All Topics / Help Needed! / What should i do ?

Viewing 19 posts - 1 through 19 (of 19 total)
  • Profile photo of ILIKEMONEYILIKEMONEY
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    @ilikemoney
    Join Date: 2012
    Post Count: 8

    Hello ,

    I would like to know if anyone had any suggestions on how to invest 200k.

    I currently have it on term deposit @ 5.25% and the renewal time is looming and would like to know how to increase the income it is bringing in for me.

    The question is can i get a better return than this in NSW through property

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

    Ok quick calc on your current situation is .. 200k @ 5.25% you are getting about 10.5k gross on your current invested amount.

    Be aware that this remains gross .. the income you receive from this is liable to bank account taxes .. government taxes and is finally treated once received by you .. as additional income.

    So you may think you are getting 5.25 percent .. but unless that is your sole and reliant income source .. you are going to have the taxman loving your money too.

    As a 20% deposit .. it would allow you to borrow up to a million. That of course remains dependant on your actual income. You havent stated if you are actually earning or not, so i've left that open in the equation.

    There is however another way you can make the most of this .. again .. dependant on your actual income. You can purchase a property outright inc stamp duty. Leaving yourself with 100% ownership of the property .. and a residual income from the property. This solution boosts your assesable assets, your free income. This means that the next time you approach the bank .. you have a greater clout to borrow with. And of course you can claim deductions on various expenses from the property against your income. Banks have a greater chance of approving a loan linked to a property with a high LVR.

    I mention this particular scenario because i've now done it several times for people i know who were poor borrowing risks with the bank due to low income levels. They've all been very appreciative for the efforts i put forth.

    If you feel you can do better than 5 and a bit percent in the current market .. you are absolutely right. I have been investing at returns of 6% or higher gross for the last 2 years, and most of them are cash positive already.

    Again .. dont pick just any property .. pick the good ones .. and for the right reasons. The rest of the scenario will complete itself.

    One thing I should add .. and this is very important .. dont get emotional on a property. If a property is seen to be producing great cash returns .. and you find it .. take out the emotions from the deal. If that means coming back the next day and possibly missing out on a sweet deal .. so be it. Unless you have sound numbers .. a good idea of how the property will work and a proper unemotional assessment, you may jump in where fools fear to tread.

    On that same note .. I refrain from mentioning specific areas, as i go on my assessment of the areas and .. i will have purchased different properties with different risk levels than you might. But I am aware of areas returning 8% to 10% .. and safer areas returning at least 6%.

    All this also depends on your ability to negotiate on price as well.

    Profile photo of whathousewhathouse
    Member
    @whathouse
    Join Date: 2012
    Post Count: 8

    Still at 5.25% even gross, it is a good return. 

    Profile photo of ILIKEMONEYILIKEMONEY
    Member
    @ilikemoney
    Join Date: 2012
    Post Count: 8

    I get 805 a month from the term deposit.

    I just thought if i bought a property out west in Sydney  i could increase my income as the term deposits have dropped since i started mine.

    Not sure what i could get for 200k 

    Blacktown,Mount druitt,ETC

    Profile photo of ILIKEMONEYILIKEMONEY
    Member
    @ilikemoney
    Join Date: 2012
    Post Count: 8

    Any suggestions where i should look to buy?

    I would also like to hear peoples opinions on where they would buy and what they would do?

    Profile photo of CatalystCatalyst
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    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Well I wouldn't pay cash for a property as you'll be paying tax on the rent as you'll only have rates and depreciation to offset the tax.  At the most pay enough so that it's cash flow neutral. That way it won't cost you anything to hold and you have more property increasing in value.

    I would look at buying 2 properties around $200-250K using your $200K as deposit and in costs (stamp duty etc).

    If you buy well you will be CF+.

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

    I can tell you where i've been purchasing in the last year and a half .. simply because I get the returns i want.

    Albury and its surrounding suburbs.

    The returns range from 6.5%-8.2% depending on the property and position.

    But considering you can get property there (rental property) under 100k with a 7% return .. its been good buying for me.

    With 200k you'll probably be looking for single units. But at 100k or just over they return between 120-150 per week gross. That seems to be twice the return you would be getting from term deposits at the moment … even allowing for the fact its gross.

    If you are worried about a rental return being taxable .. the answer is .. purchase a property at 100% then borrow against it for another one. The borrowed amount's interest component can be offset against the income from the purchased property .. giving you two for the price of one and a low taxable income from the deal.

    Talk to your accountant for working out the best deals for your income and borrowing level.

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    You shouldn't be holding large amounts of cash in your personal name. Too dangerous and tax disadvantages.

    Consider gifting to a discretionary trust and borrowing back to purchase property.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544
    ILIKEMONEY wrote:
    I would like to know if anyone had any suggestions on how to invest 200k.

