Any property gurus?

[FPV414]

Looking to make an entry in to the property market at the moment, as I've just finished taking care of some debts for the old lady. I don't want to make the same mistakes Mother dear did and end up owing a fortune on something that I'll make a loss on or no benefit in the future. She had a failed business venture for which she mortgaged the house.

Anyways I have about $400k to spend, and I will (technically, long story) have a deposit of around $80k (20%, to avoid LMI).

I have three options that I am considering. I really am looking to move out of the family home ASAP and my ideal location is Inner East of Melbourne (Toorak, Prahran, South Yarra, Richmond etc.).

Option 1: Buy a 1 bedroom modern apartment in the above-mentioned areas for around $370k (if I wait long enough I can find one for that I reckon). Cons with that is that you have no land value, will be paying body corporate and in future it won't appreciate the same as something with a bit of land value (or so I'm told).

Option 2: Obviously $370-400k doesn't buy much out there, so I was thinking I could just buy a property out near where I live (outer East, Lilydale area), move the old lady in to that, rent the old property (current house) out and that would cover most of the mortgage and the rest I'd put in from my pocket. Then I'd rent in the area I want to live I'm told the old adage goes "Buy where you can afford and rent where you want to live". I can't see any cons with this, except for the fact I'd be paying rent and a little for a mortgage - and I may have trouble to find a property in my price range.

Option 3: A friend has offered to buy a commercial property with me so we can tinker with cars etc. there. That'd be a good entry in to the real estate market and to obviously build equity off so that I can buy more property in future. Cons, unsure..

What are your thoughts guys? Bit confused as to which is the most productive path.

Any good forums or websites or reads anyone can link me to?

Thanks.

[GT0132]

Originally Posted by FPV414

Looking to make an entry in to the property market at the moment, as I've just finished taking care of some debts for the old lady. I don't want to make the same mistakes Mother dear did and end up owing a fortune on something that I'll make a loss on or no benefit in the future. She had a failed business venture for which she mortgaged the house.

Anyways I have about $400k to spend, and I will (technically, long story) have a deposit of around $80k (20%, to avoid LMI).

I have three options that I am considering. I really am looking to move out of the family home ASAP and my ideal location is Inner East of Melbourne (Toorak, Prahran, South Yarra, Richmond etc.).

Option 1: Buy a 1 bedroom modern apartment in the above-mentioned areas for around $370k (if I wait long enough I can find one for that I reckon). Cons with that is that you have no land value, will be paying body corporate and in future it won't appreciate the same as something with a bit of land value (or so I'm told).

Option 2: Obviously $370-400k doesn't buy much out there, so I was thinking I could just buy a property out near where I live (outer East, Lilydale area), move the old lady in to that, rent the old property (current house) out and that would cover most of the mortgage and the rest I'd put in from my pocket. Then I'd rent in the area I want to live I'm told the old adage goes "Buy where you can afford and rent where you want to live". I can't see any cons with this, except for the fact I'd be paying rent and a little for a mortgage - and I may have trouble to find a property in my price range.

Option 3: A friend has offered to buy a commercial property with me so we can tinker with cars etc. there. That'd be a good entry in to the real estate market and to obviously build equity off so that I can buy more property in future. Cons, unsure..

What are your thoughts guys? Bit confused as to which is the most productive path.

Any good forums or websites or reads anyone can link me to?

Thanks.

For your first step into property I'd go resi first before commercial. Your option 3 example you would get no income if you used it for personal use (doing up cars etc) which means it will be difficulty to service the debt

If your buying with the view to eventually live in after a period of renting it, buy in an area you would like to live. If not then do some research on areas with growth potential.

Option 2 you have a problem with renting your current place as you would not get a tax break on your loan interest as the loan is used to buy a place for your "old lady" rather than the place to be rented.

The 1 bed appartment seems like a good option if bought in a growth area. I wouldn't worry too much about no land, although a house does generally appreciate more all other things being equal.

[zoesgift]

commercial property traditionally gives a lower return than residential tenant type property so residential tenant property would be better option. if you feel adventurous you could try get into 2 different properties

[nuthin' fancy]

It isn't just land that appreciates, a property will increase in value if the (notional) amount paid for rental increases.

