That's the one, but it seems I edited a bit before posting. Got down off my soap-box. LOL
New Investor - very nervous
- Thread starter Darren1968
- Start date
That's the one, but it seems I edited a bit before posting. Got down off my soap-box. LOL
new investor
Thanks for the replies everyone.
I must admit that I am a bit surprised to find that many of you are somewhat negative towards my plans. I guess I still have a lot to learn as to what makes a good investment property.
I am buying a house and land package above an established home for a few reasons. I do not know if they are solid reasons but are obviously the way I think.
1. I can only afford to buy in the northern suburbs of Adelaide where prices are low and capital growth is also low so I believe I have a better chance at short term growth to lower my LVR and enable to me to build on my equity again by building rather than buying establised.
2. Based on the prices I see recently completed homes in this suburb selling for. Asking prices of approx $50,000-$80,000 over the initial building cost within 12 months of completion
3. The amount of ongoing development in the area and the existing infra structure in what is still a relatively new area which bodes well for future growth.
4. The amount of positive things going on in the area in the near future such as a whole army battallion moving here, the setting up of national headquarters for many defence contractors in the area and a huge technology park precinct being built (lots of young engineers looking for places to rent), a planned super school in the area (the states first), the new freeway being built and knowledge of further proposed developments in the area such as Delphins North Lakes Estate which is scheduled to start in two years.
5. The lower costs of building as opposed to buying established (initial price, stamp duty, ongoing maintenance etc)
6. greater benefits from depreciation in the first 5 years.
7. The fact that I can get a beautiful brand new home for less than the price of buying established. This should equate to higher rents and hopefully better tenants.
These are the things that have swayed me in favour of building over buying established.
As far as a long term plan goes I hope to achieve significant growth on the property in the first few years as the area develops and becomes more established. I have already seen this hapen in the earlier stages of the development. I would then use this increased equity to once again build in stage 1 of the above mentioned Delphin North Lakes Estate which I believe will be highly sought after and a sound investment.
After that I would like a few years to settle and reduce my LVR so I can focus on buying established properties with large land content in the northern suburbs with a view to either value adding through renovation or even possible redevelopment in the future.
I plan to buy and hold. I am not interesting in buying and selling in the short term at all.
As far as risk managment.
Well that is a tough one.
My mortgage on my PPOR is very manageable (especially as I have a housemate whose rent covers approx 40% of this).
The investment loan is to be fixed for 5 years which provides insulation from interest rate rises.
I earn good money and being single gives me a lot of free income and in those first five years I will be paying as much off my PPOR as possible to also reduce my LVR.
Combined with the estimated capital growth (increased equity) in the IP I am confident this will provide a level of safety for me.
There is obviously always risk but I believe that by having a low mortgage on my PPOR, a long term fixed rate loan on my IP, a decent income (with good annual raises) and the desire to never be flat broke again (which will curb any silly spending impulse) I will be able to comfortably weather the first few years and set myself up to duplicate the process in the future.
I also have a collection of classic aussie muscle cars and I could sell one to raise cash in the immediate short term but I'd rather stop eating for a month than sell one of my babies.
I have no other financial commintments above my general living expenses which are very reasonable so I dont foresee a couple of interest rate rises necessitating a quick sale in the next few years.
Well now you all have an insight to the way I think. Am I missing anything?
I have not taken this decision lightely and have come to the conclusion that it should work for me and I'd rather take the chance and do nothing and regret it later.
I have everything in place and now it's just a matter of signing on the dotted line.
Thanks for the replies everyone.
I must admit that I am a bit surprised to find that many of you are somewhat negative towards my plans. I guess I still have a lot to learn as to what makes a good investment property.
I am buying a house and land package above an established home for a few reasons. I do not know if they are solid reasons but are obviously the way I think.
1. I can only afford to buy in the northern suburbs of Adelaide where prices are low and capital growth is also low so I believe I have a better chance at short term growth to lower my LVR and enable to me to build on my equity again by building rather than buying establised.
