ADVICE NEEDED!! where to go?

Pardon my ignorance, but I want to get started with my first investment property and am puzzled of the next step to take. I currently live in a large unit (in my mothers name) that is really my inheritance, and I may use the equity ($200,000 - its fully owned) to help me get started.
My problem is not knowing whether to invest in my own home and rent this out, reeping tax benefits - or to invest in investment units with positive cash flow.
Im a little lost, wanting a 'mentor' or someone to offer advice. Does anyone know if there is this service available somewhere? any pointers?

Hi Pegasus,

Congratulations on deciding to get out there and make things happen! I am sure you will find the forum a useful tool. I do. You are certainly off to a good start with $200,000 worth of equity to get on with.

Please note I am no mentor but I am replying anyway. As far as I know there is no service that will give you this type of information. I have looked myself. This forum is a good place to go for ideas. Maybe there are some switched on accountants and financial planners etc who can advise re this sort of stuff but on the whole I think you have to figure it out yourself. It's better to do that anyway, gives you more control.

From what you say you have a property owned by your mother but effectively yours. What is the situation with your mother? I am thinking that if she has a pension and you let out the property which she owns she may loose some of her benefits or even her entire pension. However, if you were to buy another property you could nominate it as your principle place of residence and let it out thus avoiding capital gains tax if you were ever to sell. Your accountant should be able to tell you the details of how to do this. They can uaully advise on this sort of thing if you prompt them.

With $200,000 you should be able to buy a few properties depending on where they are and depending on your servicability. Don't limit yourself to units, houses are a good investment too.

I know lots of people on the forum are pretty positive about buying property at any time in the cycle but personally, I would hold back a little as the market is easing off. I would definitley buy property but maybe just one or maximum two to start with. I would research my options very carefully looking at how different types of property perform, different areas etc.

I would also consider putting some of the money into shares, which also requires research.

You talk about untis with a positive cash flow. I would like that too but in general higher yields go hand in hand with lower capital gain. Although some people manage to get both I think this requires a combination of even more intense research and some luck, and I understand even those on the forum who have managed it in the past, say it's hard to get both positive cash flow and capital gain in the current climate. So basically you would probably have to sacrifice capital gain to get the positive cash flow. Is that what you want?

Well thats my thoughts. Hope they help. Good luck.

Robyne

Originally posted by pegasus
Pardon my ignorance, but I want to get started with my first investment property and am puzzled of the next step to take. I currently live in a large unit (in my mothers name) that is really my inheritance, and I may use the equity ($200,000 - its fully owned) to help me get started.
My problem is not knowing whether to invest in my own home and rent this out, reeping tax benefits - or to invest in investment units with positive cash flow.
Im a little lost, wanting a 'mentor' or someone to offer advice. Does anyone know if there is this service available somewhere? any pointers?

Click to expand...

Hi Pegasus

I gather that you don't pay any rent, so stay there.

To find an IP and to call it "home" can be a conflict of interests. We tend to be emotional when searching for our "home" rather than taking the cool head of an investor, and focussing more on the numbers than the colour scheme.

Either a home or a unit can be positive cash flow, but probably more likely with a unit - be aware of Body Corporate costs for Strata Units.

Many people only invest in houses because they believe "land appreciates, buildings depreciate", and you don't get much land with a unit. I'm in this camp, but I also own a couple of units which have given good cash flow and capital growth.

You need to figure out and decide which is more important, capital growth or cash flow?
Your current income position will have an influence there.

Don't just invest to "reap the tax benefits" - ask people who did this and invested in some agricultural schemes (timber, olives, emus etc) - and had the ATO overturn the rax deductions after a few years - they are not happy campers.

At the moment I'd be wary of buying were there is a lot of development happening and a lot of land earmarked for development. If the bubble does burst, it is often these araes that are hard hit. Properties in sought after established suburbs
where there is no more land available, have some protection from downturns.

Don't just look for areas where there are a lot of renters already, also look in areas where people want to own their home and stay. Home owners usually wont sell when prices drop, investors are more likely to. When the investor demand slows its nice to have a property in a area which still has home owner demand.

There's a start.

Others can add more.


Garry K

Thanks Robyn,
The sitch with my mother is that she owns a bit of land and the family home. she sold one of her blocks and split the proceeds into 3 investents for the kids to be transfered into their names as inheritance etc.
The townhouse I live in I pay the rates etc etc, while the equity is in her name. she has said that I can use this as security for my first investments.
At this stage I am researching different areas and types of housing but am a bit overwhelmed at where to start....or if just diving in and getting started with an investment house is the way to learn.
I dont know whether to invest in a house as my principle place of residence, and let out the townhouse I am in....or invest in a couple of units and let them out. I guess my first step is to talk to an accountant and find out my options as far as using the equity is concerned.
Hmmmm....

hey thanks garry,
Food for thought!
Cheers

Originally posted by pegasus
I guess my first step is to talk to an accountant and find out my options as far as using the equity is concerned.
Hmmmm....

Click to expand...

Pergasus
Make sure you pick the "right" accountant to talk to. Also talk to a good mortgage broker. Both of whom you would find on this forum. There will be many accountants, who know little about Investment Property situations. Fortunately those that give good advise on this forum do seem to know what they are talking about.

G'day Pegasus,

Invest a few weeks and read as much of this forum as you can in that time. Take notes, or save useful items to your hard drive, or print them out, whatever - then read some more.

When starting out, it is useful to get a handle on all of the things that can trip you up. When starting in ANYTHING, it is impossible to know what you don't know.

I started out 4 years ago after giving myself nearly a YEAR to find out a little more (books, seminars, talking with others, etc.) before buying my first property. Even now, I am only starting to understand how little I know - but I am doing SO MUCH BETTER than I was 4 years ago.

It is really worth the effort !!! Don't go "leaping in" to the first thing you see - invest the time to become more informed, and be aware of your choices BEFORE you make them.

If there are any "Investor Meetings" (see Meeting Point) coming up in your area, get along to them !!! Meet and talk with others who are doing what you hope to do. We are a friendly bunch, and like a good natter.....

At least, keep coming back, asking questions - it's not rocket science, but it is not immediately apparent also. WE KNOW that, and like to help others who are genuinely interested in helping themselves. Keep questioning, where the areas you've searched don't have the answers.

Others have said it - this forum (thanks to Jan and Ian) is a GOLD MINE of great information. It might turn out to be a gold mine for you, too.


Regards,

I guess most of us here take it for granted...

Before even the forums, read the book...

Jans Somers' More Wealth from Residential Property- also available in many bookshops- should be the first port of call.

Just in case you haven't seen it already.

Jan & Ian sponsor the forum, not out of any (what would be very limited) commercial advantage, but I guess as a way of returning knowledge back.

Pegasus,

Remembr the first home owners' grant.

It *may* be worth your while to rent out where you are living now - provided you can do a deal with your mum for YOU to keep the rent, and buying a PPOR somewhere else. Then get a few boarders into your new PPOR.

This was you could offset the mortgage costs using the boarders & if necessary part of the rental from your current townhouse & get the equity increase for both properties.

After twelve months, you can always move out of the new house, turn it totally into an IP and either go back to the townhouse or move onwards.

But do the figures first!

Cheers,

Aceyducey