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Good to see Pete has weighed back in, and is taking some action and has benefitted from the considerable advice proffered.
I'm 35, and felt just the same a year or 2 out of Uni. I know myself, I was used to getting good things pretty easily: a Uni degree, overseas travel: left Uni with credit card debt ad Hecs debt.
I've invested in real estate, always borrowing to my limit, often using credit cards to complete steps, gearing very heavily and carrying lots of debt (more than anyone I know). Over the next year I'm hoping it will pay off as I complete a rural subdivision. I'm hoping to pay off my home and purchase another, larger rural block.
I add my story not to say "look how easy it is" but rather to put these points forward:
1. I looked and looked for something I could afford: Eventually bought a 8acre bush block in a rural subdivision area (1 acre blocks) for 50k: less than the 1 acre blocks. I found it by walking 10k from town out to the subdivision: had I driven I would have missed it because it was so overgrowth with weeds. I've yet to see a cheaper block in the region I live in (Cairns). It really was an ugly duckling. I have worked incredibly hard on the block to improve it over the last 5 years.2. I've had to curtail my lifestyle a fair bit, but I must admit I'm hopeless at tightening my belt and continually struggle with credit card debt etc: I just haven't developed a frugal attitude/lifestyle: I guess like Pete I think lifes for living. I really believe we aren't as tough as previous generations: I know I've had an easy life and glad of it. Having said that, often the experiences, the travel, the education, the technology pay off to improve our sophistication as workers/investors/creative thinkers. Being frugal is really great, but sometimes, in the world we live in, its not the best way: it may be part of your strategy but its not a complete strategy, it has to be balanced with proactive actions like hunting for deals or using leverage.
3. In my situation, I've only kept moving forward rather than going broke through steady price growth in my region. I had some tough times initially where I would spend money on construction on a vacant block, to find the improved block wasn't worth what I spent on it. I did most of the work myself on a budget, and perhaps I would have been better (or worse) off employing a builder. I have to be realistic: its only price inflation of the real estate I'd bought that kept me bouyant (because I'd started with no savings and $35k income, and debt). In a declining market, I would have had to abort, or even gone bankrupt. looking back, I see myself as impatient, greedy and reckless. It looks like it should pay off.
Reading Petes original Post, its clear to me now how I wanted things now! I could see (from media and sites like this) that a boom was coming and I needed to get on the train or miss out. I was impatient and greedy, but with good reason. I've now got tonnes more debt, but two great properties and an exit strategy which should leave me in a good position. I got close enough to bankruptcy to realise in slightly different circumstances how easy it is to fail when the boom-tide changes unexpectedly
I know a lot of my generation wants the nice house in the nice suburb straight out of Uni. Clearly, it wouldn't kill them to save for a few years, do it tough for a while, go without etc. They are hard things to hear, with the impatience and impetuousness of youth: I'm sure human nature hasn't changed.
My advice: keep looking for the deal or the ethical method that will build your wealth. Don't be afraid to take baby steps: as people have said, its all good education. I spent 6 months solidly researching and hunting before I bought my first place, and years since learning more. There are opportunities out there: they take time and money, but you have both, and plenty more to come.
Good luck if you do decide to push the envelope and improve your circumstances. The anger you feel is felt by many: it sounds like you will be one of those who uses it to change their situation rather than let it defeat them.
We need that sort of discomfort to motivate us to improve our lot.
I think you dramatically oversimplify the Cairns labour market.
While there are low income earners in Cairns: many working in hospitality at award or even below award rates (Offset by being on holidays, and often enjoying using backpacker accomodation or low rent inner city sharehouses), they are not the mainstream employment: Cairns wages might not compare to Sydney or Melbourne in some areas (eg finance and big business), but others would exceed southern wages (Eg some trades.)
Not to say there aren't other low income earners, who like those Australia-wide, feel the squeeze with rising house prices and gentrification.
But most workers in the city and region are on "normal" salaries: remember police officers, teachers, nurses etc salaries are pretty standard statewide. Other industries and the private sector tend to keep pace with these. These people find Cairns somewhat expensive compared to a similar regional city but similar/cheaper than capital cities. The find the excellent lifestyle more than justifies living here and paying the cost of housing.
Add to this many baby boomers choosing to sell their Sydney (or Brisbane) homes and retire up North for the warmer weather (and increasingly because we are allowed to use hoses LOL).Clearly, the Cairns Market is hot (and has a history of booms/busts) but barring major threats to tourism (which are possible) there is no guarantee of a bust as you suggest. Migration and a strong economy continue to maintain pretty steady market growth (single figures for the last couple of years) and its forecast to continue.