2. Based on the prices I see recently completed homes in this suburb selling for. Asking prices of approx $50,000-$80,000 over the initial building cost within 12 months of completion
3. The amount of ongoing development in the area and the existing infra structure in what is still a relatively new area which bodes well for future growth.
4. The amount of positive things going on in the area in the near future such as a whole army battallion moving here, the setting up of national headquarters for many defence contractors in the area and a huge technology park precinct being built (lots of young engineers looking for places to rent), a planned super school in the area (the states first), the new freeway being built and knowledge of further proposed developments in the area such as Delphins North Lakes Estate which is scheduled to start in two years.
5. The lower costs of building as opposed to buying established (initial price, stamp duty, ongoing maintenance etc)
6. greater benefits from depreciation in the first 5 years.
7. The fact that I can get a beautiful brand new home for less than the price of buying established. This should equate to higher rents and hopefully better tenants.
These are the things that have swayed me in favour of building over buying established.
As far as a long term plan goes I hope to achieve significant growth on the property in the first few years as the area develops and becomes more established. I have already seen this hapen in the earlier stages of the development. I would then use this increased equity to once again build in stage 1 of the above mentioned Delphin North Lakes Estate which I believe will be highly sought after and a sound investment.
After that I would like a few years to settle and reduce my LVR so I can focus on buying established properties with large land content in the northern suburbs with a view to either value adding through renovation or even possible redevelopment in the future.
I plan to buy and hold. I am not interesting in buying and selling in the short term at all.
As far as risk managment.
Well that is a tough one.
My mortgage on my PPOR is very manageable (especially as I have a housemate whose rent covers approx 40% of this).
The investment loan is to be fixed for 5 years which provides insulation from interest rate rises.
I earn good money and being single gives me a lot of free income and in those first five years I will be paying as much off my PPOR as possible to also reduce my LVR.
Combined with the estimated capital growth (increased equity) in the IP I am confident this will provide a level of safety for me.
There is obviously always risk but I believe that by having a low mortgage on my PPOR, a long term fixed rate loan on my IP, a decent income (with good annual raises) and the desire to never be flat broke again (which will curb any silly spending impulse) I will be able to comfortably weather the first few years and set myself up to duplicate the process in the future.
I also have a collection of classic aussie muscle cars and I could sell one to raise cash in the immediate short term but I'd rather stop eating for a month than sell one of my babies.
I have no other financial commintments above my general living expenses which are very reasonable so I dont foresee a couple of interest rate rises necessitating a quick sale in the next few years.
Well now you all have an insight to the way I think. Am I missing anything?
I have not taken this decision lightely and have come to the conclusion that it should work for me and I'd rather take the chance and do nothing and regret it later.
I have everything in place and now it's just a matter of signing on the dotted line.
Darren I emailed you the software. Let me know if it works
That's not something we encourage. Especially if it's PIA, the software produced by the people who make this site possible.
Hi Darren,
Some people prefer to do renos, and/or buy in more established suburbs and would not dream of building a new house in an outer suburb. I think it is a personal preference, everyone will have a different strategy that works for them. So don't be too discouraged, take what people have to say on board but you have to make up your own mind.
We are also building a house in Smithfield Plains. I would be interested to know about the house you are building - how many bedrooms, bathrooms etc? How big is the house and block size?
Has a soil test etc been done yet? If not you may be up for additional costs if the builder has made optimistic assumptions. Also check whether the mandatory rain water tank is included in the price, they might just do the plumbing and leave you to supply the tank.
Some people prefer to do renos, and/or buy in more established suburbs and would not dream of building a new house in an outer suburb. I think it is a personal preference, everyone will have a different strategy that works for them. So don't be too discouraged, take what people have to say on board but you have to make up your own mind.
We are also building a house in Smithfield Plains. I would be interested to know about the house you are building - how many bedrooms, bathrooms etc? How big is the house and block size?
Has a soil test etc been done yet? If not you may be up for additional costs if the builder has made optimistic assumptions. Also check whether the mandatory rain water tank is included in the price, they might just do the plumbing and leave you to supply the tank.
