First time investing - options

[Firstinvester]

Hi there,

I've been reading and learning for a while now and now want to start investing. I do have an idea what I want to do: build my wealth with investment properties and retire early. Well, who doesn;t want that? If I read the investment property magazines, it seems doable, so I want to be an example of how you can do it.

I would value forum members opinions on my personal situation and which strategy I should develop to reach my goal.

I just became self-employed with one major contract worth about $300k pa. I own an investment property which used to be my primary place of residence. I just re-financed it to get it of all other debt and to transfer it into an investment loan which increases my cash flow. The property is currently rented and pays 50% of my mortage costs.

I'd like to build a portfolio and be able to buy a few houses fairly quickly, as I think houses are fairly cheap atm and will go up in value soon.

How should I achieve this? Ideally, I purchase a positive geared property in a high capital growth area and should be able to use savings from this property to purchase another one in 12-18 months. What's the opinion of some more experienced investers?

Also, should I buy the property or my company? If I buy it I pay nearly 50% tax on the income, if the company buys the property it's only 30% but there's CGT which I believe is no way around.

I would really appreciate some opinions and advice. Thank you!

 

[JWR]

Look in your own backyard mate to invest!

Not a genius with structures though

 

[Aaron_C]

Well you just became self employed so you probably won't be allowed to borrow money...you need to be self employed for at least 2 years.

As for structure - consider using trusts.

 

[Firstinvester]

Yes, I became self-employed but I am contracted to the same company as I have been with for over 1 year and I've got a contract in place. I wouldn't think that finance would be an issue?

What's the advantage trust vs company?

 

[WASP]

Those positive cashflow high growth properties sound great. Where are they?

 

[Firstinvester]

Alright, I thought this was a forum with lots of experienced been-there-done-that people who are happy to share their knowledge and experiences. I was obviously wrong. Sorry I asked for advice.

 

[JWR]

No everyone is - just hard to find the properties you are asking - pos cash & high cap growth (and when we do find them we buy them ourselves)

I'm not an expert on loans/structures but others will help just give it time

 

[Firstinvester]

Fair enough, but please note I said 'ideally'. Ideally I'd like to be a millionaire tomorrow but it might not happen, I'm well aware of that.

I'm just after some advice on what I should be looking for. Yes, ideally such a property would be perfect but what else are the options? I just want a few pairs of eyes to glance over my strategy before I start out.

 

[JWR]

Look in Rocky - I own one there and know for a fact there is some good buying atm as there were several I was considering buying.

 

[Aaron_C]

Alright, I thought this was a forum with lots of experienced been-there-done-that people who are happy to share their knowledge and experiences. I was obviously wrong. Sorry I asked for advice.

I'm not sure where you got this impression that no one wants to help you. I'm just giving you practical advice about how lenders would view your situation...

As for the advantages of a trust vs a company - depending on the trust, a trust can distribute income to people other than yourself (such as family members) which may save you tax. It can also give you asset protection, which, since you are self-employed, may be very important for you.

 

[Propertunity]

Alright, I thought this was a forum with lots of experienced been-there-done-that people who are happy to share their knowledge and experiences. I was obviously wrong. Sorry I asked for advice.

A couple of things:
1.Wait longer than 1 hour or so after posting a Q for some responses. It can take some time, not everyone is on at this time of night.
2. The answers to your questions have been answered many times before. Try using google search: site:somesoft.com "whatever you are looking for in these quotation marks"
3. You have not provided enough information to answer. i.e what deposits have you got etc
4. You have asked too many Qs in just 1 post. The personal name, company, trust thingy Q - can take ages to answer just on its own. There are looooooog threads in here on just this one point.
5. High growth, high yields are generally mutually exclusive. There are some exceptions. Here's a give-away-for-free: Buy a house and granny flat in NSW in a high CG area. The yields are increased by the 2 lots of rent.

 

[Firstinvester]

I'm sorry but I misunderstand a couple of posts here which was clear to me after JWR's last post.

I'm not expecting everyone to straight jump onto my question (sorry patience isn't my best attribute), I just had the feeling that this wasn't taken serious and now after my last 'burst' the chances are probably slimmer.

I guess I read too many of those investment magazines today where it all sounds so easy to become a millionaire and live of your assest. Obviously a lot of hard work is involved on getting there. I'm just scared I suppose. Investment Properties cost a lot of money if you do get it wrong, so I'm trying to avoid it, also I'm not sure how.

 

[Propertunity]

Investment Properties cost a lot of money if you do get it wrong, so I'm trying to avoid it,

Understood and also very wise. You are smart enough to know that you don't know enough.

Some suggestions:
1. Read a lot in here
2. Read some books on investing
3. Go to some free seminars
4. Join some investors groups / meet ups
.....in short - get an education.

....also I'm not sure how.

You can get an education or you can hire some professional help or both.
Seek out an experienced property investor friend or relative who can help you.
Find a good mortgage broker - plenty on here.
Find a property savvy accountant.
Seek out and hire an independant Buyers Agent. (apologies for the plug)

 

[JWR]

IMO the only way to get it wrong is to pick the wrong area to invest. Its not really about the asset you buy (unless termite infested etc...) but about the growth drivers of the suburb/region.

You can also pick wrong if its a growing area but you overpay or yields are too low (for me under 7%) - but focus on area selection first.

Before that sit tight and get good advice on loans etc... no point finding a great house then being declined for finance!

 

[JWR]

Also - not that I like paying for things if I can avoid it but...

If you don't know what you are doing its better to pay for it and miss out on a little profit than to not pay for it and do nothing or to do it wrongly and cost you more down the track.

Because getting it wrong is worth Millions $$$

 

[Rolf Latham]

Hi FI

welcome and congrats on landing a 300 k pa contract !

Id suggest the following

find a great accountant to work with so as to make sure you have the right structure in place for your biz, AND your investing. Dont mix the 2

Find a good solicitor to aid you in the legal strcutures and to make sure u are protected. No good getting a great big portfolio and then get taken out by some small thing

Find a good independent mortgage broker that can map/plan where you want to go with the resources you have

ta
rolf

 

[Propertunity]

IMO the only way to get it wrong is to pick the wrong area to invest.

I think it is more than that James (and I know you're trying to be helpful).
You can pick the right area, but choose the wrong type of property
You can buy the right type of property, but choose the wrong street
You can choose the right street in the right area but finance it the wrong way
You can finance it the right way but overpay for it value-wise
You can do everything right and put the wrong tenant in it or choose a dud PM

There are sooooooo many traps for the novice.

 

[JWR]

I did say below that line that you won't make money overpaying but Prop's post is a more comprehensive guide to not lose money at the acquisition point.

 

[Ed Barton]

I just re-financed it to get it of all other debt and to transfer it into an investment loan which increases my cash flow.

what does this mean?

should it have read "I just re-financed it to get rid of all other debt and to transfer it into an investment loan which increases my cash flow."

did you refinance it and pay out other non deductible debt, eg car loan, personal loan, credit card etc?

 

[buster]

I did say below that line that you won't make money overpaying but Prop's post is a more comprehensive guide to not lose money at the acquisition point.

Just have to laugh every time I hear that. Ive been told I over paid lots of time. First time was 20 years ago. IT is now X5, last time was 2 years ago it is now x 25% .