Investing dilema opinions/advice

[Zos]

Hello to all firstly!

Been searching the net and it looks like I have found a great site!

I'll try and make this as short as possible and make sure to include the main points.

Basically I am trying to decide what the best way to make my money work.
I have some money tied up in a holiday house that will stay as a holiday house for now. I know it is not the best and would be better to rent it
out to generate some income, but not at the moment.

My current situation is I am renting and rent is costing me $25k a year.

I asked the bank about a bank loan and if we were to borrow around $350k (buy for $430k) the repayments would be pretty much the same as what
I am paying for rent now. I understand that the interest rates will rise in the future and it would be costing more to pay off the mortgage
as opposed to the rent I am paying now. But you also have the benefit of capital gains even if they are minimal.

Currently I have around $110k to play with. So I have thought about a few options.

1. Keep renting as is and buy apartments overseas around $50-60k each and rent them out and get a 6.5% return on them per annum. Once I have saved
up another 50-60K buy another one and keep adding properties to my portfolio.

2.Buy a house here in Australia and put down my $110k deposit. Keep repayments the same as if renting, and keep buying the apartments
overseas once I have enough funds. This will not allow me to pay off my mortgage sooner. But the trade off is that I have 6.5%
per annum returns coming in. And this return could be put forward to help buy more apartments. There would also be capital gains to be made
on these apartments and realistically I am thinking 2% per annum.

So really I could buy 2 apartments now and get the the 6.5% return using my deposit. This would not allow me to buy here in Australia as I
would not have a deposit saved up.

I could potentially be buying apartments overseas once every 18 months taking into consideration my income and expenses.
So in 10 years I could realistically have 9-10 apartments but still be renting here in Australia. Or have 7-8 apartments and be paying of a mortgage on a property in Australia.

There is also the other option of buying new apartments that are bigger but double the price of the smaller ones 100-120k as opposed to 50-60k.
But you would still make the 6.5% rental returns just have less apartments because of the cost. So instead of buying once every 18 month. I would
be buying once every 36 months.

3. Just buy here in Australia and pay off house as soon as possible.

I hope that makes some sort of sense. I have read that overseas property can be deducted from personal income in Australia. This is something
I don't have great insight in and would most likely need to have an accountant do my taxes.

What am I wanting out of all of this. To be in the best financial position in 20 years. Give my kids a good kick start in life.

So I am asking the wise investors on here what would be the better way to go? W

 

[spanna]

where O.S are you looking at buying these apartments?
Cheers

 

[Zos]

In Czech.

The other thing that could go a good way is that the Australian Dollar is pretty strong at the moment so buying OS has its benefits. Then once dollar drops you could potentially sell off and buy back AUD dollars for cheaper or just keep withdrawing the rental income and buying back AUD.

 

[Scott No Mates]

I could potentially be buying apartments overseas once every 18 months taking into consideration my income and expenses.
So in 10 years I could realistically have 9-10 apartments but still be renting here in Australia. Or have 7-8 apartments and be paying of a mortgage on a property in Australia.

Which country? How does its legal system, tax law, tenancy law, property tenure system differ from Australia?

What happens when the $ AU drops to $0.90us? $0.87us? or lower?

What about interest rate movements?

 

[Zos]

Which country? How does its legal system, tax law, tenancy law, property tenure system differ from Australia?

What happens when the $ AU drops to $0.90us? $0.87us? or lower?

What about interest rate movements?

If AUD drops once you have bought properties the better. Lower value dollar means cheaper to buy dollar back. Or if generating rental income over there I will be buying $AUD at a cheaper rate.

Higher dollar good to buy OS as it works out cheaper
Lower Dollar good to sell and buy back AUD.

The only thing is if $AUD goes higher which at the moment the dollar is strong so don't see it going much higher that it would cause any concern. I would not sell if dollar was very high and meant I would lose initial investment. Would wait it out and keep banking foreign currency until the time is right.

Interest rate movements would be of no concern to me as these investment apartments would be bought outright.

The laws are similar to here in Australia. I would not get taxed twice on rental income.

 

[alexlee]

6.5% return + 2% capital gains. You could get that with a share portfolio, with none of the hassles of managing overseas property.

Another option would be to buy investment property in Australia?

 

[Zos]

Managing the property is not an issue have all family over there. I don't really want to go the share portfolio route as that is never guaranteed. If there is a share portfolio that gurantees 8.5% per annum which one should I be looking at?

I could invest here but the way the market is at the moment I am not sure. Plus getting into an investment here I am looking at minimum 450k plus a mortgage and I am certain I would not be making 8.5% per annum if I am making repayments on the loan. So I would be looking at making any gains as in capital gain.

I am also figuring $AUD will drop at some point which would make for awesome money made during conversion.

I made great capital gains previously OS but that was during the boom. If Czech goes to Euro currency prices will go up as well as a result nicely.

But yeah just putting all this out there as I am not 100% sure either.

I like the idea of having 10+ apartments paid for and just collecting rent in the future.

