Hey ho all – newbie here from Melbourne. Hubby and I are lucky enough to have reasonable assets behind us, but just don't know where to start. We need to restructure a little, as much of our asset base consists of a leased farm bringing in 4% gross – hubby isn't comfortable with selling farm land just yet (though within five years), but we are excising the home from the land and should be able to sell for $150K… once done restructuring we should have:
Cash $40K
Home $375K and mortgage $238K
Farm land $990K and loan from family $227K, leased at $39,600/annum… paying $20K per year back on loan, can be reeduced to $10K if requested
Investment Property $240K, mortgage $188K, leased to govt dept for $14,300/annumHubby is very talented and would love to work for himself again. He enjoys and is very good at renovating – and we are both tight wads and VERY careful about costs. His job (nine day fortnight, good hours, suits our young family) is great for the moment, but there is no upward movement and he is already starting to be bored by it.
I have my own business which I love and which is now in its third year and has completely replaced my previous employed income… I am strict about the hours I work and leave the laptop at work rather than letting it infringe on our family time… we are very much of the philosophy that we work to live, not live to work.
We have set our goal – $1,500,000 in debt free commercial proprty before we hit 40 (June and November 2015).
I realise that we are already a good way there asset wise, but am not prepared to pressure hubby to sell the farm when he isn't ready to yet.
In the meantime, I was thinking subdivide and sell? Or even subdivide, build, sell? Possibly buy, divide, reno original, sell…
Have we enough cash to do so? Happy to use farm as equity if needed – but doesn't this eat into profits?Any thoughts or advise would be very much welcome. Also – how do you go about getting involved in the RESULTS program and how much is it?
Thanks all! So excited and very much looking forward to the journey!
Commercial properties have relatively high returns (in a healthy market) and provide steady returns, but the capital growth is poor. If you’re looking to make money through capital growth and by drawing on the growth in equity, I suggest investing in residential property.
Anything within 10km of the Melbourne CBD is solid gold because of the housing shortage. I’d look for quiet residential streets within 10 minutes walk of train stations, parks, shops, cafes, schools, kindergartens and main arterial roads. Look for places that are less than 7 years old but beware of off-the-plan developments: these are usually overpriced and will rob you of the first 2-3 years of capital growth.
As for your farm, I’d subdivide and sell if the location is favourable in relation to zoning and the urban growth boundary. The land is much more valuable if it can be developed into residential blocks than remain a going concern farm.
Good luck!
Thanks KateMelb! Sounds like sensible advise to me …. we are both a bit nervy about developing – although I guess there always has to be a first time!
Unfortunately with the farm subdivision is a no-go. We are allowed to excise the existing house and four acres from the rest of the property to sell but can't subdivide under 100acres otherwise… damn it! 20acre blocks up there go for about $80,000, or $4,000/acre. Farm land in larger pieces like ours – $1,500-$1,650/acre…. do we feel ripped or what? The closest town is ten km's away and has had little growth in the last 20 years – the young ones leave to find work and the population just gets older and older.
Any other comments more than welcome!
Contemplating the R.E.S.U.L.T.S mentoring program – any comments?
suppose it depends on what you feel you need as a return
Ive done renos, subdivision, and while some have been spectaculary profitable i cant ever remeber buying with such certainity nras homes especially in tassie because its effectively enough passive income!!! that ones doesnt have to stress about the uncertainity of havingto do renos subdivision etc. Now if one likes doing that thats a differnt matter but puerly on the numbers
Thers a 7-8% rental yield plus
highest capital growth over the past decade of all capital cities in aus ave more than 12%
so if that continued thats a starting 20% return on brand new property (zero maintenance) with cheap cheap entry $240k
Im happy if capital growth is only 5% its still 12-13% return, for doing nothing and fed govt is guaranteeing large part of it and Im helping the community so its a triple bottom line.what ever you choose make sure you take advice from appropriate people, model someone successful after all success leaves clues
Have read a little about NRAS property, but not a lot. The triple bottom line thing really appeals – my own business is structured in the same way, my suppliers win, I win, my customers win – hubby and I both feel a need to "contribute" in some way, so that side of it is certainly appealing.
I guess I am just a little sceptical – having had friends bitten on overpriced defence housing (admittedly they didn't do their homework on the area first). Are you locked in to owning for a certain period of time? Are the tennants the type likely to wreck the place?
Have just found the website so will have a more in depth look – cheers!
When one hears affordable housing the perception is poor quality houses, located in out of the way places that only scary people will rent.
This is definetly not the case in Tas.
in fact the homes Ive bought are built to a much higher std than other investment property I have seen- double glazed, heat pump hot water, universal design, etc etc .I bought a house in estate with seriously good water views iand 2x 2 bed units 1 house back from golf course estate,
The majority of tas are eligble as tenants becuase the income criteria is set nationally and incomes are lower in Tas.
The properties I bought are at reg valuation.
I just checked an old thread and found some one else wuzziemoo bought one as well and posted thread on this site about it.
Thanks for that extra info hewlett.
Been reading a bit more about the tax side of things too – seems there was a bit of concern for people buying in joint names or in a trust – that they might not qualify to receive the govt subsidy, but they appear to have gotten that sorted out…. although certainly looks better to steer clear of head lease arrnagement. Seems you can sell out too, before the 10 years – although found mixed reports as to whether the buyer has to be prepared to be in the scheme or not. We have a family property trust that we prefer to buy our investment property in – wanted to make sure that the beneficiaries can access the tax offset.
As you say, with rental returns like that, I'd be happy with less capital growth then 12%!
Can I ask who you bought through – as in which property group, manager etc? I read a little about one of the Queensland managed ones that require you to discount rent by 25.01% instead of 20%. Are the managers the ones responsible for ensuring that the tennants meet all the rules to keep owners qualified for the government subsidy?
Thanks again!
paramount group, they are also the property managers.
Yes its their responsibility to ensure the tenants is eligble and maintains their eligibilty.
In Tas 20% is the rent reduction
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