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new home
Rest assured that the software provided by Ahmad was not PIA. It was a generic calculator to better help me understand the tax implications.
I am seriously considering buying the PIA software though. I have looked at the demo and it is quite comprehensive.
The home I am planning to build is the "Kingsborough" by Hickinbotham homes.
I looked at the Devine packages and was not impressed at all. I can buy a Hickinbotham home that is almost 1/3 bigger for the same cost.
The land size is smaller than I would like but unfortunately that isn't going to change with any of the new estates going ahead at the moment in that area.
I have a few blocks to choose from which are all around the 450sqm. There are larger 600sqm blocks available but they may make the purchase out of my price range. I am yet to sit down and pick a block of land.
I have gotten comprehensive quotes from Hickinbotham which include all the extra's I require such as ducted reverse cycle air conditioning, driveway, paths, floor coverings, upgrade to stainless appliances, overhead kitchen cupboards, rain water tank supplied and plumbed to the loo's. All utility connections are included as is stormwater to the street, The list is quite comprehensive.
I will need to supply a clothesline, light fittings, curtains/blinds, letterbox, lawn and garden beds. I can get all of that done for a couple of grand and a weeks hard work.
The quoted figure also includes soil tests, engineers reports and also allows for the maximum cost of footings which should not be necessary but I wanted to quote worst case scenario.
The home includes 3 bedrooms with ensuite and master to the main. Beds 2 and 3 have built in robes. There is a double garage under the main roof and two living areas.
The total home size is 182sqm (19.56 squares) including garage. Living area is 144.5 sqm.
A floor plan is available at http://www.hickinbotham.com.au/Courtyard/kingsborough.htm
I intend to meet the sales agent this week to discuss the available land and make a few slight alterations to the quoted items/specification before making a final decision.
Rest assured that the software provided by Ahmad was not PIA. It was a generic calculator to better help me understand the tax implications.
I am seriously considering buying the PIA software though. I have looked at the demo and it is quite comprehensive.
The home I am planning to build is the "Kingsborough" by Hickinbotham homes.
I looked at the Devine packages and was not impressed at all. I can buy a Hickinbotham home that is almost 1/3 bigger for the same cost.
The land size is smaller than I would like but unfortunately that isn't going to change with any of the new estates going ahead at the moment in that area.
I have a few blocks to choose from which are all around the 450sqm. There are larger 600sqm blocks available but they may make the purchase out of my price range. I am yet to sit down and pick a block of land.
I have gotten comprehensive quotes from Hickinbotham which include all the extra's I require such as ducted reverse cycle air conditioning, driveway, paths, floor coverings, upgrade to stainless appliances, overhead kitchen cupboards, rain water tank supplied and plumbed to the loo's. All utility connections are included as is stormwater to the street, The list is quite comprehensive.
I will need to supply a clothesline, light fittings, curtains/blinds, letterbox, lawn and garden beds. I can get all of that done for a couple of grand and a weeks hard work.
The quoted figure also includes soil tests, engineers reports and also allows for the maximum cost of footings which should not be necessary but I wanted to quote worst case scenario.
The home includes 3 bedrooms with ensuite and master to the main. Beds 2 and 3 have built in robes. There is a double garage under the main roof and two living areas.
The total home size is 182sqm (19.56 squares) including garage. Living area is 144.5 sqm.
A floor plan is available at http://www.hickinbotham.com.au/Courtyard/kingsborough.htm
I intend to meet the sales agent this week to discuss the available land and make a few slight alterations to the quoted items/specification before making a final decision.
It's good to hear that it's all above board.
I know how ya feel
Hey Darren,
hang in there. I know exactly how you feel, I have just made an offer on my 3rd IP, and I only started last October. I have not told any of my non-realestate friends about it yet, as I do not want to listen to their negativities.
