Forum Replies Created
You are yet to factor in rental growth, which increases your return on investment.
Also if you bought a positive cash flow property then the yield would cover the expenses.You don't need 3% capital gains to cover inflation. If you buy the property then you are probably going to leverage it. Let's say you put in $20,000k and borrow $100,000k. Then you are leveraged 1/5 and you would only need 0.6% capital gains to cover inflation.
Your calculations are confusing you because you state "7% to cover the finance costs" but you haven't taken the leverage into account…that is where you are going wrong.
With $100,000 you could potentially invest in $500,000 worth of property, if they double in 10 years you make $500,000 on your money (minus expenses) not $100,000. That's what puts property so far ahead of putting money in the bank.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI don't know you, but I trust Richard's judgement and I liked your video. So I also petition for you to be elevated to MOD status.<br /
:)” title=”>:)” class=”bbcode_smiley” />Good to hear you are on your third property…very exciting
Ryan McLean | On Property
http://onproperty.com.au
Email MeIs he investing 10% or just giving you 10%?
If he is just giving you 10% and doesn't want a portion of the profits (he just wants to give it as a gift), then you can just fill out a stat dec saying that he gave you a non-refundable gift of [insert amount].
That way he has a document and there are very few legal complications when it comes to title deeds, mortgages etc.Just an idea, it may be helpful or it may not be.
Ryan McLean | On Property
http://onproperty.com.au
Email MeSometimes lenders will only lend 80% LVR because it goes through their business section
For a first deal buying in your own name is sometimes more straightforward and less complicated.Ryan McLean | On Property
http://onproperty.com.au
Email MeYou can create clauses in the contract before you sign it to say that the contract is subject to building/pest inspection or even subject to you obtaining finance. These clauses allow you to get your deposit back if you get a bad inspection.
Get your solicitor to do this for you
Ryan McLean | On Property
http://onproperty.com.au
Email MeWelcome to the forum and let me be the first to congratulate you on looking at investments this early on.
This is a very open ended question as there are hundreds of different ways you could invest. Do you want to go positive cash flow or focus on capital gains?
Do you want to buy locally or in rural areas? Do you want to renovate a property for increased profits?
Your wage should be enough to get a smallish bank loan once you move to 43k but how much deposit do you have?
Ryan McLean | On Property
http://onproperty.com.au
Email MeA discretionary trust has asset protect. I must admit though I don’t no the difference between a discretionary trust and a discretionary family trust…is there are difference?
With a discretionary trust, having a company as the trustee offers great asset protection in the case of a lawsuit. The trust may be liquidated but all your other assets aren’t then up for offer.
Ryan McLean | On Property
http://onproperty.com.au
Email MeTrue that number 8…my bad. You will not pay Capital Gains Tax on your family home. I know that, it just slipped my mind with all this talk about turning it into an investment.
Sorry about my mistake and thanks for the correction
Ryan McLean | On Property
http://onproperty.com.au
Email MeI wouldn’t sell the family home until you know what you are going to do with the surplus money. Otherwise it tends to disappear on living expenses. Remember by selling your family home you will incur Capital Gains Tax. For that reason it may be better to borrow money to buy the smaller home and then rent out the first home to cover the costs.
Be careful with your cash flow though. You want the rent to completely cover your costs of both properties if you can, or almost anyway.
Owning 2 properties instead of one can give you a lot of benefits. You will experience capital growth on 2 properties instead of one, and you will experience rental growth on your investment property. As rent goes up you will have more money coming in to pay off the loan of the 2nd property. In the end you will then have a good source of passive income to help your mum in retirement.
Or you could later go and buy a third property as an investment so you get capital growth on 3 properties and rental growth on 2 properties. I see no reason not to use this as an opportunity to build a portfolio for retirement.
This is not financial advice. Get professional advice before making a decision
Ryan McLean | On Property
http://onproperty.com.au
Email MeI am from the Sutherland Shire and I use PKF Accounting in Caringbah. They have treated me really well.
With PKF you get 2 accountants assigned to you. So if one happens to be on leave then you can contact the other accountant. This has been really helpful for me. They are located in Caringbah so not too far away. It might be worth giving them a look.
They specify mainly in business stuff but they set up a couple of companies and trusts for my property investing.
Ryan McLean | On Property
http://onproperty.com.au
Email MeA few more points:
1) A trust can take as long as 2-3 to set up and receive all the necessary paperwork (trust deeds, tax file number, ABN etc)
2) Home loans in the name of a trust usually come under ‘business financing’ with the bank so you will need to go through a different loan application then if you purchased the property in your own name
3) Some banks only allow 80% LVR on properties purchased with a trust4) Why set up a trust if you and your partner will be the trustees??? That doesn’t offer the best asset protection and it just makes life hard for you. The trustee is responsible for the trust and in many cases if the trust is sued then the trustees are liable.
