Hi Everyone,
I know you get asked this a million times and I am sorry to post up something that may have been repeated in the past…. but I have been browsing the forums for the past couple of days but can't find anything really specifically related to the information I am looking for.
I from VIC and am 25yo and buying with my partner who is 27yo our income between us is approx 95000 a year give or take… my partner is due for a pay rise so I'm not sure how much that will bring us to, I am in IT with a family who are mostly tradies in the building industry also my partner is a motorcycle mechanic so is very handy with the tools. Anyway I have been watching the market over the past couple of years and have finally saved up enough money to purchase an investment property to rent out. We have 65k deposit & stamp duty etc between the both of us and are looking for a property between 350k-450k. We have been approved for up to 515k but would need more money for a deposit if we were going to go that high.
I have been looking at the sunshine, braybrook area as the west has been experiencing a huge amount of growth which is expected to continue over the next couple of years and they are only 15k's from the city and next too footscray which has experienced a huge growth in the past couple of years. But I am torn between there and the south easter suburbs (dandenong, noble park etc) as they are a less of a risk due to better reputation etc. First question is can anyone give me any advice as to how to choose the right area to invest?? Would I be better of looking further out in sunshine north/west or deer park for a significantly cheaper property for starters?? or should we just dive into the deep end??
Secondly my plan was to buy a run-down property that was on a large block of about 600-700sqs fix it up and then subdivide and possibly build a unit out the back if money permits me to. I wanted to know how would someone go about getting funds to do this?? Can a house you've only just bought be used as capital to get more money to build a unit or would I need to wait a while until I have paid more off the house before they would let me??
Also I have heard that if you sell within 12 months of purchasing the property u lower the CGT by 50%… I have no idea if this is true or not… can someone provide some info on this??
Also I have heard briefly about the benefits of buying a house under a trust… can anyone do this or do you need to own a company?? how would u go about doing this?? how would if benefit me??
If someone can help me with my very n00b questions in simple terms before my brain explodes I would greatly appreciate it!! or even point me in the right direction.
Hi Reeen
Talk to a Property savvy investment finance person.
Your thoughts are good ‘insofar’ that you are looking to invest.
Be aware that if you are purchasing a older building the depreciation ‘tax relief’ is limited as opposed to buying new even though you are looking to develop the block.
We are builders and sell a lot of investment property in Queensland ‘present day nearly all waterfront’ sic, and history has shown that those who venture into doing something ‘developing’ they know little about or have gotten the wrong advise hurt, whereas the people who let those who look after them more forward without any pain.
Remember that most properties ‘until present day’ have doubled in seven to ten years and all you have to do was use other peoples money when buying new. Yes we sell new not used!
@BluegrasspiThanks for the advice bluegrass… I am in the process of trying to make an appointment with someone at blaze acumen securities… someone recommended them on here in another thread a while back. Don't really know any others… or where to look.
By tax relief do u mean how much of the depreciation I can claim on my end of year tax return? sorry if that's a stupid question I'm not very savvy when it comes to tax stuff.
I have another question if anyone can answer it… should I be setting up an offset account?? how do they work?? and if I am looking at subdividing and building a unit out the back should i be setting up my investment loan with a LOC?
Hi Reeen
Yes tax relief is depreciation amongst other things and you can claim it weekly if you set yourself correctly. A tax form call a ITWV is available on the tax website.
Your questions are best answered by a finance person. Another company you can look at is australianpropertyonline for advise. This company is not mine but the owner is very well versed in property investment finance and I have used them.
KevinHi Reeen,
I think what it comes down to is how much risk are you comfortable with? Sunshine and Braybrook are suburbs that definitely have potential and have experienced some great growth in the last few years like wise with Dandenong and Noble Park. I even think that Terry Rider had Dandenong listed as one of his hot spots early last year. But like you said, you would consider one over the other based on the risk involved. Often more risk means greater returns so you have to weigh that up for yourselves.
