I have always been risk adverse sort of guy & dislike debts of any description. I am employed, no debts, own a house & have savings. I am starting to think about investing in properties. I have some basic understanding of negative gearing & would like to spend some time reading about property investing. Can anyone recommend a good book?
Hi dreamerman.
Welcome! Firstly property debt is good debt, because property appreciates
You want to gear yourself into that line of thinking for sure.Some suggested reading is discussed here;
https://www.propertyinvesting.com/forums/property-investing/help-needed/4330780
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Yes, I understand that. Borrow to invest in property is ok with me. Thanks for the link, reading it now. Cheers
No worries
Check back in with us if you'd like more ideas on titles Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
PS if you surf through loads of the threads on this website, you will notice one piece of advice keeps getting repeated. Use Interest Only loans with offset accounts. Just load all your cash into the offset rather than locking it in the home loan account. Then, when you want to get another investment property, you have cash readily available in the offset for your deposit
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
JacM, thanks. So that I am clear, Interest Only loan is where only interest is being serviced & no repayments towards the principal amount. Offset account is where excess cash can be credited into the loan account to reduce interest costs but not towards permanent reduction of principal. These excess cash can be taken out again for other purposes like rolling into another investment property.
Correct.
Obviously at some point, the bank expects you to pay them back for the original price of the house if you wish to keep it (otherwise you'd have to sell it to pay them back). So if you never intended to sell the property, and let's say the property originally cost $200k, then you'd eventually want $200k in the offset, so you could give it to the bank and close matters off.
The general strategy these days seems to be to get a few properties, all interest only (as many as you can comfortably service without getting into strife if the interest rates go up a bit, or if you have no tenant for a while). Let capital growth do it's thing, and at some point, sell a couple of properties to entirely pay out the loans on those you want to keep. I’ve created a bit of an example below to give you a vague idea what people are up to. Please realise the numbers are approximate. It is a very very basic example just to help get your head around why people are doing the interest only loan thing.
So let’s say you buy the following properties:
House A : price $120,000
House B: price $150,000
House C: price $145,000
House price $300,000After 10 years, you'd think they'd all double in value. So resale prices would look like this:
House A : sellable for $240,000
House B : sellable for $300,000
House C : sellable for $290,000
House D : sellable for $600,000Right. So at the 10 year mark, your owings to the bank are a total of $715,000 (which is the total of the prices you purchased the properties for).
Let's say you choose to sell Houses C and D.
Here's how it would look, roughly:
House C you sell for $290k. The real estate agent has to be paid say, 3% commission, which is $8,700. Let's say your solicitor costs $1,000. You've held the property for more than 12 months, so you get a capital gains tax (CGT) discount of 50%. I believe the tax is then charged on the profit "above inflation". I used this link to get a VERY BASIC IDEA OF the CGT payable if you were on an income of say $100k : http://www.yourmortgage.com.au/calculators/capital_gains_tax/
So we have:
House C
Sale price; $290k
Minus agent commission of $8,700
Minus solicitor fee of $1,000
Minus what you owe the bank of $145,000 (original price of property)
Minus capital gains tax of $26,505
Leaves you with clear profit of $108,795
House D
Sale price; $600,000
Minus agent commission of $18,000
Minus solicitor fee of $1,000
Minus what you owe the bank of $300,000
Minus capital gains tax of $57,230
Leaves you with a clear profit of $223,770
So by selling Houses C and D, you have made a profit of $108,795 + $223,770 = $332,565
To completely pay the bank back for houses A and B, you only need $120k + $150k = $270k. Conveniently, the profits you made from selling Houses C and D after 10 years of ownership means that you can do this, with a little cash to spare. So you pay the bank bank and from that point forward, the rental return on Houses A and B gives you an income towards a more comfortable retirement.
Does this help?Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
ps this is a good read https://www.propertyinvesting.com/forums/getting-technical/finance/4325393
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
JacM, thanks. Your example really helps. I actually know a friend who did the very same thing. He now owns (fully paid up) 3 houses in the ‘burbs. Planning to head to Boarders & pick up a good book. I don’t have much faith in shares so properties will have to do for me.
Awesome matie – very exciting ! May I suggest that you carry a little notepad around with you everywhere you take your book. When you read a bit of info that you hadn't known before, make a note of it in your little summary notepad. If you don't do this, after a couple of books, you forget some of the nuggets you've learned
Also get a loyalty card for your chosen bookstore
You'd be surprised how many books you buy once you get motivated about investing!Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi dreamerman
Welcome to the forum and I hope you enjoy your time with us.