I had looked at the new H&L at Andrews Farm, but I have deciced to buy something not so new around the same area. I rang a Prop Mnager in the area, and she said cos there is a lot of IPs in that area, they are taking a while to rent. Just go onto www.realeastate.com.au and have a look how many are there. For that price if it is a 3 bedroom, one bathroom, single garage, you can buy them for about $200 -210K in the old Andrews Farm and with the new developments around the old Andrews Farm will certainly rise with them and the new road going up, and more and more Defence jobs in the area. With the depreciation on the new place though, it will help your negative costs for about the first 5 years.
I will try and send you a spreadsheet, when I find your personal email, that I got fm here, if you do not get it, pls email me on [email protected]
Just make sure you have gone through your worst case scenarios, and try and make it work for you. Don't spk to any of your friends who do not know anything about IPs and investing, they will only make you feel more nervous. If you can afford it, just do it, and the next will be easier.
Cheers
Hey Darren,
hang in there. I know exactly how you feel, I have just made an offer on my 3rd IP, and I only started last October. I have not told any of my non-realestate friends about it yet, as I do not want to listen to their negativities.
I had looked at the new H&L at Andrews Farm, but I have deciced to buy something not so new around the same area. I rang a Prop Mnager in the area, and she said cos there is a lot of IPs in that area, they are taking a while to rent. Just go onto www.realeastate.com.au and have a look how many are there. For that price if it is a 3 bedroom, one bathroom, single garage, you can buy them for about $200 -210K in the old Andrews Farm and with the new developments around the old Andrews Farm will certainly rise with them and the new road going up, and more and more Defence jobs in the area. With the depreciation on the new place though, it will help your negative costs for about the first 5 years.
I will try and send you a spreadsheet, when I find your personal email, that I got fm here, if you do not get it, pls email me on [email protected]
Just make sure you have gone through your worst case scenarios, and try and make it work for you. Don't spk to any of your friends who do not know anything about IPs and investing, they will only make you feel more nervous. If you can afford it, just do it, and the next will be easier.
Cheers
Spreadsheet ??
Hi Darren,
I am confused. I cannot get to your personal email, and I tried to upload it on here, but it is too big.
If you go to the information resources area in here, there are calculators in there, but I have had mine updated for the current taxes. Anyway, you can still email me direct, and I will send it to you. [email protected]
cheers
Hi Darren,
I am confused. I cannot get to your personal email, and I tried to upload it on here, but it is too big.
If you go to the information resources area in here, there are calculators in there, but I have had mine updated for the current taxes. Anyway, you can still email me direct, and I will send it to you. [email protected]
cheers
Hi Darren.
Regardless of negative or positive replies you may get, just keep going forward.
The main thing is that you are actually doing SOMETHING.
We all do things that someone else may have done differently, but that doesn't make it wrong. You do what feels right for you at any given time.
Further down your investing path, you may change your strategy (or you may not).
Just keep trying to educate yourself and keep an open mind.
All the best.
Regards
Marty
Nice House Darren and really smart move. Buy into the Devine estate but use cheaper builder to lock in immediate equity. We try to use same strategy.
I think 450m2 is fine for a block size. Our blocks in Smithfield and Smithfield Plains (new homes) are 392m2 and 375m2 (smaller homes on them then yours though) and we are seeing good CG and have a good tennant. We are getting $210/week rent in the Smithfield one which is inferior to the house you are going to build in size and fittings (ie. its only 130m2 total or 118m2 plus single garage and only has single bathroom, basic fittings etc). Our Smithfield Plains one is almost finished and it is about same size as our other one but has 2 bathrooms. It has been appraised for $220-$240 per week rent. So I suspect this place you are building should be able to get more than that. Maybe PM Xenia who may be kind enough to offer an appraisal re. rental etc.
Seems like you have done your homework to me and are going inb with eyes open re. all potential building costs etc. The figure of around $2.7k re stamp duty was correct by the way as we bought land in Adelaide last year for 69k and paid around $1.6-$2k or so.
Don't let knockers put you off building as opposed to established, it can be really rewarding if you go in with your eyes open re. potential risks and costs etc. A lot of people get mixed up thinking buying new means a completed turn key project with developers margin etc, but this is just not true when you are buying land and building on it using an affordable builder as you are.