I like to keep it simple for your first. Have a careful look at the real body corporate fees, avoiding a property with a lift is a good idea.

Give some thought to Stratum (or Company) Title. This involves your purchasing shares in the company that owns the property for the right to occupy a unit in the complex. It is a an early form of strata title, most of the deposit taking lenders will go to 80%, mortgage insurance is generally not available. You should get more for your money in this type of property BUT DO YOUR RESEARCH FIRST.

Good article here: http://news.domain.com.au/domain/rea...815-2rxix.html

This research should include a pre approval for finance via your bank or broker, make it specific for company share if you want to go down that path.

Relying on information on car related forums for big purchases is fraught with danger. Use this forum to get ideas, but don't rely on it in the absence of proper, professional advice.

In regard to option 3, all partnerships fail, I would suggest you go it alone.

[nuthin' fancy]

Originally Posted by FPV414

Anyways I have about $400k to spend, and I will (technically, long story) have a deposit of around $80k (20%, to avoid LMI).

Thanks.

Don't forget your purchase costs either, spending $400k, a first home buyer will spend about $14k after your conveyancing, rate adjustments and insurance are factored in. This is in addition to your 20% equity to avoid LMI.

[xrsprint94]

Whats stamp duty on 400k mate? First home owners grant?

[nuthin' fancy]

Originally Posted by xrsprint94

Whats stamp duty on 400k mate? First home owners grant?

Stamp duty for first home buyer on $400k established is $9,822. No lump sum grant unless property not previously occupied.

In addition, factor in titles' office costs $1,100, conveyancing $1,000, rates adjustments and insurance $1,000.

[Stefan]

Scratch option 3 first up.

How will you pay this mortgage AND rent somewhere to live?

Option 2 is the best, and will be the most tax efficient, as all your interest for the property will be 100% tax deductible.

[stevz]

There may be some here who will disagree and call me a doomsayer, but I think you'd have to be stark raving mad to buy at the moment. With the market at unsustainable highs, the bubble further inflating and the fragile state of the economy, its a sure fire way of doing your dough and putting yourself in negative equity.
http://www.youtube.com/watch?v=CB2SluAUWJA
I posted this video in another thread. It describes the carnage of the Irish property market when their bubble finally burst. Sobering stuff.

[Road_Warrior]

Originally Posted by stevz

I posted this video in another thread. It describes the carnage of the Irish property market when their bubble finally burst. Sobering stuff.

The Irish property market also had a massive oversupply problem courtesy of someone's retarded idea to build as many housing estates as they could, just because they could, with no one to buy the houses. Polar opposite of the state of the Australian housing market (i.e. demand outstripping supply - still).

[Crazy Dazz]

Originally Posted by Stefan

Option 2 is the best, and will be the most tax efficient, as all your interest for the property will be 100% tax deductible.

No, NONE of your interest would be deductible.
Stay where you are (in "Mum's" house) and look to subdivide in the future.
I'd be very cautious about getting into negative gearing at the moment, and about putting all your eggs into one property. (When you say that you'd have $400k to spend, I assume you're talking about a $320k Mortgage? That's a big millstone to hang around your neck.)
If you are looking for capital growth, and determined to play in the real estate market, then go for an old house on a large block. Stick to areas you know well, and remember "location, location, location."

[jimmyxr6t04]

Originally Posted by Crazy Dazz

No, NONE of your interest would be deductible.
Stay where you are (in "Mum's" house) and look to subdivide in the future.
I'd be very cautious about getting into negative gearing at the moment, and about putting all your eggs into one property. (When you say that you'd have $400k to spend, I assume you're talking about a $320k Mortgage? That's a big millstone to hang around your neck.)
If you are looking for capital growth, and determined to play in the real estate market, then go for an old house on a large block. Stick to areas you know well, and remember "location, location, location."

Depends how he structures it all. If his mum is paying rent, and it's classified as an investment property then the interest would be tax deductible.

OP - If your mum isn't going to be paying rent, is there any reason you'd want her to move into your new place? I'd leave her where she is, and then rent out your new house to someone who will pay rent, therefore making it a tax deduction.

I'd continue to live with your mum for a year or two, saving on rent, whilst building equity by having someone else pay your mortgage off. Then i'd use some equity out of that property to buy your own house where you want to live.

