[AMA] I'm a Property Investor. Ask me about Property Investing

RubenM on 06/12/2018 - 08:04
Last edited 06/12/2018 - 08:59 by 1 other user

I’m a property investor with 10 (mainly very low value) investment properties with a total of 13 tenancies (one granny flat and two duplexes).
I’ve been investing since 2010 and much of my income in that time has gone into either saving deposits or paying for property related expenses.

Along the way, I’ve made plenty of mistakes and I’m not even close to being able to retire on my investments, as the bank ones far more of the properties than I do.

Currently I’m 36, have a one year old son and a wife that works part time.

Ask away, but I probably won't answer questions that don't have to do with property investing or are too detailed.

Standard disclaimer: None of what I'm writing constitutes financial advice, they're my experience and opinions only.

Introduce Yourself

closed Comments

  • htc on 07/12/2018 - 22:24

    For granny flat, does the tenant for granny flat and the tenant for the main house split the electricity bill?

  • johndowy on 07/12/2018 - 22:52
    -5

    By the sounds of it you still have a full time job.

    What makes you be able to call yourself a 'Property Investor'?

    How do you define a property investor?

    • MinifiguresAU on 07/12/2018 - 23:18
      +6

      The definition of a property investor is someone who invests in property. The OP has invested in property and is therefore a property investor.

      • johndowy on 07/12/2018 - 23:45
        -8

        I invest in the stock market though my super. Does that make a stock broker?

        • Shutterfish on 08/12/2018 - 00:34
          +7

          You are a stock investor not broker

    • RubenM on 08/12/2018 - 07:54
      +3

      I'm also a gardener even though that's not my job.
      If someone has one IP, they can call themselves a property investor.
      Personally, I think it'd be drawing a bit of a long bow to call yourself a stock investor when your super makes all the choices on what to buy. But if that floats your boat, go for it, I'm not stopping you.

  • coolsteps on 07/12/2018 - 23:14

    thanks op for the post i have found it informative as i'm a first time investor who has recently purchased a dual key investment property in Logan. the only downer is having to make the P&I loan repayments while the house is still being constructed whilst i have funds in the offset account to cover these payments i'm not getting any return until house is build and tenants move in. it will be positive cash flow though once its finished. my questions for now. 1. are there any good local property managers that you can recommend in Logan that don't charge too much %? 2. where in Logan did you buy? 3. how long should i wait after house is build and after getting some equity in the investment property before buying another investment property? 4. as a second investment property should i go for a negative geared one to reduce tax or stick to positively geared dual key investments? 5. is it possible to buy a completed new dual key investment property thus saving having to get a construction loan which have higher interest rates and getting a lower interest rate on for an established house?

    • RubenM on 08/12/2018 - 08:08

      1) My property managers are fine, but not great. If you still want their details, message me.
      2) Crappy old house on a 700+m2 Block in Marsden. Made some improvements, but the house is still fairly basic.
      3) There's no one answer, it all depends on the market. If there's sufficient equity and you qualify, you can get some out.
      4) Personally I'm not a fan of OTP (sounds like that's what you're doing), but it's a decision you have to make for yourself. My advice would be to wait a little bit and see how the numbers stack up in reality to what you assumed. What to buy next actually also very much depends on your most important factor: Your end goal. Why are you doing this? I want to retire comfortably on property, that's why I chose high yield so that I could keep buying and establish a large asset base. If you haven't worked out your goal, make it your priority.
      5) I'm sure it would be, but I haven't bought a new property in my life, sorry. If that's what you're interested in though jump onto Property Chat, there's a respected member (not just a spruiker from what I can tell) that sells those.

  • magikz on 07/12/2018 - 23:18

    Do you rent room by room for your properties, or do you prefer to rent out the whole place empty?

    • RubenM on 08/12/2018 - 08:10

      Finding a new tenant is enough of a headache at times, doing it room by room would make it a full time job, plus harder to determine liability for damages and you're not always permitted to have boarding houses. So I stay away from that.

  • daclaw on 07/12/2018 - 23:50
    +2

    Title should be changed to "I'm a property speculator"

  • hibijibis on 08/12/2018 - 00:14

    this used to be quite popular for a number of years. do you think this strategy is still possible in the new era of royal commissions and difficulty getting loans etc.

