do so in an offset account.
Your broker can show you the tax benefits or I can explain it more.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I guess I just assumed that I would be best off doing that?
Sorry, I’m still learning!
In your situation I would be most concerned with creating capital as your main problem with building a portfolio, in the inital stages will be funding deposits. Buying a place that you can do some minor renovations to, to add value would be a good option.
Regards
AlistairOriginally posted by jasevr4:I guess I just assumed that I would be best off doing that?
Sorry, I’m still learning!
The reason is tied up with the ATO treatment of redraw.
Why don’t you research this site and find out the reason why….post it here for others.
You will learn more that way and by giving to others you will increase your own good fortune.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Well, I may be wrong, but from what I have read, it seems that the big advantage with an offset account is that you can use the money in the offset account for any use, whether it be for personal or investment purposes at any time.
Say I had a loan of $100000, and over a year I payed $10000 in extra repayments, for me to redraw this $10000, the Government would consider me to be taking it out for personal purposes, making 10/100 (or 10%) of my interest is not tax deductible.
For reference, I found this thread the most helpful.
However there is still a “hazy area” in my mind.
Say I did redraw the $10000 for a deposit on a new investment house, does the ATO still view this as being a personal redraw?
Thanks again Simon.
Alistair; would you advise that I borrow more than I need to purchase the house so I can perform these renovations/repairs?
Spot on mate.
The ATO see it as personal borrowings when the use is for personal reason such as buying a home, a car, a holiday, big screen TV etc
If you draw it for investment purposes then you are able to claim the interest.
Using the offset gives you the flexibility.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
After reading your first two points I said to myself “So essentially, it just gives me more flexibility with what I can do with my money”.
Then I read your third…
Originally posted by Mortgage Hunter:Using the offset gives you the flexibility.
[biggrin]
How much you borrow is really dependent on the situation. If the place needs a lot of work you might be better off borrowing extra straight away, but this will cause you to incure some costs such as additional LMI.
If it doesn’t need that much work, given that you are going to live in it for six months, you may be better off simply paying for the improvements out of your own cash flow.
Hope this helps.
Regards
Alistair
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