    The question is can i get a better return than this in NSW through property

    Hi ILike,

    You do not need to limit yourself to a $200K purchase.

    The $200K could become deposit money. Further borrowings on this could realise further borrowings of around $800K (subject to income checks). While the additional borrowings may not have a commensurate increase in net rental income it does mean you will have a larger asset base than you would if if you simply purchased a $200K property. 

    Not sure how such a leap would fit into your risk profile but food for thought.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
    Post Count: 2,539

    If you bought a house that yields at least 6.2% and borrowed any of the extra money you need to cover off the last portion of the property price does not cover, and your stamp duty and legal fees, you would end up with a surplus rent (after holding costs) of more than $850 per month.  An example is to get a house in Corio VIC.  A house priced around the $230k mark will generally fetch about $275 per week and that would achieve your goal, plus you'd enjoy capital gains, plus you can put the rent up each year.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of beansbeans
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    @beans
    Join Date: 2010
    Post Count: 10

    Would I be naive in suggesting below as a very basic calculation forgetting about negative gearing, depreciation, tax etc

    Term Deposit

    $200k x 5.25% = $10 500.00 / year 

     

    Putting the $200k towards property as a 12% deposit on $1.65mil portfolio

    $1.65mil x (estimate 5% property increase) = $82 500.00 / year

    Profile photo of DerekDerek
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    @derek
    Join Date: 2004
    Post Count: 3,544
    beans wrote:

    Would I be naive in suggesting below as a very basic calculation forgetting about negative gearing, depreciation, tax etc

    Term Deposit

    $200k x 5.25% = $10 500.00 / year 

     

    Putting the $200k towards property as a 12% deposit on $1.65mil portfolio

    $1.65mil x (estimate 5% property increase) = $82 500.00 / year

    Not naive – just need to consider the whole picture.

    While your capital growth calcs make sense. It does depend on what ILIKE is trying to achieve. His (?) earlier post suggest 'income' is the greatest focus.

    So if we explore further your possibility we would need to consider income V costs.

    Costs would be approx $91K for loan interest and $17K (allowing 1% of purchase price) for other costs giving a total of $108K in outgoings.

    To outperform the current return of $850/month (gross) ILIKE will need to purchase property with minimum rent return of 7.15%

    EDIT — some rough maths being applied so further due diligence required.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Yeah my reply was based on the understanding that ILIKE needed income, as opposed to being in the stage of gathering assets

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Could also use a small deposit and place remaining funds in an offset account.

    Profile photo of ILIKEMONEYILIKEMONEY
    Member
    @ilikemoney
    Join Date: 2012
    Post Count: 8

    Thank-you for all of your responses.

    It has given me a lot of food for thought and i am currently looking into my options to get the best return property wise.

    Profile photo of CatalystCatalyst
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    @catalyst
    Join Date: 2008
    Post Count: 1,404
    xdrew wrote:
    I can tell you where i've been purchasing in the last year and a half .. simply because I get the returns i want.

    Albury and its surrounding suburbs.

    The returns range from 6.5%-8.2% depending on the property and position.

    But considering you can get property there (rental property) under 100k with a 7% return .. its been good buying for me.

    With 200k you'll probably be looking for single units. But at 100k or just over they return between 120-150 per week gross. That seems to be twice the return you would be getting from term deposits at the moment … even allowing for the fact its gross..

    Do you see any CG prospects there or are you happy with just the cash flow?

    Profile photo of FreedomThruPropertyFreedomThruProperty
    Member
    @freedomthruproperty
    Join Date: 2012
    Post Count: 13

    There are plenty of areas worth considering for both rental income and capital growth. Personally, I am currently looking seriously at the Hunter Valley, Toowoomba and Western Sydney, and am in the early stages of looking into regional Victoria (Bendigo and Geelong in particular). From the research I've done so far, they all seem to have potential.

    Xdrew – Albury was completely off my radar, but I will be taking a look after reading you post!

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

    Do you see any CG prospects there or are you happy with just the cash flow?

    Albury remains a country town exposed to the rural elements .. however .. it has managed to substitute in a large sector from the Australian Tax Office .. which now headquarters there and is just expanding its premises at the moment.

    It has a reasonable industrial backyard and has most of its older housing commission areas now being sold off as owner occupiers.

    In other words .. Albury is going through a refurbishment as we speak. The two main shopping centres are getting to be quite large and there is a reasonable amount of activity taking place within the town.

    It also has a possibility of a fast train going through within a year or two.

    My reason for investing in Albury is that the town remains central to VIC/NSW relations and as such .. a reasonable place to invest for the next 10 years.

    And that for me .. means Capital gains too.

    Profile photo of ModonnellModonnell
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    @modonnell
    Join Date: 2012
    Post Count: 5

    Maybe invest in an unlisted property trust .. Returns can be good and usually spread over different  property types 

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