    • RubenM on 08/12/2018 - 08:16

      It's not so much the royal commission, but APRA. I would agree that it's much more difficult right now than when I started.
      In the future, I expect rules will be relaxed again and borrowing will become easier. When that is and whether it returns to the same levels, I've got no idea.

      But that shouldn't stop anyone from getting started now, if that's what they want to do. You should still be able to get three investment properties.

  • randomvis on 08/12/2018 - 01:03
    +2

    Don't take this the wrong way, but I fear for investors like you with many properties. I really hope the best for you and the risk pays dividends down the line. But my head thinks something different. I know that if prices plummeted the mainstream public and media will make you out to be enemy #1 and heartless people will be cheering on families getting devastated.

    My question is this:
    Are you aware of Loan Application Form (LAF) Fraud? If so have you obtained your full Loan Application Form for any of your loans? Some people in your situation managed to get money cut off their loans if fraud occurred…. that being said chances are decreasing with each passing day and it is likely that once AFCA is in full swing you will be unlikely to take the same route.

    (For more information visit Nick Hubble's talk at the Mises Institute or Google search LAF fraud in senate documents on Hansard's)

    • RubenM on 08/12/2018 - 08:35

      Thanks, I'll have a look into it. However, even if it shouldn't have passed the bank's muster, it did pass my checks and balances, so I would feel it to be a bit unethical now to throw up my hands and blame to be the victim, wouldn't it?

      Still, I'll have a think about it, so thank you.

  • CharityCase on 08/12/2018 - 01:11

    Off the plan apartment, yea or nah?

    • RubenM on 08/12/2018 - 08:35
      +1

      Strong nah!

      • newbiesh on 08/12/2018 - 14:56

        Why? I think they good as they have new opportunities?

        • inittobinit on 08/12/2018 - 16:06
          +4

          They're not wise choices for a number of reasons.

          1. Prices are always inflated. There have been developers that offer '$100k off' black fridays which should shed some light on the magnitude of overcooking we're seeing at the moment.

          2. Risk. There are nightmare stories of developers vaporising after taking deposits

          3. We're in a falling market. Suckers who put down $600k for a 2 bed unit in Melbounre 2 years ago are just/yet to take the keys on their apartments with current valuations of $450-550k. You are pissing away capital from the moment you sign the dotted line.

          4. Further to point 3 should your OTP shoebox go down in value such that your LVR skyrockets you will also be barred from the once previously approved loan on this front. Thats if tightened APRA lending regulations don't crunch you first.

          And of course you're stuck because you put it all on black with no other capital to meet new lending requirements because you got a bit trigger happy with your credit card purchases to reward yourself for putting that big ole' 5-15% deposit down and not having to worry about a mortgage until you move in. 'I'll save then'.

          I'm looking at thousands of unit sales in blue chip areas of Melbourne and the hits some people who bought in ~2012-2016 are taking selling in 2018 is simply eye-watering. Of course not every pocket reflects this sad narrative, but it does for a vast majority.

    • idonotknowwhy on 08/12/2018 - 09:44

      A conveyancer I know says "nah".

  • seedyrom on 08/12/2018 - 04:48
    +2

    I always find it funny when 36 year olds are suddenly experts in long term investment strategies.

    As we approach the Christmas season, I know I’m going to get involved in painful discussions with my brother-in-law about his next “get rich quick” scheme that someone at his work has told him about.

    I’ve sold up all my investment properties and got a million in cash burning a hole in my pocket. I am certainly not looking at the property market as a home for it.
    I’ve just put $100k in my both my wife’s and my super. Next year, I’ll put $300k into hers and mine as part of the non-concessional contribution scheme whilst it is still available. That’ll leave $200k which is in a vanguard fund.

    My super provider is pretty good (in the top 5 as recommended by the barefoot investor), and I’ll happily take a 10% pa interest, with just a 15% taxation rate.

    We went to a recommended financial advisor, who wanted $8k pa to manage our funds … but they couldn’t even match vanguard returns. If you can’t beat the market, what the hell am I paying for??!? LOL.

    My wife thinks making money is fast paced and sexy. The reality is it is boring and long term.
    Having dealt with all manner of shitty strata companies, I really hate people … on both sides of the strata agreement. I used to think property was king … but now I feel there is money to be made elsewhere. Using the taxation benefits of super just seems like smart business to me.

    • RubenM on 08/12/2018 - 08:42
      +2

      I'm an expert in MY investment strategy, not anyone else's. I have put a few thousand hours into property investing over the best part of a decade, so I do know a thing or two, though I'm not claiming to have any superior knowledge.

