Thread: Investment Property Advice

From my point of view you'd be better sending the money to me, so I can think about your options for a while. I could test it out by using it to build my shed....

Sorry to be a nuisance, I couldn't help myself. Surely you should be looking around for a good financial planner or advisor. I think that only someone who knows all or your details and your aspirations and retirement plans could answer your question.

Originally Posted by Rossluck

Surely you should be looking around for a good financial planner or advisor. I think that only someone who knows all or your details and your aspirations and retirement plans could answer your question.

I think thats pretty sound advice but be careful, there are a lot of sharks out there. When I was in Sydney I invested in real estate and never regretted it but I didn't rent any of the properties I had built, I just sold them. In hindsight, I would have made much more money hanging on to them, renting them out and selling them later.
I think for young people, property is a good, long term investment. If you look back over the years, property has performed very well in the long term. Sometimes, even in the short term. There were areas in Brisbane where you could buy a house fo under $70.000 when I came here 5 years ago. Same house today selling for $250.000. Not a bad return. I don't think rental income will out perform other types of investments but the capital gain can be quite significant. But, please note, I am not advising anyone as what to do with their money, these are just my personal observations and opinions.

There are other options apart from property. You're still fairly young so 70k into superannuation now would be quite handy down the track. I think the tax rules in that area have changed recently too, in your favour. I owned a rental property once but I'm reluctant to do it again. A lot of it comes down to your "investor profile" which is something a financial planner will work out in your first meeting.

Hi Doughboy,

Definitely find a financial advisor and a darn good mortgage broker.

Ask the mortgage broker how many investment properties they have. If they don't own any, you may want to run very fast elsewhere.....

cheers
Wendy

I think for right now rental rates need to substantially increase to make buying rental properties a worth while investment - at least on the sunshine coast. The place I live in rents for 300/week. I'm a two minute walk to the beach. A $200,000 5 year fixed rate mortgage including all applicable rates and expenses would be around 500/week. And for the foreseeable future it doesn't look like property prices are going to climb all that fast to offset the weekly loss of $200. It has me looking for other types of investments at this time.

Originally Posted by rufflyrustic

Ask the mortgage broker how many investment properties they have. If they don't own any, you may want to run very fast elsewhere.....

Hehe.

I was in a big shopping centre yesterday and was taken by two guys on a booth flogging an "investment system". Their poster said "Earn $100 k per annum working at home."

I actually stopped and asked them what they were doing there rather than working from home, and they said something that seemed to mean something like "go away smarty pants"!

Doughboy, the following is NOT investment advice, but a few things for you to to chew over with anyone giving you advice!

Superannuation: Hmmm... pay 15% on the way in, and 15% on the way out if you retire before 60 = 30%, or about the same (maybe more than you pay in personal income tax). OK things have changed again this week.... or have they?

Think about that, and the fact that if you buy a rental property with a long term view (say 25 years), you will only be paying off a very small percentage of the total loan. Even if history is made, and there's zero capital gain, how else can you get someone else to make contributions to your super?

Don't worry about negative gearing, if you can afford it, well and good, but the important thing is to be able to control the payment shortfall in the first few years. Hang onto it, treat your tenants well, give them a rent discount.... keep them there. You don't care about income from it, you just want someone to pay it off for you in the long term!

It's one of life's ironies that people who can't afford to pay off a house of their own, actually do so for their landlord!

Good luck! (and don't muck around with investment advisors who don't charge anything - they'll get their pound of flesh out of the "product" they sell you, and you'll pay them an ongoing percentage, as well as the fund manager).

Cheers,

P

Having been in real estate for 20 years, I think i know a bit about it.

here's a very short summary:
Negative gearing simply means that the repayments on your loan exceed the rental income. So, let's say you get $300 a week in rent, but your loan is costing $400 per week to service. In that case, you are negative gearing $100 per week, which is tax deductible. So, that $100 each week comes off your taxable income for the year, which could mean that the $100 a week is effectively only about half that in reality.


There are other tax advantages like depreciation allowances and any repair costs along the way are deductible.

Property is a long term investment, not short term. The ingoing and outgoing costs are too high to make it short term. the other issue is that you can't access your capital easily or quickly. You have to sell the property to do that.

