Hi Guys,
Well this is probably going to be just another newbie topic that most of you are probably sick to death of seeing but hopefully some are not quite sick of them to shed some light and offer some opinions and direction.
So as way of introduction I am newly married and we are looking at starting a property portfolio and without going into great detail this is how we stand right now.
- PPOR valued at $600k owe $450k financed through two interest only LOC both in the wifes name with credit cards attached for day to day expenses and living. (I am not listed on loan docs or title)
- Together we earn $250k+ before tax , I contribute to 2/3's of this.
- We have no other debts, no CC's no car loans.
- We cover the interest on our PPOR and all living costs on the wifes income (no kids yet!)
- We have no investments yet, though I have equity rights on top of my salary that will vest in mid 2012, currently 2200ish rights currently trading at $45ish on the ASX. (Will be considered income that tax year)
- We have spent the past 18 month just getting our house finished the way we want it and expect to have it all done by the new year. At this time we would like to be in a position to go out and start investing in property.
I have spent many hours over the past few weeks researching and reading through online posts which has given me some great insight, though like most I have got questions.
- What books can anybody recommend?
- What trust setup can you suggest for building a property portfolio that provides security and portability in generations to come and possible tax reduction on my income.
- Can anybody recommend professionals that can assist in advising what would be the best setup for us, keeping in mind we would like to invest locally, nationally and in NZ.
Basically if your were me what would you do?
We are prepared to spend the time and money to become educated, but failing opening the yellow pages and trying our luck, where do we start? and who can we trust?
We are located in Perth but travel is not an issue if the person/service is right.
Thanks in advance
JoshCJosh,
I am guessing you have read Steve McKnight’s book if you are on this site. If not get it and read it, its like a bible. Another book I enjoyed reading was ” How to achieve wealth for life, through property investing “, Tony Melvin and Ed Chan – these guys also have a book on Trust structures, ” How to legally reduce your tax “, it goes through the basic trust structures but be wary of their TM Property Investor Trust, I have recently read a few threads on here that indicate the PIT is not all it claims.
cheers
Shane
Scratch wrote:Josh,I am guessing you have read Steve McKnight’s book if you are on this site. If not get it and read it, its like a bible. Another book I enjoyed reading was ” How to achieve wealth for life, through property investing “, Tony Melvin and Ed Chan – these guys also have a book on Trust structures, ” How to legally reduce your tax “, it goes through the basic trust structures but be wary of their TM Property Investor Trust, I have recently read a few threads on here that indicate the PIT is not all it claims.
cheers
Shane
Thanks Shane.
I havent read anything yet.
Basically have had the thought of investing in the back of my mind for quite a while but have done nothing about it yet. I have had a bit of time up my sleeve of a night over the past few weeks and just started looking into options. Im aware of the basic concepts but thats it. There is a list of books on Gatherum-Goss’ web site that they recommend reading, but to be honest Im not much of a reader unless it is really interesting or I know it is worthwhile reading, hence I asked for recommendations.
Thanks for the recommendations and Yes, from what I have read about the C&N PIT thus far it doesnt seem to have the integrity that Im looking for, however I wont rule out possibly making an appointment to see what they have to say and offer in person.Cheers
JoshI found the Jan Somers books, easy and interesting to read. Her first one I read was way back in 92 I think, but I have read them over and over again.
I agree with Pascoe, I have only read one of Jan Somers’ books, but she seems to be the leader in info on Positive cash flow properties.
I’m also the same as you Josh when it comes to reading, I think I have read about 15 books in my life, fortunately 10 of those have been property investment related.
One thing I would definitely suggest you do is see your accountant about setting up a trust structure to suit your needs, trusts serve a very good purpose. In Steve M’s book there is a very good chapter on how a trust structure provides you with asset protection and also increases your borrowing capacity if you have it set up correctly.
I have recently set up a discretionary trust for investing purposes, they cost around $500 just to give you a round figure.
Shane
Thanks Guys.
When it comes to books I litterally judge them by their covers, and to be honest I have seen 0-130 in 3.5yrs on the bookshelf and thought "pfft whatever, just anouther scam or pyramid scheme" haha, sorry Steve, just seems too good to be true and you know what they say…….
