Ok so which is a better option more houses with less deposits or less houses with more deposits in them? please let me know which way you would go and why? what is bad and good?
Also if you are starting out to invest in property what is better to buy residential or commercial/industrial? which is a quicker way to make it? money is not a problem. regarding 30% deposits on commercial property just would like to hear what your opinions views are pros and cons.
more houses, smaller deposits. The more of other peoples money you can get the better! Aslong as you can afford them if interest rates go up and you have vacancys.
why not spread it arround? try both whatever works for you go with.
Commercial Property has more return on investment but the reason is because of the higher risk. If you lose a tenant it can take some time to get another tenant and if the commercial property had a specific business you may need to find a similar business tenant. I do not invest in commercial or industrial.
API magazine article had that commercial property is not for beginners.Plus side of commercial – no outgoings – tenant pays them
Property value is determined by rent usuallyLess deposits – relies on getting capital growth to overcome interest costs. Plus side more leverage that might capture capital growth when it occurs. (you will need to consult your crystal ball on this one) . Higher wage earner can use tax deduction on negative gearing to get 30% back of negative income = (rent) -(expenses) or more percentage if on a higher tax bracket. More houses may increase repair costs, council rates, insurance, ect.. More properties in same state of AUS will increase land tax obligations.
(you need to keep on working at a JOB to maintain loans and hope you do not have any long periods of vacancies of tenants ). More Capital Gains Tax if you sell.More deposit. – Gives you some breathing space. Lower leverage means you do not get massive capital gain advantages if market values grow. More deposit means you can concentrate on getting house to a cash flow neutral position or slightly cash flow positive by paying more off loan. Once it is in this position you buy next house and get that one into same position and buy again. Advantage less cash flow required by you to just maintain the loan interest payments. As you can pay down the loan over time your borrowing capacity increases for the next loan. (get enough of these set up in positive and you eventually can stop working) (requires more time to make wealth) More of a cash flow strategy
You do not need to sell as property makes money eventually and doesn't cost you to keep hence no capital gains tax.I feel there is some biased in your comments duckster, you still buy to hold with less deposits it just takes longer for the IP to get to a neutral state.
The differance in costs of a 20% vs a 10% 5% or 3% LVR is not huge generaly speaking. as long as the invester can afford it.
Risky yes, but the long term gains are what young investors should be looking for
It depends on your view of the market. if you think house prices will keep increasing faster that inflation, then it is probably best to buy as many as possible as quickly as possible and then sit back and wait. if you are less confident, then maybe higher deposits to cover yourself a bit.
Most people tend to start off with little deposit and then slowly decrease the LVRs as they purchase more.
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 Young Investor,
As you can probably gather from the posts, everyone has a view and there are pros and cons of different strategies. You also need to factor in your individual circumstances (salary, cash reserve) and risk appetite. The type of property you buy also makes a big difference ( gearing, maintenance costs etc)
My own strategy has been to minimise my deposits whilst I have been able to get full doc loans. This kept my cash reserves high so that I was able to leap into more properties earlier and use more of the bank's money rather than my own. I was also aiming to build my asset base quickly.
Of course the net benefit of a given strategy will depend on the market conditions and your specific investment decisions, but I have done fine so far.
Commercial tends to scare off early investors, but many seasoned investors swear by it. If you go down this route, tap into someone who has some experience in this field
Mark Taylor
Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser
HI
Not an expert by any means as also starting out myself altho know lots about tax and other areas…but no one above has mentioned the benefit if you dont want to use all cash and have a negative effect on the property dont forget about the Witholding Variance form the ATO makes available to utilise the refund in tax expected at the end of the year due to neg gear situation(depreciation costs etc) to use weekly or however often you get paid. You get to use the money when you need it or want it through the year instead of waiting for that big fat refund in one hit EOY.
Cheers
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