What sort of a structure should I use for a newbie property investor?

Hi aturner

Welcome to the forum.

You’re in an excellent position to start investing. A high income with relatively few expenses.

Firstly, I wouldn’t base your investing decisions primarily on the taxation benefits available. The tax benefits linked to residential property should be seen as a bonus (not the main reason).

The best advice I can give is to continue reading widely, forums like this are an excellent free resource. Also surround yourself with a team of professional that understand property investing.

This is going to sound bias coming from a mortgage broker but question your business bankers understanding of investment structures as well. Far too often, we have clients that come to us to fix issues that banks have created. The most common is when the lender cross collaterises their properties – which can be an expensive lesson for the unsuspecting customer.

All the best.

Jamie

Hi aturner,

You are one of the first people i've seen here for a while who actually has the right placement to do something serious with your possibility for investment. You've got a good job (now) and you got minimal expenses.

If you're playing it like anyone else who is young .. you will spend it on loose women .. fast cars .. and .. trinkets. And then wake up middle aged … not on such a good income .. an unexpected mistress / lover / baby  and before you know it .. you are trapped in the extended cycle of middle aged regrets.

If you are on 200k .. work out what your REAL expenses are (barring the reasonable rental situation). Since you got time up your sleeve .. borrow to a reasonable level, buy just investment property .. and buy lots of it. With your deposit you should be able to get a half million dollar investment without question. An 800,000 dollar investment if you push it .. and you fall short of the million dollar invest simply because of the current timing. All up .. that should allow you to get a passive income of somewhere between 25k-50k (risk factors allowed for) for your investment. Thats without pushing it too hard. If its your first invest .. you should push yourself to a level where you can allow for fallibilities and unseens. If you are experienced .. you know what can be expected.

In these trying times .. your skills with negotiation will be paramount for your success. Grab a book or two on proper negotiation skills and learn how to achieve them. They'll help you work out what makes a good deal and how to gear it to become a better deal. Negotiation is not FLEECING the other party. Its understanding their needs and wants for settling the property and how to achieve win-win outcomes for both parties. An important skill with dealing in property.

Without quoting you WomeninPropMelb, I think you are right .. to a point.

The biggest mistake .. is that everyone aims for negative gearing just before a burst of inflationary pressure takes hold. And thats what the markets and the monetary cycle is geared up for right now. So what sounds like a good option 70% of the time is NOT a good option right at the moment. I would suggest that appropriate and conservative gearing is a wiser move.

And having had my thrill of both loose women and fast cars .. I agree totally. It is never to be underestimated.

Hi Jamie, I agree with what you are saying. An investment should be looked at as a whole approach. It all has to be right for the individual. There are many philosophies on property investing and no one is right or wrong- just what is right for the individual.

What are you spending $120,000 on if you only have a very small amount of expenses and no rent?

In your situation,  I would be leaning towards commercial property. 

Well aturner, commercial property has some advantages and disadvantages. Residential is something that everyone can get into if you like- we all, well most of us live in something- so we can all relate to residential property. Commercial has some tricks for young players.
Yes, I am with you- get into residential- just do something with your income.
Good luck.

Excellent advice….. and not because you agreed with me

Cheers

Jamie

Hi there aturner,

you are in a fantastic position. well done.  You have great income and are obviously a good saver. Getting into property should work well for you. 

Over time I would take the following steps:

Put at least 20% deposit down on the investment properties and try to make some of these properties move from negatively geared to positively geared. That way, if you lose your job or your income drops substantially, you wont have to find lots of money every month to keep paying the mortgages.  Being negatively geared is fine if you still have some income coming in to make up the difference.

hope this helps,