In regards to talking to my accountant, I have mentioned a few things in the past about buying property in NZ and claiming on my aussie tax (my wife is from NZ and would like a slice of home in the portfolio) and to be honest his comments didnt really fill me with confidence, so Im not sure if he has the experience that Im looking for. He has been a great accountant thus far, though I would like to seek second advice as a minimum.
Thanks again for the info guys
Josh
I know what you mean by the shock value of the cover of Steve’s Book, he did manage to do it once upon a time, but yes you are right the cover does not apply to the current economic climate. Nevertheless, its a good read.
As with anything you are passionate about, try and surround yourself with technical experts. I just started ringing around all the local accountants and solicitors in my local area until I found a few that actually invested in property themselves. At least now when I go to them with a strategy or far out idea they at least know where I am coming from.
Shane
Josh,
Educating yourself and finding a mentor is the best way to fast track creating wealth through property. There a lots of different strategies in property and you need to find one that resonates with your time as well as your finances.
A great start would be subscribing to Australian Property Magazine which covers all aspects of property investing plus a monthly update on every state suburb by suburb. It also features case studies of different investors and different strategies every month and it also has an online business mall with loads of books about every topic to do with property.Next get an accountant and a mortgage broker who specilaise in property and know how all the ins and outs od lending in trusts and asset protection as well as tax minimisation. Make sure they also have a property portfolio themselves. I cover how to choose the right dream team in my latest book "Sold for Top Dollar – Low Cost Housing Improvements to Maximise your Sale"
A lot of the books on the market like Jan Somers and Steve McKnight's early titles were written years ago and are not relevant to today's market. Michael Yardney has a great book and he also has a regular newsletter which is full of latest property info.I suggest you also join a property investor group so you can mix with like minded people and network with them. I can suggest you contact Jenny Brockis in Perth who runs Active Property Network (www.activepropertynetwork.com.au) meetings monthly. APN meetings educate investors and bring in guest speakers to broaden their members knowlege about all areas like finance, accounting, different strategies etc It is a great place to get referrals to professionals when you are starting out.
Good luck with your endeavours. Remember knowlege is power.
Cheers
Charyn Youngson
Author, Property Coach, Professional Home Stager
http://www.housestoimpress.com
http://www.soldfortopdollar.com.auAgain thank you all for your input and recommendations. I value education and training highly, it is a huge part of my job and I enjoy becoming more knowledgeable.
In regard to some books being “out of date”, Im glad you have mentioned that as I was questioning myself if some were still relevant. I guess they all probably still hold information that can be put into practice in some shape or form.
Charyn, thanks for the info about APN, Jenny actually used to be my family GP when I was a teenager, I had been told by someone else that she had moved into property but I didnt realise how much, I will definitely look her up.
Thanks for the well wishes, Im looking forward to the challenge!
Cheers
JoshHi,
I think people are rightly pointing out that Steve's book 0-130 property's in 3.5 years is an older book. I read this when it was released and it was great at the time (some people still recommend it as something to read). However, he recently published the 'update' book – From 0 to 260+ Properties in 7 Years. All the reports I have read say its right up to date for the current market and it's next in line on my 'to read' list.
Andrew
itsandrew
Go as far as you can see and you will see further.
Josh,
An interesting starting position.
I think Jan Somers books provide both an easy reading style and covers a lot of the topics needed for an investor. INteresting about being out of date, her first book was written of her experiences in the early 80's of high interest rates, maximum 80% loans, limited lenders etc. Sounds familiar?I am not a big advocate of trusts unless you have a specific need for them for asset protection or unless you have minimised the tax benefits of owning in your own name or you are running into land tax costs.
I would go and meet and talk to people. There are many accountants out there who have not even the basic knowledge to assist a property investor or who want to sell you services like trusts when you have no real need for them. Some of the books and magazines list questions to ask professionals to get a view if they know what they are talking about or are just hot air. Similarly with mortgage brokers, many can get you one loan, but do they have the knowledge and reasoning about how to finance a multiple property portfolio, which lenders to use first, which to use next, why certain lenders and not others, etc. If a professional cannot explain why in simple terms that you understand, go to someone who can.
