If you were single, in your early 30s, earning $70,000 pa with a $200,000 deposit, how would you invest it?
Entering Real Estate Market with $200,000. What Would You Do?
poiuy1234 on 22/01/2015 - 14:37
Comments
Enter with $400,000
Woosh
the green felt is very valuable real estate - ask the casino.
put it on 1 number. at 35:1 you will have a $7 Million deposit. if you lose, go back to living with your parents for the rest of life.
*1:37… 1:38 if the casino plays the double zeroes
Hate to be a stickler, but I think there are table limits… unless you manage to sneak into the High-Rollers' Room.
Pro tip: here's how to sneak in to the high roller rooms; say "I have $200,000 and I'd like to gamble with it please"
@Tafe: Not at The Star (Sydney). You need either membership 'privileges' (ie. have demonstrated a consistent monetary turnover) or establish a line of credit at the cashier's. I wouldn't even try lying about $ - you would be politely but firmly escorted out [have seen it happen], otherwise known as The Dimitriades.
@HN Professional: I think you may have missed the point… He wouldn't be lying about having 200k. He has 200k
Can't sneak in, there's huge double doors with a guard outside… have a friend with platinum membership take you or better yet, try flash your money at the guard =P
why try to "correct" with wrong info? DONT ANSWER.
35 to 1 is the correct payout. THINK WHY.
36 to 1 is the payout in your try-to-be-pain-in-the-ass double zero scenario. (which would never exist for a 200K player.) YOUR WELCOME.
Sorry misread that as the odds of hitting the number you pick and not the payout multiplier, my bad
However pretty sure the double zero still pays out 35:1 even though odds are worse… =/
@Serapis: no problem. all good.
people negged me for giving correct info. :( do they think I am an actual zombie, and neg me so they feel safer?
[@Serapis](/comment/2519900/redi
Damn Crown Casino.
Take a break and go around the world. Will def invest in life long memories !!
I have been and will continue traveling :)
I'm afraid to do this… but I know it's good, and it's something that I wannnnt to do.
Travelling… I'm 25, and have nearly 30k in savings…
The plan: WOrk my lame job until I save enough, to get a mortage, and buy a house. THen rent it out, and go travel…
inose = Great idea, i'm now 36 when I was 21 I bought a property rather than a new car and I thought "I'll use the rent money to make repayments on new cars for the rest of my life" - you know, sacrifice 1 car now but have an income stream to pay off 10 cars over the next 50 years…as inflation pushed rents upwards it soon became apparent the rent wouldn't cover the repayments it would actually provide enough to pay cash for (modest) new cars every few years (if that's what I wanted to do with the cash). Insanely awesome outcome.
If you can get your foot in the door with a property and work hard to pay it down (or at least get into a cashflow positive situation - you can enjoy an lifetime of effective "free" travel.
$200,000 deposit, I struggle to comprehend what your life would've been like if you've saved so much.
Probably its been great. He's in his early 30s so has been working I assume for 10-15 years. So if he has been living with his parents or sharing accomodation etc, $20k/year saving plus having a good social life and taking holidays etc etc is not out of the question
Alcohol and drug free ;)
really? Alcohol and drugs are the only source of fun you can think of?
I spent a lot of money on booze, birds and fast cars. The rest I just squandered.
It was just a joke.
I play computer games, go riding, do martial arts, read, take photos, watch movies,cook,make coffee etc. All that is also alcohol and drug free so yes I do have a little bit of a clue.
Blackjacks and hookers
It would not have been a miserable life, I'm 30 by the end of the year, have recently purchased my first property, been working since 15, had almost nothing to show for and saved $120,000 in the last 3 years (that were miserable). I actually struggle to comprehend what my life would have been like if I saved earlier, saving $20k/yr since my first real jobs I'd be floating on nearly a quarter of million with ease.
$200,000 deposit, I struggle to comprehend what your life would've been like if you've saved so much.
$200,000 ahead of your life
Use it as a good equity towards a reasonable house instead of blowing all up against a million dollar house. Close to 50% equity on a $450,000 house to start with, is brilliant. After couple of years, depending on the market, either use the equity against another loan for an investment property or I would sell this house and buy another one more suited for the new family.
Thank you for that! Would you always recommend buying a house over a unit?
I am stuck between a unit in great location vs house a bit further out…;
Generally yes as it is the land that appreciates, but a unit in a good area can net you good capital growth too.
i.e. I would take a unit in a better area over a house in a not so great area if looking at investment purposes.
I will go for a house in a good location first. Spend money on the land more than the house. However, don't spend money based on '$5000 extra because it's in front of a park'. Most of the valuators don't see that as an added value when putting a price for your property later on. Close to shopping center/public transport/school etc does however.
