calling all advice and tips

[navycso]

hi my name is chris

First some info about me

I am a 24yr old male who is currently employed in the Royal Australian Navy. I have worked there for over 6 yrs now. My approx base wage is 40 000 plus 10-15 thousand dollars in allowances (i.e seagoing/rental assistance) I am married and my partner earns approx the same and is also in the navy. We have no children and don't intend to have any in the near future.

We currently have a car loan (15 000) and a personal loan (8 000) and rent in sydney (420 p/w however the we actually only pay about 140 per fortnight). these are pretty much our only outgoings bar the usual food, mobile, home phone and electricity. We manage to save about 40 000 a year.


After reading Steve Mcknights 0-130 properties in 3.5 years we have caught the investing bug, or more to the point came to the realisation that IP were within our reach.

Our current plan of attack is to pay off our loans asap (we can be debt free by may-jun next year) and then save up 80 000 dollars, borrow about 80 000 dollars and purchase 2 x 80 000 dollar properies to WRAP. We would be able to do this every 2 years putting all the money made from the Purchaser back into buying more properties to wrap. hopefully getting to the point in about 7 yrs not needing the 80 000 dollar loan in order to buy the two properties. Ultimatly we want to be able to retire at 35-40 and live on about 100 000 per annum wage.

However some of my concerns with this are (and i am hoping you fine people can help me with)

How do you find people to purchase your properties in the first place???

Is there a company out there who can help me find these people (nationwide) and can help me with the finer details of Wraping

How can i avoid paying 48% tax on my positive cashflow??

What are the laws (i.e states)

Are there any pitfalls i should watch out for??

Can anyone recommend any books/seminars/finacial investors who can help me achieve my finacial freedom in the time frame i require???

Any advice would be greatly appreciated.

thankyou in advance

chris

[email protected]

 

[Simon]

Some thoughts on Fathers Day morning will a bellyful of undercooked pancakes.....

You have two good incomes. Deposit will be your hurdle so consider paying the minimum off your loan and save a deposit instead.

$80K is a big target esp if you think it will take 8-9 months to pay off a $23 000 debt.

Why don't you save 20% deposit now (or less) and buy the first property. Set your goal one at a time instead of two at a time - it may be a little more reachable and you will be able to stay focussed easier.

Cheers,

 

[Lissy]

Hi nvaycso
There are two main "gurus" in the wrap arena in Australia.
One is Steve McKnight, as you've already discovered, and he can be found at www.propertyinvesting.com
The other is Rick Otton, his website is www.creativerealestate.com.au
They both have a workbook/manual that you can purchase, and they both run courses occasionally.
At this stage I believe Steve's Wrap Kit is out of stock, but due to be available in the next few months.
Steve ran a seminar a month or so ago, and hasn't released details of any more. Rick has one coming up in November.
Hope that helps.

 

[D.T.]

Hi Chris,

Congrats so far, you're already on the right track.

Some questions for you tho, where do you plan to find $80k properties? There isnt very many of them Also, is Steve Mcknight's the only book on the topic you've read? If so I'd recommend Jan Somers' "More Wealth from Residential Property" and Brad Sugars' "Real Money Real Estate" just so that you can see a couple more of the 1 million ways to skin these cats

I had questions very similar to the ones that you have asked not too long ago, I went to a Navra course and that answered all of them and more. I'd assume you'd be at sea most of the time and wouldnt get a chance to go to one, but i'd definately recommend it if you get the chance.

As for more info on Wrapping, either check out the people that Lissy suggested, or talk to MichaelG on this forum - he was president of the Wraps Association, last i heard.

-Good luck

Dave

 

[navycso]

Thank you

I would like to take the time to thank those people who have replied to my post. With the info you guys and gals have provided me i have gained alot more wealth of knowledge. Again thank you and keep em coming!!!

chris

 

[Kevmeister]

Only you know your risk tolerance, but why wait 2 years to save $80K when you really only need $32K + costs to fund the purchases at 80% LVR. The market will have moved by then.

There have also been a couple of threads I read of late where people have questioned the wisdom of wrapping in the context of the current climate of capital gains. That is for you to decide.

The kind of property you're likely to wrap is probably also the kind of property that is likely to be cashflow positive. Why not [consider] finding a cashflow positive rental property, in which case you potentially also benefit from any future capital gains on the property. If you wrap, you forego any future capital gain on the property.

I would assume that employment in the Defence Forces is relatively secure, so it would seem to me you don't even have to particularly worry about job security for servicing these properties, either.

The $40K per annum you can save is capable of servicing the interest bill on $650K-odd of property, even if they were un-tenanted (ie. worst case scenario). In other words you have massive serviceability.

 

[Corsa]

Originally posted by navycso

How can i avoid paying 48% tax on my positive cashflow??

Hi Chris

I am not sure if you would have a tax problem immediately as you are earning say $40k plus 10k in allowances. Assuming that you also have deductible expenses of around $10k then you would have a taxable income of $40k. If you purchased two IP's for $80k without a wrap with rental income per week of $130 then after 20% costs and interest only repayments on 6.5% you would be ahead by about $700 per IP which equates to $1400 additional taxable income. In this case, the tax bracket you are currently in is that you would pay $2380 and 30% on income earnt over $20,000.

Without the IP's your tax would be around $8380. With the IP's your new tax would be $8,800 equating to an additional $420 in tax. Therefore you are better off by ($1400 - 420) $980 per year.

When your taxable income is getting over $50k and you are paying 42% in tax on amounts over $50k or over $60k and you are paying 47% in tax on amounts over $60k then this is when you may have to think about more advanced minimisation strategies.

In the meantime, strategies that you could employ in the whilst you build up your portfolio is to buy the properties 50% in your name and 50% in your wifes name (or one IP each) so that you keep your income under $50k as long as possible. If you think that one of you is more likely to get a payrise sooner rather than later then adjust the % equity accordingly to minimise your tax bill.

The way I have factored the allowances may not reflect your situation but usually allowances are given to reimburse you for costs that you incur, is this how it works in the Navy?

Cheers

Corsa

 

[Glenn]

Hi Chris,

Mate, great to see you are fired up and looking to do something! It might be worth writing a list of things you hope to achieve with your property investing before settling a strategy.

I am not a financial advisor, nor a millionaire but I do know that there are 2 financial aspects to property investment:

1. Rental Income
2. Capital Growth

It is my firm belief that rental income assists you to pay the loan taken out to buy the property while the capital growth makes you rich.

Have a think about the following scenario for a minute...would you prefer to have a property yielding 10% (taxable as it is income received) with a captial gain of 5% (not taxable until sold) or a property yielding 5% with a long term history of gaining 10%??? What I am trying to get across to you is that you will get gain on gain for the period of ownership through the capital growth of the property but the tax man eagly waits for the rental income and takes his cut at the end of each financial year.

Food for thought

Glenn