Need First Time Investment Advice

[FutureBound]

Hi everyone
I am new to this forum, never actually joined a forum before, anyway I googled Negative gearing verse Positive gearing and it came to a discussion in this forum which was a good read. However it was all based on one type on scenario which was not relevant to me.
I admit I am very uneducated on these topics as it is all so new. I need advice based on my own situation and looking for help. I have a few questions I would like to asked based on my family's current situation.

Our situation;
One income earner on average wage $58,000, we both are early 30's, our home is valued between $400,000 to $450,000, amount owing on home is $86,000. No other debts at all.

1. Is it advisable to invest through a Investors Club instead of doing it ourselves which scares us (due to being new and uneducated) the thought of them doing the homework and run around really appeals to us.

2. Get a Positively Geared property for cash flow and more income or negatively geared property as we have more time.

3. Take out a interest only loan (which I don't fully understand what happens when the interest is paid off - do u start paying the principle then) or principle and interest as are slight worriers that we will never own it.

Any advice for us being First Time Investors would be much appreciated.

 

[Rolf Latham]

Hiya

Welcome and congratulations to be so advanced alrrady in your financials !

You have almost paid your home off..........usually the average Australian manages that in their 50s.

Id suggest you do a lot of reserach before you commit to a strategy and an investment.

Perhaps on of the better things to do at this stage may be to sit with an indepent mortgage broker that knows about investment and is willing to help newbies ( many brokers arent willing to do the groundwork) to see how you can make your current circumstances best work for you.

From there you can then look at the type of investment, the tax issues etc etc

ta

Rolf

 

[Propertunity]

Our situation;
One income earner on average wage $58,000, we both are early 30's, our home is valued between $400,000 to $450,000, amount owing on home is $86,000. No other debts at all.

Congratulations & welcome to the forum - plenty of good stuff in here

1. Is it advisable to invest through a Investors Club instead of doing it ourselves which scares us (due to being new and uneducated) the thought of them doing the homework and run around really appeals to us.

Many people of the forum here would say bad things about TIC while others have only good things to say. If you use the "search" option on the forum here, perform a search for "TIC" and have a read for yourself. Generally speaking though, if you want others to do the homework and run around - then you can use some entity like TIC or even a BA (Buyers Agent) like me or others on the forum but don't fall into the trap of outsourcing your investment decisions.

2. Get a Positively Geared property for cash flow and more income or negatively geared property as we have more time.

There are many many strategies. This is just one. Perhaps it might be an idea to sit down with a good mortgage broker / financial planner and work out some goals first and then the strategy will become obvious from that.

3. Take out a interest only loan (which I don't fully understand what happens when the interest is paid off - do u start paying the principle then) or principle and interest as are slight worriers that we will never own it.

That is a common concern. With IO you never pay down the principal. Why do you want to own it?
Have a read of this thread:
http://www.somersoft.com/forums/showthread.php?t=50517&highlight=IO

Cheers,

 

[FutureBound]

Thank You and thanks for the advice. It seems like such a scary process when your not a gambler so to speak.

 

[FutureBound]

Thank you, your post has been extremely helpful especially a better look into TIC, much appreciated.

 

[rugrat]

Hello!

I think the best thing you could do, before anything else (definitely before making any decisions), is to browse the forums, learn everything you can about PI and then decide what will work best for you in your position. You are talking about a LOT of money when you are talking about PI, so you want to make sure you don't rush in without understanding things. I have still to settle on my first IP (settlement won't happen until early next year), but I have found this forum a wealth of information. There are so many things I have learnt that I didn't even know that I didn't know. I am still learning something new each day, and surprise myself when I actually find I know the answer to a question that is being asked.

Find yourself a book that runs through the basics of property investment. There are many recommended here in the forums. Something as simple as 'Property Investment for dumbies' is a great start and should answer at least some of your questions (although don't be surprise if it raises even more.)

Personally, I'm not into the whole "investor's club", but I know of others who are - it is a personal decision.

I am all for positively geared or nuetrally properties - The hard thing is finding one in an area with high potiental capital gains. But also choosing a property that is either positively or negatively geared, depends as much on your financial situation as anything else. In mine and my hubbys case, we actually end up with better cashflow with a new negatively geared property - because it reduces his taxable income considerably, and he is on a reasonably high income.

