Hi,
I don’t agree with what Kev said about selling and buying another property to renovate. It is simply not wirth the hassle with a child in the house. Also, as Kum Yin suggested capital gains less than 25% is not worth it because you won’t make enough money after you take out all your costs to make it worthwhile.
However, one suggestion that some investors I know have done over the last 3 years is to move out of their house and turn that into an investment property. And then buy a second IP with the equity from your first house. This way you have a tenant and the tax man helping you pay off both houses. Also, if you are looking to move overseas in a few years. Then you can live in a rental property for a few years until you leave.
I had some family friends that build a retirement village in Sunraysia (Regional Victoria) and to fund it they rented for 3years so they didn’t have to tied up their money in their PPoR. Then once they started selling the villas they bought a house which no mortgage.
Hope this helps. Although, as someone else suggested now might be the time to save money for a while especially as you have a child which would cost a bit.
Cheers
Paul[suave2]Read Read & Read some more.
There is a system known as lease options,where you lease property for a period with the option to purchase at a set price at a later date.(you use less money to do deal)
The idea is you either add considerable value then sell at a higher price at the same time that you take up the option to purchase,hence pocket the difference.The other way is to do a sandwich lease/option at a higher price then what you are paying & again pocket the ongoing + cashflow and difference in sale price.
You must make sure you cross your T’s & dot your I’s.
A helpful site is rickotton.com
Would also help to eat mince instead of rump steak to build up equity.Learn learn until your $ are available,you will get there!!!
Cheers BarryHi and thank you all for your replies… no I would never consider selling my home to buy a rennovator.. apparently with our incomes they will lend us enough to buy another IP anyway.
I found a great little one for $149K with a tenant who pays $150.00 per week. We have made a verbal offer of much less and the seller is considering it. The tenant wants to stay in it long term which suits us fine.. The house is only a 2 bedroom but it is new and nothing needs to be done… what ar your thoughts?
Romina and Luca (and bubba Nicolas)
Hi,
I am not a PI at the moment but v v v eager to get into this though..i wont do this deal just coz its not a +CF untill you are ready to offset the loss against your income it being -ve geard and just selling before you move overseas but then it might not b worth it as its not prefreed to sell without 25% rise.just some thougts may help.[specool]sorry… but I did not understand what you meant… I am not selling my current house. We are keeping it and buying this second one as a second property to rent out.
Romina and Luca (and bubba Nicolas)
what i wanted to suggest was that.. as you are buying second property for renting it will give you the rent but it will also eat into your income as the rent will not be enough to cover for the mortgage payments..and as you said you are moving OS that means i m guessing that you will end up in selling this which will mean that you have to pay all the expneses associated with the selling and there it may not be all the hassle.. i hope it makes sense.
sorry i meant it may not be worth all the hassle as you may not make enough money as REA,CGT etc etc needs to be looked into.
hi
well we worked out the repayments on a 140k loan would be approx $190 per week.. the rental is $150 so we would only be putting in $40 per week ourselves.. sure there is other things to consider like insurance, rates etc.. but I am sure this property will increase in value? I mean $140K is quite low.. everything else in the area is no less than 190kRomina and Luca (and bubba Nicolas)
R & L
Yes there are other expenses to consider but there are also other deductions to factor in as well. Loan expenses deductible ove rthe term of the loan or 5 years whichever is the lesser, building write off dependant on the age of the building and Depreciation on the internal fixtures and fittings.
Think you would be suprised how little the property will actually cost.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Hi Richard and thanks for your reply… what do you mean.. is this a good thing ??
Romina and Luca (and bubba Nicolas)
Hello romina
Yes, Richard means that after writing off the buying expenses, a little each year, plus depreciation on the building, fixtures and fittings your tax bill will be lower so that the net cost of your investment may be lower than you think.
Please don’t get insulted but from your questions I really think you need a good mortgage broker and accountant to help you calculate what it will cost you after tax and to set this all up correctly.
For example if you are using the equity in your home for the deposit and buying expenses this should be a seperate loan and not an increase in your current mortgage. You have to be able to isolate this interest for tax deduction purposes.
Since you were living on 1 salary previously I assume now you will be able to save quite a bit. The best place to save it, I think, is in an offset account against your home mortgage. This works the same way as paying off extra on your mortgage, in that it reduces the non tax deductible interest you are paying, but gives you more flexibity if you ever decide to rent out your house or want to use that money for another IP.
If you buy this property it sounds like you should definately invest in a depreciation schedule.
Hope this helps [smiling]
ElkaThanks for the information R& L with your questions i have learned that we can use the other costs as depreciation and it can work in our favour.
[party]A bit of encouragement![king]
Great to see you taking heart and going for it Romina!
I was in a similar situation to you three years ago. I was on about 33K salary and only had PPI.