Generally people set up a trust with a non trading company as the trustee and you and your partner would be directors of that company. This is not financial advice see an accountant before you go ahead and set up your trust.Ryan McLean | On Property
http://onproperty.com.au
Email MeDuckster explained it perfectly. You can claim the total costs (including depreciation) minus the total income.
If your costs are more than your income you can claim the difference on your tax. But if the costs are less than the income you have to pay tax on your earnings.Always see an accountant for professional advice. Don’t take anything written in this forum as ‘law’. We are here to help you out and give you ideas, but not financial advice.
Ryan McLean | On Property
http://onproperty.com.au
Email MeMy mother in law has a granny flat that she wants to rent out. The only problem is that it is too close to the fence line and thus presents a fire hazard (according to the council). It was built years ago before these restrictions came in.
She is a law abiding citizen and thus doesn’t want to rent it out because she wants to obey the law. So if you are going to build one, then make sure you take into account how far away it is from the fence so that you can legally rent it out without having the council up your ass.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI/O loans give you more cashflow early on as you don’t have to pay off the principle too. It can mean the difference between a property being positively cash flowed and negatively cash flowed.
I/O loans allow you to purchase more property quicker if the only thing holding you back is the monthly cash flow you can afford.If someone else is paying for the interest (the renters in a CF+ property) then there is not really a need to pay it off. By paying it off you are only saving 7-8% on your money. Instead you can take that money, invest in more property and get much better returns
Ryan McLean | On Property
http://onproperty.com.au
Email MeThere are many advantages to interest rates rising. Rents go up (and as for your question when should you raise the rent…I would say as soon as possible to cover your costs), prices come down…meaning if you can afford it then it can be a good time to buy.
The interest rates were at historic lows because of the financial crisis. They were never meant to stay this low and thus will rise to normal levels (8-9%) within the next 2 years. So be prepared for that. Obviously this is just my opinion and there are many others out there.
The property market seems to be slowing, so it is smarter to buy for rental income and long term growth as it is unlikely you will experience much short term growth with interest rates rising.
Ryan McLean | On Property
http://onproperty.com.au
Email MeWhen it comes to property the more properties you have the more growth you are going to receive. If any of your properties are returning a positive cash flow then why not keep them and use the cash flow to help pay off your dream PPOR.
You need to be smart about this. Yes you want a dream home, but you also want to be able to generate a passive income so that you don’t have to work as much and you are more secure.
Keeping all three properties ensures both capital growth and rental growth. But you have to be careful of rising interest rates.
Basically the most important thing is whether you want the dream home and you want to start building your portfolio all over again, or if you want the best of both worlds. If you want the best of both worlds then keep your portfolio, maybe sell one property, and buy your dream home if you can afford it.
Friends of mine are buying their dream home but splitting it in 2 and renting out half of it until they can afford the whole thing. That way they own their dream home, but they can afford it too. Good luck
Ryan McLean | On Property
http://onproperty.com.au
Email MeWith smaller money I tend to do business ventures. Mainly online stuff, sometimes I will invest the money to buy a product cheap from overseas and sell it on ebay. It is not really investing as it is a fair bit of work, but it is a good way to build up capital.
You are right, putting money in the bank seems like such a waste.
Putting money in an offset account might save you more money than a savings account would make you.Ryan McLean | On Property
http://onproperty.com.au
Email MeNo I am NOT saying you shouldn’t be paying off your land loan.
Just trying to get the concept over to you that money is a liability and property is an asset. Some people focus so much on paying off debt that they never collect any assets. In the end they might end up with no debt, but they have no assets making them rich. For me, I like to spend my money on property that pays itself off (including the debt) than just spend my money paying off the debt myself.
That is all I was trying to say. Just trying to get a concept across, not trying to give individual advice. Sorry if I confused you.
When it comes to not paying off debt I wouldn’t speak to me. I am not a broker or financial advisor.
Ryan McLean | On Property
http://onproperty.com.au
Email MeWell welcome pinkboy. I also use this forum as an outlet. Even though most of my friends are finance minded most of them don’t want to talk about property or aren’t really doing anything in property. It is nice to find some like minded people I can chat to.
I also love seeing all the questions and problems people have. Things I didn’t even think about. Helps me learn and keeps me sharp.Ryan McLean | On Property
http://onproperty.com.au
Email MeNumber 8 is right. You have already done the hard work. You are in the game and you have started generating passive income. There is little sense in going backwards. You don’t want the join those putting all their hopes in winning the lotto.
Ryan McLean | On Property
http://onproperty.com.au
Email Me
:)” title=”>:)” class=”bbcode_smiley” />
