Starting out

Good afternoon Hawko,

It's great that you're thinking of using the money to invest in property. Personally, I would (and have) put such a large sum of money in a term deposit at the best rate for a year or so and use that time to learn as much as possible about investing in property. There's many books, forums and seminars out there that would easily fill up your time. By then you'll be far more educated and be able to make better informed decisions regarding your strategy, structuring your finances etc. Also, the interest by the end of the year on the TD would be enough to put a deposit down for a house. Thank you bank!

1. If you're single and don't have a job, I think renting a room may be a better option and use the money to buy IP's instead. Negative gearing will slowly drain your bank account as you don't have any money coming in. Of course if you do get a job and earn a high income, there are tax benefits associated with NG'ing your PPOR. There was a thread created on here about renting vs buying a PPOR but couldn't find it.

2. If you haven't bought a house in Aus before then you are eligible for FHOG but the inheritance being a property may affect this. Was the house in Aus?
Check out the discussion on Somersoft- http://www.somersoft.com/forums/archive/index.php/t-31168.html

3. Starting small is always a good idea as it will give you an idea of what goes on before, during and after buying a property and  mitigates risk associated with larger deals in capital cities. It's a lot of work and requires a lot of effort. It also depends on  what your portfolio strategy is and what outcome you are looking for from property investing. Buying rural may produce neutral or positive cashflow (especially as you can put down larger deposits) but historically, it is slow to gain much CG. There are also reno's, flips, vendor financing etc that are good ways to get into the proeprty market and these can be done in any market.

I would highly recommend any books by Steve McKnight, Michael Yardney, Dolph DeRoos and Margaret Lomas just to get you started. And of course, reading through websites like this on a daily basis helps greatly.

https://www.propertyinvesting.com/forums/property-investing/help-needed/4337228?highlight=rent%2Cvs%2Cbuy

Best of luck with the future decisions,

Derek

Agree with xdrew here…with no job- you best to go for IP first — produce rent ie around $15k-20k per year..and can be used as ur “job income” for your next purchase the PPOR OR IP 2…

Regards
Michael

Get job first then buy..that why u can lavage more from the bank; rather then using all ur cash.

In regards to the rual VS inner—it’s a personal choice and depends on your overall financial “plan”…i have personal have only invested in Inner city and have 6 good foundation property all with good capital growth ( all within 1-30km of CBD)…VS my older sister who has 17 properties but mostly located in the rural regions ( 30-100km CBD) —- one has good rental one has good capital growth.

Never hurts to have a mix of both; but i say for ur first property get a good “foundation ” property that you can keep on leverage against ( ie a capital growth property- established area)

Generally speaking House alwasy brings more CG then units- CG comes from Demand ( land) , location and gentrification.

P.s you can stil get a loan based on your “rental” income – just not a LARGE loan…

Regards
Michael

Hi Matt
Nice $ position you find yourself in!  I think the decision about PPOR or IP is a personal one it's not up to me to tell you what to do.

Re what/where to buy – why not consider using say half of the money as a deposit towards a small block of units.  If you buy some with decent returns you will be cashflow positive and the lender will include the income from them in your servicing capacity? And they'd put money in your pocket each week.
Personally I like units because it reduces the risk of vacancy – we're not likely to have them all empty at once.  Then there's the benefit of strataing and selling them individually in the future.
Keep doing your research – there's a mountain of information on this forum and also on other websites.
Cheers,
Tracey

Friggen helll! $500,000 cash.

I would immediately take some legal advice on asset protection. Possibly gift it to a discretionary trust and then take a loan back from the trust to invest the money, or buy a PPOR etc.

Later on if you were to get sued, for eg, then the money would be still repayable to the trust.

This would also help with tax. eg you pay cash for a PPOR using borrowed trust money at nil interest for the first x years, variable rates, and then move out, the loan could revert to 7% and the whole interest on the loan deductible.

Many things to consider before you start to consider investing.

The first thing lawyers think of is covering their arses. The second thing is covering the client's arse!

Another thing to consider is future relationship break downs (a trust may not help in this regard, but could). And, if Hawko dies then attacks on his estate, family provision claims etc. Having the money in a trust can assist in keeping it out of reach.

Actually it may still be possible if the deceased you inherited from died less than 3 years ago.

Congrate on the job.

Even though the salary is not great; the bank will still lend you a certain amount– the short fall will jsut come from your own pocket.

Regards
Michael

I liked a much earlier comment about a term deposit whilst researching, and Terry's multiple comments about seeing the right professionals.

I think you're in such a fantastic position having that lump-sum cash, so take the time to educate yourself on how to most successfully invest your money to achieve your personal goals. If the money is not already sitting in a high interest account, the first thing I would do is deposit the lot into perhaps a 6 month term deposit at a great interest rate. Then book yourself in with a good financial planner, and accountant. Start talking to the experts (and yes it will cost you money, but its all worthwhile for the tailored, professional advice) and work on a plan that suits your goals. Might as well have your money earning top interest while you're preparing your path for investment. Also it does appear that the majority of property markets are reasonably flat at the moment, so you wont be missing out on large capital gains over a 6 month period.

Also a popular theme mentioned in investing books is about delayed gratification and if you can live frugally for a while, you can reap the benefits later. so perhaps consider renting/sharing and focussing on investments for now… FHOG benefits vary from state to state, and also in some states if you buy just for IP this doesn't mean you are ineligible for FHOG for a PPOR in the future.

But I'd pay a lot of attention to Terry's posts and not spend a cent of your income without some professional advice, and getting it set up in the right structures from day 1.