Forums / Property Investing / Help Needed! / property investing help

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  • Profile photo of JD86JD86
    Member
    @jd86
    Join Date: 2009
    Post Count: 52

    Hi Guys,

    as some of you may know, I lost my job around 7 weeks ago, I was made redundant as the boss could not afford to keep the business running.

    I have managed to find a new job, and I am really enjoying it. I have been there 5 weeks now.

    The only downside is, I am sort of working as a sub-contractor.
    I am an architectural draftsman, and have a little business on the side. As I am still young, I want full time employment for security and experience.
    I am acting at my new job as a full time employee, in that I work 9-5, 5 days a week. The boss pays for all equipment etc. required. I go to the office every day, do not work from home. By all means I am a full time employee, except my boss likes to pay me as a contractor (I believe it is easier for him).

    Now this is working well for me, I am clearing around $200 per week more than my previous job after I put away 20% for tax.

    I own a house which is valued at $350k, and the loan is $230k.

    My income is now $960 per week clear (after putting 20% away for tax on my mortgage) and mortgage is $360 per week.

    I feel I am in a position to buy an investment property, so I have asked my mortgage broker to investigate how much I can borrow etc.

    He is mid-investigation but has warned that some banks will consider me self-employed and will need 2 years of financial records.
    Whilst I have had my ABN for approx. 5 years or so, I have only eanred minimal amounts through it as I have been a full time employee during that time with a small side business.

    I believe that if I ask, my new boss will write a letter stating I work full time and my probabtion period is over.

    I am not planning to borrow/buy for another few months so I will have been at new job maybe 4 or 5 months by then.
    I have just started this process to get a pre-approval so I can see how much I can borrow and start investigating properties.

    What can I do in my current position? I do not want to wait 2 years to be able to buy an investment property. Am I jumpiong too early at my mortgage brokers warning or should I be genuinely concerned that I wont be able to borrow?

    Also, do you guys think the following is a good plan?

    My house is valued at $350k with a loan of $230k. I can rent it out for around $350 per week which will make it almost neutrally geared.
    So my plan in the next few months is to rent it out, and buy an investment property as mentioned above, that hopefully isnt too negatively geared whilst my girlfriend and I rent a house together. Because I'll be sharing rent with my girlfriend, my expenses will drop a fair bit. Then, after a year or so, if both investments are going well, I can borrow to buy another property and so on…

    Any advice appreciated

    Thanks

    Profile photo of JackFlashJackFlash
    Member
    @jackflash
    Join Date: 2011
    Post Count: 66

    Good to see you got a job Josh. The sub contract thing is likely to be illegal under ATO rules (unless you do work for other design houses as well). Talk to an accountant about it. That said self employed vs employed has its pro's and con's. Big tax advantages in being SE but the one I like is I don't have to give those super fund <moderator: delete language> any of my dosh because they <moderator: delete language> don't know how to invest it. The only real downside to SE is the ability to borrow. Once your SE'd you're seen as higher risk so you get put through the grinder every time. Fact of life so use the time to build good solid financial records.

    Quote:
    I do not want to wait 2 years to be able to buy an investment property.

    I could slap you young fellas sometimes. You're in a property bear market!!! Price pressure is down!!!! Globally financial Armageddon may be on the way!!!!

    Why oh why would any investor in their right mind be in a rush to buy into a falling market?

    Profile photo of JackFlashJackFlash
    Member
    @jackflash
    Join Date: 2011
    Post Count: 66

    Some perspective:

    We face a bigger problem now and we will pay a higher price” than in 2008, says Nassim Nicholas Taleb, author of Fooled by Randomness .

    “The structure of the problem has still not been understood,” Taleb said today at a press conference in Ukraine. “We haven’t done anything constructive in 3½ years. Nobody wants to do anything drastic now.”

    And no wonder: The big U.S. banks’ eurozone exposure totals $2.7 trillion.

    When Greece defaults — is it really a matter of “if” anymore? — investors will run for the exits from the rest of the PIIGS countries too. That’s big trouble for the big French banks. And the big German ones. And those banks alone account for nearly half of that $2.7 trillion total.

    Imagine if one of those French or German banks collapses… and the knock-on effects on U.S. shores.

    This is one key to the “mother of all financial bubbles” scenario.

    “This new bubble started years ago,” he says, “with the government’s response to the Internet stock crash in the early 2000s. Then it morphed into the bigger housing bubble… And eventually into the even bigger credit crisis of 2008.”

    “Now, due to the aggregate of those government actions, we’re in the middle of the largest financial bubble in history.”

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479

    If you think its hard out there to borrow money .. chances are you are right.

    But then its also a great time to be advertising for better returns than the banks. I found myself short for a couple of properties in 2008 when the banks werent lending to almost anyone and the money supply dried up. So i posted an ad in the paper for getting a better than bank level of interest on your money, and i got 5 people who were willing to accept my deal. I only needed one of them. But the funny thing is .. using the fact i had more people wanting to lend than properties i actually had .. i made a couple of stitched up deals BASED on the fact they wanted to lend me money ! HOW AWESOME IS THAT?

    You got to stop thinking of the bank as the only honest broker in town. Money is money. Creditworthiness will carry you far. And using your head to make your deals will carry you even further.

    By the way .. my credit cards were used to pay the stamp duty in transfers. Thats for anyone who bags credit cards as a means of having money. All deals were refinanced through banks in late 2009 (so was credit cards). So they are with banks and the banks are happy, and i got the loans i wanted. Funny how the worm turns.

    Profile photo of wisepearlwisepearl
    Member
    @wisepearl
    Join Date: 2009
    Post Count: 264
    JackFlash wrote:
    The sub contract thing is likely to be illegal under ATO rules (unless you do work for other design houses as well). Talk to an accountant about it.

    Just curious, is your claim about it being likely illegal due to something about contractors only being able to receive 80% of their income from one company as a contractor? or something else?

    Profile photo of JD86JD86
    Member
    @jd86
    Join Date: 2009
    Post Count: 52

    I have spoken to an accountant, he just advised I put away 20% of earnings for tax at end of financial year

    no mention of the above stated 80% rule, however I do do work for myself, so could end up being 80% or less earnings from new employer

    I'm more concerned on how I can get finance, I understand low-doc loan may be possible, but they are higher interested and more restricted if I am not wrong?

    Any advice appreciated
    Thanks

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