      To be honest, I'm not sure I actually understand your post. You made a million dollars from property (congrats) yet you're saying how property is a bad investment vehicle?

      • seedyrom on 08/12/2018 - 11:01
        +2

        It’s not the best vehicle.

        I just worry when people get geared up to the eyeballs, and “a current affair” showcases them as Australlia’s next Frank Lowy.
        Negative Gearing means you are heading backwards to go forwards.

        If anyone has an investment which is generating so much revenue they are worried about paying tax, i’ll happily take the burden off your hands.

        • Pentanol on 08/12/2018 - 22:48
          +1

          I hate people like you. You made $1m from property yet you are finding reasons to whine?

          Everyone have their own investment strategy and different risk profiles. What you find risky may be ok for others. I personally only buy cashflow positive properties before deduction but thats me cause I'm stingy and dont want to pay out of my pocket.

          • DingoBilly on 09/12/2018 - 23:11

            @Pentanol: Yeah completely agree. This guy literally has made all his money from property from the sounds of things, and now he's a bigshot because he rode a boom he's happy to call out anyone else who goes against his opinion.

            No idea about his age etc. but could criticise him the same way he criticises OP - thinks he's an expert in long term investment strategies because he's read the barefoot investor and was successful in the property market… :\

    • BestofOZB on 08/12/2018 - 08:50
      +2

      What taxation benefit of super? Anything above 25k you are paying huge tax on.

      Supers report their return before your fees, make sure that 10% actualy is 10%.

      If you didn't like investing in properties it doesn't mean others can't do it, OP is obviously doing well, so keep your advice to your BIL! And yes there are many people in their 20's or 30's who are experts in what they do!

    • Croshema on 08/12/2018 - 09:44
      +3

      I always laugh when people deride people for their age at 36, at what age would you feel this comment was not It needed, 40?

      One thing for sure is at least this person is doing it and they have real world experience, and for me that means there opinions are worth listening to.

      Though speedyrom has his point as well.

      As I will now balance my above comment with plenty of people have been deluded into thinking they understand things when investments are performing well, when in reality anyone could be making money, the real experts are the ones who understand when to get out or who can make money in a down turn.

      When things go bad many people who have been taking like experts for years (even 10+) are left going WTF happened, the real experts are laughing, at the Banks.

      Not saying this is the op, just a general rant.

  • [Deactivated] on 08/12/2018 - 06:03
    +1

    Approx what percentage of investment portfolio is not property ?
    If basically the only investment you have is all in property, do you plan on changing this. Generally not a good idea to have all your eggs in 1 basket. Must be really stressful when hear news of possible market crash with real estate values.

    • RubenM on 08/12/2018 - 08:47

      Just did the maths, 0.25%. That's not counting super or any money in my offset accounts.

      It can be stressful, but none of my investment properties are in Sydney or Melbourne. Plus while it's still the same investment vehicle, they are in four very different markets.

      I'm not planning on changing this any time soon, though I haven't made up my mind completely what to do once I do retire. Shares would be a lot less work to manage, so depending on how much time I'm willing to sacrifice and how much cashflow I'll want, I'll make the call based on that. But that's 14 years (or more) away.

      • Pentanol on 08/12/2018 - 22:51

        I'll argue that shares are more stressful though they may be less work as the transaction cost are lower to buy or sell, thus more volatile.

        • RubenM on 09/12/2018 - 07:26

          It definitely can be, but I would just go a simple fund and try and not look at it.

    • idonotknowwhy on 08/12/2018 - 09:49

      The best investors don't stress and don't worry when the market is going down. Your asset class is down? Sweet, time to buy more!

      Getting emotional about investments is what crypto kids do lol.

      • [Deactivated] on 08/12/2018 - 11:33

        Your asset class is down? Sweet, time to buy more!

        A friend of mine does something, like this with share market. Kind of doubles investment when share price is going down. He does eventually sell though, once the shares that were going down and down again (with him investing more and more) once the market eventually goes back up, he sells. He has an MBA and is exceptionally intelligent (and rich from previous job) so I guess he knows what he is doing and also has enough cash reserves to keep investing more when markets drop

        • idonotknowwhy on 08/12/2018 - 12:16

          That's the key thing (having cash reserves). During a recession, you're more likely to end up unemployed. This is exactly the time you don't want to be selling your assets lol.

