[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

April 1, 2012 - 11:53 pm

Thanks for all your insights and opinions.

Greatly appreciate it.

Location

In terms of location it seems like Ballarat has a lot of potential for future growth.

• Close to Melbourne for those that love to shop, dine at fine restaurant, or enjoy the night life 
• Close to Geelong if you want to relax at beach
• Appears to be an employment hub with many people from surrounding suburbs and even overseas coming to work here
• Has a lot of money flowing into infrastructure, improving transport links, and various industries such as health and education
• Houses are still affordable to first home buyers with median house price is almost half that of Melbourne

Rent

• Was under the impression that the newer property would rent out faster, with less vacancy period
• And that if it were to be rented out by bedroom i.e. for $100-$130 per week resulting in difference of $60-$150 per week, it would be easier to do so with the newer property

Body Corporate Fees

• Glad you brought this up JacM, as this had never crossed my mind
• I'll be sure to double check this if I decide to purchase a new property

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

March 17, 2012 - 11:49 am

Have done a bit a research recently and it seems that the Australian Government is very generous and have implemented many schemes to help make it more affordable for Australians to own their home:

First Home Saver Account

• Government making contribution equal to 17% of your personal contribution up to a maximum amount
• Earnings from this saving account is taxed at only 15%
• There is no need to report income from this account in your tax return
• Other people such as parents can also help contribute funds into this account

First Home Owner Grants:

If you have never bought a property in the past you may be entitled to one or more of the following (1 July 2010, to 30 June 2012):

• First Home Owner Grant $7,000
• First Home Bonus $13,000 (For newly constructed homes)
• First Home Owner Regional Bonus $6,500

i.e. Buying a newly constructed home in regional Victoria might mean you could access $26,500 worth of grant

Affordable Homes Program

In South Australia, they have an affordable homes program, to help those that earn less than $72,907 p.a. earn their own home. The houses they offer are around $250,000 and include former public and community housing block and new houses in the latest developments. These houses are available to eligible households for a fixed period of 30-90 days before they are offered for sale on the open market. Have done a brief analysis and it appears that the houses they offer are +20% below the price of many similar properties in the same suburb.

Hope that helps!

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

March 16, 2012 - 10:07 am

One of the websites you might consider looking into is:

http://www.realestateinvestar.com.au

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

March 8, 2012 - 11:31 am

Very impressive

If you don't me asking…

How did you go about with your research to find such a gem?

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

March 1, 2012 - 11:47 pm

Although Australia is in a much better position than the rest of the world, I believe that we are still not immune to what is happening to the rest of the world and depressed/lower property prices.

There are three critical areas to consider:

1. Economy – How would a slowdown in other parts of the world and our rising dollar affect our economy, exports and jobs?
2. Financing – Will interest rates rise or lower? Will it be more easier or more harder to find financing?
3. Confidence – Australians may be cashed up and have the borrowing ability, but may sit on the sidelines because of fear and uncertainty

Regardless of what happens to the economy, people will always need somewhere to live. If there is a downturn in the economy we will likely see more people downsizing to more affordable homes, which could result in large declines in property prices in the upper end of the market.

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

March 1, 2012 - 11:25 pm

It depends….

Are you buying the property as a lifestyle asset or as an investment?

What are you aiming for? Capital Growth?

What are your needs? or What are your tenant's needs?

What is the demographics of the area you are investing in?

Property prices are usually directly linked to demand and supply, which are largely determined by the population residing in the area.

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

December 28, 2011 - 12:30 pm

Hi Kenneth,

I would like to open my own business within the next 5 years and require roughly $AUD2-4m with a minimum of 10% deposit to get started

Are you looking more at being a money partner or joint venture partner?

If you are looking at being a money partner:

• What kind of percentage return are you looking for?
• What kind of security do you want?
• How long would you like to invest for?

 

Feel free to send me a private message if you have any queries or would like to discuss this further

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

December 10, 2011 - 9:28 pm

The mantra of many highly successful investors is to 'Own nothing, but control everything'.

As Terry mentioned, a Discretionary Trust with Corporate Trustee is one of the best structures for not only asset protection, but also for tax minimization and estate planning

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

November 28, 2011 - 2:30 pm

Yes, you guys are right.

After doing some proper calculations, I've come to the same conclusion:

"Placing money in a Offset account wins hands down in all scenarios where interest from the loan is greater than that from interest"

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

November 27, 2011 - 11:40 am

Yes.

