Advice for new investor - positive gearing

[JD86]

Hi Guys,

I am 25 and own my house, it is worth approx. $340k, with a loan of $230k.

I earn $48k p.a. I have contacted my mortgage broker and he says I can borrow up to $400k total, factoring a rent of around $250 a week and my salary.

This means I can borrow up to $170k, with a rent of $250 per week.

Is this achievable anywhere in Vic? I have been looking around Ballarat, Bendigo, Mildura and Geelong.

Can anyone suggest any areas, preferably in Vic, where I may be able to find such properties? Or am I just dreaming, and should wait til my salary increases, and gain more equity to buy my first investment?

Thanks guys

 

[Melbournian]

Hi Guys,

I am 25 and own my house, it is worth approx. $340k, with a loan of $230k.

I earn $48k p.a. I have contacted my mortgage broker and he says I can borrow up to $400k total, factoring a rent of around $250 a week and my salary.

This means I can borrow up to $170k, with a rent of $250 per week.

Is this achievable anywhere in Vic? I have been looking around Ballarat, Bendigo, Mildura and Geelong.

Can anyone suggest any areas, preferably in Vic, where I may be able to find such properties? Or am I just dreaming, and should wait til my salary increases, and gain more equity to buy my first investment?

Thanks guys

Hi josh - i think markets come down a bit. Congrats on paying off you PPOR.

I think u can achieve positive gearing - through renovation depending on the area you select. You know what i am talking - u did draw my plans for the permits

 

[sashatheman]

Hi josh - i think markets come down a bit. Congrats on paying off you PPOR.

I think u can achieve positive gearing - through renovation depending on the area you select. You know what i am talking - u did draw my plans for the permits

I don't think he paid it off. I think he meant he has a mortgage as opposed to renting.

 

[zed_kid]

I don't think he paid it off. I think he meant he has a mortgage as opposed to renting.

I don’t think melb meant fully paid off ppor, I think he meant congrats on paying off P&I on your ppor... I think

 

[tobe]

I think it is most likely possible in regional victoria. A 2 beroom unit in Ballarat, or an old miners cottage in some of the feeder twons close to Ballarat, bendigo, perhaps Geelong.

A 2 bedroom unit in Sheparton, traralgon/Moe/Morwell, Hamilton.

Itl take bit of looking, but I reckon they would be out there.

 

[Kinnon Bell]

Oct last year I purchased 2 properties in Horsham, Vic. One is 3/2/carport purchased for $100k. Did a 7k reno and found a tenant within half a day for $190p/w.

The other is 2/1/2 house on a big corner block, purch was $115k only did a quick tidy up and rents for $180p/w after being on the market for 2 weeks. Plan is to subdivide in a few years and either put a relocatable home on it or knock the other house down and build a duplex.

Have my eye on Mildura at the moment for the next one.

 

[Deltaberry]

I don’t think melb meant fully paid off ppor, I think he meant congrats on paying off P&I on your ppor... I think

The P&I for April?

 

[BayView]

This means I can borrow up to $170k, with a rent of $250 per week.

This scenario would not be pos geared if you are using 100% borrowed funds. It sounds as though you would be using 100% borrowed funds?

It would be neg geared, it may get to be pos cashflowed with a healthy DS attached.

Rent is $13k per year, and 20% of that goes up in smoke for holding costs = $10,400k nett rent

The loan repayments would be around $11900 - call it $12k (assuming you put in the purchase costs out of your own cash).

 

[jaycee]

This scenario would not be pos geared if you are using 100% borrowed funds. It sounds as though you would be using 100% borrowed funds?

It would be neg geared, it may get to be pos cashflowed with a healthy DS attached.

Rent is $13k per year, and 20% of that goes up in smoke for holding costs = $10,400k nett rent

The loan repayments would be around $11900 - call it $12k (assuming you put in the purchase costs out of your own cash).

By my calcuations, it's not too far off with good depreciation (?)

Mtge $170k
Interst 7%
Rent $250
Income Tax Rate: 20%


Expenses
Interest...............$11900
Council Rates........$ 600
Water Rates..........$ 600
Bldg Insurance.......$ 300
Other...................$ 500
Llord Insurance..$ 300
TOTAL.................$14200

Income
Rent...........................$13,000

GROSS HOLDING COST...$1200

Depreciation
................................$2000 ?

TAXABLE SHORTFALL.....$3200


Tax Return....................$640

NET HOLDING COSTS.......$560

So just over $10/wk rent rise and it's neutral,

Without the depreciation claim, add another $400 to holding costs.. or $960... $18/week rent rise will make it neutral

So not far off the mark, not positive, but I wonder if that was an actgual NEED the orignal poster was looking specifically... Still worth including such scenarios in one's criteria still ??


I'm stating to think it could be the way to go next....

 

[JD86]

thanks guys

i have not paid off my ppor yet, still have a 230k mortgage

yes positive cashflow is what i am after, is it at all achievable for my scenario or am i dreaming?

another question i have is, how to finance such a deal.

if i found a deal, do i add the deposit, say $17k, to my ppor mortgage, so it increases to $247k, and have an LVR of 90% on the IP which may make it positive cashflow or go 100% on the IP? can i do either of those? are there any other ways to structure finance?

are there any books people can suggest on finance for IPs?

do people think i can achieve a positive cashflow IP? or should i wait til i have a better income, and more equity, and maybe dabble in shares for the time being?

thanks a lot

 

[wobbycarly]

*snip*
do people think i can achieve a positive cashflow IP? or should i wait til i have a better income, and more equity, and maybe dabble in shares for the time being?

thanks a lot

Without knowing your level of expertise, I wouldn't suggest you "dabble" in shares unless you want a smaller deposit!

 

[ozk]

By my calcuations, it's not too far off with good depreciation (?)

Mtge $170k
Interst 7%
Rent $250
Income Tax Rate: 20%


Expenses
TOTAL.................$14200

Income
Rent...........................$13,000

GROSS HOLDING COST...$1200

Depreciation
................................$2000 ?

TAXABLE SHORTFALL.....$3200


Tax Return....................$640

NET HOLDING COSTS.......$560

Hi Jaycee,
Why do you add Depreciation to Gross Holding Cost to get the Taxable Shortfall. And how do you get the Tax Return and Net Holding Costs figure?
I know your calcs are right from calculators on the internet, but I don't understand the logic.
OzK

 

[jaycee]

Hi Jaycee,
Why do you add Depreciation to Gross Holding Cost to get the Taxable Shortfall. And how do you get the Tax Return and Net Holding Costs figure?
I know your calcs are right from calculators on the internet, but I don't understand the logic.
OzK

When I wrote "TAXABLE SHORTFALL", I meant the TOTAL EXPESNES you can claim to the ATO.

So you're cash expenses er year in my calculations were $1200 after rent.

The, say you can claim $2000 Depreciation.

On your tax return, your negative holding costs would be $3200 ($1200 expenses + $2000 Depreciation)

 

[ozk]

Hi Jaycee
That makes sense now.
OzK

 

[JD86]

any other areas people can suggest to get these type of figures?

or advice on what i should do?

thanks