Hi Kristy,
Maybe start by chatting with a Mortgage Broker. See, it is no good considering buying in inner Sydney if your finances don’t allow it. Better to get a good idea of how much you can spend. This will likely provide some limits as to “where to buy” right upfront. As well as that, just by answering questions the Broker asks will help you to “learn what is needed”.

Other than that, do a bunch of reading to help get you more comfortable in the “property investing world”. Maybe start with this thread :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

Benny

Hi Asou,

how can I get away from paying the massive capital gain tax?

Two ways that spring to mind are these:-
1. Wait 12 months before onselling (be sure you check which dates are important – I believe Contract Date applies, and NOT Settlement date…. but check that). In so doing, you HALVE the CGT owing – well, really, you HALVE the amount needing to be reported as a gain. CGTax then is paid accordingly – it may bear no relation to “HALF”….. in fact, you could pay a lot less than half, especially if it has you in a lower marginal Tax scale.

2. Start a Company – that way you would pay only 30%.

Or, as you say, Buy/Reno/Hold can work well too – but this doesn’t leave you quite so free in cash terms.

Do note this is all opinion – listen more to those who have a sig that shows they KNOW all this,

Regards,
Benny

Hi Melissa,

A good question, and one oft-asked – “Do we invest before buying a PPOR (own home)?” Click on the link below, then check out the third post in that thread. It takes you by the hand and shows you the answer. Of course, it may not be the WHOLE answer, as it is written as though “financial reasons” are all that exist.

https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

If one looks from an “emotiional perspective”, or a “lifestyle perspective”, then there could well be other reasons why the answer given would NOT work for you. Still, it is a start – and has covered the important points very well. I hope it helps to give you a fresh perspective.

Benny

Hi VYAW,

But it will obviously take longer to pay off the larger loan.

Hmm, if that is part of your plan, then you are likely right. But what if paying them off is NOT part of your plan? Have you given that option some thought?

e.g. Did your Mum and Dad pay off a $40,000 home over 30 years? What if they had also owned an investment property valued at $40,000 and DIDN’T pay that off? Today that property could conceivably be worth $400k+, with a $35k loan on it. Is that any kind of problem, especially since it is positive geared?

Could it be argued that NOT paying it off would free up extra $$ to buy another one? What do you think?

Benny

Hi Reiya,
I’m with “walking to run” who says

Ill leave your scenarios to someone better qualified to answer but i think you need to step back first and talk to some brokers, there are many on here and hopefully they will help.

Yes the whole scenario is complex – but it is like eating an elephant. One bite at a time you can do it.

Getting your finances set up correctly should be one of the earlier steps. In doing so, you will learn much from your adviser re the whole scenario of IP investing. They can also answer some of the deeper questions re IO vs P&I or Offset vs Redraw. so do quiz them.

Right now though, do check this out :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

In that link there are several different subjects approached – go looking for those that are of relevance to you right now.
Regards,
Benny

Hi Tiger,
The main thing you are seeing is how there are two major “parts” of any Finance Deal. One is LVR the other is DSR. And either one can limit you.

Richard, or other Mortgage Brokers on here, can take you chapter and verse through the complexities of all this.

Right up, I’d say you are in GOOD shape with $600k of equity. Yes, the DSR side of things might slow things down with the size of a loan, but then, the right purchase could see you able to make a second purchase right after that.

Take the time to learn all of this for your own benefit. It helps to have some understanding which will occur as you meet/talk with others like Richard. And welcome aboard – I hope your search for more info is a fruitful one,

Benny

Hi Wadez,

1. Click on “Forum” at top of page (between Home and News)
2 This shows a forum Index – choose which forum you want to start a thread in (click on the forum you want)
3. Now that you are in one forum, at top left a “New Topic” button appears – click that, then follow the bouncing ball,

Benny

Hi Suri,
What Jacqui has suggested makes a lot of sense, and reminds me of a story Steve tells in relation to his mantra of making money. His aim when investing is to :-
make the most money
in the least time
with the lowest aggravation
and the least risk

Balancing those out on a particular deal he had, led him to do exactly what Jacqui suggested above. He had a block that could be developed, so he “ran the numbers” and found something like this (I don’t recall the actual figures but is an example):-
Developing and building one extra house was going to gain him just $20k in 9 months (erk!!)
Developing and building two extra houses was going to gain him around $120k in 10 months (not so bad)
Getting Development approval and onselling to a builder would gain him $100k in 6 months without having to actually build them himself. (He chose this path)

Though building two houses would have earned him more, he would have had to outlay far more to build two houses, so the return on investment was going to be way lower than spending just enough for a DA, and getting nearly the same return more quickly.

