Whilst I am finding many properties wherein the rent covers the interest on an interest only loan at the current low rates of sub 5% for resi IPs, I find that once you factor in PM costs, insurance, strata fees, local council levies, sundries, there is no cash flow positivity. I suspect that to get the positive cash flow, we are dependent on the tax deduction and depreciation.
Someone help!
- Thread starter trey
- Start date
Whilst I am finding many properties wherein the rent covers the interest on an interest only loan at the current low rates of sub 5% for resi IPs, I find that once you factor in PM costs, insurance, strata fees, local council levies, sundries, there is no cash flow positivity. I suspect that to get the positive cash flow, we are dependent on the tax deduction and depreciation.
Hi guys got a few questions i would like your advice on.
My names trey and live in NSW with the parents. Im 24. Ive got 200k saved for a deposit and im currently saving around 3k a week. people tell me i should buy a house which i would rent out because its better than having money doing nothing for you. Ive been looking around and houses are espensive! im scared about jumping into a mortage at 24 and often wonder what would happen to all these people who have large mortages if there was a crash! i no no one can tell me exactly what to do but would just like peoples insights if they were in my situation.
With 200k you could buy a house outright and have 50 k to spare. The average mortgage is only about 50% of value, if there is a crash their will be little consequence for most people as they wont be forced to sell, but they will be able to pick up a bargain. With 3000k a week income you must pay a lot of tax so it shouldn't be hard to get a cash flow neutral property
Who are these people
Prices will go up, down and sideways at various times within the cycles, but like the share-market, the long term trend is up
Hi guys got a few questions i would like your advice on.
My names trey and live in NSW with the parents. Im 24. Ive got 200k saved for a deposit and im currently saving around 3k a week. people tell me i should buy a house which i would rent out because its better than having money doing nothing for you. Ive been looking around and houses are espensive! im scared about jumping into a mortage at 24 and often wonder what would happen to all these people who have large mortages if there was a crash! i no no one can tell me exactly what to do but would just like peoples insights if they were in my situation.
Savings of $200 k is a "massive" effort, as is saving $3 k a week or $156 k a year - congratulations
These people telling you to buy a house must be different people than those telling you to wait until prices drop?
Where have you been looking that houses are expensive, there maybe others in a different location that are cheaper?
Play around with a spreadsheet and some scenarios and assumptions
- What if interest rates rise
- What if interest rates fall
- What happens if you have no tenant for x weeks
- What happens if your property achieves 10% Capital Growth
- What if Rents increase
- What if you have to decrease rent
- How much could you borrow at 50,60,70,80,90% LVR
- How will investing affect your taxable position
- How about renovations, developing, investing overseas
Most of all...Have fun
The below is just a scenario for illustration purposes only, but someone with $200k could potentially control around $530,000 of capital by
Allocating 50% to Shares and 50% to Investment Property
- IP's Leveraged at 70% (You could purchase a Residential IP up to $330k)
- Shares Leveraged at 50% (You could purchase Managed Funds up to $200k)
You could capitalise purchase costs or chip in with another 10 weeks of savings at $3k p/wk
Further annual assumptions for this illustration of:
- Interest rates of 7%
- Share returns of 10%
- Property returns of 4.5%
- Property costs of 2%
Cashflow of around
-$45 per week
-$2,333 per annum
Play around with figures as you want
I should have become a tradie.
Who are these people
Prices will go up, down and sideways at various times within the cycles, but like the share-market, the long term trend is up
Savings of $200 k is a "massive" effort, as is saving $3 k a week or $156 k a year - congratulations
These people telling you to buy a house must be different people than those telling you to wait until prices drop?
Where have you been looking that houses are expensive, there maybe others in a different location that are chea
Play around with a spreadsheet and some scenarios and assumptions
- What if interest rates rise
- What if interest rates fall
- What happens if you have no tenant for x weeks
- What happens if your property achieves 10% Capital Growth
- What if Rents increase
- What if you have to decrease rent
- How much could you borrow at 50,60,70,80,90% LVR
- How will investing affect your taxable position
- How about renovations, developing, investing overseas
Most of all...Have fun
The below is just a scenario for illustration purposes only, but someone with $200k could potentially control around $530,000 of capital by
Allocating 50% to Shares and 50% to Investment Property
- IP's Leveraged at 70% (You could purchase a Residential IP up to $330k)
- Shares Leveraged at 50% (You could purchase Managed Funds up to $200k)
You could capitalise purchase costs or chip in with another 10 weeks of savings at $3k p/wk
Further annual assumptions for this illustration of:
- Interest rates of 7%
- Share returns of 10%
- Property returns of 4.5%
- Property costs of 2%
Cashflow of around
-$45 per week
-$2,333 per annum
Play around with figures as you want
Hi redwing, thanks for that im in the process of making a spreadsheet suited to me. yes my taxable position is another reason im wanting to invest.
hi Lucerocks yes my only regret isnt that i didnt leave school earlier!