Look on the bright side
Dear carpe diem,
That is the basic thrust of what I would personally consider doing in you position, but you need to educate yourself about the options and the risks. Pour a few dozen hours into reading through this forum and also somersoft.com/forums. This will add to your knowledge of handling the properties you have, and learn other peoples ideas of where to invest now. The risk with shares is that the share market slows down or crashes after you invest, leaving you with more debts and repayments than you have presently, without the planned on return! Not good. Unfortunately, we all lack the crystal ball required to see if/when that will occur: many seem to think we have a year or so of good performance before that is likely, but wild cards like bird flu or terrorism could mean all bets are off! Selling is an option, but it seems to me that you have plenty of equity, which basically means plenty of time to plan that. I would think you can likely hold on till prices start increasing again. Certainly you can access most of the equity by refinancing, and can still sell later if you want. Once you sell, you pay various costs (incl agents fees + taxes) and burn your bridges on that particular property. If resources keep performing for a year or more and you don’t get burned, you can create some income, possibly reduce your debt, and learn more along the way to assist in your future investment. Chat to a good mortgage broker about the best way to borrow. While you may be close to being able to live off equity, I personally don’t like the installment bond approach: seems like unnecessary jiggery-pokery, surely a lodoc or nodoc will be available. I’d be looking instead for an investment offering genuine cashflow such as managed funds or resources shares, but make your own risk assessment (and note I have never done this myself!)
Good luck on your journey[biggrin]Look on the bright side
Greetings
Sorry to hear of your illness, but glad you have such a great asset position to make life easier.
Personally, all my investments are in property, but if I had a large amount of equity and wanted cashflow in the current economic climate I would personally consider investigating
1) Maximising your available cash by refinancing all your loans at 80% equity.
2) Select a range of investment options with good growth and cashflow returns: currently these might include shares in the form of managed funds, resources etc: seek qualified financial advice on this front. I’d be paying someone by the hour to help me choose the best plan (rather than paying eg 1% managment costs) and also take into account the advice on this forum and your own feelings.
Note once you are buying shares or similar there is a risk of loss of capital, so take this into account in your risk profile. Perhaps there are bonds or similar with a lower risk but still a good return: if you are borrowing for this you may be able to count this as income to help get the interest rate down.
3) If you don’t mind this level of personal involvement, perhaps commercial property if you can find something which you are comfortable with.These are all just ideas for you to check out, and I’m sure others in this forum can add to or contradict these!
Keep smiling though,[biggrin] you are in a good financial position: plenty of aspiring property investors on this forum would love to hold your asset position!
[smiling]Look on the bright side
Greetings,
I have lived in Cairns for five years and own two properties here. By most accounts Cairns is one of the most promising cities on the East coast for property investment, with a large growth predicted for the next 20 years. It is certainly a great place to live, work and play, if you can handle the heat and wet season. A lot of locals steer a bit clear of the Northern beaches, but this is the favoured area for tourists and out of town investors.
I will cover the negatives first. The best beaches are a fair way north of the city, which means longer commutes (eg 15-25 minutes) into town. Believe it or not that is considered a long way here! Also you can’t swim in the ocean for 1/2 the year due to stingers in the water (unless you swim in the nets) : The water in summer is so warm it sort of defeats the purpose to a degree, anyway. Many of the beaches, esp beachfront have serious problems with inundation in heavy weather, high tides etc. Some beaches (esp those close to the city eg: machans, , Holloways, Yorkeys, even Trinity) can have access cut during a cyclone or very heavy rain with a high tide).
One downside generally with Cairns is it is a fairly small economy dependant on tourism: it took a hiding during Ansett and SARS a few years ago. While other industries are growing, it lacks the stability of Brisbane or even Townsville for example.
Having said that, the tourists want to come for a reason: its a great spot
There have been some very nice and very expensive units and townhouses built recently. It always strikes me that they are so retail. Personally, if I had 1.5 million, I would want to own a block of land with my dream house, not an apartment in a big complex with 30 other units sharing your beach frontage! And you could do this, but developers have already grabbed a lot of them and cut them up.
Having said that, Beach frontage is likely a stupid idea in Cairns, between us being overdue for some big cyclones and global warming, you might not own much in 20-50 years!I think a townhouse would be a good idea rather than a unit, to get around the unit oversupply issue.
