Gold Coast investing

Hi Groono,

Good for you for starting to consider property as a vehicle for building wealth.  It certainly is, as many on here can attest.  But as you seem to already know, there is a lot to learn before pulling the trigger.   Regarding timing, with Interest Rates as high as they are, finance is harder to get for many.  Yet Banks still want to lend (it’s their bread and butter) so loans can still be found.  You seem to know that you are OK for up to $800k, so I guess you have already checked your financing capabilities, yes?  If not, it is a good place to start, as you don’t want to search for $800k properties if it turns out you can’t finance them.

Like you, I have always favoured buying property with land content, so I bought no apartments, only houses, townhouses, etc.  It is land that rises in value, while buildings deteriorate, so the more land, the better.  Also, don’t buy new unless you are having your own builder building it on your land.  Why?  Simply because in areas where developers build lots of homes (e.g. at Pimpama/Coomera) they have already charged you over-the-top $ to buy the finished product.  There is not likely to be capital gain for many years.   Whereas, if you buy a home that needs renovation and you can make that happen, then you are adding value that is all yours to utilise once complete.

Property values run in trends and, as you would be seeing, a shortage of rental houses and a surfeit of people wanting to rent, leads to increases in both values and rental rates.  But then, that changes regularly as “buying becomes cheaper than renting” and the rental market falls back a bit.  Buying could become more preferable as Interest Rates decrease again (maybe this year?) but for now the rental is king.  Rents are growing hugely, as are values.

Re “is it really worth it if rent doesn’t cover expenses?” – it can be, so long as the value is climbing, and/or there is another reason where changes can be made that WILL lead to increased rent in the future.  e.g. a renovation perhaps, or a subdivision, or even a change of purpose like changing from a single family to an HMO style rental where you house 3 or 4 people, each paying rent.  (HMO is Housing with Multiple Occupants).

Keep in mind too, that times like these make things hard for some folks.  There can be multiple reasons for a sale (the three D’s – death, divorce or destitute – are common ones) and some folks “just want out” and are not looking to get the best possible price.  You would be helping them out just by making an offer, and they may well sell to you for a bargain price just to be free of their situation, allowing them to “move on”.   So yes, even today it can be worth making offers.

For yourself though, set limits.  Use your strengths to your advantage.  e.g. if you are handy, look for a place that can be renovated by you.  If you can manage people, find others who will renovate for you.  If you prefer to be a passive investor, perhaps a Joint Venture with someone else who is a “live wire” but has little money of their own.  Or if that’s not you, then maybe investing in other areas is better – e,g, Steve’s SOGIF fund for one.

Meanwhile do keep reading – some things will speak to you and perhaps provide a catalyst for your investing.  Do check out the “big picture” link that I sent you – there is a host of good info in that link.  And check out the Training Centre on the Home Page.

Don’t be in a hurry to invest – chose your battles after you know just which type of fight you like to be in.  :)

Regards,

Benny

Hi Groono,

Is the ‘big picture’ link sent to my personal message box?

Sorry, I hadn’t yet PM’ed you – it’s coming…. ;)   But here is the link in one of the forums anyway:-

https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/

  I know that council rates, and interest can be tax deductible. But generally, what percentage can be deducted?

That percentage would be equal to your Marginal Tax Rate.  Some expenses related to an investment are claimable.  What that does is REDUCE the Tax you need to pay on those costs.  e.g. If you’re Marginal Tax Rate is 30% (i.e. you earn between $45k and $130k) then when those expenses are taken off your income, the Tax saved is 30% of their total.  Expenses of $1500 would therefore save you a Tax amount of $450.

One would want to find an investment that doesn’t only rely on future growth.  That is where buying smart helps.  So does “adding value” (renovation?). Repurposing – turning a 4 bed house from a rental of $600/week into an HMO dwelling where you might get $1200/week plus.   And there are a host of other options – JV’s, syndicates, options, etc.   Lots to learn, and not all will suit you, but good to know of in case they might suit eh?

Keep reading Groono – sounds like you already have – you seem to be aware of much already !!  :)

Benny