Hi all,
Ok so here is where im at…
My girlfriend and I have $300,000 in cash. We have no investment property's and we live in a relative's apartment with her. We dont pay her rent, we just cover the bills.
We are looking into investing the money in property.
Now I have just been told that if we buy investment properties in joint names that the banks are abit tighter when lending money for future IP's ???
Its not an option to have the investment properties only put in one name. Would a trust help get around this or … ?
Apart from that I have no idea where to begin!
Anyone care to share what they would do if they were in our position with that amount of money…
PS we got the money from inheritance and savings ect….
Cheers
It's a huge sum of money so careful planning is required. What are you aiming to achieve from property investing?
A lot will come down to your own risk tolerance levels and other information such as current incomes, existing liabilities, etc.
With property, it's a good idea to surround yourself with a team of professionals – a good IP savvy accountant and mortgage broker should be a priority.
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]
Ill provide a bit more info…
My girlfriend and I have been together for almost 2 years and have lived together most of that time. We have spoke of marriage and we do plan on getting married in the not so distant future.
Anyhow the majority of that money is my girlfriends inheritance. But I have contributed enough to it to afford my own investment property anyhow.
I spoke to her after reading some of these posts and I think us buying an investment property each in our own name would be easier?
The other negative in this scenario is my girlfriend studies full time at uni and doesnt earn much income, whereas I am only a 3rd year electrical apprentice. My income is $520 net per week. Not much either. Though at this stage we have no liabilities, except for a car?
As to what I want to achieve from property investing… well to grow a solid property portfolio, and someday be able to leave my job and live off my propertys as I continue to expand? – I guess thats a pretty common response to that question..
Hi Aj,
I must admit your comment about 'joint names' creating borrowing issues caught me by surprise.
I am not a broker but if you are both working using both incomes will enhance, rather than diminish, your borrowing capacity (unless there is some fancy trick I am not aware of).
Hmmmmm, Where to start?
Need more information. Not that I am advocating you put it all out there. Rather just getting you to think a little more about your situation.
Grand plan stuff.
1. How long is your current residential arrangement going to be suitable?
2. At some stage will you be wanting to buy your own home?
3. Are there significant life changes on the horizon? Change of job? Marriage? Kids?
4. Are you looking to move into the property at some stage in the future?
5. Are you chasing cashflow or growth focussed investment properties?
6. What are your long term property plans?
7. Are your comfotable investing outside your own home town?Important Financial and Tax Stuff
1. Are incomes similar?
2. Is this likely to change?
3. Is there a need to protect your assets?
4. Is tax saving part of your goal?Notwithstanding I don't know the answers to the questions I have posed to you and for what it is worth I would endeavour, in most cicumstances, to use as little of your cash assets as possible. Look at some offset account type structuring to minimise your monthly interest bill while retaining healthy cash reserve levels.
Just noticed your second post after I hit publish.
I can actually answer all those questions Derek.
Grand plan stuff.
1. How long is your current residential arrangement going to be suitable? We can stay where we are living right now for as long as we want.
2. At some stage will you be wanting to buy your own home? Yes we do but my girlfriend has a house overseas(long story) she is going to sell when we want to buy our own home here to live in. So the money we have now we can use purely for investing.
3. Are there significant life changes on the horizon? Change of job? Marriage? Kids? We are both working on our studiesapprenticship at the moment. So at this stage our jobs we be quite secure with what we are doing and yes we do plan on having kids and getting married in the future.
4. Are you looking to move into the property at some stage in the future? No – that money is all for investing.
5. Are you chasing cashflow or growth focussed investment properties? Can I say both?
6. What are your long term property plans? Long term property plans would be to build a large property portfolio and hopefully one day live off them and not have to work anymore. The sooner the better! More time I can spend on investing.
7. Are your comfortable investing outside your own home town? Yes, defiantly – anywhere in Australia is fine by me.
Important Financial and Tax Stuff
1. Are incomes similar? At this stage no as my girlfriend is at uni full time. When we both finish studying and my apprenticeship our incomes will be much the same.2. Is this likely to change? Not once we are both in our set career.
3. Is there a need to protect your assets? Not sure about this one?
4. Is tax saving part of your goal? At this stage no as our incomes are quite minimal and dont get taxed much. Not really much of a concern anyway. Im probably focused more on positive cashflow and capital growth than negative gearing.