Structuring your loans correctly to safegaurd your assets is probably something you wont read in a typical book but can certainly recommend any of Steve Mcknights books for education.
Again hard to make structured suggestions without further information.
By the way not every deal is negatively geared, positive and neutral geared (especially after non cash deductions) deals are fairly common so no reason to be be loosing cash each month if you dont have to.
Just be cautious there is many a shark out there happy to take your money off you.
Richard Taylor | Australia's leading private lender
Multiple Property Services – simply copying and pasting the same marketing pitch into threads on this forum is not helping to educate people. Users of the forum have no beef at all with commercial operators pitching in their 10c worth, as long as it is informative and relevant to the original question at hand. Take a look at the way Richard (as above) writes, and also Terry. They make no secret of the fact they are in the industry with a service to sell, however they actually answer the question the original poster has asked.
I hope you don't take offence to my comment, but people are going to get sick of you pretty quick and ignore you altogether if this is the way you choose to participate on the forum.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
JacM, thanks for voicing out.
Tried to talk to my ultra-conservative wife about investing & it didn’t go well. She feels insecure about having cash in places other than in bank deposits earning interest. Will try again in a few days. Wish me luck.
Hehehe I once attended a seminar that advised against discussing property investment aspirations with friends and family.
Perhaps try mentioning to your wife things like this:
Property goes up in value approx 10% a year. Your salary does not. So the market is rapidly pricing you out. Get on the boat quick.
Look at the ageing population. Do you genuinely believe there will be a pension for us when our generation is of retirement age? Doubtful. Either way, I'm assuming there will not be, and looking after myself.
Look at what happened to superfunds with the arrival of the GFC. Not cool for people who are already retired and having to draw on the funds. They don't have the luxury of waiting for the market to recover.
Basically, in my opinion, you can't afford NOT to buy property. You don't have to buy mansions. Just affordable stuff that you can find tenants for
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Spot on JacM. You're right, people simply cannot afford NOT to take control of their finances and start investing.
When it comes to retirement, have a look at a few interesting tidbits of information.
This is why we're screwed if we sit on our hands.
in 1936, 17 tax payers in australia looked after 1 retiree with their taxes etc.
in 2020 – it is expected that 4 tax payers are expected to look after 1 retiree. Think they'll be able to do it?
More than 70% of australians retire at age 65 on an average income of $300 GROSS per week or less.
What sort of lifestyle does that give you?
Most people that have done nothing to invest in assets wind up living a very poor lifestyle when it comes time to retire. Struggle struggle struggle. And as more people retire, leaving the strain on the next generation to look after them, it is only going to get worse and worse.
Put it into perspective, how much money do you think you'll have in your super when you retire? 100k? 200k?
How long were you planning on living? 20 years? That means you'll only get 10 grand a year to survive on. What if you spend more? Pretty soon, you'll either have to go back to work just to survive, or starve. What if your body starts falling apart on you? What if you can't work?
The time to act is now. The time to do something is now. Standing still in fear of making a mistake is not going to lower the risk for you, it's simply going to guarantee it.
Benjamin Csikos wrote:More than 70% of australians retire at age 65 on an average income of $300 GROSS per week or less.That is scary stuff. When you consider that it costs $10 to buy a steak in the supermarket, it's pretty obvious that the food bill per person per week easily clocks in at $100 or more.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
and then there's rent!
Essentially I guess the expectation for retired people is this… sell your house that you have worked most of your life to pay off, and then rent and live off the money you have made from it.
Not my cuppa tea. I want to leave a legacy behind for my children, not blow their inheritance because I was too scared or lazy to 'have a go' earlier in life.
No regrets.
When I am retired, I don't particular fancy having to answer to a landlord. Or being asked to move from my little comfort zone of home because the landlord wants to do something else with the property. No thankyou. Pretty sure I will be set in my ways and want to feel settled in my home.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
JacM, I share your views but there’s only so much I can do re convincing my wife. I have more than $100k sitting in the bank earning enough interest just to keep up with inflation. $500k equity in my home. No other debts except credit cards which I promptly pay off each month. My affairs are very simple.
You want to gear yourself into that line of thinking for sure.
Check back in with us if you'd like more ideas on titles 
price $300,000
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