Hey everyone! I'm 21 with about 60k in savings keen to get into PI but not sure whether I should/can at this stage. I study business/law at uni and have 2 yrs to go and live with my dad rent free. I have always been very disciplined when it comes to money and have very few expenses. I have a steady casual job which I do for fun (army reserves) which earns me about 5k/year tax free but most of my income comes through other means such as ebay. I'm very entrepreneurial and always find ways to earn my money – all my savings I have earnt myself over the last few years through such means.
However this income isn't steady, it's hard to say how much I actually earn and I'm unable to provide any tax returns. Given my circumstances and age would I qualify for a low-doc loan or at least a no-doc? With a deposit of 50k I'm hoping to get a small unit or at least a studio apartment around 200-300k in the Hornsby shire in Sydney (my local area) or the city. I figure now is a good time to buy and since Im living rent free with few expenses, my money would be better off in property than in the bank. So if I can find a property that is as close to neutrally geared as possible then I could benefit from the experience and capital gains. My dad would be able to act as a guarantor should I be unable to service the loan. Opinions? Thoughts? Should I opt for a P&I or IO loan?
Alternatively, should I wait until I get more of a deposit or am on a salary or look further out at cheaper properties? (although im a bit hesitant to buy away from where I live or in an unfamiliar area)
I look forward to your responses!
-AdamFinding a neutrally geared property will be a challenge. I assume you do not pay any tax at the moment?
With no history of income your only hope for "normal" finance is a No Doc or maybe Lo Doc loan. You can also access private funds and loans from cash partners, but there are dangers to look out for for the inexperienced.
But here's the catch; if you have not been putting in tax returns and declaring income for that casual income, you may come up on the A.T.O radar for a nice audit. Even now, if your savings are in an institution of some sort, they may be wondering how you saved $60k with no income to show for it.
Also, if you have no taxable income and haven't paid any tax, then most of the tax deductions you can use from an I.P will not be allowed. You are sort of shooting yourself in the foot by existing the way you are right now.
You don't necessarily need to be on a salary to start your investing career, you can still do what you do now, but It is time to come clean and start declaring taxable income from the ebay etc funds if you are going to continue that way. You can then use your tax deductions from your I.P to reduce your tax payable at the end of the year. You may still have a tax bill, but it would be small. Everyone has to pay tax; get used to it. You just try to reduce it through various means legally.
You can either pay it as you make your income by way of weekly/monthly/quarterly instalments, or just wait until the end of the year and put in a tax return with your accountant and they will work out the final result and tell you how much you owe.
A good accountant is needed to set you up properly so you can maximise your position and not get into trouble with the A.T.O.
i have not paid tax the last couple of financial years because I have had a lot of deductions that have reduced my income below the threshold (mainly large amounts of stock that is yet to be sold). Everything has been recorded. I paid tax a few years ago.
I dont see a Nodoc loan being a problem but only issue would be the security for my mind.
How small is the unit. If it is a studio and less than say 50 square metres i think we might have an issue.
Richard Taylor | Australia's leading private lender
Richard is right about small units being a worry from most lenders, but both the NAB and Comm Bank have recently loaned on 38sqm one bedroom units in Woodridge Qld. This area is having another surge as Im sure Richard will confirm so Im just wondering if hornsby area is currently getting cap gains or is still flat like other parts of sydney.
As you want to invest, why not look at other options, other states and even 2 or three smaller properties in differing locations.
Just a thought.
DD
Hey guys,yes hornsby saw capital growth of 9% last year and alot of it is new units in there these days,
There are those little one room studio apartments (older build near the station st,next to rta)that you can pick up but i would personally look elsewhere to that block.Weaponx yr definately on the right track and you wont have a problem getting a loan ,but maybe consider a little house
or a commercial shop in a busy little area evenLuke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
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