Be aware that construction costs are high here due to cyclone proof requirements and material and labour costs and scarcity.
In terms of “average cost” it depends completely on build quality and location. Cheap near the beach would be outrageously expensive anywhere else. New, prestige, beachfront could cost well over a million, whereas an older 3br townhouse back from the beach would start in low to mid 200s. I reckon you’d be better spending a bit more and getting a house on a decent block for development down the track, but thats me.[evo]You need to talk to an accountant to find out how much you will actually get from a sale once you calculate agents fees, advertising, taxes etc. There is a lot to be said for long term real estate investment, because whenever you buy and sell you lose a fair amount of equity. However, I would caution against holding in a threesome without written rules as to how you will decide what to do with the property in the future. What if you want to sell urgently and they tell you no, just to buy you out at a cheap price.
If you have the resources, why not buy the others out: the rent would pay most of your mortgage.
Go and see a mortgage broker and see what you can borrow. It really depends on your personal situation.
[biggrin]Look on the bright side
Thanks, much as I expected. In that case I will definitely sell first to ease serviceability, and that should give me access to>20% deposit and settlement costs. Still will likely be exceeding my serviceability though, unless banks will consider rental income from completed project as well. I’m guessing there aren’t lo doc construction loans.
“If you look long enough into the void the void begins to look back through you.” Nietzsche
There seem to be several large upcoming developments especially prestige land releases coming up. Locals seem to really like Mission Beach, and I guess it has potential to be “the next Port Douglas” (read next Noosa for SEQ), which is fine, but to me it lacks proximity to an international airport, and prices are already very high. If interest stays strong in resort style coastal living, it will probably do well, but I’d be concerned that a mild downturn in RE and tourism could leave a bit of a glut of overpriced properties.
I meant to say in the Cairns posting to, that towns like these which are very tourism dependant can be hit hard in the event of a tourism downturn. I live in Cairns, and the local economy really suffered for a year or two at the time of the Ansett collapse, terrorism fears, which all followed the GST impact. I think this is a great place to invest, but it does have this risk factor which would be less great in a larger, diversified economy like a capital city. Eg. a birdflu pandemic or recession would both hit tourism very hard.
Having said this, many people find once they’ve lived in FNQ they’d never go back to a big city: the lifestyle is great, and more people realise it every year, so the economy is steadily growing and diversifying. Interestingly, the building industry about as big as tourism up here at presentYou would likely find some positively geared property in commercial RE. Prices have largely plateaued in Cairns, with steady single figure growth likely in stronger areas, but a possible upcoming glut of units likely to lead to discounting down the track. Rents have been trending upward, but once again, a unit glut could slow that down.
Have to agree though, that Cairns is a great spot to have to come and check out your investment property. If you can access finance without needing equity from banks, then small (40-55sqm) 1 br units at the budget range are available for around 100k which rent for up to $150 weekly gross: these must look pretty attractive to someone from down south. Agents are mostly really helpful and friendly, especially now things have slowed down a bit.“If you look long enough into the void the void begins to look back through you.” Nietzsche
I would say you have definitely missed the boat, but IO could be wrong…..
Prices have really skyrocketed: especially anything near the beach. Still, as a builder that might be ideal.. lots of people wanting to add value to their new, suddenly very expensive beachfront blocks and wanting homes to match. Wouldn’t buy there myself, just can’t stand the thought of paying 5 times what was paid a couple of years ago. Cooktown would really need builders, and it has the bitumen road due to go in during the next year or so. Cairns would be good too, but already lots here. One thing to remember about moving up here is the heat and rain. I am building a house at present, and it really starts to get hot at about 11.00 or so: can hardly touch the steel at lunchtime. Come December, it will start raining and might rain 3 days out of 4 for 3-5 months: can really slow you down (still I guess you are used to rain in melbourne: at least our rain is warm[biggrin])
You wouldn’t regret the move lifestyle wise though![]“If you look long enough into the void the void begins to look back through you.” Nietzsche
My Wifes Maiden name was “Dear”, and she received no end of jokes, usually relating to deer, so was glad to change. Her father was a cruise ship officer, and he worked with two other officers on one ship, named “Love” and “Darling”. Naturally their PA announcements caused considerable mirth amongst the crew and passengers.
“Darling, Love here, would you come up to the bridge please”
“Yes Love, right away.”
“Coffee Darling?”
“Yes, thanks Dear”
True story.
I’d love to be able to say there was a funny ending, like “my surname is Mucus”, but it is more prosaic than that!