I got sick of not being able to do something so I changed careers, moved to a mining town and now I have about 150K equity to invest with, a salary that will support many more investments and my wife and 3 year old are living a nice quiet life.[shades]
It seems that you are going even further and starting where you are! That’s fantastic!![blink]
Well done. I’m impressed![thumbsupanim]
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional.
Thanks everyone for the support…
Romina and Luca (and bubba Nicolas)
Have you considered moving out and renting a house. This would make the 196k tax decuctable as well as the depreciation schedule on the house and all associated costs in the renting and repairing of the dwelling. Also free up cash flow by getting your tax back fortnightly instead of waiting for the end of the financial year. Living in your own home is great but not as financial as renting in out. Once you have more cashflow you will be able to buy more propertys or pay your home off sooner. food for thought
but we would have to pay our mortgage as well as rent???
Romina and Luca (and bubba Nicolas)
Hi, just read your stuff for the first time. Good on you for going back to work.
In a flat market, and 3 years is a short time, you may find the costs of buying and selling may be more than any capital growth. The market is in a flat part of the cycle. You need also to look at what you have to put in to make up loan payment, plus are you going to have the rental through an agency, and the costs of rates are usually around $15 -20 a week, plus insurance, these are a lot of costs. I agree you need to do more number crunching with a proper accountant. The cost may save you heaps in the long run.
There are a few stories about broke people that then turn around and make millions. You will normally find they leave out quite a few of the facts. They are also usually trying to sell you a book or seminar. Would they need that liitle pitiful income if they were really worth millions?
The bank will not lend much to the below average wage earner, as you found when you were not working. There have been some great property stories out there when there was a huge boom, but I previously owned a house for 1989 to 1997, and I can guarantee you I made not one cent capital gain, and I really kept the place nice. Since I sold it (divorce) the property has more than doubled. That is the market, and unless you are sure that your property will grow, why would it be for sale when others are worth more? Because it is smaller, block is smaller, or a bad location. Have a real good look around the area. I know you are frustrated and keen, but please have a really good look at all of the figures.
Best of luck to you, and good luck in you move to Italy.
kjs
Hi Kjs… a little honesty goes a long way!!
My plan was to buy a property with a tenant.. we found one which was 142K with a tenant paying 150 p/w I was not going to use a real estate agent to manage it as a rental property as the tenant, a pensioner, has been there several years and wishes to stay on for good… the only thing, it’s in an area which “apparently” is booming…. but how do I know it’s true? I have noticed prices have doubled for houses in the last few years and the value is rising still even though little by little.. land went from 2K a block (large) to no less than 40K a block from the year 2001 to date.
I just don’t know.. I know there is money to be made out there but how?[oink]
Romina and Luca (and bubba Nicolas)
Sorry if I seemed a bit blunt [blink]. I do worry that some of us feel like we are failing when really we just don’t have the resources at the given time to do what these huge success stories have done. We are doing the best we can, but while doing something is better than doing nothing, sometimes that something is cashing up or consolidating. You have a limited time frame due to your move to Italy, and I would hate to see you postpone that due to needing to wait for the timing of whatever you have done to be right. You are motivated, and have gone back to work, and you are looking and asking, so they are all good things. Best of luck.
kjs
Not sure if you have purchased anything yet but i think you need to consider a few things and reassess what it is you are trying to achieve.
Firstly, what does it cost you every week to live? do you have a budget? i know you have returned to work but even so, you have an existing mortgage payment to make, you must be running 1 or 2 cars, plus rates, bills, mobile phones, gifts, holidays, entertainment, nappies, doctors, health insurance and general expenses broadly would add up to say $xx a year. I really don’t know your personal expenses, but that’s the first thing you should do. Calculate everything you spend in a year. you may be suprised how much it adds up to.
then calculate your total take home pay betweent he two of you after tax. minus that from the above calculation and you have the amount you could afford to spend on an investment per week. you then need to decide if that surplus would be better off been paid down on your ppor mortgage which charges interest that is not deductable, over having an investment in a flat market.
you have to remember buying something with a tenant in it doesn’t always mean you will have a tenant there paying the mortgae. there may be times you get a bad tenant that you have to kick out, or periods of vacancy. you need to have cash to cover it. i would recommend $20k in reserves just to make sure you’re feeling comfortable and ok with what you’re doing.
then you need to consider the family aspect. you have mentioned that you have a child and your mother is looking after your child. How long can your mother do that every day? it may not be available forever. If a situation were to arise and you had to take back the daily care of your child then you would either need to consider childcare ($300 a week) or not work. This would put you in a dire circumstance if you ahd an investment property.
i know you are very keen on the idea of property investment, but sometimes you need to take a look at the bigger picture of life and all that you want from it to decide what the right or wrong decisions are.
I can’t tell you whether you should or shouldn’t be going out to purchase property, i’m just giving you some thought pattern to consider in making your investment decisions.
If i was in your situation these are the things i would be considering.
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