Our current strategy is totally involved around buying land and building a home on it and renting out for long term hold. We have made some mistakes along the way but get smarter each time and have learnt heaps re. what builders to use etc thanks largely to this forum. The strategy is working for us and can work for you to.
Go for it I reckon
Jase
Rentals in Andrews Farm
Poppy,
the RE just said that the new ones were taking a month to rent out, where as the older ones were getting rented out straight away. It may have been that time of the month, as I looked at the rentals site last night, and there was only a few, compared to when I looked about a month ago there was heaps.
Just as long as Darren does go ahead, he can't go wrong, old or new.....
Poppy,
the RE just said that the new ones were taking a month to rent out, where as the older ones were getting rented out straight away. It may have been that time of the month, as I looked at the rentals site last night, and there was only a few, compared to when I looked about a month ago there was heaps.
Just as long as Darren does go ahead, he can't go wrong, old or new.....
replies - thanks
Some interesting and informative replies there. Thank you all very much.
The only thing holding me back at the moment is the fact that I cannot figure out how much this is going to cost me out of my pocket each week.
I'm also absolutely stumped as to how much it would rent for. I'm guessing $225 a week based on what I see on the internet but I guess 10% either way would be close to the mark.
I have all my finance sorted and ready to go but that doesn't make it any easier.
I also want to see an accountant (I have been recommended one who specialises in property investment) through a friend who has several properties so that I can get the figures crunched by a professional.
I am seriously now seriously considering buying a cheaper property in the Elizabeth East area with a lot more land. Obviously the rent is lower and probably the possible capital growth but then again the loan is much more manageable.
Dammit!! Why is this soo hard. lol
Some interesting and informative replies there. Thank you all very much.
The only thing holding me back at the moment is the fact that I cannot figure out how much this is going to cost me out of my pocket each week.
I'm also absolutely stumped as to how much it would rent for. I'm guessing $225 a week based on what I see on the internet but I guess 10% either way would be close to the mark.
I have all my finance sorted and ready to go but that doesn't make it any easier.
I also want to see an accountant (I have been recommended one who specialises in property investment) through a friend who has several properties so that I can get the figures crunched by a professional.
I am seriously now seriously considering buying a cheaper property in the Elizabeth East area with a lot more land. Obviously the rent is lower and probably the possible capital growth but then again the loan is much more manageable.
Dammit!! Why is this soo hard. lol
Tis OK...........
Just found the thread I wanted:
http://www.somersoft.com/forums/showthread.php?t=32245&highlight=holding+costs
Have a read of these and see how you go
ciao
Nor
Just found the thread I wanted:
http://www.somersoft.com/forums/showthread.php?t=32245&highlight=holding+costs
Have a read of these and see how you go
ciao
Nor
Darren,
There is also a way you can reduce the money coming out of your pocket each week for the shortfall between your rent and your costs - by completing a Income Tax Withholding Variation (ITWV) from the ATO (go to their website, Income Tax Withholding Variation ). Effectively you get your tax refund component early to help with cash-flow.
I am settling on an IP in Adelaide in a couple of weeks and got depreciation report quotes from Herron Todd White and Washington Brown Group - this will also reduce the weekly shortfall as mentioned already.
At the end of the day everyone has their own Property Investing style - mine is established houses in sub-blue chip areas that will go in the future. Yours may be new houses in outer suburbs - whatever suits you.
CR
There is also a way you can reduce the money coming out of your pocket each week for the shortfall between your rent and your costs - by completing a Income Tax Withholding Variation (ITWV) from the ATO (go to their website, Income Tax Withholding Variation ). Effectively you get your tax refund component early to help with cash-flow.
I am settling on an IP in Adelaide in a couple of weeks and got depreciation report quotes from Herron Todd White and Washington Brown Group - this will also reduce the weekly shortfall as mentioned already.
At the end of the day everyone has their own Property Investing style - mine is established houses in sub-blue chip areas that will go in the future. Yours may be new houses in outer suburbs - whatever suits you.
CR
Darren
The term in here is often called analysis paralysis.