 

[Lovehouses]

You sound quite keen on an apartment in Czech. Why don't you buy one to start with. You can alternate and buy a second apartment in Australia.

 

[Zos]

Yeah I am keen just not sure if this is the best method to use my money. I have just moved back from being in Czech for 5 years so I know the ins and outs. I have bought and sold twice there in that time.

I am just thinking for the future.

 

[Zos]

Or maybe I should ask what would people do with $130k? I asked the bank what kind of loan they can give me based on my salary of around $100k p/a.

Bank will loan me $350K so I can buy for $430K if I take into consideration stamp duty etc. So much for wanting to buy for $600k in a decent area.

So what I don't understand is people having multiple properties earning less and having less saved up but the bank still borrowing them money. Like a while ago I read some young lady having 27 properties on an average salary. Obviously they are all on mortgages. I understand that they are all rentals and this must be the difference in how she gets so many loans.

But how is the bank guaranteed that the housing market does not collapse (UK as an example or USA)? This lady now has 27 properties that each lost 20% value. She can't make repayments (rental has gone down) If she sells to repay bank she will have a massive debt that she cannot repay - Bankruptcy is the answer? Because banks are so careful not to lend you too much in case you can't pay it off or so I found out.

So going by that, there has to be a way to get more out of what I have to work with, than just buying a house for $430K.

One of the reasons I am looking at buying OS outright, no loans, renting them out get some extra income. And here just rent in the nice area we wanted to live in.

 

[dex]

There's a very good chance the AUD will hit parity again and go even higher towards the end of this year and 2015 so take that into account.

 

[Zos]

There's a very good chance the AUD will hit parity again and go even higher towards the end of this year and 2015 so take that into account.

RBA is having a hard time driving the dollar lower. I'll have to watch that dex. Might pay to wait and buy when dollar hits this parity. A lot of my funds at the moment are OS. Might even be worth converting to AUD now and then sell dollar again.

If only we knew what will happen. There are the privelidged few who have access to sensitive data before it is released who use it to make some nice profits.

 

[Zos]

Quick question for the experts. Do you always need to save up 20% of the property cost to get a loan approved for an IP? Or are there ways to use your equity (home you are living in but paying off) and not worry about the 20% deposit?

 

[jingo]

There are the privelidged few who have access to sensitive data before it is released who use it to make some nice profits.

They usually get caught and go to jail for this! I traveled to Prague last year - stunning city. I like your apartment idea. Buy one overseas to start with and see how it goes. I don't know the tax implications etc - you'd need to find out. Otherwise, as Alexlee suggested, gradually buy Australian shares.

 

[Zos]

They usually get caught and go to jail for this! I traveled to Prague last year - stunning city. I like your apartment idea. Buy one overseas to start with and see how it goes. I don't know the tax implications etc - you'd need to find out. Otherwise, as Alexlee suggested, gradually buy Australian shares.

Yeah I think I will most likely give it a go. Just have to decide whether to buy new ones which will be around the 80k mark or buy 30 year old ones that are about 15k cheaper.

The newer ones are nicer brick instead of concrete panels. Maybe better to go the newer ones. Getting tenants in either one is not an issue the small apartments are in high demand. But buying new ones might mean slightly lower rental yield %.

 

[strongy1986]

Hey zos you didn't happen to have a night club in chapel st a few years back!

About the lending though, most people here would do 10% deposits, you said you have kids? That will decrease the amount you can borrow by heaps. Duel income also helps a lot.
What other debts do you have?

Sounds like a pretty low amount the bank is offering you I would go see a mortgage broker

 

[Zos]

Hey strongy no I did not have a nightclub on chapel st.

Yeah I have 2 kids with the wife at home looking after them. We don't have any other debt, but by having the kids it must be greatly effecting my borrowing power. I worked it out the bank is offering to loan me an amount that the repayments are exactly the same as my rent now. I know we can easily afford more. Like you say, maybe see a mortgage broker as $430k does not buy much in the SE of Melbourne.

I am not sure if they can take into account my assets over seas in my lending power? Bank never really discussed that with me.

 

[strongy1986]

Haha sorry about that, there used to be one called zos

Anyway, if your getting an income from those assets then they should include it.

The banks have been pretty generous with us. We have about half mill in loans and our combined income is lower than yours. But I guess we were using it for investment, don't have kids And probably pay a little less tax

 

[Terry_w]

When investing overseas you have to consider the succession laws there in that country too. Not many people would consider this but what would happen to those properties when you die?

 

[Zos]

When investing overseas you have to consider the succession laws there in that country too. Not many people would consider this but what would happen to those properties when you die?

Valid point and luckily I know the answer to that in the country I am talking about. Basically any inheritance would go directly to my children, even if no will was written. By law that is what happens, it would not get forfeited to the state.

It sounds good on paper getting in 50K a year in income from rental after having a portfolio of 10 apartments. 10 years is $500k which is certainly very good for something on the side. By then adding apartments would be a yearly thing with that much money coming on.