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Firstly, you should consider asset protection and possible tax advantages. Gifting to a discretionary trust would be a good idea followed by a loan back to yourself or another discretionary trust for investment.
It wouldn't be 100% safe in the early years, but would be good asset protection thereafter.
I would use that has a deposit to purchase 3-4 another investment property ( 15% deposit each + cost)
Regards
Michael
Firstly, you should consider asset protection and possible tax advantages. Gifting to a discretionary trust would be a good idea followed by a loan back to yourself or another discretionary trust for investment.
It wouldn't be 100% safe in the early years, but would be good asset protection thereafter.
Yeah, now we're talking. Lying on the beach daydreaming is boring ... ;-)
regards
Michal
Hi Terry,
Does the gift and loan back strategy work for cash?
I thought it only worked for things like equity in a house, because when the trust loaned the equity back, it had a mortgage registered to it. I don't think you can obtain a security/mortgage with cash?
How would that work?
Hi everyone
A hypothetical question. If you had $300k in cash to spend on investment properties and had a free reign to do whatever you wanted, what would you do?
regards
Michal
Yeah, now we're talking. Lying on the beach daydreaming is boring ... ;-)
regards
Michal
Yes buying 3-4 negatively geared properties and paying LMI since you're at 85% gearing. You've just thrown yourself in to the rat race for 10 years. Good job.
You can also invest in shares and earn a decent income on your $300K.
Last month you could have bought CBA shares for $44 bucks and earned $3.20 per share fully franked dividend. This should equate to approx $600 (gross) per week.
Alternatively, there are several other quality companies that you can invest today (eg. GUD @ $7.44 paying 64cents fully franked) that give you 12% gross dividends which should equate to approx $700 (gross) per week.
Cheers,
Oracle.
Well maybe not. A slight variation on this could be 2-3 properties at 20% + cost. Then you ride the capital gain wave for 3-5 years. Might be a good way to go.
Sigh... Let me do the sums for you.
You buy 3 x $500k properties with $25k stamp duty. Put in $100k for each, that's the 80% gearing you're talking about.
At $425k debt (since you don't have money to pay the stamp duty) at 6.8% that's $29k interest you have to pay per property. If you have three of them, that's $86k. Then you have to pay council rates, land tax, agent fees etc which will be in the vicinity of another $6k. So your total costs is $92k. Follow so far?
Now what rent do you hope to get? Maybe $500 rent per week, which is a 5% yield? So at $500 per week x 3 properties that's $78k. So you're losing $14k per year. Now here's the questions.
a) Can you even afford to lose $14k per year? Not if you're earning $50k I can tell you that and trying to save money.
b) Can you even get that much financing? What's your reported income?
c) You sure there's a wave 3-5 years later? Check out a city called Sydney, but if you must check out one called Tokyo.