Haha, mate you're going to be so far ahead of the pack by the time you're 30 you won't even think about school!
200k at 24? When will it be my turn...
On a more serious note, I've just joined the forums after recently purchasing a PPR. My suggestion is, read the stickies, the FAQs and the various strategies floating around. Do a goals list and see which strategy will work out the best for your circumstances. I've spent hours reading here for about 3-4 days and I've only just begun to get a little understanding of IP. Good luck and have fun mate!
On a more serious note, I've just joined the forums after recently purchasing a PPR. My suggestion is, read the stickies, the FAQs and the various strategies floating around. Do a goals list and see which strategy will work out the best for your circumstances. I've spent hours reading here for about 3-4 days and I've only just begun to get a little understanding of IP. Good luck and have fun mate!
Just a quick update ive now saved 220k and i have been talking to lots of different people about different strategies. one guy who is also my age gave the advice of be in as much debt as possible at as young as possible while you can manage it because it wont get easier and for tax reasons. He went on to say he was in 1.2mill of debt with three houses and if anything happened he could just sell up. Scary i thought but then he said "you have to risk it to get the biscuit" lol.
Another said Pay of your Ips and get them positively geared. Another person said go Interest only with offset accounts and use the banks money not your own to fund your IPs. So everyone has there own different view. Im now ready to talk to Professional people but unsure in what order and who actually. I no i need banks, broker, accountant, financial planner real estate agents. My question is who would be the best person to talk to first about planning a strategy?? I know i need a whole team of the people mentioned i just want to no who you experienced guys would talk to first. Thanks
Another said Pay of your Ips and get them positively geared. Another person said go Interest only with offset accounts and use the banks money not your own to fund your IPs. So everyone has there own different view. Im now ready to talk to Professional people but unsure in what order and who actually. I no i need banks, broker, accountant, financial planner real estate agents. My question is who would be the best person to talk to first about planning a strategy?? I know i need a whole team of the people mentioned i just want to no who you experienced guys would talk to first. Thanks
Personally I would go and visit a financial planner that I felt confident with and start talking about future goals.
Investing is property is a path to accumulating wealth but how you set up things and whether it suits your needs is best left to a professional.
Investing is property is a path to accumulating wealth but how you set up things and whether it suits your needs is best left to a professional.
Sorry.............. did you say direct property and planning ?
You will be hard pressed, there arent many that DO work with direct property AND dont have their "own" product to sell, and still have PI cover that would cover them.
My advice is to not exclude a planner, but first and foremost work with a generalist that can identify what you want, why you want it and what your risk profiles are, thence an accountant and a solicitor to structure Holding entities, then get finances sorted to map the plan to see if its achievable or sensible, then see a planner to do cashflow analysis modelling and put in place protection etc
ta
rolf
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rolf
They tell me a self made multi millionaires are not someone with any special ideas or delusions of grandeur just someone 99% blind to the way others out there see the world as it is,"IF" you have those funds just sitting there costing you money,then find a broker and buy into any of the top 4 fully franked Banks with reinvestment set-ups,then study what compounding means,because the most you will get on that money is 4% the other way is above 9%,,imho..this is not advice you would have already had enough emails from experienced people and if you are conflicted between all the choices that are in front of you DoNothing
because impatience can be a one off killer..imho..
Well done..you have a huge head start that many of us here dream about
You are young and have many many options..
For someone to motivate you and get you trully fired up about property seek out Nathan Birch. Send him a message , shout him a beer (or 2 ) and go have a chat
http://somersoft.com/forums/showthread.php?t=46231
http://nathanbirch.com.au/index.html
You are young and have many many options..
For someone to motivate you and get you trully fired up about property seek out Nathan Birch. Send him a message , shout him a beer (or 2
) and go have a chat http://somersoft.com/forums/showthread.php?t=46231
http://nathanbirch.com.au/index.html
Agreed don't go the planner!