Also how you structure the title, is important. We are a single income family (for all intents and purposes), with my DH (darling hubby) on a higher then average wage. So it makes more sense for us at this stage to put a greater proportion of the property in his name, so he can get the greater tax benefits, and doesn't affect my FTB as much, because it doesn't count towards my income.

As for IO loans, they make alot of sense in most people's situations, particularly if you still have debt against your current mortgage. But there are always exceptions to every rule. And the trueth is that you need to do what you feel most comfrotable with yourself.

Doing as much research as you can and considering what kind of strategy you want to use, is the best way to start. What do you hope to gain out of investing in property?

Good luck with everything.

 

[FutureBound]

Thank you also rugrat much appreciated, I just have to keep researching.
Congrats on your property!

 

[antonio]

Welcome aboard Futurebound!

Like yourself, my fiance and I are in the same boat.

The SS Forumites here are mighty friendly and I feel
blessed that I came across this last year but not being
in the position yet to invest.

Now we can!

What we've found helpful to understand the lay of the
land - various strategies and ask people you know who
are actively investing in property.

Here's what I've found in terms of a general holistic bird eye's
view of real estate investing:
(SS veteran investors, please feel free to correct me if I'm outta line)

Capital Gain (ie value of house)
vs
Cashflow (ie rental covering expenses + tax deductions)

Long term strategy of using growing equity in portfolio
vs
quick returns (wraps, options, reno + flip)

Doing investment yourself
vs
Buyers agent and/or property/investor "club"

Here's a thread of Recommended Reading Resources if you
haven't already come across it

http://www.somersoft.com/forums/showthread.php?t=9652

Hope that helps

A

 

[josko]

Hi everyone
I am new to this forum, never actually joined a forum before, anyway I googled Negative gearing verse Positive gearing and it came to a discussion in this forum which was a good read. However it was all based on one type on scenario which was not relevant to me.
I admit I am very uneducated on these topics as it is all so new. I need advice based on my own situation and looking for help. I have a few questions I would like to asked based on my family's current situation.

Our situation;
One income earner on average wage $58,000, we both are early 30's, our home is valued between $400,000 to $450,000, amount owing on home is $86,000. No other debts at all.

1. Is it advisable to invest through a Investors Club instead of doing it ourselves which scares us (due to being new and uneducated) the thought of them doing the homework and run around really appeals to us.

2. Get a Positively Geared property for cash flow and more income or negatively geared property as we have more time.

3. Take out a interest only loan (which I don't fully understand what happens when the interest is paid off - do u start paying the principle then) or principle and interest as are slight worriers that we will never own it.

Any advice for us being First Time Investors would be much appreciated.

Welcome Futurebound.

You have had some good answers to your questions. You do realise you open a can of worms when you ask for our advice?

I'll not give you advice but give you some facts to think about.

Keep in mind that interest rates will rise and be careful of information overload. One step at a time.

Interest Only Loans can usually only be applied for a small period of time. Usually after a period of 5 years they will convert to Principal and Interest for the very reasons you are suggesting. You have the option then to refinance or choose IO again. Speak to your broker about different packages and options.

First of all though, you need to decide the path you are going to travel.


This is how Negative Gearing works.

Your income is $58,000. So you are paying $11,250 in tax Yr 2009-2010.

If you bought a property with a NG shortfall of say $10,000 you would bring your income down to $48,000. You would pay: $8250 in tax instead of $11,250. On this example, you would receive a refund of $3000 for having your property NG.

So effectively, you are actually losing $7000/yr or $134.62/week to keep your property.

(NB: I have not included depreciation which can also help lower your tax.)

It is worth really sitting down and understanding NG so that you can understand how it can work for you. $134.62/week might be too much for you and you might choose to find a positive cashflow or neutrally geared property.

Antonio, you've got it right! I don't think I have seen the different forms of investing compared like that.

Regards JO

 

[travelbug]

Thank You and thanks for the advice. It seems like such a scary process when your not a gambler so to speak.

If you liken property investing to gambling then obviously you need to do a lot more research.

Maybe get some basic property investing books and learn the basic terminology and find out which strategy suits you, then you will be more able to make some sound decisions. It is a huge decision. There are so many different paths to take with property investing. None are right or wrong, just what suits different people.
Do you want to buy and hold, buy and renovate to increase equity then sell/rent? Do you want units, townhouses, houses? The list goes on.

Keep reading here. There are many very clever and successful people here who generously give their time. Good luck. Be careful it gets addictive.

Keep an eye on the meeting section and come to some of the meetups. You get to network with some interesting people (and it's fun).