[Stefan]

Originally Posted by Crazy Dazz

No, NONE of your interest would be deductible.
Stay where you are (in "Mum's" house) and look to subdivide in the future.
I'd be very cautious about getting into negative gearing at the moment, and about putting all your eggs into one property. (When you say that you'd have $400k to spend, I assume you're talking about a $320k Mortgage? That's a big millstone to hang around your neck.)
If you are looking for capital growth, and determined to play in the real estate market, then go for an old house on a large block. Stick to areas you know well, and remember "location, location, location."

If I buy an investment property I can no longer claim interest? When did that happen? I better call my accountant. I'm going to have to pay back a huge amount of tax.

[XW-BAXR6T]

Originally Posted by FPV414

I have three options that I am considering. I really am looking to move out of the family home ASAP and my ideal location is Inner East of Melbourne (Toorak, Prahran, South Yarra, Richmond etc.).

Not bad areas toorak, south yarra & richmond, but a nightmare to park ones car. Parking is always taken on streets, finding a place with a car port is rare as hens teeth.


Just a feindly warning. I know because i lived in prahran since 1972 to middle this year "2013".

[ILLaViTaR]

No experience myself, just a wealth of knowledge from the experience of friends and acquaintances. Buy land that can be subdivided. You can get a 3 bedroom home in Frankston North for example for $270000. Subdivide it (the council in Frankston are encouraging growth) and put a unit or townhouse on the rear block, renovate the 3 bedroom. A Considerable return. And 400k isn't too far off the final costs for all this. Frankston was better 2yrs ago however. The same sudvide principle can apply to anywhere just find the best area at the time. A lot of people are buying in the outer Sydney suburbs out by that motorway at the moment expecting it to blow up. But the whole world knows about it just like they did with the Flinders mining stock, that's the problem I wouldn't trust anything like that personally. It's also possible to pack 3 properties on some corner blocks which is a similar concept that may be even more lucrative.


Live in it for a year to dodge 50% CGT you can cycle from property to property without paying a cent of CGT. I can't remember how exactly but I'm pretty sure you can only have 1 PPOR at a time but there is a way to have an investment property as well as your own residence. Whilst somehow able to bullshit it's not infact an investment property. I think you establish it as your PPOR by living in it for a year and tell the tax office circumstances have changed for you and they let you rent the place out with no CGT penalties despite you living in another residence. I don't fully understand how this works as you still have to live somewhere yourself which would basically cancel out the rental income you receive. But that's not correct, it's a money maker for people I just fail to understand how they do it.

If the tenant is family most people are dodgy and do it off the books. If she payed you cash in hand you can just tell the tax office it's a second place of residence and not an investment property. There's no proof of it being an investment property/no papertrail. NO CGT risk, no taxed rental income as well as other benefits BUT you can't negatively gear.

Most important thing is not to conform to the standardised norms like everyone else, most investors have only 1 investment property over 20yrs and are just playing around with spare cash, the commercial side love this and who are the people who actually capitalise. Most people just follow the grain and negatively gear and aim for their 7% return ACA and the like suggests. Safe boring and simple with little reward. You should set your ambitions high as high as 15% which is very possible (laugh it up and get laughed at for laughing) if you just don't sit there and let the agencies do everything. For example a friends father's has a 3 bedroom property worth $340 p/w. Instead he has simply put up ads up on craigslist etc and has 3 uni students renting out a room each for $150 p/w. All officially done/in contract/no riskier to an agency etc $450 p/w over $340 p/w, the average broker would tell him he needs another 200k invested to receive such a return. Or... just a couple of ads on craigslist in his situation.

[|||]

i too encourage tax fraud

[XW-BAXR6T]

I agree with illavitar, frankston area is where i live now & i love it here plus this area has so much potential & it isnt far from the city, not as far as most people think. I was looking at mount dandenong & boy was i glad i hadnt bought there instead i ended up in franga area. franga is the door way to the mornington penisnula & will be very close to the third proposed air port. My house is a 4 bedroom the price was just above 300k "ready to move in right away" 6 months ago. very good price for all the amneties you can want together with world class beaches near by such as dromana, sorento, rye & portsea.

Franga has changed a lot since the bad days. like st kilda has for those still thinking of the bad days.