If the IP was negatively geared that would change the calculations and could mean that you would be better off having your money in a savings account in order to claim more from the interest associated with your IP loan.

It all depends on the inputs.

Particularly your marginal tax rate, and how much you are negative gearing by.

Generally Offset accounts work quite well with PPR loans, but with IP loans it depends on your circumstances.

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

November 27, 2011 - 6:10 am

Interest earned from your savings is taxed, whereas interest saved from your loan is not

For instance if you have $100,000 savings@6% interest p.a., and are at the marginal tax rate of 30%, then you would earn $6,000 per year, but then be taxed on $1,800 and be left with $4,200

On the other hand, if you were to place that money in the offset account @ 6.7%, you would save +$6,700 p.a. and this would not be taxed, so you would be better off by $2,500 per year (minus the costs associated with an offset account)

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

November 26, 2011 - 7:55 am

Rule of Thumb: Never invest in anything you don't understand

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

November 26, 2011 - 7:51 am

Looks like you've already answered the question yourself

Interest from PPOR is not claimable, whereas interest from IP is claimable

So it's better to funnel all excess cash into the offset account against your PPOR

Unless of course, you can do something better with the money

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

November 25, 2011 - 1:24 am

WJ Hooker has a good point

If you are going to be a passive growth investor that is just looking to buy and hold, you would want your property to appreciate faster than the amount of money you are out of pocket by

Simple calculation based on your numbers you provided above:

• $33,000 holding costs
• $13,000 rent
• $20,000 extra out of pocket expenses
• $540,000 purchase price

Means that you would need your property to appreciate by a minimum of 3.7% p.a. to break even

Also of note

• A property that is 80% below the median house price i.e. $450,000 as opposed to $540,000 has more room to the upside, especially if there are lots of buyers at that range and mortgage repayments are less than 30% of household income for the area you are investing in
• Depending on how you structure things, you might be able to claim depreciation and interest repayments, but whether this is in your best interest will depend on your goals and circumstances

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

November 12, 2011 - 7:22 am

What Lies Ahead for the Australian Residential Property Market?

Quite an interesting article by Bill Zheng, who believes Australian Residential properties will do quite well during the next 10-20years, for the following reasons:

• Money supply will increase
• Australia is more aligned with Asia (and will benefit from its growth), than with Western Countries
• Australia will become wealthier as a nation, and most of the wealth will reside in residential properties

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

October 31, 2011 - 11:52 am

As JacM mentioned, you could offer the retired couple the price they want, and negotiate terms that would allow the deal to go through i.e. asking them to leave some money in the deal (30-40k), and offering 10% interest on that money with the balance paid out in 5 years time.

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

October 31, 2011 - 12:46 am

Guess it depends what your goals are, and what you want to achieve from purchasing the property.

If you are buying it as a lifestyle asset then the numbers don't matter as much as the emotional side of things.

However if you are buying it as an investment, then numbers mean everything and due diligence mean everything.

As Michael mentioned, location plays a crucial part in terms of capital growth, and a gross yield of 6.8% seems average.

Personally I would prefer to have at least +1% return over the interest rate for the loan i.e. if interest rate is 6.7%, I would like to have a property that yields at least +7.7%, so based on $860/week , the most I would pay is $580,779 (unless there are cost effective means to increase rent or add more perceived value)

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

October 23, 2011 - 11:00 am

Tim Ryder:

• Australia is not one property market, but is made up of thousands, which are all moving in different directions or at the same speed. At given point of time, there are markets that are going backwards, markets that are flat-lining, markets that are growing moderately and some that are growing strongly. That means there are always opportunities in Australia to create wealth.
• Instead of asking "Is this a good time to buy real estate?" a better question would be "Where is it a good time to buy real estate in Australia?"

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

October 18, 2011 - 12:36 pm

The banks mainly look at two main variables:

• Loan to Value Ratio (LVR)
• Your Debt to Income Ratio

They have pre-approved the loan based on your income from your previous employment

Whether they would approve the loan now that you may not be making as much income is questionable

The only way to find out is to disclose this information to the lender

However, having said this, there is a less chance of the loan going  through if the lender does know about the changes in your circumstances, and they may need someone else like your dad to go guarantor for the loan

[kong71286Participant@kong71286Join Date: 2009Post Count: 261]

October 17, 2011 - 3:28 am

Impressive Renovations