Hi everyone.
I've been doing loads of loads of research lately to prepare myself for the first property. I thought maybe it might be a good idea to introduce myself and let you all know my situation and my goals. Then when i post my many questions on here, you'll know a little something about me.
I'm 26 with a very lovely 24 year old fiancee. We currently have about $8000 between us in savings. For the next 12 months we plan to be very tight, and have a goal of saving $40,000 between us by this time next year. We are currently renting, and are happy to continue doing so while we build our property portfolio.
The lady has a job in scientific research earning $50,000 gross, while I am but a lowly university student, but still managing to earn $30,000 gross while doing so. I plan to graduate at the end of 2009, and am assured a job paying $50,000+ a year when i graduate.
Our investment strategy to begin with is quite simplistic. Buy properties at the lower end of the price spectrum, in a rural town at first, and then add property to our portfolio every year, with the ultimate goal of enough passive income to retire (if we choose to do so) in ten years.
Buy and hold will be the name of the game for us to begin with, although we have help from my father who has made a lot of money doing everything (wrapping/flipping/subdivision/commercial) so more creative plays will come as we gain more experience and confidence.
I have a couple of questions to begin with.
1. Is it better for us to pool our money and buy one house to begin with, or should we save a little longer and buy one house each under our own names?
I am asking this question with regards to Taxation, Future property accumulation, lending power, legal, everything.2. We have 12 months to become the savviest investors on the planet. How would you do so?
My current plan is to subscribe to API, read the paper daily (living in queensland, which do you recommend?) and read as many investment books as i can(again, which do you recommend?)Thanks very much, and i look forward to being an active member of the forums here.
Bruxism
You'd be better to pool your money. I'm against buying property in small rural areas because of possible low capital growth.
You could start your property purchasing now with little or no savings. Don't forget you would be eligible for 1st home owners grant of $7,000. You need to contact a mortgage broker as soon as possible to get your borrowing capacity assessed. In Brisbane we are in fast rising market so the longer you leave your purchase the more it's going to cost. I think that the median price of a Brisbane property is going to rise by more than $80,000 within 2 years.
There are heaps of books around. There are some on this website as well as somersoft.com.au & propertyupdate.com.au & custodianwealth.com.au. Go to Borders bookshop for a very comprehensive range of books – make sure you buy the Australian books, not the American or English ones. Also, in every edition of API you'll get a list of books at the end of their magazine. Why don't you look at a couple of books and ask this forum for their opinion before you buy. Two books I'm reading at the moment are: "How to achieve wealth for Life" by Melvin & Chan, "How to grow a multi-million dollar property portfolio" by Michael Yardney. Very impressed with both books which are easy reads.
Pooling your money will be helpful when it comes to obtaining finance.
The more income you have, the better your loan servicability will be, so you will be able to borrow more.
I am no legal eagle, but I would think that even if you were to buy in individual names ; say a property each, if things went sour and you were to split up (I'm assuming you live together?) then the law tends to treat you as husband and wife anyway, so everthing would be split somewhow.
I agree with Hleung about the rural towns; not to say they won't have cap growth, but you would want to do some serious research on the towns to see if they are increasing in population and size or not; job prospects etc.
A good guide is to look at towns with populations of more than 5,000 to start with.
thanks for the help so far guys. Just a couple of queries.
1. first home owners grant. I won't be living in it, so i couldn't get it….right? Fiancee is not a permanent resident, so she can't get it, so what's the ruling if we bought a house together?
2. Rural areas. Yes, i'm aware of the problems with rural areas, but I'm confident with the area i've chosen to perform well and with my father's ability to see a good deal, having dealed in the area for 40 years now. Brisbane prices, on the other hand, have gotten way too high for me and i don't see myself having the ability to enter the market there just yet.
3. When it comes to pooling our money, while i understand the legals of us splitting up, what i'm more interested in is the financial side of things. like…will the artificial lending ceiling hit us sooner if we borrow as one entity? How will our tax returns be affected (i really don't understand how that one works). should we maybe even kick things off in a trust, or does that come later?
Thanks very much for all your help so far L.A Aussie and hleung it's really appreciated!
bruxism
bruxism wrote:thanks for the help so far guys. Just a couple of queries.1. first home owners grant. I won't be living in it, so i couldn't get it….right? Fiancee is not a permanent resident, so she can't get it, so what's the ruling if we bought a house together?
2. Rural areas. Yes, i'm aware of the problems with rural areas, but I'm confident with the area i've chosen to perform well and with my father's ability to see a good deal, having dealed in the area for 40 years now. Brisbane prices, on the other hand, have gotten way too high for me and i don't see myself having the ability to enter the market there just yet.
3. When it comes to pooling our money, while i understand the legals of us splitting up, what i'm more interested in is the financial side of things. like…will the artificial lending ceiling hit us sooner if we borrow as one entity? How will our tax returns be affected (i really don't understand how that one works). should we maybe even kick things off in a trust, or does that come later?
Thanks very much for all your help so far L.A Aussie and hleung it's really appreciated!
bruxism
1. Using a trust to invest in is not a clear cut issue. There are some people with 35 properties who don't invest in trusts. I personally don't as I doubt very much whether I'm going to be sued in the future.
2. Don't know the situation regarding joint applications between a permanent and non permanent residents. You need to contact an accountant.
3. You'd be struggling to borrow much on your individual incomes. Much better if you could pool your resources together.
4. Even though your father has dealt in rural areas for 40 years, I'd still get a second opinion. Surely you can buy something farily cheap in Brisbane? Have you considered units or townhouses? There are still properties under $300,000 in places like Ipswich.
Thanks very much for all that. I'll definitely be contacting an accountant to get some of the finer details sorted out. Any recommendations in brisbane?
and yeah, brisbane still feels way out of my comfort zone, and i'm dead against units and townhouses because
1. buildings fall down, land doesn't
2. Units don't allow me to add value to them(well not as much as houses do anyway)Is there a flaw in my anti-unit thinking?
Hey Bruxism,
Even though I am new to property investment your line of thinking makes sense.
Most people I have talked with say land + building is good. But like the book says it depends on your goals.
And yeah get advice from people but in the end you make the choices as its your money and hey if you make a mistake who cares, learn from it.
Lol I know I will make tons of mistakes as I have always made in my short life
but I make sure to learn from them at an early stage rather than when it hurts.My email is [email protected]
would love to chat with you on msn sometime
GOod luck
For an Accountant why not contact my Accountant Steve Hodgkinson who is a partner at the Gold Business Group.
Steve is a forum member and can be contacted on 07-5532 2855
Try him in the New Year when his office reopens. Tell him i referred you as most good property Accountants are not taking on new clients.
Richard Taylor | Australia's leading private lender
For an Accountant why not contact my Accountant Steve Hodgkinson who is a partner at the Gold Business Group.
Steve is a forum member and can be contacted on 07-5532 2855
Try him in the New Year when his office reopens. Tell him i referred you as most good property Accountants are not taking on new clients.
Richard Taylor | Australia's leading private lender
but I make sure to learn from them at an early stage rather than when it hurts.
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