There are some things about units which I don't like, yet some, which I do.
I take units as short term investment solutions. Mostly because, if they are good, they come with a chunky body corp and maintenance cost, not much freedom to do any major work in the unit, most of the time, you don't really own any land.
Houses and Units attract different demographics in the rental market. A family of three or four will most likely rent a house, where as bachelors or young couples tend to rent an unit.Sometimes, expenses on owning an unit for investment can be used towards negative gearing. I like that part. Sometimes an unit will only give you good returns till its 'new'. Units sometimes are built with sole purpose of investment, so build quality at times suffer. Older the unit will get, the shabbier it will become, bringing in lesser rent. And your re-sale value of the unit will get a hit as well based on the other units of your building etc.
When I was in Melbourne, rental availability was quite low. You had more demand for rental properties than the supply. People didn't care for the type of dwelling as long as it was close to work/school etc. In Gold Coast however, distance from a unit within Surfers and a 3-4 bedroom house in any of it's surrounding suburbs is 10-15 minutes for sometimes similar or cheaper rent.
My personal opinion will be to find land in a suburb which is showing good value growth over the last year. See if the graph is a a steady rise or does it have a rhythmic dip. If it does, gather data from couple more years. Looking at growth over a quarter might only show you a short term growth boon based on certain condition. New development of a subsection? Heavy pricing discounts within an estate etc.
If you are looking for units, get them near CBD zones or close to universities. This gets you a pretty busy rental market. If you are buying an unit in an apartment near CBD, ask for the developer if you can purchase extra garage/parking space. Rent the parking space to someone who has to drive down to CBD for work.
Thank you so much for all that. Very much appreciated!
It also depends on the state you live in and what the public school rules are. Students can no longer cross boundaries in WA unless they're in specialist programs. So a house further out may not have "favourite" schools nearby… hence negating any benefits of resale house vs unit wise. A unit in a great area, close to cafes and good public transport will always win vs a house with a backyard but terrible neighbourhood.
buy buy buy!
Man u read my mind.
I am in my 30s as well with a bit of coin.
Tossing up between buying an apartment 10 min from Sydney or a house 50 mins away.
I am leaning towards the unit because it is at the train station and schools etc
Finding a tenant is not that hard either.
PS I am looking to spend 800k or so with the same deposit.Wish you good luck grabngo!
Hey, congrats on getting such a big nest egg. There is a great deal of satisfaction to be had in home ownership (I assume you are begging the question anyway).
grabngo - If you are in Sydney, the NSW govt is incompetent with transportation planning so places closer to the city are a good bet for capital appreciation. 2nd best would be near rail transport. Autumn/Winter is the least competitive time to purchase (but with less stock), Spring is the worst because everyone decides they want their own place after mulling on it over winter.
Usual disclaimer - I am not a financial planner, this does not constitute financial advice.
Invest in foreign property, from what i was told, buying a property in England, the rent covers all of the repayments.
Whether that's true, I don't know as I dont have any experience in this field
How easy would it be to do that though.. wouldn't you need to be a resident to buy property in most foreign countries?
Honestly, it was just a suggestion given to me by a friend. I have not looked into this myself but if it is true, it would be worth looking into.
I was intrigued, cause I would like to do it. A rental property in the UK, yeilding great returns and then a tax write-off trip to the UK once a year..
I have 2 properties I rent out in the UK, bought when I was resident there and hadn't planned at the time to leave the UK. One property the rental income is much higher than the mortgage payments the other about even - but only because the mortgage interest rate has come down quite a bit in the last 6-8 years. So it depends on the location and also relies on interest rates being /staying low.
When I got my UK mortgages most lenders added either an extra 1% to the mortgage rate or an additional annual payment if the poroperty was to be let out - so that may be something to watch out for.
Letting agent fees are typically 10-15% in the UK from my experience.
Do you have your own home or are you renting?
I would buy two established houses/villas (not apartments) for ~ $500k each, within 15km from the city and rent them out. It will be a long term investment, so don't worry about the investment noise (FEAR).
You'll have $800k loan with $5000 repayment, but you should expect at least $4000 in rent per month.
You'll be slightly negative geared.two established houses/villas within 15km of Sydney CBD for ~$500k - you'll need a time machine :P
OP profile says Adelaide, you don't need a time machine there =)
This is also achievable in Perth market. You can get a decent 5 years old 3/2 villa with green title.
Thank you for that. However, I am currently renting/sharing.
