- Hi All,I like to seek advice to see which would be a better option for me to go for my 1st IP. The following scenarios apply to my current situation and 12 months later.
I'm looking to buy an IP that worth no more than $310k or max $350, as I'm seeing more properties fit into this price range this year, I'm not sure what the property market will be like by next year, my concern is that by next year, I may miss out.
Scenario 1 – Current:
Owned a residential property (2 bedroom unit, estimated market value approx 320k), still owning mortage $8kSaving of approx 10kNo other debt
Scenario 2 – 12 Months from now:
Residential property will be paid offCash saving of approx. $40k – $50kNo other debt
More about my situation:
My after tax montly salary is $5300, after deducting all expense, I have about $3k saving per month.My annual salary before tax is $92k. The main purpose for me to feel an urge to get into getting an IP is for mean of reducing tax through negative gearing.
Also, I will be turning 40 year old by end of this year, single, am I too old to get into the property market? Hope to get some advice.
Thanks
lamp1111Hi Lamp
Firstly welcome to the forum and i hope you enjoy your time with us.
I must admit i would never recommend any client get into property investment merely to reduce their Tax liability as Govt policies change and buying with a view to making a loss in never a sound investment.
Buying in an area with sound cash flow and capital growth prospects is certainly a better strategy.
With a virtually unencumbered property structuring the loan correctly is imperative so that you dont cross collateralise the securiities and give any potential lender excessive security.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Agree with Richard.
Definetly wouldnt be investing to minimise tax. Investing in property should be puting money in your pocket every month not vice versa. You can only buy so many negatively geared properties before the bank shuts its door.
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
Thanks Richard and engelo10,
Thanks for your advice. Yes, Richard has definitely made me aware of the point regarding what if the government changes the law. I should not put my focus only on minimising tax.
To re-adjust or correct my thinking in my first post, I would much prefer to have an IP which will put me in the neutural or postive geared position. Given I'm inexperienced in property investment, entering the first time, I am more confortable choosing IP in the areas I'm familiar with, however, properties from these areas would cost between $340k – 380k, weekly rent around $230 to $250. My plan is to access equity of my current home (20%) and get a new loan IO only for the remaining 80%.
Unless I have a larger deposit, I will only end up in a negative geared position for a number of years and gradually work towards neutural to postively geared. For the worse scenario, if I cannot find a tenant, I will still be able to pay off the load confortabely.
What I want to find out from forum members is, is it common to access equity (20%) from their existing home and borrow the 80% without much cash savings?
Does getting an IP under my current siuation stated below be considered risky or normal?
In my case for wanting an IP worth between $340k – $360k, will require new loan of 80% and 20% from my existing home (current market value approx $320) that is more than 90% paid off (i.e. $8k to pay off), cash saving approx. 10k or should I save until I have 50k, which will be mid to end of next year?
I would like to get a genaral idea regarding my readiness to get into the IP market at this stage, I will definitely engage a broken or planner to have my loan properly setup, so my next question is, how much does it normally cost (roughly) for engaging a broker/planner to assist with setting up loan and / or strategy for simliar case like myself? And Richard, have you got any client who is based in Victoria?
Thanks in advance
lamp1111
Hi Lamp
Yes hundreds of Forum clients in Vic and will in fact be down there tomorrow for a FIFO visit.
We personally dont charge any fees for our services as we are remunerated from the lenders who we place the business with.
Yes taking an standalone 80% lvr and the balance of the 20% + acqusition costs from your PPOR is standard practise.
What you need to do though is get the refinance and restructure in place upfront as this can often take the longest even though it seems simple and is the least amount.I cannot see with the equity you currently have that the strategy is risky at all.
A good located property is a sound strategy and especially when you have little to no deductible debt.
By the way you are never too old to get started in building wealth for your future.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks again Richard!
Wondering what time and where about you will be meeting with your forum clients in Victoria tomorrow, is it for anyone or appointment required?
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