  • witsa on 08/12/2018 - 07:07
    +2

    Firstly don't worry about all the naysayers on here. Yeah there is a risk with what you're doing, but anyone who wants to make it big, there's always some degree of risk.

    My question is about the decision process you took to buy the interstate properties. Did you have to fly over and inspect the house or the suburb? Was all the research done online?

    I have an investment too but it's in the city I'm living in. I'm no big time investor but I wouldn't be confident of myself buying remotely without that local knowledge of the market.

    • RubenM on 08/12/2018 - 08:52

      Thanks.
      I did fly over multiple times (it's tax deductible) before I bought and spend hundreds of hours researching the areas from afar as well. Does it match local knowledge? Not always, but I think it's the next best thing.
      It wasn't all online, other than going out there, I also spoke to agents in that area. You always have to be careful what you believe, given that they've got a vested interest, but you can still learn from them.

      Good luck with your property. Any future plans for more?

    • hibijibis on 08/12/2018 - 09:00

      i feel the same way, however i think to be an effective property investor should keep all your options open!

  • centrelink on 08/12/2018 - 12:01
    +1

    What house in what area should I buy right now and at what price . NOW!

    • RubenM on 08/12/2018 - 16:11
      +2

      I've got a lovely place at Rockhampton, only $1M should do it.

      • MtnMama001 on 09/12/2018 - 09:56
        +1

        Hahaha!! S/he can have mine for $350,000!

  • SoapyWooder on 08/12/2018 - 12:59

    How much have you invested in property education? (seminar, membership, etc)

    How much have you lost in deals ?

    Thanks

    • RubenM on 08/12/2018 - 16:13

      I've spent maybe $1000 in education all up. Books, cheap seminars and magazine subscriptions. I would never go to one of those expensive seminars though. There are no "secrets" and no gurus. Anyone telling you otherwise is trying to scam you.

      Sorry, I don't understand the second question. Could you please elaborate?

  • Shanp on 08/12/2018 - 14:20

    Enjoyed the read. Thanks. How much of your rental income do you allocate towards outgoings excluding your loan repayments?

    Eg. rates, tenancy vacancies, land tax, maintenance & management fees.

    • RubenM on 08/12/2018 - 16:15

      I don't separate it like that, more than 100% goes to the total costs, so I supplement with my salary. But if I took out principal repayments, I'd about break even.

      • Shanp on 08/12/2018 - 17:26

        But do you know the outgoings for each property in relation to rental income?

  • newbiesh on 08/12/2018 - 15:00

    The house u live in atm is rented or yours?
    Am opposite of you, i buy new off plan apartments with dedicated developers and not overseas dodgy ones, easily gets rented with high yield, with quality tenants, when entire development is complete u dump it into the market, please argue with me :)

    • Shanp on 08/12/2018 - 15:33

      How early into a project do you normally purchase. I have never purchased off the plan but have heard some alarming stories. Would you mind answering some questions?

      Have you ever had a valuation done at settlement that has come in above or below the purchase price?

      Have you ever had problems with changes to the quality or size of the unit after contracts have been signed?

      Thanks.

      • newbiesh on 08/12/2018 - 16:46

        First one I bought was about 60% complete with really respected developer, i couldn't see the apartment inside just the outside.
        Yes, depends on the bank and valuer, but after going multiple banks i end up getting the price match i wanted. That's one of the risks of it but again not major as if it came down undervalued you can get insurance for it but luckily didnt happen to me.
        No never. These stories you heard are from the dodgy overseas devs with off plan you must research the developer pick the local and respected developer, it happened to two of my firends where they didnt deliver on time and delayed for 2 years etc, wrong floor level etc.
        I tend to stick with only 2 property developers when it comes to offplan, never had issues with them and been smooth, there are few perks of offplans as well such as incentives and many more. To me buying already established apartment is like buying something at full price, since it is completed and aged, but with off plan you risk a bit with good dev snd there is reward.
        A good solicitor can help you with future issues eg change of size etc.
        For your record i held 3 off plans one by one, no issues, all had instant quality tenants because were near city attracted not so dodgy people where is OPs logan ones, the one i sitll keep im waiting for woolies to complete their development downstairs before selling it.

    • RubenM on 08/12/2018 - 16:18

      Glad it works for you, it's just not for me, but I take your word for it that it can work. I think if people are starting out, then it's quite easy to make mistakes and lose money with OTP though.