I advise one thing first, if you haven't already - PAY OFF YOUR OWN MORTGAGE FIST!

And be aware of Financial Advisors. They can be great but I've sold homes for some over the years who have lost the lot. They often have a barrow to push by putting you into funds where they get a commissin. No problem there, just be aware of it. There have been several property trusts go down the gurgler lately. They offered higher than bank interest but like all those things, the higher the return, the higher the risk. kind of like shares in non blue chip stocks.

Property generally is a safe investment. In the business I recently sold, we manged over 600 investment homes for landlords who generally had one or two properties. I've seen it all. Good tenants, bad tenants, good landlords and absolute pains in the butt who we handed files back to.

If you want to go through it a bit, I'm quite happy to have a chat. PM me if you like.

Hi Doughboy,

Personally I would put your money into the share market. Anyone who didn't make a fistful of $$$$$$$$$'s in the last financial year then they are better investing it elsewhere. Remember if you buy shares and keep them for over a year then sell them, then you only pay tax (@ your personnal rate) on 50% of the profit.

I dare say there are some excellent financial advisors out there but they are thin on the ground. I had 3 managed funds since 2000 which I bought into via the advice given by Paul Clitheroe (the host) on Channel 9's money programme. It was only in the past 18 months that two of them turned positive whilst the third one was a bigger loser than the 2 winners put together .

If you do want to get into IP's then there aren't many better sites than this one to join. The archives have a wealth of info.

http://www.somersoft.com/forums/

Regards
MH

Originally Posted by bitingmidge

Superannuation: Hmmm... pay 15% on the way in, and 15% on the way out if you retire before 60 = 30%, or about the same (maybe more than you pay in personal income tax). OK things have changed again this week.... or have they?

Yep, it's always changing. But at the moment it's supposed to be 0% on the way in and 0% on the way out (after 60). Maybe I'm being a bit naive.

Originally Posted by Dan

Yep, it's always changing. But at the moment it's supposed to be 0% on the way in and 0% on the way out (after 60). Maybe I'm being a bit naive.

It's 15% going in if it's before tax (salary sacrifice) and tax free coming out if you are over 60.

Originally Posted by Gumby

If you want to go through it a bit, I'm quite happy to have a chat. PM me if you like.

Could I PM you and go through it also.

Your question has no answer, I'm afraid!

The best advice I'll offer is to take your time. Put your cash in a 6%+ bank account for a year and spend the time talking to as many people as possible, including here, but also including as many financial advisors as you can find. Find experts in your locality - real estate agents, property managers, mortgage brokers, tax accountants. You need to be able to get expert advice from people you know well enough to trust. Also read as much as you can - At least your local paper, the Australian, and if you can, the Financial Review too. Remember, your're already earning 6%, so you can afford to spend time learning, rather than risk your financial future by rushing into something.

Your best weapon is the knowledge you have in your head.

One of the key concepts you need to learn is leverage. So for example, you take your 70k, and use it as a 20% deposit for a mortgage, which means you can borrow 350k. So now when your investment (either shares or property, or a share in a racehorse if you like) grows by 20%, instead of making 14k, you make 70k, which is all yours (except tax). This means you're making money by investing the bank' money. Once you've got a grip on leverage, then the rest is up to your team of experts - mortgage brokers to get you the best rates, lowest fees, etc, tax advisors to show you ways to make sure you not paying too much tax (remember tax avoidance is illegal), and financial advisors to ensure you are following an appropriate strategy, and to keep you up to date.

Final thing to remember is the investors golden rule - going back thousands of years - High Return requires High Risk - there is no avoiding this, only dealing with it. Anybody who tells you otherwise is trying to fool you.

Good luck. I'll see you in Millionaires Row in a few years!

$70k wouldnt buy you a telegraph pole, let alone a property in Sydeny or environs (incl ACT)

Originally Posted by Dan

Yep, it's always changing. But at the moment it's supposed to be 0% on the way in and 0% on the way out (after 60). Maybe I'm being a bit naive.

15% on the way in. 15% on fund earnings plus capital gains tax. From July 1st this year 0% on money taken out of fund providing you meet age criteria.