Depends on how much risk you wanna take. Less risk buy a 1x unit near a train station and collect rent. Fairly easy and can let agent handle the work. Dont borrow much until you are more comfortable.
If you can handle stress and sleepless nights, buy two units or houses, you will be more heavily geared and more sensitive to interest rate movements. But it could pay off in long run. But never assume prices always go up.
Side note, if you can handle more stress and have time, then why not invest in a business/franchise. Last one has best rewards but its a hell of a ride.I dont agree houses always better. Depends on location. Houses come with more responsibility and require maintenance of building too. Body corp fees take care of maintenance for you which is less stressful.
Just another opinion
Thanks for that. The only thing is that I need a place to live … I just want to make sure I set my self up so that I can buy an investment property relatively soon after purchasing my first home…
Whichever option you choose @poiuy1234 pay off as much as you can asap. That way you develop equity in your property, which assist you with investing in other properties.
Best of luck!
While Im not expert and everyone situation is different, from my own experience, and family +friends that i have witnessed, the first new years of mortgage repayments seem hard, then inflation kicks in and your financial situation feels more secure enough to do things you did before, such as overseas holidays every year.
But this is only my experience.
With that kind of deposit you could buy a property to live in and an investment, depending on the area. Build 2 townhouses?
Go some small that you can manage the repayments on. Buy something relativity new and close proximity. You'll have no dramas renting it out if circumstances change.
Hey,
The demographics you mentioned are exactly like mine today,
You can do what I did.
Buy a unit in an ideal area where rental demand is high(im in inner Sydney). The unit i live in is my investment. 5 years on, best decision ever made. Only dilemma(in a good way)now is that Ive saved so much on potential rents I could have been paying, I can upgrade to something bigger in the near future.Always a good idea to invest in somewhere that you yourself could live. That way you have options for different circumstances. Something bad happens and you need to sell a house - selling your principal might make more sense. Or your principal sky rockets in value - so you sell it without paying capital gains tax and move. But then you will want to get an evaluation done on your investment. Else you may end up paying more capital gains on your new place if it were also to sky rocket.
what kind of occupation r u working as atm?
Buy a place for 500k or less which suits your lifestyle (work, friends, interest, proximity to transport, etc)
Only put in the minimum as a deposit plus government charges like stamp duty.
Put the balance in an offset account and wait until you know what you really want to do (ie. family, marriage, travel, kids).You always need to be thinking 5 years ahead so you are financially flexible and can achieve your goals.
Having debt up to your eye balls is inflexible.
Not having the ability to take opportunities will also be a detriment to your wealth & your life.
Life is for living not squeezing every penny.
^ this.
Min deposit (20%) to avoid LMI, rest in offset account, interest only loan with what you would have paid off principle going into offset.
In x years you can move it to an investment property, use offset funds as a deposit for new house and have original loan amount tax deductible.
Or you can use offset funds as deposit for future investment.This maximises your future options.
Depends, Which state are you in?
I take it you are looking to live there? Rather than just an investment home?
Ussally with these things seeing an independant finn adviser wouldn't hurt.I would say just keep in mind the costs of selling a place and buying another, you have real estate agent fees, stamp duty, removalist fees, etc. So if you are looking to buy a place to live, try and be sure you'll like living there for a while.
Also there is no subsitute for a strong deposit (and you are doing well there).
As for house vs unit vs town house, I used to think house, as the land will increase in value more than a unit or townhouse. But after living in a house for the last couple of years I'd have to say I'm really over mowing the lawn every weekend and the other maintenace issues.
Given you'll have a mortgage for a while, always make sure you can replay the mortagage repayments when interest rates are much, much higher.
i would go and ask this question on an actual property investment forum
Somersoft is one of the best one and has alot of posts already about property investingI second that one! I'm always asking questions on there!! :-) You can make some really good contacts there too!
yeah same…just wish i would get off my a$$ and act alot quicker
some of those guys accumulate property so quickly
Nice work saving. A bit of work has gone into that!
I am not a financial planner and this does not constitute advice; merely something that might be worth considering.
REMOVE EMOTION
This is the biggest killer for people looking to purchase an investment. Your own home is a different story however. The sums must work. End of story. If they don't … walk away.INVESTMENT HORIZON
Are you intending to buy-and-hold (i.e. rely on rent and long term capital gains to make some $?) or renovate-to-profit?RISK THRESHOLD
What is your risk threshold? Do you like the idea of eggs in one basket, or a "diversified" portfolio? 200k could get you a deposit on 2 places, or a single more expensive property. Again … look at the sums to help decide.PURCHASE
1. RESEARCH, RESEARCH, RESEARCH. Know your market & suburbs. Some streets in a suburb might have good parts and bad parts.Find a property priced lower than its neighbours. The mantra should be "buy low, sell normal". Selling "high" can be difficult.