      And the house is 40% ours and 60% the bank's. Being Sydney, it's by far the most expensive property we own.

      • newbiesh on 08/12/2018 - 21:02

        How so? Maybe i been lucky but how can one lose money with OTP? Developer dont deliver?

        • RubenM on 08/12/2018 - 21:42

          Booming economy: Developers intentionally delay the build so that they can make use of the sunset clause and resell for a profit.
          Tanking economy: your property is worth less than what you're paying for it.
          And you don't know what standard it will be, plus developers can deviate from the plan by a certain percentage and you're still bound by it. Basically the contacts are all for the developer and not at all for the buyer.

          • newbiesh on 08/12/2018 - 21:48

            @RubenM: Yep these are again happens with dodgy overseas devs. Along with other issues such as shitty materials and not as the ones in the display.
            Thanks, i thought there are other things that i dont know :)

  • whirlpool_guy on 08/12/2018 - 17:57

    Thank you OP for doing this AMA. I'm also invested in properties (Low-value Sydney units)

    1. Do you see yourself buying more properties in the next 2-3 years (I'm cosidering this but loan approval could be difficult)
    2. Have you ever experienced difficulties getting loans approved?
    3. Do you have a plan to retire early, say in your mid 50s / early 60s? Will you keep or sell the IPs at that time?
    4. Are you portfolio mostly consist of free standing houses? I bought units mainly due to lower total cost and higher rental yield
    • RubenM on 08/12/2018 - 18:18
      +1

      1) No, I don't think I'll buy again for quite a while, unless one specific property comes onto the market, which is next to mine. But even then, I might get my ex mentor to buy it and develop together with her.
      2) A few close calls, but I've never had a loan denied. A good mortgage broker helps a lot.
      3) The plan is to be able to go down to three days a week by the time I'm 45, which is nine years from now. I don't currently plan to sell up, but if I decide it's too much work and I've got sufficient equity, I might well do so. I don't have plans to completely retire though, unless I find something fulfilling enough.
      4) I've got three semi detached properties, the other seven are freestanding houses, two of which consist of two units/semis each. And one of the houses has a granny flat.
      I like land because it gives you more potential in the future.

  • Ghost47 on 08/12/2018 - 18:10

    So you're pretty set on property, is there any reason (besides easy access to credit etc.) why you didn't start to invest in say low cost index funds after your 5th or 6th property? Do you manage the properties yourself or do you have an agent do it for you?

    • RubenM on 08/12/2018 - 19:08

      If I believe that property is the best investment vehicle for me, then in my opinion it does not make sense to change my strategy half way through. I would only consider doing that once I have enough equity that I can retire on a 4% return. So in my case that would be at least $2M plus a paid off home and I'm not anywhere near that yet.

    • freshofftheplane on 09/12/2018 - 09:54

      The real answer is that @spludgey is mostly investing money that he doesn't own, and it's not so easy to do that with index funds

      • RubenM on 09/12/2018 - 09:59

        Precisely, thanks.

  • random101 on 08/12/2018 - 19:55

    At what point to you decide to get a property manager vs self manage?

    • RubenM on 09/12/2018 - 07:27

      If it's more than two hours drive, I'd get a property manager. Also, I would not want to manage more than three properties myself.

  • deviant on 08/12/2018 - 22:51

    Thanks for posting OP and definitely giving us an insight into your investment strategy.

    What age did you buy your first house?
    What was your best investment?
    Wha price range do you look for in IP?
    Are you cross collateralising all your loans to fund the next mortgage? And so are you with the same bank?
    Was your aim always positive geared properties or did you ever consider growth assets?
    Why didn’t you put your houses under trusts? Land tax? Asset protection?
    Why did you never buy in Melbourne?
    Ever considered unitblocks or boarding rooms?

    I am 34 and my investment strategy has been land content and location and potential development. Two of them being commercial and are positive geared. The rest negative geared. I’ve done okay but I’m blowing a lot of money on interest.

