I’m 24, have worked the last few years away from home (on pipelines) and have scrapped up a large deposit for my first IP, I’ve also got a nice share portfolio filled with a few resource companies ([thumbsupanim]THUMBS UP TO THE OIL PRICES) and an i.t. company (hurry up next years ann announcements!!).
I realy only know 1 couple (aside from my granparents) who own more then 1IP and have yet to delve deep into their investing minds for advice (My first piece of advice from them was to set some goals, they suggested a few books, one of which was 0-103 properties in 3.5 years and then come back, which i’ve done but yet have found time to catch up with them).
When people ask what I’m going to do with my money I say that I wish to invest in +geared IP’s, they just laugh. All anyone can share with me is bad experiences of a friend of a friend who has owned a rental or they’ve encourage me into -gearing an IP as it would be great to get some tax money back, but thats just stupid, for every dollar i get back i’ve had to spend 3..What I want to know is is it feasable to put down a large deposit (30-40%) and turn a -geared IP into a +Geared IP and hopefully rely on CG on property value down down the track, or should the 20% deposit be a benchmark and something that’s not to be crossed when investing..
The catch is that I don’t get much time off (work 28days fly home for 6 days off) So hunting for something is very limited.
Is my large deposit better off sitting in a bank and or shares, or am i doing no harm in turning a -geared IP into a +geared IP with a large deposit?
I’ve set a modest goal of having 1mill$ positively geared property before i’m 30, is it silly to think I can only do this via large deposits?
I’ve yet to speak to any financial advisers..
When I see mates driving around in their fancy cars, renting fancy units with their fancy debt repayments, I always get the old rundown ‘You can’t take your money with you’ from them.
It’s very tempting to have all those fancy things, but I’ve come this far doing without and I’m willing to go for longer.Any advice would be more then appreciated. *Im all ears* [strum]
Hi Joeic
Different peopple have different methods. There is no one best way. If it was me, I would be looking for high growth property. It would be a bonus if positive geared. If you have a large deposit, it is OK to use that, but also consider the possibility of using as little as possible (and maybe paying LMI) and putting the remainder in a 100% offset account. That way you are saving interest, and can easily access the money if something else comes up – eg. another proeprty and/or some more shares.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Joelc
Fanstastic effort keep that mindset rolling along eventually you will have private means & your friends will still be working & under the pump
I have always paid 30to 40% deposit on low doc does not matter how much deposit you have to pay just get in the game you can always refinace later if need be surprising how well this caper goes after a while if you stay conservative the money & assets just keep accumalating just be patient hope this helps johnno [biggrin] 5Hi Joel,
Congratulations on having clear and diverse goals for yourself. For many people this is their stumbling block and they often end up doing what they always done.
Originally posted by joelc:What I want to know is is it feasable to put down a large deposit (30-40%) and turn a -geared IP into a +Geared IP and hopefully rely on CG on property value down down the track, or should the 20% deposit be a benchmark and something that’s not to be crossed when investing..
Is my large deposit better off sitting in a bank and or shares, or am i doing no harm in turning a -geared IP into a +geared IP with a large deposit?
As Terry said there are many ways to invest in property and making large deposits is one of them. For me I would prefer to use my deposit money/equity to maximise my property purchasing power at a time when disposable income (from the sounds of it) is at its highest level.
I would not discount the possibility of using LMI (although your residential status may affect this) to extend what savings you have to leverage into more property.
The other side of the negatively geared property equation is that by choosing wisely and allowing for a bit of time you will see rents and values increase. Of these two there are greater returns to be made in the long run through growth rather than rent – it all depends upon your investment philosophy and beliefs.
I’ve set a modest goal of having 1mill$ positively geared property before i’m 30, is it silly to think I can only do this via large deposits?
For me the key is what are trying to achieve – and will larger of smaller deposits be more ‘valuable’ to you as you strive to achieve this goal.
I’ve yet to speak to any financial advisers..
Most financial advisers have limited experience or understanding of the property market and will try to steer you away from property.
When I see mates driving around in their fancy cars, renting fancy units with their fancy debt repayments, I always get the old rundown ‘You can’t take your money with you’ from them.
It’s very tempting to have all those fancy things, but I’ve come this far doing without and I’m willing to go for longer.
It is true that you cannot take it with you but some delayed gratification will help you make choices when you get to your desired level of financial independence.
I know that I do not want to always work a 9 to 5 job just to maintain what I currently have. Equally I am sure that you too do not want to be on a ‘pipeline’ for the rest of your life.
Hope these are of use.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958You can pay 100% of a purchase price for a house if you want, that way you’ll get very positive gearing.
The important thing to remember is that building wealth can occur through many different ways, but they all have something in common: leverage/gearing and the power of compounding interest.
If a house has a net rental yield of 4%, and you pay 100% of the purchase price for it, you are going to get 4% return on investment. Hopefully there will be a capital gain as well, so if the house goes up by 4% a year as well you are getting effectively 8%. But 8% is pretty ordinary in the overall investment world, particularly when coupled with the risk and management that owning property involves.
If you borrow 50% of the money, your leverage goes up because you can effectively have two houses for the same investment, so your return on investment will go up. If the house goes up by 8% you are really getting 16% return on investment.
If you can find a positive geared property even with a 10% deposit then you will find that the return on investment will be up into the 20% and higher area.
The higher your return on investment (usually caused by higher leverage, but not always), the faster you will get your $1 million of property.
The amount of deposit you use is up to you, but it will have an effect on how fast you build your portfolio.
_____________________________
We all need somewhere to live – but do we all need a CBD apartment?
You must be logged in to reply to this topic. If you don't have an account, you can register here.