Hi AJ,
You guys have come a long way since your earlier post about 'investment companies' and you have given your whole situation plnety of thought at a macro level.
While your asset level is terrific your combined incomes aren't that flash at this stage.
Limited income will mean limited borrowing capacity so if you really want to get into property you may find the size of your deposit to be signifciant. This is not ideal as I would prefer to see someone retain as much of their cash as possible. Having said that all possiblilities need to be considered on their merits.
How long before you finish your apprenticeship? If the time frame is relatively short 'waiting' may be an option.
Determining your borrowing capacity would be a great step – no ppoint making rolls royce plans on a beer budget. At the same time there are advantages to spending a reasonable portion of your borrowing capacity under normal circumstances. Certainly when we work with clients we suggest they determine their borrowing potential when they are committed to some form of property investing as this help makes for more meaningful discussions;
Getting property with the right mix (for you) of growth and cashflow is possible. Might mean a little extra looking and research.
Hope this helps.
Due to your limited borrowing capacity I'd be inclined to continue living rent free (providing it's not a burden on your relationship with each other and/or family member) and look to purchase something that's at least cashflow neutral (so as it's not a burden on your finances and doesn't diminish your borrowing capacity too much).
With low rates, most markets being in favour of buyers and your willingness to invest outside of your own town, there should be plenty of properties that will fit this criteria. Just a matter of honing in on a particular area.
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]
There are some asset protection and tax strategies which you could utilise before you invest and still use the money.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Derek wrote:Hi AJ,You guys have come a long way since your earlier post about 'investment companies' and you have given your whole situation plnety of thought at a macro level.
While your asset level is terrific your combined incomes aren't that flash at this stage.
Limited income will mean limited borrowing capacity so if you really want to get into property you may find the size of your deposit to be signifciant. This is not ideal as I would prefer to see someone retain as much of their cash as possible. Having said that all possiblilities need to be considered on their merits.
How long before you finish your apprenticeship? If the time frame is relatively short 'waiting' may be an option.
Determining your borrowing capacity would be a great step – no ppoint making rolls royce plans on a beer budget. At the same time there are advantages to spending a reasonable portion of your borrowing capacity under normal circumstances. Certainly when we work with clients we suggest they determine their borrowing potential when they are committed to some form of property investing as this help makes for more meaningful discussions;
Getting property with the right mix (for you) of growth and cashflow is possible. Might mean a little extra looking and research.
Hope this helps.
Itll be another 2 years before I finish my apprenticeship and am on a good wage.
Therefore what if I did buy an investment property now, say for example around the 200K mark and used a 50% deposit? Then once my income increases I can pull the cashequity back out when I can borrow more??
BigAJ wrote:Derek wrote:Hi AJ,You guys have come a long way since your earlier post about 'investment companies' and you have given your whole situation plnety of thought at a macro level.
While your asset level is terrific your combined incomes aren't that flash at this stage.
Limited income will mean limited borrowing capacity so if you really want to get into property you may find the size of your deposit to be signifciant. This is not ideal as I would prefer to see someone retain as much of their cash as possible. Having said that all possiblilities need to be considered on their merits.
How long before you finish your apprenticeship? If the time frame is relatively short 'waiting' may be an option.
Determining your borrowing capacity would be a great step – no ppoint making rolls royce plans on a beer budget. At the same time there are advantages to spending a reasonable portion of your borrowing capacity under normal circumstances. Certainly when we work with clients we suggest they determine their borrowing potential when they are committed to some form of property investing as this help makes for more meaningful discussions;
Getting property with the right mix (for you) of growth and cashflow is possible. Might mean a little extra looking and research.
Hope this helps.
Itll be another 2 years before I finish my apprenticeship and am on a good wage.
Therefore what if I did buy an investment property now, say for example around the 200K mark and used a 50% deposit? Then once my income increases I can pull the cashequity back out when I can borrow more??
The trouble with this is if you want to use the money for personal expenses the interest won't be deductible. What if you want to buy a home to live in?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi AJ,
I must admit I am not one for buying cheap.
Budget limitations of that magnitude can really restrict your investment options which may compromise what you end up doing.
Eg If you end up buying in smaller country communities with limited positive property attributes. If you look at larger centres or cities you could be confined to serviced apartments which are not a good investment.
Given you are both studying I assume you are relatively young so a couple of years finalising studies and getting employment and an income to match isn't a bad thing.