Way less aggravation and risk !! You may well be in that same situation – run your numbers, and see what they say.

Benny

PS By the way, I just found Steve’s actual numbers and the story (I didn’t have the facts right, as I suspected… wah!!) It is the story that opens Chapter16 of “0 – 130 Properties in 3.5 Years”. His third option actually paid him MORE money than the second option did. Oh, and there was way more to it too, so go find it if you have the book.

Oh, and the final learning from the story (as it all worked out to a $130k profit) was “How many deals like this would YOU have to do each year to replace your wage?”

• This reply was modified 10 years, 5 months ago by  Benny. Reason: Adding the book reference

Hi Audsco,
Also because others haven’t yet responded, I wanted to pass on what I believe could be useful. I don’t know, as I don’t spend much time at auctions, nor have I purchased a place that way……

I recall a story written by an investing “player” who wanted to snap up a property – he formed his view of value with a walk-thru on the day of the auction. He determined the amount that would be his “highest bid”. During the auction, he had the distinct impression that it was “just him and one more (maybe a “plant” working for the vendor?)

But HERE is the key – the reserve was not reached, and our friend had outbid the “other bidder”. This made him the first one the RE agent came to talk to once the place was passed in”. He ended up buying the place at his final offer price.

And he was offered $40k more before the day was out from someone else wanting to buy it from him.

I thought that might be worth knowing….

Benny

Hi 5102,
Sorry to hear what has happened – but then, as you said, this is not as bad as it might have been, so hold tight to that thought.

Original plan was to revalue to purchase 2nd property but I’m just not interested because it just feels too risky and I don’t trust myself to understand the process.

ANYTHING is risky if you haven’t educated yourself ahead of time. Consider getting behind the wheel of a car without learning first HOW to drive….. even if a friend says “You’ll be OK”.

Spend some time here – just read up on a number of threads on a number of different subjects – you will be amazed just how easily you can learn of “good ways and bad” to invest in Real Estate. Steve cites a valuable lesson when he says “Buy a problem, sell a solution”. i.e. Don’t buy new, but instead, buy the “Possibility of extra growth” (the problem). It could be – an old house on a large block that needs to be developed, or it could be rundown, so selling cheaply – it could be MANY differing things. But if YOU can fix whatever needs fixing, then YOU can command the fee for fixing it.

That might sound like “Oh, I couldn’t possibly do THAT” – but look for what you CAN (or COULD) do with Real Estate, and search for a way to claim $$ from it. For some, it may be “Buy and Hold” (knowing that more infrastructure is to be built, and/or more development is to be allowed per block). Or you may know that “Shared homes” are in big demand in an area but no-one is supplying it (and you could!!) Or you might read up on, and meet up with those doing, development of land.

Admittedly I feel pretty silly and foolish listening to very slick guys talking wealth creation lingo. I thought I did my due diligence but I’m probably more risk adverse than I thought. Perhaps the situation is more in my head than reality. But we’re in our 50’s, have teenagers and not a lot of super so this was to be the beginning and I feel like I’m already at the end.

You are only at the end if you choose to be. Your situation could do with some specialised help – an accredited adviser in money matters. e.g. There MAY be good reasons to “cut your losses” with this property in Gladstone – but then, there may be other good reasons to “stick with it”. Someone who is fully aware of your total financial situation (and has nothing to “sell” you except their expertise) would be a useful ally right now.

Get some “second opinions” on what is the best thing to do right now. From the little I know of your circs, you are in a position where you CAN still recover, and quite well. We do hear some really awful stories, where the prognoses are VERY gloomy. I am not so gloomy re you, 5102. Take a deep breath, read a bit more, and start talking to those who can help.

And do consider putting some $$ toward properly educating yourself in whatever money-making scheme you want to try. I well recall an axiom that reads “If you think education is expensive, try ignorance !!”

Thanks in advance… just needed someplace to put it out there to hopefully learn from my mistakes and try to make the best of a difficult situation that isn’t the worst that it could be.

Welcome here, 5102 – I hope the various replies can offer some meaningful and useful thoughts for you.

Check out some of the thoughts in the link below – they might help to steer you to some useful early learnings:-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

Regards,
Benny