[danzvtil]

ive just sold a unit after 7 years, and wouldnt go down that path again. Strata fees are MONEY FOR NOTHING. I would only consider house on land, you have greater chance of adding value if you so desire, plus subdivision may be a future possibility.
Ive just exited the property investment market (sold 1 unit and moved into a previously rented house) if I put all the money i had to top up the properties over the last 7 years into a bank account i would be well in front with none of the risk or headaches.

[FPV414]

I'm on my phone now so can't elaborate, but most of the points brought up have already gone through my head for each option.

I have already seen my bank so can put in STF offers, I have spoken to a financial planner, accountant and broker as well. I feel like you can't get enough advice on the topic so thats why I'm here trying to gather more info.

Subdivision is an option for the place I currently live in. Its the old ladys but as I've payed her debts off its basically mine to do as I please but she obviously needs a place to reside.

I may just go the apartment option or the factory one and start a side business. Once I'm on my feet again I can go ahead and subbie the current prop and go hard from there.

As for parking issues - I wouldn't look for a place without a carpark.

[BPXR6T]

I cashed in around mordialloc. Bought property there when I graduated uni, just before the boom. Before they redeveloped the old Epsom race course. I bought between that and the beach as I suspected it was going to grow. I had dreams of sub dividing but never got there. I cashed in and retired at 30. Back at work now though part time. I got totally out of property to play with other things for a while. Looked at Seaford about twelve months ago. Had time on my hands and was looking at doing a few quick renos. Plenty of termites down that way. Around Seaford a lot of older places are just being bulldozed and sub divided as they're good sized blocks. A mate has a place on the beach side of the railway and has done okay on it. He done a reno on that and has renters in there looking after it, but is just going to knock it down and sub divide in a few years.

Not really contemplating another investment property at the moment but am thinking of buying an apartment in Melbourne as I'm sick of living in hotels. Property still seems pretty cheap in the cbd.

[Fordman]

I like to research from:

http://www.reiv.com.au/Home.aspx and its also interesting to read some of these articles http://www.propertyobserver.com.au/ keeping in mind why a person is saying certain things. ie. Real estate agents saying theirs never a better time to buy.

If you want something larger those inner city areas are going to be out of the 400k mark. It really is a question of what you want to do. Pay the same price in your ideal location for a small apartment or move out a bit further and get a bigger place for the same amount...capital growth is almost always better on larger land mass.

[ebxr8240]

Buy or invest where you can afford !! Don't know Melbourne..
People have to rent somewhere ! What is not suitable for you can be a gem
for others.. The sooner you invest the better..
In 1990 when I paid $130k for each [two] properties everyone said I was crazy..
Oh yea min $450k each now and claimed interest the whole time,,
The negative doomsayers are STILL renting filling out Lotto every week !!!
Just be aware interest rates could go to 9% so budget on that atleast..

[Polyal]

While I disagree with everything Stevz says in general and dont go along with his bantering Im actually sheepish about entering the market even though I am over paying rent.

I know I could wait and wait but things are in an odd state at the moment, im keen to wait until late 2015/2016. Even then we wont see the impact of the auto industry loss until '17/18 I guess. Thats alot of years in rent where for the same cash I could be paying something off in the 'burbs. :(

[buggerlugs]

Originally Posted by Polyal

While I disagree with everything Stevz says in general and dont go along with his bantering Im actually sheepish about entering the market even though I am over paying rent.

I know I could wait and wait but things are in an odd state at the moment, im keen to wait until late 2015/2016. Even then we wont see the impact of the auto industry loss until '17/18 I guess. Thats alot of years in rent where for the same cash I could be paying something off in the 'burbs. :(

Mate, if everyone believed in what Stevz was on about, we all may as well go out the back shed and top ourselves. I bought one of our houses in an up and coming area called Mackay 8 years ago. Paid $180,000 for a nice 4 bedroom brick veneer 1.5ks from the beach. Paid the house off in 3 years, had and are still having great rental returns. Have other houses doing very good as well....... It was drummed into me in the early days that rent was dead money................

[Dash_XR]

It's a good time too buy but you gotta be careful with inner suburb apartments at the moment, that many high rises are getting approved there's every chance better cheaper apartments could be built just around the corner dropping the value on yours straight away.