PS Terry explained perfectly why using a large deposit and redrawing later can be problematic. If there are further investment plans in place redrawing isn't a major issue. If the redraw is for personal expenditure then there is an entriely different outlook.
This money we are playing with is for investment only. We have a house overseas we can sell to buy our own home here to live in when the time comes.
Its a REAL LONG story why my girlfriend has a house overseas. But yeah so its not a issue. This money wont be used for personal expense. Investment only.
**EDIT**
Also to add, to reply to you Derek, Well I was thinking about looking around the western sydney region and actually spending 250-300K with a larger deposit if need be.
Obviously still doing ALOT of reading and research and you guys are helping alot. Much appreciated.
Hi AJ,
Not really familiar with the western parts of Sydney.
Sound like you are really committed to your plan. I suggest you have a good discussion with a good broker before advancing your plans much further.
HI AJ,
300,000k is a huge cash. I don't think many people start with they property investing journey with this huge cash which i think you are in the very good position to start to learn.
if i was you, I won't get into debt too quickly. even is a house loan.
buy the house upright with your cash.
1) you don't have debt, all the net rental income after paying rates and fees is yours, ( positive cashflow for sure !!)
2) you get a bit of taste of what "property investing" is like, you will be potentially facing tenant issue, difficult agent issue, maintenance issue, possible rent behind issue …… all sort of problems which property investor have to deal with
3)you buy upright you, means you get into the market. so in the future you have higher income and you guys married also after experienc some the tenant issue, agent issue, maintenance………. then you can start to using the first IP to leverage to 2 or 3 IP.
so at that time you start to face finance issue, such us interest rate, fixed vs variable, line of credit………in this way, you don't go straight to face all the property invesitng "problem" in one go, instead you break it down one bit at the time. often you see people screw up big time because they have to deal with finance, tenants, agents, trade people, builder, council, architect, townplanner, interest rate, accountant, solicitor…….but they couldn't even handle just one thing properly ……..
Hence, my sugguestion is get a property upright to get into the market. ( you will learnt area research, data gathering, dealing with agents, accountant, solicitor……..) leave the finance and other thing for later.
of course, you can look for other professional to help, but whether you can find them and also comfort to use them is another story !
I may sound very stupid, but play small start with is the safer way to make huge money in long run, especially you have never purchase any property before.
Good luck for your property investing journey : )
Hi AJ,
I agreed with Elisey.
after learning handling small problem then you become smarter and more experienced.
Then you can go bigger issue.
don't borrow money just because of interest rate is low.
it comes down to your personal financial management skill and self-development. the better understand yourself the more money you make.hope this helps
Taylor
elisey wrote:HI AJ,300,000k is a huge cash. I don't think many people start with they property investing journey with this huge cash which i think you are in the very good position to start to learn.
if i was you, I won't get into debt too quickly. even is a house loan.
buy the house upright with your cash.
1) you don't have debt, all the net rental income after paying rates and fees is yours, ( positive cashflow for sure !!)
2) you get a bit of taste of what "property investing" is like, you will be potentially facing tenant issue, difficult agent issue, maintenance issue, possible rent behind issue …… all sort of problems which property investor have to deal with
3)you buy upright you, means you get into the market. so in the future you have higher income and you guys married also after experienc some the tenant issue, agent issue, maintenance………. then you can start to using the first IP to leverage to 2 or 3 IP.
so at that time you start to face finance issue, such us interest rate, fixed vs variable, line of credit………in this way, you don't go straight to face all the property invesitng "problem" in one go, instead you break it down one bit at the time. often you see people screw up big time because they have to deal with finance, tenants, agents, trade people, builder, council, architect, townplanner, interest rate, accountant, solicitor…….but they couldn't even handle just one thing properly ……..
Hence, my sugguestion is get a property upright to get into the market. ( you will learnt area research, data gathering, dealing with agents, accountant, solicitor……..) leave the finance and other thing for later.
of course, you can look for other professional to help, but whether you can find them and also comfort to use them is another story !
I may sound very stupid, but play small start with is the safer way to make huge money in long run, especially you have never purchase any property before.
Good luck for your property investing journey : )
Thanks for that. I didnt really think to buy a place outright. But it may seem like the best idea in my current situation for the time being.
Hi BigAJ,
I guess I might be stating the obvious here, but when you purchase an investment property outgright you will have the rental income to add to your income when looking for finance once you have established the property and have a good record of the rent being paid.All the best.
Ellie
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