While anything I say cannot be construed as advice (and that goes for anybody else who says anything in this forum) I'd be suggesting a few things
1. Your lending institution is comfortable with your debt. That means that they have run your figures through all sorts of mathematical equations, and decided that you pose a low risk (base on what you have told them), and based on the value of the property.
A house and land package will provide you with some good depreciation benefits. That should provide you with some tax breaks.
You mention an army battallion moving there. Could you check if your property is eligible for a DHA lease? Check out http://www.dha.gov.au/for-investors/lease and http://www.dha.gov.au/for-investors/lease/requirements/adelaide .
DHA give 6-9 year leases, with an option at the end. The management costs are high, but the benefits are good, and the security of a long lease can be well regarded by some lending institutions, as well as giving you peace of mind.
This could well fit in with your view of buy and hold- although it may hold back the property value when you do need to revalue.
(Though, in a new area, be careful about depending on cap growth. If there's a lot of spare land around, this may not happen in the short term. It may depend on the longer term availability of land).
450sqm is very small. It doesn't leave anything more for expansion, and it leaves the potential for problems with neighbours. But it IS the way things are going now.
2. In terms of what it will rent for... call a few agencies, posing as a potential tenant looking to move into the area in 12 months, and check the figures.
3. What will it cost? The demo of PIA you now have should be able to give you some numbers. Be very conservative on growth figures, and liberal on cost growth.
Good luck with it, and keep us informed.
spread sheets
Thanks for those links Nor. I found one very useful spreadsheet that really helped settle the nerves as far as out of pocket expenses go.
Thanks also to GeoffW. Some good advice there.
I have considered DHA (as I'm ex-military myself I know a bit about them) but the list of inclusions they expect in the home unfortunately stretches my budget just a little too far.
They expect a covered pergola, downlights to kitchen benches and quite a few other little things that don't seem like much but soon add up.
I'm also pretty comfortable with the estimated maintenance costs being a new house. I don't foresee any thing major in the first few years. After that I'll be in a much better position to cope with anything that pops up anyway.
I am confortable contributing $200 a week to this property out of my pocket and all the calculators I have found show the figure is more likely to be slightly below that.
I have always intended to apply to vary my weekly tax so as to further ease the burden on repayments.
It is very exciting and yet scary at the same time.
I also love the term Analysis Paralysis. That sums it up perfectly.
The next one will be easier as I'll have a better understanding of all the costs etc.
Could anyone also suggest a rough figure of what I would be looking at for depreciation on things other than the construction costs? I fully intend to get a professional depreciation schedule done but a rough total estimate from someone who has built a similar property would be helpful for further analysis.
Thanks again everyone. You are all extremely helpful.
Thanks for those links Nor. I found one very useful spreadsheet that really helped settle the nerves as far as out of pocket expenses go.
Thanks also to GeoffW. Some good advice there.
I have considered DHA (as I'm ex-military myself I know a bit about them) but the list of inclusions they expect in the home unfortunately stretches my budget just a little too far.
They expect a covered pergola, downlights to kitchen benches and quite a few other little things that don't seem like much but soon add up.
I'm also pretty comfortable with the estimated maintenance costs being a new house. I don't foresee any thing major in the first few years. After that I'll be in a much better position to cope with anything that pops up anyway.
I am confortable contributing $200 a week to this property out of my pocket and all the calculators I have found show the figure is more likely to be slightly below that.
I have always intended to apply to vary my weekly tax so as to further ease the burden on repayments.
It is very exciting and yet scary at the same time.
I also love the term Analysis Paralysis. That sums it up perfectly.
The next one will be easier as I'll have a better understanding of all the costs etc.
Could anyone also suggest a rough figure of what I would be looking at for depreciation on things other than the construction costs? I fully intend to get a professional depreciation schedule done but a rough total estimate from someone who has built a similar property would be helpful for further analysis.
Thanks again everyone. You are all extremely helpful.
Darren
Something to consider whn building a house for DHA standards.
Yes, it will cost more for those inclusions.
But they will add to the capital value of the house, so your money will not be wasted- and you will get the depreciation along the line.
