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I choose the house for a few reasons
Firstly, as you mentioned strata fees don't exist, meaning more positive cash flow due to the lower expenses
Secondly, because you can do a lot more to improve both the cashflow and the value of the house. You have more say over renovations and you have the power to renovate the exterior as well as the garden.
You can do more with houses such as subdivide land, even knock them down to build new houses…you can't do either of those with units. You can turn a house into dual occupancy. Plus I am a strong believer in owning the LAND underneath the house. Land is a finite product, they aren't making any more land (except in Dubai where they make their own islands…..actually all the usable sand has run out there so they can't even do that anymore.)
However, on the flip side many people prefer units. They create a cheaper entry point into the market and can be lower maintenance.
I would own units IF I could own the whole block
Ryan McLean | On Property
http://onproperty.com.au
Email Me@lorddopg – That is up to you to decide. I guess monthly income would be a big indictator though. As monthly income tends to be a major goals when you are investing in positive cash flow real estate.
So far I have come up with
1. Steve McKnight and David Bradley
2. Margaret Lomas
3. Dymnpha Boholt
4. Rick OttonCome on you guys need to know some more?
Ryan McLean | On Property
http://onproperty.com.au
Email MeIf you can't manage to sell them then I would be happy to take them off your hands.
I will pay for postage.
Ryan McLean | On Property
http://onproperty.com.au
Email MeBe careful, you don't want to throw your $300k into one investment deal and then lose it all. Then you will be left with next to nothing.
Take your time, research your area and your properties and buy right. You aren't going to be able to gear (and if you can only a little bit) so find the right property with minimal potential risks.
Hope you can find some good (but not too expensive properties) that you can rent out and that have a high rental return. That way you will have more money to 'eat'.
Ryan McLean | On Property
http://onproperty.com.au
Email MeIf it is zoned commercial then I think the local council is trying to tell you something. It is probably ideal for commercial property.
Why not turn the home into an office and rent it out at such and then do something with the back yard. As an office doesn't usually need a large back yard it might be an idea to put another office in the back and rent that out for two incomes.
Go and talk to a real estate agent in your area and say you are thinking of renting it out (and thinking of using them as the rental manager) and you just want some advice on what is in demand in the area. Real estate agents are great sources of market info.
Ryan McLean | On Property
http://onproperty.com.au
Email MeWow! Lucky you!
This has put you in such a great position.
Be careful because I have seen people receive huge large sums of money that they said they were going to save and they have dwindled it away. If you don't want to buy an investment property then it might be an idea to just pay off your loan with the bank. Having it in the offset account could be a huge temptation to spend it when you want a new gadget or new clothes or a new car. If it is paid off the loan it is harder to withdraw it. Plus how awesome would it be to have your home fully paid off???
If you have survived without the money until now you there is a good chance could survive without it in the future.
If you think of it like that then it may be an idea to look at investing in property. Investing in property that generates a good cash flow could end up giving you extra 'spendable' money in your pocket each week and could set you up for life. If you have to get a small loan on the investment property then let the rent pay back to mortgage so you never have to pay it. Then when it is paid off you might even want to think about buying another investment property.
Be very careful and very wise. This heritage gift could set you up for life, so be smart with it and get good advice.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI suggest you speak to a professional. Your circumstance is more suited for the help of a mortgage broker or accountant.
You are in a great position with your income and hopefully a bit if equity in your home/land. Unfortunate that you have that bankruptcy problem to deal with.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI don’t understand what suggestions you are asking for???
You probably still need to save a deposit. Even vendor finance loans require some sort of deposit….not to sure about rent to buy options though.
Note: Vendor finance interest rates are usually much higher than the banks. Just be aware of that.
In do wish you luck, but you look like your in a tough spot. If you had some sort of deposit then you would probably be fine. Maybe save a bit of a deposit and then look at vendor financing
Ryan McLean | On Property
http://onproperty.com.au
Email MeMy advice would be to look at the area and what buyers and renters are looking for in the area. Do they want a big house? Can they afford a big house? Or does the majority of the market want a smaller more affordable house?
Giving the market exactly what it wants can pay big dividends. There are pros and cons to both your ideas, so find out which one has the best chance of making you more money.
Also depends if you want to sell straight away or not.
Idea: I don’t know if you can do this but seeing as you have paid a deposit on the land maybe you can see if you can build on it before September? That way when you finally settle you will have less time spent building the house. I don’t know if this is possible but it may be worth a look.