He He.
PS this is a great forum. Redwing has posted some awesome ones! I laughed and laughed. Clearly he doesn’t work for a living to have time to do this……?“If you look long enough into the void the void begins to look back through you.” Nietzsche
One thought: you can keep this as your PPOR for 6 years after moving out if you wish: ideal if you want to sell it after a few years without paying CGT. Can’t neg gear it as well though. If you move back in within 6 years, it stays as your PPOG, and the 6 years starts again when you move out again.
“If you look long enough into the void the void begins to look back through you.” Nietzsche
Could you use your husbands income to service the loan, but use the properties purchased as security? I might be missing something but I wouldn’t expect a problem with this unless he is already heavily exposed.
If you want to make the most of cash, perhaps a reno or a joint venture would allow you to build up more equity.
Wish I had 250k cash to play with!!!!!!“If you look long enough into the void the void begins to look back through you.” Nietzsche
The weather is gorgeous, 25-28 during the day, mostly blue skies with occasional showers to keep things green. Most nights get down to 20degrees, rarely below 15.
I meant to take the trip once you own the property!
Just searching Cairns at realestate.com.au turned up plenty of units in your price range, and also an ad for a cashflow positive 4br house for $270k
I can’t comment on the details but it may be worth a look for some who are always asking where can we get cashflow positive property (I suspect this is after depreciation etc).
But at present in Cairns there is high demand and thus high rents for “executive” type 3-4 br 2 bth homes.My point with SARS etc is not that SARS will necessarily occur again, but just that an economy dependant on one industry is vulnerable. No one saw SARS or bali nicghtclub bombing coming, but it would have decimated local tourist industries.
Dallas
“If you look long enough into the void the void begins to look back through you.” Nietzsche
I have a couple of similar queries…
1. If you live in a house and claim it as your PPOR, then move out for six years, can you claim deductions such as interest and rates etc. or do you forgo these to maintain your CGT exemption (the latter I would expect)2. I recently bought a house with my fiance. My name is on the title and mortgage, but it is understood we have 50% share in equity and ongoing costs. I charge her market value rent over the whole house (which approximately equals mortgage etc costs). I live at both properties at times. Can I claim deductions on this property?
(I live with my fiance to be close to work, and spend a lot of time at my previous PPOR – which I wish to maintain as my PPOR, as I may sell it shortly, or we may return there to live later).
We don’t intend to sell the shared house any time soon.Sorry if this sounds a bit confused[blush2]
Thanks
Dallas“If you look long enough into the void the void begins to look back through you.” Nietzsche
Hi Dev,
I live in Cairns and consider it a fair place for investment. prices seem stable: possibly growing at about CPI. You would not get much for 150k: maybe a older small house 15 min from CBD or older 1-2br unit within 5min of CBD. Returns are mostly well and truly negative.
HOWEVER, compared to prices, values and returns in larger centres, Cairns would compare favourably. Also not a bad place for a tax deductable property inspection trip!
Cairns is relatively reliant on tourism, and thus vulnerable to threats to this industry (eg SARS) but its economic base is broadening, with increasing education and industry.
My impression is that darwin is more expensive, but also has a stronger economy.
One thing to remember about the north is construction and maintainance costs are higher than the south, due to cyclones, high rainfall, heat etc:On balance, I would recommend Cairns for property investment.
Dallas“If you look long enough into the void the void begins to look back through you.” Nietzsche
To help you figure out costs it can be very helpful to use a calculator which will tell you how much you can borrow given your income, the monthly repayments, and other costs such as stamp duty. A mortgage broker can do this for you but I find it most helpful to do it myself first to have a play with the numbers and see what works best without any pressure to make a decision etc: I find the calculator at westpac.com.au (under calculator, home loans) great for this. Westpac appears about as generous as anyone in terms of borrowing capacity: be careful, they may lend you more than you can afford. Do a budget and see how much you can afford.
But most of all, when deciding whether to buy, look at the property and context. Is it a good buy? Does it suit your investment strategy? Are there prospects for growth, improvement or development? If there is profit to be made immediately or medium term you might go for it, but I would not buy an IP just for the sake of it. It really depends where you are. Much of SE Australia is in stagnation or decline, and you might be better saving more deposit (thus reducing borrowing costs such as mortgage insurance), and possibly find yourself in a position to exploit people who need to sell in a hurry at discounted prices later.“If you look long enough into the void the void begins to look back through you.” Nietzsche
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