The buy an old house on large block was the way too go a few years ago until all the mum/dad investors caught on and now it's not as easy as it use to be. Even out in Lilydale.

For a first one think of something that is good value and appeals to the widest range of buyers/ tenants if/when you want to sell/lease. Something you can add value too as well.

Also you dropping what you think might be a 20% deposit now might not be enough to clear mortgage insurance once you add all the other costs, stamp duty, conveyancer, building inspector etc so alway have some backup. Definitely worth doing though if you can.

[jimmyxr6t04]

Also, don't forget that LMI is also tax deductible on an investment property. So, whilst it's good to have a bigger deposit, sometimes it's worth borrowing that little extra and keeping your cash in your account, working against your own mortgage.

I think it's deducted over the first 5 years though? so, 20k LMI is a 4k tax deduction every year for the first 5 years. In the ACT, stamp duty is also tax deductible in the first year, so if buying purely for investment, it's a good place to look at.

For my most recent IP, i managed to have tax deductions of about 40k in the first year, so my last tax return was a good one!

Maybe not as affordable as Melbourne, but some decent houses with very good rent return.

[stevz]

I laugh at those who think capital growth is an infinite thing.
If property doubles every 7 to 10 years like the spruikers will have us believe, eventually 95% of the population will be locked out of the market and housing will only be affordable to the rich and elite. Our wages certainly don't double every 7 to 10 years and the cost of living gets higher and higher so eventually something will have to give.
Ridicule me all you like. Some people will learn the hard way.

[Stefan]

Originally Posted by stevz

I laugh at those who think capital growth is an infinite thing.
If property doubles every 7 to 10 years like the spruikers will have us believe, eventually 95% of the population will be locked out of the market and housing will only be affordable to the rich and elite. Our wages certainly don't double every 7 to 10 years and the cost of living gets higher and higher so eventually something will have to give.
Ridicule me all you like. Some people will learn the hard way.

It was the end of the world not long ago too...never happened....

And most are already locked out of the market...I don't live in great suburb, 30 min from, Sydney CBD...house price? $1 - $1.2M minimum. I wonder how many first time buyers are buying houses here? Nil.

House price in 2003, $650K would have got you a 3 bedder.

Suburb 5 minutes away a bit more upmarket, 2003, 2 bedroom brick house, fairly rundown I paid $720K, Same house could not be bought for under $1.4M today.

And the market had a correction in that period. but ten years on still going up and up.

So yes my guess is 10 years it will be near impossible to get into the Sydney property market.

[XB GS 351 Coupe]

Originally Posted by stevz

I laugh at those who think capital growth is an infinite thing.
If property doubles every 7 to 10 years like the spruikers will have us believe, eventually 95% of the population will be locked out of the market and housing will only be affordable to the rich and elite. Our wages certainly don't double every 7 to 10 years and the cost of living gets higher and higher so eventually something will have to give.
Ridicule me all you like. Some people will learn the hard way.

Mate you are a clown, property has steadily gone up, if you are renting you are paying someone elses property off for them with your money, bough my first property for $165K, payed it off in ten years while living in it, sold it on for $379K exactly 10 years later, (so your guess of it only doubling in 10 years is a little off), bought a block of land in Sydney and payed cash, build a house and had a small mortgage, lived in it for 8 years and sold it for $590k.

Last week bought 2.5 acres 5 minutes from Port Maquarrie and payed cash with my spare change, still have enough to build a house and a shed……so yeah my bubble will bust when I am living on 2.5 acres 10 minutes from the beach with my 15m x 12m shed and 40square house and no debt.

Life will be hard to take

[buggerlugs]

Originally Posted by stevz

I laugh at those who think capital growth is an infinite thing.
If property doubles every 7 to 10 years like the spruikers will have us believe, eventually 95% of the population will be locked out of the market and housing will only be affordable to the rich and elite. Our wages certainly don't double every 7 to 10 years and the cost of living gets higher and higher so eventually something will have to give.
Ridicule me all you like. Some people will learn the hard way.

"The dumb nation", "We're Screwed" , "2013- The beginning of the end of Australia" So why are you still here If this country is going to the pack as you describe, what's holding you here ? Have you had a bad Real Estate experience ? You sound very bitter...............