If you are looking to do some work on a property to add some value, and you are planning on doing the work yourselves then you definitely want to consider location because you dont want to spend to many hours travelling to and from your IP. If you want to do the whole subdivide and develop thing then you probably want to sit on the original house for a little while especially since it is your first IP. You can always do a little reno, add some value and in 12months get it revalued. With the extra value you add plus any capital growth, you may be able to borrow more money and look at doing your development.
As for the CGT, I think you will find it is the opposite of what you thought was the case. If you sell withing 12months you pay 50% CGT.
Hope this helps a bit. It sounds like you have done your fair share of research and sometimes people will just keep on researching because the fear of taking the plunge is too great. If you are comfortable with your decision then just do it. Its better to begin investing sooner rather than later.
Corie
Thank you very much for the advice ppl!! That was all really helpful.
I'm pretty comfortable with a high risk so probably going to keep looking in the west but I have now been keeping my eyes out in for stuff in the south east too just in case something worth while comes up.
The trip from where I live to Dandenong or the west is pretty much exactly the same so travelling isn't really an issue. Plus I have family that lives near both those areas so that's helpful. Can travelling costs be used as a tax deduction?
Does anyone by any chance know any good documents on CGT that I can read up on? or does anyone know any ways to help reduce it?
Again thanks heaps for all the advice already!!
I have done some more reading and have another question I'm hoping someone can help me with… sorry
Positive or negative gearing…
I know that each situation would be different for each person but can you do both, for example buy a positively geared house and use the extra income to buy something that is negatively geared so that you break even… but in the negatively geared one you'd be hoping for +cg's… what I'm trying to ask is can you have both?? positive gearing and positive capital appreciation??
If so would it be a good thing or would you end up paying too much tax?
reeeen wrote:I have done some more reading and have another question I'm hoping someone can help me with… sorryPositive or negative gearing…
I know that each situation would be different for each person but can you do both, for example buy a positively geared house and use the extra income to buy something that is negatively geared so that you break even… but in the negatively geared one you'd be hoping for +cg's… what I'm trying to ask is can you have both?? positive gearing and positive capital appreciation??
If so would it be a good thing or would you end up paying too much tax?
Hi Reeen
It's perfectly fine to have both types in your portfolio. I've got a mix of CF+ and CF- which balances out somewhere around neutral (or slightly negative).
As for positively geared and decent growth all within the one property, Margaret Lomas's book "20 must ask questions" has some great criteria for identifying those types of properties.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
HI Reeen,
A good purchase is a must. It can hurt you more than you think in the long run. Im speaking from personal experience. Go to a couple of free seminars. Alot of the time they provide good advice on areas they think will do will in the short to mid term. You can also buy a property a little run down and do some cosmetic work on it. There are so many options it is hard to get focused on where to buy and also do well.Melb will always do well even though the market is cooling.
Regardless of whether a property is cf positive or negative, you really want to look at the performance on similar properties in the same suburb over the last decade. You really want the thing to double in value every decade. Refer to the back pages of the Australian Property Investor magazine for the stats. It is said that in general, cf positive properties doesn't produce as good capital growth, which over time, costs your wealth level more than the cf positive cashflow (in terms of high rental return) saved you.
I would think any of the areas you are looking at will perform well, and all for different reasons. On one hand, Sunshine is a bit closer to the city, on the other hand, Dandenong is a bit closer to the Mornington Pensinsula for those interested in watersports.. Have a chat to councils to understand minimum block sizes for a subdivision, and remember for a battleaxe block (where you essentially sell the backyard and the driveway), a big chunk of the square metrage is taken up in the driveway – so it might work out that the rear block needs a bit more square metrage overall in order to fit a dwelling on it.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
There are several ways of reducing your CGT liability but the easiest way is not to ever sell your asset.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Great thanks you so much everyone for the awesome information!! I'm very glad I found this forum!!
fredo_4305 – do you know of any free seminars that I can go to in Melbourne?? or any links to people who hold them??
Yes JacM thats the one thing that is getting me the most… all over this website and everywhere else I read everyone always says "location, location, location" so yeah I'm really struggling to decide where is best… so if anyone has any good recommendations I would appreciate it very much!! even if you dont want to share with the whole world u can just msg me
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