Also- some banks will allow 100% of rents as servicibility when a house has a long term lease. That can be a huge help further down the line. (It's rare, I know. But my bank gave me that much. 70-80% might be more normal. ).
Also check the market rents vs DHA rents with the extra inclusions (though bear in mind that DHA charge 15% (+GST) management fee. That was a kiuller when the marhet fee was 7%-= now it's 8-9% plus extras, letting fees, etc- DHA seems not so bad now. Especially considering the free routine maintenance. I've paid zilch management above my 15% (+GST) for the last ten years now- it's become quite attractive considering property maintenance and relet fees on my other props.
Depreciation- I don't have the figures. 2.5% of the building cost. There's a few Quantity Surveyors out there (eg depreciator or WashingtonBrown.
But you're getting bogged down in the details.
The big picture is capital growth.
If you really think that you area is up for some good cap growth, and you believe in it, then it's your decision where to go. The growth will be your big benefit.
You've indicated that your repayments are bearable. You've probably factored in rent and interest payments- and even depreciation on buildings- other depreciation would just be a bonus.
Darren, I've had some huge capital growth in my properties. Of course, I bought them at the start of a boom, so what has happened to me is not indicative (past performance etc...).
But, at the end of the waiting game, a well chosen property should have risen at a reasonable percentage over a good number of years.
And the amount you're paying for it will only have changed in proportion to market interest rises.
And, even better- rents will probably have risen.
So your weekly expenses will have dropped (well, after a few years, there's a few maintenance items), rents will have gone up, and you're now getting back more than you're paying.
But on the big numbers...
Flock of bats. Bought for $490K in about 2001. Sold in 2006 for $770K.
So what income I earned, what tax I paid, is peanuts.
I was getting, after expenses, perhaps $15K pa profit. And I would have kept them, forever, if I had been able.
But I needed some cash for the business- and there it was . $280K (less CGT).
I'm not unhappy about that result at all.
Something to consider whn building a house for DHA standards.
Yes, it will cost more for those inclusions.
But they will add to the capital value of the house, so your money will not be wasted- and you will get the depreciation along the line.
Also- some banks will allow 100% of rents as servicibility when a house has a long term lease. That can be a huge help further down the line. (It's rare, I know. But my bank gave me that much. 70-80% might be more normal. ).
Also check the market rents vs DHA rents with the extra inclusions (though bear in mind that DHA charge 15% (+GST) management fee. That was a kiuller when the marhet fee was 7%-= now it's 8-9% plus extras, letting fees, etc- DHA seems not so bad now. Especially considering the free routine maintenance. I've paid zilch management above my 15% (+GST) for the last ten years now- it's become quite attractive considering property maintenance and relet fees on my other props.
Depreciation- I don't have the figures. 2.5% of the building cost. There's a few Quantity Surveyors out there (eg depreciator or WashingtonBrown.
But you're getting bogged down in the details.
The big picture is capital growth.
If you really think that you area is up for some good cap growth, and you believe in it, then it's your decision where to go. The growth will be your big benefit.
You've indicated that your repayments are bearable. You've probably factored in rent and interest payments- and even depreciation on buildings- other depreciation would just be a bonus.
Darren, I've had some huge capital growth in my properties. Of course, I bought them at the start of a boom, so what has happened to me is not indicative (past performance etc...).
But, at the end of the waiting game, a well chosen property should have risen at a reasonable percentage over a good number of years.
And the amount you're paying for it will only have changed in proportion to market interest rises.
And, even better- rents will probably have risen.
So your weekly expenses will have dropped (well, after a few years, there's a few maintenance items), rents will have gone up, and you're now getting back more than you're paying.
But on the big numbers...
Flock of bats. Bought for $490K in about 2001. Sold in 2006 for $770K.
So what income I earned, what tax I paid, is peanuts.
I was getting, after expenses, perhaps $15K pa profit. And I would have kept them, forever, if I had been able.
But I needed some cash for the business- and there it was . $280K (less CGT).
I'm not unhappy about that result at all.