Don't be afraid to make an offer on a property. Even if it is low as the worst they can say is "no". You never know the financial position of the vendor. They might be desperate.
Build relationships with the agents. Let them know you're in the market, and you're ready to go. You want them calling you with a "I have this house - are you keen" before it goes on RE.com.au
There are a number of sites that can help pinpoint where to buy. These days, you don't need to live nearby to make it work. e.g. http://www.hotspotting.com.au/. onthehouse.com.au gives you valuation and sales history.
FINANCE
When financing a rental, I have always tried to put as little cash into the property as possible. This serves a few major purposes …negative gearing is maximised, and you can reduce your own tax bill (if the property is purchased / financed in your name and not through a company/trust)
Yes; if you are under 80% LVR, this will mean that you also have to come up with mortgage insurance, which is capitalised into cost of the property.I understand that the tax department looks poorly upon money invested in Real Estate being withdrawn to maximise negative gearing after the fact (look for a loan facility with an offset account).
On point 2, if there are readers in the know here, would appreciate confirmation or correction.
Further; the federal government have been making noises (again) about removing the ability to negative gear.Shop Around. Find a good mortgage broker.Don't be afraid of getting banks to deal on rates. There are some great rates in the market now - and banks are doing deals to get you in the door.
As an investor … That offset facility is your friend.
good luck!
edit: formatting and comment on mortgage insurance
I'm in a pretty similar situation at the moment - just sold my old house in NZ and am now looking to buy in Australia. 30y/o, $150k deposit, $75k/yr income. However I am looking to live in the house and rent out the other rooms (mostly to get a dog, as renting with a dog really limits your options up here).
Thinking about purchasing a 4 or 5 bedroom house for around $600k (I'm on the sunshine coast).
The tax law around this seems to be pretty well documented, allowing for a percentage claim depending on how much of your house you rent out:
https://www.ato.gov.au/General/Property/Your-home/Renting-ou…I'd be careful about borrowing too much at the moment with interest rates at historic lows. If borrowing $800k, an interest rate rise of 2% in 3-4 years time (back to 2011 levels) would mean an extra $16k/year you'd have to come up with.
you would have done well with the nzd to aud conversion! its almost at parity. You used to get like AUD 75c to 80c few years back and now its like mid 90c
Yeah mate. I moved here in 2011 and transferred $20k @ 75c (to set my self up). last month I moved $110k @ 93.9c, bloody marvelous. Unfortunately I did loose about $20k selling the house, so made it up on the exchange rate. Been trying to sell it for 4 bloody years. Just glad I can move on with my life finally.
I would keep saving money and wait for another inevitable bubble burst in America again in the near future and pick up some real investment bargains. The prices you see today are way over inflated because too much printed money are flowing around.
http://www.mra.wa.gov.au/projects-and-places/elizabeth-quay
Invest in high end apartment? what do u think?
If not buying in Sydney I would sit back and wait for the recession, Cash is King.
The awesome thing about recessions (for property investors) is that when people are forced to sell their homes, they still need to live somewhere - the price of rental accommodation seldom falls, all that happens is the price/return yield for investors improves. If property price fell in our current low interest rate environment say 10-20% (which would be a disastrous bust) hundreds of thousands of small time investors would come out of the wood work either directly or via SMSF's and push sales volumes back up again bringing prices up too. First home buyers and nae-Sayers who have been sitting on the sidelines for the past few years would appear too. While I personally believe our economy is a little sluggish at the moment, I think the property market is rock solid and has plenty of buyer redundancy to withstand some hard knocks.
Time is your friend in real estate - ask the guy who bought a house in Adelaide/Melb/Syd/Bris/Perth/Hobart 5 years ago how shattered he'd be if prices fell 10-20% tomorrow - maybe a slightly raised eyebrow, that's about it.
In the current buying climate the sooner you dive in the safer you'll be when the inevitable downturn occurs.
Give me borrow money I will double it. Cash only please.
cash is no longer king - get in now on a house and land package - around 350k - live in it for 6 months - then rent it out -you will have appositively geared property and an asset with growing equity
Buy a property, claim first home buyer grant, live in it for at least 12 months and you'll have the 6 years after your initial 12 months to rent it out, capitals gains tax free. Move back in, live in it and the 6 years resets itself.
great thread, learned lots.
Im 19 this year and mum has been urging me to find work and buy a house asap
Casino. Red.
If you were single, in your early 30s, earning $70,000 pa with a $400,000 deposit, how would you invest it?