Hi All,
Young investor looking for some guidance to keep me on the right track. I wish to one day retire from property and are not concerned with living outside my means. Share with me your property acquisition strategy's as I wish to model my self from the successful path created by others.
~ Back Ground:
I have recently turned 22 and have purchased my second property. Which I believe is really good whilst at UNI but have now hit a mental hurdle on the "right" next move. But I also now have a problem with what strategy should I follow, whether I setup a trust or not, how to minimize tax. I have a passion for investing and are open to any ideas, so please feel free to make any comments. I have considered mentor programs and paid courses/seminars so i'm looking to be pointed in the right direction.~ Situation:
Waiting till settlement to move into my new place. Currently finishing my last yr of UNI and have a position to start in Nov full time for 60k+ pa as an Engineer. I'm also working almost full time at the moment which will be used to cover the repayments of my new place. My girlfriend and investing partner currently earns 40k and has half ownership in 2nd IP though is all in my name. We plan to purchase a second property together by the end of the year and with the current situation will be able to save for the deposit.~ Properties:
IP no.1 – Half ownership of a NewZealand IP bought in 2004 for $68000, current value of approx. $110k (50% equity), currently renting for $145pw.
IP no.2 – half ownership of a Geelong (Victoria) home $224800 (5% equity), 3-Bedroom with potential rent 245-260pw.
Both IPs have Interest Only loans.I've read articles where people own 30 IP's with 50% equity but how do they service those loans? I've read books on positive cash flow IPs but don't believe this strategy to be relevant at present times. As I wish to purchase locally.
Q. We would like some help finding a great strategy which allows us to continue to buy and hold, though I am happy to sell to pay down debt. How much should we save before we purchase the next place, or should we simply try to put down as much as we can on IP2, then access equity for next deposit. Should we setup a trust and purchase future properties through that?
Another possibility would be to join the RESULTS Mentor program for Jun 2008 and be setup for 2009, or join in 2009 as I have a commitment to finishing Uni in Novembers of 2008.
Any advice and comments are appreciated, thank you all in advance, look forward to all the wisdom that this forum as to offer. Ideally I would love a combined effort in developing a strategy for my situation. I'm prepared to pay for financial advice but are skeptical of financial advisor's which is what lead me to asking the questions here.
Kind regards,
JarredWow, your certainly on the right track with your passion and keen interest at a young age. Gr8 to see. When talking strategy i would reconmend getting your self a good accountant and mortgage broker to become part of your 'team'. Small hint, try to find acc/broker's who are property investors themselves. If you need a good broker let me know! Cheers
Enjoy your courage, go for it!
Hi pjreno, thanks for your reply.
I am currently looking at getting a good "team" together. Are you or anyone else willing to share their personal investment strategy? And I'm talking about right down to tax claims, loan types, business structures, property criteria, use of leverage, LVR, etc.
Q. To access equity in a property, is it just a matter of refiancing the loan to incorporate the rental return, to increase your borrowing power? or is it just a matter that the banks will lend you more because you have more assets?
as always, look forward to learning more.
cheers,
JarredHi Jarred
Congratulations on coming so far in such a short period of time.
Unfortunately one of the biggest hurdles going forward is serviceability.
Lenders generally take a percentage of your rental income (this varies from lender) and add this to your own income and then subtract your interest repayments (usually worked out at a higher rate than you are actually paying and in some cases on a P & I basis) deduct an amount to cover assumed living expenses and other any other liabilities and this gives you an amount to service the new loan with.
Of course if the funds are to be used for investment the negative gearing inpact of the interest can be added back into the equasion.
Any shortfall between the rent you receive and the interest repayments, rates, insurance etc can of course be deducted from your taxable income at your highest marginal rate but whilst the property is negatively geared you are still going backwards.
Of course as prices and interest rates increase the amount you can borrow (assumign your income and rents remain fairly stable) reduces but that is not to say that you should not percevere and slwoly build up your portfolio.
I purchased my first property in the Uk at 18 and since arriving in Australia have acquired well over 40 properties we hold for capital growth and double that amount again that we purchased for cash flow by wrapping or leasing on a rent to buy basis.
Now the total LVR would be around 30% and the monthly income is considerable but times have changed and prices moved on.
One consideration is to ensure that any mortgage broker you use is well versed in loan structuring and is an active investor themselves. Many have no idea when it comes to Trusts or cross collateralising securities and are better off with the mum and dad first home buyer.
Remember read, discuss and listen as you never stop learning in this game.
Good luck and fire away with any questions you may have.
Richard Taylor | Australia's leading private lender
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