Hello all. I'd be grateful of any pointers as I'm not familiar with the market or intricacies of the tax/legal system here.
My wife and I are in our early 30s. We've no kids and both work in 100k jobs, security of those unknown really, but look good now. We have about 1/2m in cash, no property, no debts and no real assets to speak of save about 30k in vehicles.
We live and work in Sydney and rent our home. Landlord is something of a comedian and is looking for a 12% increase in rent come the end of our first 6 months 'in line with market conditions', haha.
This could be the kick I need to get back into property, but I'm very wary we're not even near the bottom of the market yet. What would you do?
Cheers,
AlexHi 4lex,
I am no expert, but as far as i have been reading and researching (for the last 3years) i have come to one conclusion- and that is the sooner you buy the better. It is true that at the moment house prices have become a little crazy especially in places such as Liverpool/ Green Valley in wetern Sydney. But you have alot of cash that you can use.
If i were in your position i would look for a property at the bottom of the market, a fibre house maybe that i could renovate and live in for the time being. You would get the first home owner grant and you wouldnt be paying sum1 elses mortgage. It could become and investment proeprty in the future for you and you could…
Renovate and sell it
Subdivide and build
or demolish and build a new housethere are many things possible and you are in a great financial position, so why wait?
Again its only things i would do… as i said i am no expert.
Lina
Alex
Sorry for all the spelling mistakes,
i was kind of rushing.
Lina
Thanks for that Lina, and I didn't even spot the typos until you pointed them out.
I think the FHOG is an important part of our strategy, and reno is where we made our existing capital so no strangers to it, though that was overseas. I'm still a bit confused about the best way forward though – the home we will ultimately live in will cost more than 600k in todays market, so in order to take full advantage of the fhog we'd have to buy and live in a sub500k property for six months I believe?
Be that as it may, the real investment strategy will lie elsewhere – but I just can't find anything that truly is positively geared, once all the costs are counted – though maybe I'm missing something in my spreadsheet – can anyone recommend a really good property focussed tax accountant who offers advice by the hour?
Cheers,
AlexHi 4lex,
Depending on the financial goals you are aiming to achieve and your appetite for risk, there a number of ways you can approach your property investment strategy. You can earn a financial return from IP's from either rental income or capital gain. It is the latter approach that the tax system is legislated to benefit the most from.
While acquiring and holding a positvely geared property will earn you a financial return from day one, this investment approach typically involves owning properties that don't appreciate in value as quickly as "more" negatively geared (or possibly cash-flow neutral IP's). I could have look at your spreadsheet to check if your assumptions are reasonable or if you missed any components in your financial model. Perhaps your model hasn't factored in depreciation as a tax deduction yet.
Based on the introduction you have provided, I can see you can benefit from the 6 year absence CGT main residence exemption for starters. This exemption is a pretty good one to use for your first property. But the key thing is to make sure you resist the temptation to rent it out straight away……you must establish it as your main residence (to be eligible for the FHOG, you must live in it for 6 months anyway). After the living in it for 6-12 months, you may move out and rent the place out. You can rent it out for up to 6 years and if sold within 6 years, any capital gain will be CGT free (provided you do not own another property in Aust).
I've written an article on this topic which I can PDF to you if you wish. It contains a numerical example that you can follow.
Hi Alex,
Have you ever considered being a Private Money Lender providing the financial backing for an experience property investor … if not you should check it out. Follow the link below … it is a 3 minute video clip on Youtube that give you a quick general idea of how it operates. It is a bit cheesy (American Style Selling) … but it does cover the main components of private lending.
Video Clip: http://www.youtube.com/watch?v=XyaGVGHQkeY&feature=related
From your posts you are looking for …
1. A positively geared opportunity – These opportunities offer 9% – 12% ROI … Great in this stage of the property market.
2. You are risk adverse – Your money is secured by a registered 1st mortgage on title over the property.
3. You are risk adverse – Based on a 80% loan to value (LVR).This might be something to investigate further. If you want to know more about how they work shoot me an email or call me for a quick chat.
Property Trader | Boston West Pty Ltd
http://bostonwest.com.au
Email Me | Phone MePrivate money lending opportunities available paying upto 12%, secured by bricks and mortar!
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