Helping a mate spend $100000

[JCat]

G'day, i'm after some opinions...I'll try and keep it short and sweet.

A mate just received above amount of money through a will, he has no assets and still lives at home with Mum
He is a sub contractor chippy so work can be up and down, so borrowing may be limited?

He wants to get a rental in Geelong, units $180k-$220k, houses $250k-$300k.

What do you think is the best way for him to take advantage of that money?

If he puts it all in one property, he may not get any tax advantages?

If he wants to buy 2 properties, he may not get finance and/or be able to cover it when work slows??

What do you learned people think?

 

[jim1964]

Nice position to be in.Personally i would buy 2 properties at a 90% lend.You will pay LMI but by doing this it should leave some change as a buffer for unexpected bills etc.
Talk to a few brokers,there are a few on here which if asked will give you a straight answer.

 

[JWR]

I'd buy + cashflow properties (5 of them at 150k, 90% LVR with the 25k left to pay for stamp duty etc...) so he doesn't have to worry about paying the mortgage.

 

[HotRod]

If he puts it all in one property, he may not get any tax advantages?

You get these "tax advantages" when your property costs more than it gives you back, that is, you LOSE money.

I would be jumping for joy if I had to pay tax.

Means you are making money.

BUT, I will not pay any more tax than I legally have to.

 

[Peter_Tersteeg]

The suggestion for 2 houses or units at 90% is a reasonable one but it's more likely to be negative geared and will cost your mate to hold it from one month to the next.

If he bought a single property he could likely get it close to neutral geared. The downside to this is he only gets to access so much property (it's all about control in the long term).

Long term I think Geelong is a good area. Values can be affected by the employment situation at Ford, but it's by no means a small town, there's plenty of diversification and there's plenty of longer term growth and demand prospects.

 

[JCat]

I'd buy + cashflow properties (5 of them at 150k, 90% LVR with the 25k left to pay for stamp duty etc...) so he doesn't have to worry about paying the mortgage.

Not sure he wants to get in that heavily straight up, mmm they'd be pretty close to positive too.

You get these "tax advantages" when your property costs more than it gives you back, that is, you LOSE money.

I would be jumping for joy if I had to pay tax.

Means you are making money.

BUT, I will not pay any more tax than I legally have to.

Yeah, fair point! So you think just a single property? House or unit?

 

[HotRod]

Not sure he wants to get in that heavily straight up, mmm they'd be pretty close to positive too.



Yeah, fair point! So you think just a single property? House or unit?

I'd look at it this way.

You could just put the money into a cash management account and earn about $3000pa after tax. You capital is preserved and you have a guarenteed income (that might go up or down).

If you say invested that $100K in a house for $300K, you'd probably be looking at a cash flow of about NIL to $1000pa (after depreciation and assumes about you are still working) BUT the house could increase or decrease in value.

Just need to weigh up if it's worth the risk.

 

[jackbak]

You get these "tax advantages" when your property costs more than it gives you back, that is, you LOSE money.

I would be jumping for joy if I had to pay tax.

Means you are making money.

BUT, I will not pay any more tax than I legally have to.

But in this case he may only be making that profit because he is putting down a deposit of around 50%.

I'd be buying two properties around the $200-250 mark.

 

[wobbycarly]

Subscribing to this thread because it's partly about Geelong...

 

[JCat]

Yes, he will be using the whole 100k as a deposit, but remember his employment is a little up and down being a subby so are the banks going to lend for 2 properties??

 

[matto_]

whats the purpose of buying the props. Have you worked out the strategy/goals with him.

Also - how active is he wanting to be in his investment. Being a chippy he could be leveraging from his building knowledge and experience to do more active approaches liek reno's.

Also - Y G-town?

 

[JCat]

whats the purpose of buying the props. Have you worked out the strategy/goals with him.

Also - how active is he wanting to be in his investment. Being a chippy he could be leveraging from his building knowledge and experience to do more active approaches liek reno's.

Also - Y G-town?

Purpose- to put his money where it's safe (comparitively).

Strategy- buy and forget about it..

Goals- grow a bit of wealth over time.

How active- not very, he's a chippy all week and cant be stuffed on w'ends.

Y G-town?- Cause he loves the Cats!!

 

[matto_]

Purpose- to put his money where it's safe (comparitively).

Strategy- buy and forget about it..

Goals- grow a bit of wealth over time.

How active- not very, he's a chippy all week and cant be stuffed on w'ends.

Y G-town?- Cause he loves the Cats!!

Safety - it is all relative. Are Geelong prices safe?

You could go worse than geelong - 8% per year growth over last 10 years, and approx. 50% over last 5.

Next step - would be getting down to the micro level DD.

G-Town - I like the cats also - but dont really use this as part of my investing strategy.

BTW - agreed - GO CATS.