It is also about finding someone on your wave length.
Good luck
GregHi Josh,
Great advice from everyone so far. I would add that subscribing to a lot of e-newsletters is a great way of keeping up with things and views in the market place. I subscribe to probably a dozen or more. Anything from mortgage brokers, property developers, to people who suggest cash flow positive (Margaret Lomas to capital growth Michael Yardney. Being informed and knowledgeable means you reduce risk and stress so the more you can find out the better. Books are great but magazines such as Australian Property Investor and Your Investment Property are providing articles which are right up to date and help both existing and novice property investors. If you can I would suggest you get some back issues over the last 6 months or more. Costly, not when it comes to making thousands of dollars both now and well into the future. Seminars are another good option but beware of paying excessive amounts.
Trusts- they are more important as you go along but come at a price in terms of accounting cost and land tax. I have 3 and as a good mortgage broker will tell you it is better to spread your loans as well as your properties over a range of suburbs or states.
Whilst you are both on good incomes I would advise against getting too carried away with investing overseas just yet. You are obviously still of an age to consider children so this is something to factor into any future commitment. The local market has plenty of potential and is a separate market to get to know although I understand the desire to invest in Nz.
More great input, thanks guys, I appreciate your opinions.
Before joining this forum my initial plan was purely to have a few -ve geared properties to get something back for the tax that I currently pay. Like with anything though, as you receive more information you question your plans and end up starting all over again. Not that this is a bad thing at all.
Our overall goal is to at least replace one of our incomes with profits of investments and small developments. My wife is a town planner so we would like to utilise her skills with some development/ redevelopment work.
Greg maybe you are right about the trusts. I see their value and purpose, but I also think, at this stage, that a few properties covered by adequate insurance in my name will give us a start.
Trustee, we will definitely be building a portfolio in Australia first, but long term hopefully in NZ aswell. Children are definitely on the cards in a few years, we would like to have our initial investments setup and running before kids so we know exactly what our position is when we do extend the family.
Overall we wont be looking for property until we know exactly what we want and how we are going to structure and manage it. Hopefully with the input from this forum and our own research we can get there.
One question on my mind at the moment is, there is a chance that we will relocate to NZ one day, what happens to our trusts and investments if this was to happen?
Cheers
JoshJoshC,
Not knowing your particular circumstances but based on your comments, I would suggest considering:- purchase more negative geared properties in your name now that have capital growth potential – effect to reduce personal tax and have longer term potential to revalue to extract equity. Note most trusts do not allow you to access the negative gearing benefits.
- look at purchasing one or two more positive (less negative) geared or neutral properties in your wife's name and also where you may do a reno/development on in the mid term. When your wife stops working (presuming it is her and not you) in a few years, the properties start to return positive rentals and with lower income, easier to reno/develop to minimise CGT effects.
I had a client recently move to NZ and has existing IP's in Australia. My understanding with the tax agreement with NZ, he is able to take advantage of the negative gearing benefits from Aust against his NZ income. I am not a tax expert but worth following up.
Good luck
GregHi, not to be taken as advice but your wife might have an instinctive feel & knowledge of her own backyard.
I'm Asian and I have NZ properties. I've been thinking that it's a good time to be buying older or even decrepit houses on big land to rebuild. Stacks of -ve gearing with depreciation = +ve cf. All the 5 units I have are set up like that. I bought them in 03 and haven't had to pay tax for 8 years but the rent is more than enough to cover expenses. I haven't even bothered to revalue them.
I keep the 2 incomes & tax separate but because it's a carry forward "loss", I've not married that to the Aussie part of the tax yet. If I wanted to, I could but it's hardly worth the hassle.
The NZ managers are very good. We did have one [a young inexperienced fellow] who absconded but that's all been settled.
On a high income, you might want to consider building [look for old houses or shops] in Australia. You may even find some young investors with no money but who can spot properties with potential.
Good luck with it,
KY
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