All Topics / Commercial Property / Commercial or Residential as a start

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  • Profile photo of Eliana888Eliana888
    Participant
    @eliana888
    Join Date: 2023
    Post Count: 0

    Hello,

    on page 52 of “0 to 130 properties” book , I am thankful for Steve’s guidance that we should seriously re-evaluate our investing goal if it based on how much tax we will save because our property have lost money ,so am committed to do my best to get my investing goal and numbers right form the get go since it is my first time real estate investing.

    My goal is really to achieve passive income and turning my active working income into passive income and the channel will be through positive cash flow real estate

    1- I have $100K savings and i want to use the in smart and wise way so i am enquiring if buying my 1st investment property better be Commercial or residential property?

    2- if residential is the start –> I am thinking of putting 10% deposit of purchase price only so i can leave some capital to by another one later , but I will have to add LMI in this case, so I am enquiring if I paid LMI upfront instead of having it capitalized onto the loan amount , Can I claim this LMI amount in my tax return as tax deductions?  but Is  going 20 % deposit more effective from access borrowing again 6months down the track?

    3- Is Western Australia overly priced at the moment for Residential ?

    • This topic was modified 6 months, 2 weeks ago by Profile photo of Eliana888 Eliana888.
    • This topic was modified 6 months, 2 weeks ago by Profile photo of Eliana888 Eliana888.
    • This topic was modified 6 months, 2 weeks ago by Profile photo of Eliana888 Eliana888.
    • This topic was modified 6 months, 2 weeks ago by Profile photo of Eliana888 Eliana888.
    • This topic was modified 6 months, 2 weeks ago by Profile photo of Eliana888 Eliana888.
    Profile photo of AdamCareyAdamCarey
    Participant
    @adamcarey
    Join Date: 2023
    Post Count: 0

    Great to hear you’re diving into real estate with a clear goal in mind! Regarding the Commercial vs. Residential debate: It depends on your risk tolerance and investment strategy. Residential properties often have a broader market, while commercial can offer higher returns but with more complexity. Consider what aligns better with your long-term goals.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi Eliana,

    Re your first question, I recall Steve saying things along the lines of “Grow your wealth in Residential until you have enough Equity to be able to move into Commercial, then live off that Comm Income”.  The reasonings behind that come from a few factors:-

    1.  Resi investing is usually cheaper to get into (better when starting out?).

    2.  Resi has MANY more folks invested in it (everyone needs a home, but not everyone needs a place of business).

    3.  Resi sees many opportunities for profits to be made, whether thru good buying, developing, renovating, etc.

    4.  Resi has a wealth of different “playgrounds” allowing you to purchase according to your goals – e.g. do you need more Income right now, or more Growth?  Different areas provide differing results – e.g. regional vs city investing.  Lower vs higher socio-economic areas….

     

    Onto question 2 – “I am enquiring if I paid LMI upfront instead of having it capitalized onto the loan amount , Can I claim this LMI amount in my tax return as tax deductions?”

    Hmm, I think you could (but I don’t KNOW!) – and capitalising onto the loan can be a way of getting into something with a smaller deposit, and at a somewhat minimal cost.  Of course, this means you will need a higher loan, and above 90% the LMI becomes quite fierce (yet still a small part of the total loan, so one to consider).  And the second part of your question re re-borrowing is one for a Mortgage Broker, so I’ll leave that one alone.

     

    Question 3 re WA – not my bailiwick, but I have long seen Perth marching to the beat of a different drum to the East Coast.  And up until a couple of years ago, it was heading downhill.  If you are seeing similar problems to us in the East (high immigration, high rental demand but super-low vacancy rates, builders going bust, etc) then your market may also have turned around and would be trending upward.  The good thing is that (unlike East Coast) your prices would be starting from quite a low point, meaning equity growth may come more quickly.

    Back quite some years now, I recall Perth’s median actually EXCEEDING Sydney’s – an unheard of event.   I would think Perth would be quite a lot lower today, but perhaps on the climb?  How are the medians trending over there?

    Regards,

    Benny

     

     

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi Eliana,

    I had a quick look around and found this (re Perth’s values):-

    https://www.openagent.com.au/suburb-profiles/perth-property-market

    Scroll to roughly the middle of the whole segment and you’ll see a graph showing House price growth over the past 3 decades.  It shows Perth pretty much stood still from 2007 until today.  That has me thinking good times may well be ahead for Perth.

    Oh, and note around 2007 – right there it shows Perth equalled Sydney’s median.  I knew it was quite some time back – in the day, I thought Perth’s median actually passed Sydney for a time.  But that may have been for just a month or two, so the yearly figure doesn’t show Perth ahead of Sydney on the graph.

     

    Profile photo of Eliana888Eliana888
    Participant
    @eliana888
    Join Date: 2023
    Post Count: 0

    Thank you so much Benny.

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