Ryan McLean | On Property
http://onproperty.com.au
Email MeFirstly, let me say welcome to the forum and congrats on making your first post!
In regards to the financing of the property I can't give you financial advise, because I am not a financial advisor, but I can offer you my knowledge of the subject.
Borrowing the full amount to pay out your first mortage – I doubt this is going to happen as the banks need the property for collateral. So if you fail to make payments on the loan they can take the home, sell it and fully pay off the loan. To do this they generally request an 80% loan to value ratio (otherwise you pay lender's mortgage insurance).
Borrowing 80% of the new investment property will allow you to borrow around $160,000, with you putting in a $40,000 deposit and paying for expenses (such as stamp duty). This will be nowhere near enough to pay off your first property.
Generally speaking many people finance investment using an interest only loan. You only pay back the interest on the property (not the principle too), but this lowers your costs and thus increases your available monthly cash flow. If cash is tight, then it can be hard to pay principle and interest. You can always change it to principle and interest once the rents increase and cover the extra cost.
Steps to follow:
1. See a bank, get your current home revalued and find out your borrowing capacity
2. Get preapproval for a loan (any loan up to the amount you want to spend). See either a bank or a mortage broker. A mortgage broker may help you refinance both properties so it works best for you
3. Do your numbers and see if you can afford this property and if it is a good investment for you
4. See a financial advisor to get correct financial advise
5. Make an offer
6. Go from there, solicitors are pretty easy to findRyan McLean | On Property
http://onproperty.com.au
Email MeJust to clarify.
Firstly, how many people are on the title of the current property? This will affect what you can do. You can call them by fake names if you are scared about privacy.
Secondly, how many people do you want to transfer them into? What is your end goal? Do you want to sell the properties, have one each to live in or rent out, keep all three as a joint venture, sell 2 and keep one as a joint venture. Let us what wheat your desired outcome is then we can better help you with a strategy.
Ryan McLean | On Property
http://onproperty.com.au
Email MeRick Otton does a lot of vendor financing all around Australia. I think his company is called “we buy houses”.
Just note that they will often add 2-3% on the banks interest rates and you will still have to put a deposit down. Plus they add a good deal onto the purchase price so you have to be in it for the long term.
When it comes to refinancing with the banks you can show them your regular payments over time and you can show them how much equity you have in the property. Because you will have a contract based on a certain price they will do a valuation on the property and then whatever it is worth minus whatever you owe will be your equity. Most lenders should take your equity into account so you don’t require a deposit.
Good luck! If you do successfully buy your own home with a vendor finance deal then maybe you could look at selling a home on a vendor finance deal???
Ryan McLean | On Property
http://onproperty.com.au
Email MeMe and my wife are awesome at making a kitchen and bathroom look brand new with only spending a couple of hundred dollars on paint. It is amazing what a few coats of white paint can do. If you are willing to do the work.
If you have laminate kitchen cupboards that are dated you can paint over them. You have to use a primer for the undercoat (a water based one preferably) and then put your coat over the top of that. With a primer as the undercoat you can paint most surfaces…even tiles.
Once we had a blue bathroom where the walls looked like something you would find in a Winabago shower. We painted the whole bathroom white, except the floor tiles and we did the same in the kitchen. Painted a few other rooms and the rent jumped 10% after we were done. A 10% rent increase is pretty massive and can do a lot for your cash-flow.
If you put the effort in then you can get a good return on the money spent.
Positive cash flow properties do exist in capital cities. I often find them in Sydney. If you create a dual occupancy often you can turn one income into 2 or 3 incomes with not a lot of money. The more you search and the more experience you get the easier finding positive cash flow properties becomes.
Ryan McLean | On Property
http://onproperty.com.au
Email MeThe best teacher is experience. Use your time off to search for great property deals at you can afford and that will generate you a passive income. Make offers on hundreds of properties and see where that takes you. Gain experience by talking to real estate agents and meeting up with other investors. Learn from your mistakes on smaller deals (where you won't lose as much money) before you money on to bigger deals.
Otherwise people to think about learning from would be Steve McKnight, Dymnphna Boholt, Rick Otton, Margaret Lomas. These people all preach positive cash flow in one way or another
Ryan McLean | On Property
http://onproperty.com.au
Email MeI would have to agree with angel, investing in positive cash flow property can often be the best way to go.
It seems silly to me to invest in property just to reduce your tax. Why wouldn't you prefer to invest in property in increase your non-taxable income. A positive cash flow property can deliver non-taxable income if the depreciation of the property offsets the income of the property.
