Hey
I am 18yo and am looking at investing as soon as possible, primarily in real estate but I will also look at other methods (gold, siler, stocks etc)
So some questions,
I am looking at joining the army, rifleman specifically (not because I dont have options rather because it seems like an interesting career). So im looking at ~50K a year but I will probably have a lot of disposable income since i will live on base (cheap food + cheap rent + free doctor/dentist etc)
Q1) Is that enough money to get started in real estate investing?
Q2) can someone explain Capital gains tax to me… for example if i buy a property to renovate and sell will I have to pay 48% of my profit in tax?
Q3) How much time is required to invest? (a broad question, perhaps you could provide the amount of time you currently spend investing?)
Q4) I am looking at buying, renovating, renting it out and then selling it when the reno is done .. good or bad?
Also could you point me in a good direction to start, like some good books to read?
I have currently read "how I turned $1000 into $5 million in my spare time" however it was a bit old and was based in the USAAny other advice is welcome, thanks for reading
Cheers
-LarryEDIT: i was also wondering why so many people here have a website at the bottom of their post like
My Investment Decision – Free property investment website!
Become a smart investor – http://www.myinvestmentdecision.com.au Are they actually real investors or are they just trying to sell you a product??Do you also buy properties all over australia or do you stick to one area? How would you manage tenents if you live in another state?
How do you obtain finance for a property? Do you go for a interest only loan?
How does equity work (from what i understand it works similar to this (please correcct me if I am wrong) : Buy a house for $200 000 right, so you get a 95% loan and put 5% down in cash. So then you can 'borrow' equity and take $200 000 from the house and get another loan to buy another house? is that how it works.. ?ah young grasshopper, these are many of the questions that every investor asks. Seek out the answers in the archives & you will find riches beyond belief.
Hi larrytheinvestor,
Go with Scott, trawl this forum. mine the golden nuggets of information.
All the questions you've asked, have been answered in the past.
Happy start.
Angel
PS you're parents should be very proud of you. You are a great Australian. Bravo for thinking of serving your country.
Hi Larry
Welcome aboard.
Nathan Birch just posted an interesting scenario based on someone earning $50k per annum that you might find useful https://www.propertyinvesting.com/forums/property-investing/general-property/4336419
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
thanks.
Equity is your assets – dept right? So if i have a house that is worth $400 000 and I have paid off $200 000 of the loan that means I have $200 000 in equity. So then I can borrow this money and add it back to the original loan right? So i would then have a $400 000 loan to repay but i would have $200 000 in cash that I could use to invest. Sort of like liquidating an asset?
However if i get a interest only loan that means that I will never be paying off the actual loan, only the interest. So that is why banks have a lower interest rate for interest only loans and a higher one for a normal loan?
So that is equity..
CAN YOU PLEASE TELL ME IF I AM ON THE RIGHT TRACK HERE?
If i have bought a house for $200 000
I have a down payment of $30 000
(that means i have an instant equity of 30 000)I renovate it for a cost of $10 000 and reevaluate it and it comes to $240 000
So that means I now have an equity of $70 000 and a loan of $170 000So if the property is CF+ or CF= then the monthly repayments of the $170 000 loan are covered.
So i take the $70 000 and use it as a down payment on a new property, using my income to cover the interest that I pay on the equity loan. I then get a new home loan and use it to pay for a new property.Then i repeat?
However using this method I will end up with tons of loans and if I lose a tenant then I am basically stuffed
So it would be better to sell the house to get rid of the first loan and then buy the second house…?
Also wanted to check whether this is correct: (i found it on this forum)
For IP always use IO never P/I.
Is this good advice?
larrytheinvestor wrote:Also wanted to check whether this is correct: (i found it on this forum) For IP always use IO never P/I. Is this good advice?The whole idea of making the most of a deal is making as much of a profit as quickly as possible. And the most obvious way to do that is to maximise your leverage. So you are borrowing at a fixed rate using OPM .. the only variables you'll have is making sure tenancies remain steady and maintenance bills. The other reason is more simple … you just get tax breaks on the interest component and not the principal … so … people offset their interest bill against their income plus net rental income .. result .. lower tax paid .. rising property .. win/win. And until the fixed term expires .. a known level of payment to adhere to.
Hi Larry,
You pretty much have the right idea. Your equity can equate to being your deposit. However, in the example you gave above
" if i have a house that is worth $400 000 and I have paid off $200 000 of the loan that means I have $200 000 in equity. So then I can borrow this money and add it back to the original loan right? So i would then have a $400 000 loan to repay but i would have $200 000 in cash that I could use to invest. Sort of like liquidating an asset?"
is not quite correct.
You can only borrow 80% of the value of the property. In this case above, if you had an existing loan of $200K on a $400K house, you can – subject to servicing ability – borrow an additional $120,000 to use as deposit for the next house. You see, $320,000 is 80% of $400K.
Of course you can borrow up to 95% in some instances but you will have to pay lender's mortgage insurance which very, very hefty and it would be unwise to be extremely geared anyway. If possible, and I emphasize the word IF, try to stay within 80% of the value in order to give yourself room for manouver in case of price correction.
Increasing your property portfolio is not difficult if you stay on the right side of positive gearing. Which means you make money, not lose it. Simply stated, this means you are receiving $100 a week and only spending $80 on maintenance and interest payments.
If you are Sydney-based, I have time for face to face discussions. Don't worry, I don't sell anything. Not even a broomstick. I'm retired with time on my hand.
Take care.
Angel
Personally I would take out a 90% or 95% loan for your first property and pay some mortgage insurance (which in most cases can be added to the loan). Saving a 20% deposit on a 50k income will take a long, long time. Also, the costs of mortgage insurance are deductible over a 5 year period.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
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