Thread: Investment Property Advice

Originally Posted by coastie

smart arses who thought they could afford properties,then fell over when something happens to them eg marriage break up,redundancy etc etc

I dont see how a failed job or marriage makes someone a smart esra

And I did see the smilie on the end, but still dont get it.

Al

Maybe its coz they are smart ****'s that their marriage/job fell over

Originally Posted by rhancock

(remember tax avoidance is illegal),

Tax avoidance is legal. Tax evasion is illegal.

Doughboy,

one thing I've done a bit differently from most folks is find the tenants first, then send them out to vet the properties on the market, and choose a short list. Then, I've bought one of the properties that they've chosen.

It's saved my time, and the RE agents can't pressure you, or the tenants, because the deal doesn't happen until you and the tenants are happy.

I've had tenants in these deals stay for ages, and look after the place like it was their own, as they felt they had a stake in the purchase. (OK, "like it was their own" isn't necessarily exactly how I would have treated the place, but in general they've all done more than I expected, and never rung me to change tap washers or other trivial things).

Cheers,
Andrew

Good for you Doughboy that you have an important thing down pat. You are choosing an investment that suits you.

Myself I am fond of the sharemarket but I am also the type who will be happy spending 1 1/2 hours a day doing the research. It is a must do thing. If you don't have an interest in that then don't buy shares.

Some lessons from the sharemarket that might help you.

Spread your risk. This has to be the number one truism. As far as real estate goes the riskiest bit is when you have only one property. I think this at this point getting a bit of super that you put something into each month is good strategy. Just so you don't have all your eggs in one basket.


When you buy you want to be getting something someone else will buy from you, whether that means getting a tenant or a future buyer. There is no point getting something that only you can see the value of. It might be a good strategy to look through the rental pages and see what sort of rent similar places are getting and then work out how much you are paying and how much rent you are likely to get. Will the rent pay the mortgage? If it does then you are pretty risk free eventually you will own it and it will have some value. The amount of the increase or decrease in value has not really hurt you as the tenant has paid the mortgage. In fact you will be wealthier as the tenant paid the mortgage. Of course getting the cream of a nice increase in property value is sweet but plan to be OK if there is no increase.

Here is where it gets tricky. Return on Capital for housing rental is about 5% it's not very much and I think in Sydney it is less. People get around this using negative gearing meaning you can deduct the money you are paying from your income tax. See an accountant to learn about this and devise a suitable strategy.

This might be the most important point seek professional advice. The tax system is a real bowl of spaghetti which would confuse a genius. I can't advise you and take what I have said with a grain of salt. I hope it helps but chew it over before you make your own decision.

At the end of the day you are the one who will have to wear it whatever you do.

Studley

Theres a brilliant location in Sydney for the first "Doughboy Burger Emporium"
Heaps of passing trade coz its in the middle of a bridge....

I tried asking the crew at somersoft for advice on renovation but they were useless, that's why I came here. Actually other way around, but you get the point.

Join Somersoft, you will learn heaps and they are almost as helpful as everyone here.

Cheers
Pulse

Originally Posted by Studley 2436

Here is where it gets tricky. Return on Capital for housing rental is about 5% it's not very much and I think in Sydney it is less. People get around this using negative gearing meaning you can deduct the money you are paying from your income tax. See an accountant to learn about this and devise a suitable strategy.

The 5% would only apply to the rental, what about the capital gain, which like with shares, is where the money is. No one refers to the great dividends they receive from their shares and quotes that as the return on capital.

Thats right. The property we own has earnt at most $900 a year, and most years made a loss. But it was $110k when we bought it in 1998, and is now worth $260k, so growth has been $150 over 9 years. Thats extra value is what allowed us to buy the house we live in.

Boban I was only considering rental income. It is one way to look at the investment. My reason for this is that there are expenses that require liquid funds to pay. Capital assets can be used later as they build to finance new investments such as a second property but do not pay the bills.

One of the beauties with the share market is that you can liquidate your stock quickly. You can't do this with a house so the strategy must be different. Of course as a house increases in value which it will do over time the rent also increases but your investment remains the same, so the 5% if the house doubles in value becomes effectively 10%. Housing is a long term investment and should be considered that way. One of the things about investing in the share market is that the tax system is set up so much in favour of housing investment. I have asked myself lots of times if the share market is better. Each has it's advantages and I don't say one is better than the other. As I said at the beginning everyone must make their own decisions and make their savings in a way that best suits them.

Studley

Studley, I agree with you. Its just that to focus on the 5% is little misleading especially given the nature of the investment. You have outlined it well in your last post though.

Originally Posted by Studley 2436

I have asked myself lots of times if the share market is better.

Share market, no place for the weak hearted though

Hum...I wonder if Doughboy has found his investment property.
If not, perhaps a look at this forum may bring some more info on the subject from people who have, some of them, several dozen and some few, hundreds of properties.
www.propertyinvesting.com/forum

Dong go ask them about woodwork though.

http://www.propertyinvesting.com/str...egativegearing
Negative Gearing... Friend or Foe?

Often proclaimed as a property investor's best friend, negative gearing is a concept that few people really understand. Sadly this ignorance is causing many investors a lot of financial heartache.
Let's review the basics of negative gearing, the way it works and how unwary investors are being willingly coaxed to buy a so-called asset that's purposefully designed to lose money.

In his special article entitled 'Positive Cashflow Returns Through Property Investing', expert property commentator Steve McKnight rightly pointed out that there are two ways to make money in real estate. Either through capital appreciation, when your property value goes up, or via positive cashflow returns, when you have more income than expenses.
And in the world of property investing, the most common way that investors seek to profit is through capital appreciation, which is why location is regarded as critical to real estate success.
The preferred weapon in the fight to achieve capital gains returns in Australia, New Zealand and Canada is something called negative gearing.

Negative gearing seems simple enough - buy the right property in the right location and then have the tenant and the taxman partially fund your repayments while you sit back and profit from the appreciating property value.
But can using property to make money be that simple? In a rapidly rising market, as was seen in most of Australia between 1996 and 2002, yes - it can appear to be that easy. Just hop on the escalator and ride the easy way to the top.
Yet there quite are a few investing pitfalls that aren't discussed in the glossy sales 'off the plan' brochures, at the free seminars, or on the carefully tailored TV reality shows.
So let's take a full "warts 'n' all" look at negative gearing to see when to use it... and when to avoid it like the plague.
...........................................................................................................
Read the whole article here
http://www.propertyinvesting.com/str...egativegearing