You goal seems to be flawed. To simply reduce your taxable income isn't an investment strategy. Does it make sense to you to lose $120,000/year in interest repayments on your IP's just so you can save $60,000 in tax? If you negatively gear you are still going to be out of pocket and you will have to work harder just to maintain your properties.
None of this is financial advise, it is just my opinion and doesn't relate to your specific situation but it sounds like you are in an incredible position to start building passive income through investing in real estate. If you buy properties that produce you income then soon enough you guys may be able to quit your jobs and just live off the income from your properties. You can't eat negative gearing, but positively gearing can buy you food every month.
Just some food for thought. Don't think about reducing tax so much as about increasing your passive income through investing.
Ryan McLean | On Property
http://onproperty.com.au
Email MeDo you have a lot of assets that you need to protect? Are you vulnerable to a law suit? Is the property going to be positively cash flowed.
Firstly you should know you can't negatively gear a trust. So if you are after the tax write offs from a negatively geared property then you won't get them.
Secondly, if there is another offer on the property and you have to move quickly then do you really think bringing a trust structure into the deal will make it move along quickly?
Ultimately trust structures are great for protection yourself, but I shot myself in the foot early on when I tried to purchase a smaller property in a trust structure. It takes time to set up the trust (and the holding company) and then it takes even more time to get loan approval because with some lenders getting a home loan in your own name is a completely different department to getting a home loan in the name of a trust.
See what your accountant says for your specific situation as every situation is different.
Ryan McLean | On Property
http://onproperty.com.au
Email MeUnless you shopped around a lot before you settled on St George it is likely that there would be another lender who would better suit you. This is the realm for the mortgage brokers (not for a forum) and it all depends on the specifics of the transaction.
How much equity do you have in the property?
Do you pay interest only or principle and interest?
How much rental income does the property produce?Good work on buying 8 units under 1 title! I hope that they all rent out for you 52 weeks a year!
Speak to Richard (Qlds007) he is a quality mortgage broker who frankly knows way too much about all aspect of property finances. He is a nerd in this area…which is exactly what you need.
Ryan McLean | On Property
http://onproperty.com.au
Email MeI agree with some of the things that you said, but not all of them.
I prefer houses over units as the expenses are often less (you don't have to pay strata) but that is only if you are limiting in buying one property. If you have enough money you could buy a block of units or a commercial property.
I don't agree with buying new and maximising tax. It doesn't make sense only to buy for tax reasons. I buy property that makes money first, then if it has a tax benefit that is a plus, but never a sole reason for buying.
Refinancing as a matter of course can save you thousands! Not only can it save you money it can drastically increase your cash flow or it can allow you to extend yourself and buy another property and increase your income.
Choosing a good solicitor and getting your property properly inspected before purchasing is a must! So you are right on the money there. And having a good accountant who knows what they are talking about when it comes to property is a godsend!
All in all I wouldn't classify these as 'rules' to live by. There is some merit to some of the points, but I definately don't agree with all of them
Ryan McLean | On Property
http://onproperty.com.au
Email MeProperty could definately provide you with $30-$40k per year. If you invest your money wisely then you could achieve that.
The only problem you have is that your borrowing power is completely limited by the fact that you don't have a job. If you had $200k and a good job you could buy a few house in rural centres, but with 200k and no job that means you are going to have to purchase each property outright.
xdrew sounds like his friend had a pretty good idea. Take the money and invest it in property that gives you a good rental income, then you can take that rental income to the bank and hopefully they will see it and let you borrow some money.
Maybe you should look at investing in property that you can add value to by doing minor renovations. Then you might be able to achieve a higher rental yield.
The other option I see is investing in shares, but from what I know about shares you would probably have to be creative and sell options on your shares to achieve the 20% return you are after. See a financial planner if you are ever considering this.
Good luck and I really hope you can achieve it. It can be done, but you have to be a good investor and know what you are doing
Ryan McLean | On Property
http://onproperty.com.au
Email MeThe local newspaper is a great idea, you can also list your property for rent online. I believe RealEstate.com.au requires you to be a real estate agent but other sites like domain.com.au and homehound don't require you to be an agent.
If it is near housing commission don't you think that the cheaper rents might attact some dodgier tenants? In that case it might be a good idea to have a real estate agent managing the tenants in case anything goes wrong. The real estate agent's application form often scares away the dodgier people.
If you rent it out yourself it might be an idea to have a solid application process so you can find out what the people are like before you let them live in your property.
Ryan McLean | On Property
http://onproperty.com.au
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