Hi everyone. I figure that there are some great property investors in this forum who can view things from many different angles so I am throwing a question into the ring.
If you had $150,000 dollars to invest, how would you make that money work for you? This is assuming that you have no other properties to use as equity – just the $150K.
Boshy888
I was actually thinking last night about interest rates, returns and tax, etc since I have some money sitting in offset accounts thus saving interest. This was done a few months ago now when interest rates were high, rents were only starting to rise, capital returns were zero.
This was the best return after tax at the time.. I figured about 6%However,
Now that interest rates are falling, rentals rising, capital gains still flat… maybe now the best is to buy as long as the rental is around 5%, after costs should get effictive 2-3% or more depending on depreciatin etc. If any capital gains then even better, this is about par or better than offset if interest rates keep falling.That's my general observation at the moment.
If i had a home loan I would put the $150,000 in that, and then reborrow it. Reduce non-deductible debt first. Then borrow it to invest into something else – using 20% deposits from this money, then borrow to buy some property and maybe put some into the share market when it bottoms – with a margin loan (with a conservative LVR).
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
$150K could go a good way towards purchasing 3 or 4 properties if you split the deposits up the right way.
(1)
I'm the old school of buy and hold (B&H) so would look at splitting the deposit to secure a few cash flow properties that would achieve reasonable CG after 10 years. This might not produce the best Cash On Cash (COC) return but you have spread the money over a few properties and because positive cash flow you are already getting some returns from your $150K.
(2)
Find 2 properties that you can buy out right and have no debt but immediate returns on your 150K.
Again maybe not the best COC return but close to hassle free investing as you can get that.All great ideas. I was assuming that there were no other loans to pay off – just a straight $150K to play with. Besides the usual straight forward options, I was wondering if anyone could figure out how to make it work really really well because due to my lack of experience I can only think of the fairly run of the mill options.
boshy,
One needs to determine ones safety/risk factor to decide how to invest $150K.
For some this isn't a lot of money for but for others it could be all they have.
For me B&H positive geared is in the low risk category and why I advocate it more than others methods, although it may not bring the best and fastest rewards/gains.
Yeah…. I am learning a lot about the risk profile of both myself
and my partner . Interesting learning curve…. Risk factors can be a good indication of a persons financial upbringing and maybe the difference between you and your partner. Always good to find a medium somewhere or compromise.
With $150k I would buy two houses on sudividable blocks. I am in SA so could quite easily find two houses around the $250k mark each. I would then subdivide the house, do a basic $10k reno on the house, sell the house and then sell the vacant lot. If I was able to get a construction loan based on end value I would build a house on the vacant lot.
My criteria when doing this is to only buy properties where the house, once renovated, could sell on the smaller, subdivided block for the same price that I have paid for the entire block. Based on the above criteria, I would be able to turn the $150k into $300k within 12 months. If you are able to do this then basically you get the vacant block for free, minus subdivision costs.
Having said that, you have to know what you are doing because there are plenty of things that can go wrong, eg, reno costs going over, not being able to subdivide the block, paying too much for the property in the first place. But if you know what you are doing, it is a pretty healthy return on your investment.
My advice for avoiding things going wrong? Research, research, reseach. Know your market. Know your market. Know your market.
Cheers
K
Find yourself a leased industrial or commercial property with a quality tenant in the sub- $700k category. It will be positively geared, on a long secure lease and you won't need to worry about too much for several years.
I think your idea sounds good Linar.
Have been looking at a lot of homes lately and am astounded at how few people bother to present their homes well or to their best when putting them up for sale. I have been looking in the first home buyers market and I also wonder if some people are colour blind – like "What the HELL were you thinking when you decided to paint the walls that colour???" Or the wall and floor tile combos are abysmal. Smelt LOTS of mouldy properties too. You probably wouldnt' get too many mildewy smelling houses in SA but here on the east coast of NSW there are a lot of them. It is an interesting exercise though.
Hi Boshy
I am a bargain hunter in whatever I buy. I see no point in going out and paying full price for clothes when I can wait until the store has a 20% off. Yet so many of my friends see something they like and just pay full price for it.
It is EXACTLY the same thing with property. Some people look for bargains and some people just pay whatever is going. When it comes to selling, some people maximise their profits and others don't even turn their minds to how to get the most for their property.
You get the bargains by looking past the ugly colours and the quirks the vendors. Lots of people can't look past the colours or the disgusting carpets. But that's where the money is. Look into the mould though!
If you want to PM me I can give you some figures to support my above scenario.
Cheers
K
Thank Linar. I can see past the carpets, paint, kitchens etc but my partner has trouble visualising the 'after' change. However, some owners are totally oblivious to how their home actually presents but like you say, buyers have reason to celebrate that fact. We are currently looking at a solid older home in need of a repaint, new kitchen, bathroom and a few other bits and pieces but it has good 'bones'.
and my partner 
. Interesting learning curve…. 
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