    • footyboy on 09/12/2018 - 07:52

      As many as 11 questions…

    • RubenM on 09/12/2018 - 07:54

      1) 28, I think, so not that young. I wish I bought at 18, like some people I know.
      2) Answered above
      3) Not looking for a price range, but looking for good yield and they're at the lower end of the market. I paid between $143k and $325k for my properties.
      4) None are cross collateralised. I have mortgages with four different lenders, which makes balancing accounts a bit annoying.
      5) If anything, the aim would be positive cashflow, not positive geared, but most of mine aren't either.
      I'm not a believer that you can predict future growth easily. Plus if I went for growth assets, I would love only be able to hold half the asset base that I do, because of the costs of each purchase. So then you'd have to ask, do you think that in the long term blue chip is going to grow at twice the rate as the rest of the market? I personally don't think so.
      6) Similar to the answer above, I would not have been able to buy as many properties. You need a higher LVR and I believe interest rates are higher. I think that if you do this as asset protection from your spouse, then you shouldn't get married in the first place. Other asset protecting is certainly valid, but but worth the trade offs for me. In retrospect, it would have been good to keep all my investments on the Central Coast, even with those higher costs, but looking back selectively isn't very helpful.
      7) Melbourne just didn't have the returns that I was after, plus the higher purchase prices mean that you've got to wait longer to buy again. Again, looking back, I wish I had bought there, but if I was in the same position again not knowing of future growth, I'd give Melbourne and Sydney a miss again.
      Researching areas and understanding the process for each state also takes a long time, so you can only focus on so many markets, that's why I never bought in Vic, Act, Nt, Wa, Tas.
      8) I did consider it, but due to the additional complications, I gave share houses a miss. As for unit blocks, I'm not really interested in those for the same reason that I'm not interested in apartments: ultimately you invest in land and units give you a low land component for your money.

      Sounds like our strategies aren't worlds apart then. But I'm paying plenty of interest too.

  • newbiesh on 09/12/2018 - 00:12

    How far are you from early retirement? I always thought owning lots of properties could retire me :(

    • RubenM on 09/12/2018 - 08:01

      Fairly far. I need one of these things to happen:

      1) Rents need to go up over 50%.
      2) I start developing my blocks and increase my rental income by increasing the density.
      3) Property values need to rise and lending restrictions need to ease. This would allow me to buy a say $2M high yield commerical property which would increase my income.

      Likely it will be a combination of all three and I anticipate that it will take between 10 and 20 years.

    • RubenM on 09/12/2018 - 08:05

      Having a mentor and paying for advice is contradictory to me. If you're paying someone (above buying coffee, meals, etc for them) then they're not a mentor, they're a financial advisor. Giving financial advise is something that I'm legally not allowed to do.

  • drprox on 09/12/2018 - 17:09

    How much debt do you have?

    • RubenM on 09/12/2018 - 18:37

      Between $2.5M and $3M.

  • ely on 09/12/2018 - 18:11

    How do you sleep at night?

    • RubenM on 09/12/2018 - 18:36

      With a one year old son, not terribly well!

      • ely on 11/12/2018 - 07:46

        Hahaha, yeah, my daughter is not long past that.

        Seriously though, property speculation is a massive disaster for this country, with those not holding property getting screwed coming and going - paying more tax to cover the concessions given to those with property, then getting screwed again by the sky high prices thanks to rampant speculation, and now looking to get screwed once again in the economic fallout as the ponzi wobbles and hopefully collapses (which is still better than it not collapsing, but it would have been better still to not have the bubble at all).

        Do you not have any ethical problems with what you're doing?

        • RubenM on 11/12/2018 - 08:10

          Ethical problems? No, not at all!
          As I mentioned before, I see my contribution as a marginal positive for society, not amazing, but I still provide housing to people that would never be able to buy homes.
          Also, if the market was to collapse, at a certain point it would no longer be financially viable to build new properties, leaving people in the lower end of the socio economic scale in a far worse position than they are now. If I had to choose between not being able to own a home and not having a home, I know which one I would choose.

          Also on the paying tax thing, I think we should all be paying more tax, so the fact that my speculation is increasing the amount of tax people pay does not bother me in the slightest.

          • ely on 11/12/2018 - 08:21

            @RubenM: This thread is long, so I haven't looked over the whole thing, can you point me to your rationale? It seems pretty clear to me that property speculation is a net negative - it does provide some services, but at massive cost. Rental properties would still be provided without the massive subsidies given to property speculators.

            I lean towards free markets, so I don't really see any situation in which it's not financially viable to build new properties. In a total collapse the cost of the inputs to housing (especially land) would also collapse, and so it would still be profitable to build housing even at a much lower cost. Your suggestion about having to choose between not owning a home and not having one is much more likely in the current housing crisis, where the cost of renting and owning is skyrocketing and this is something that you're culpable for.

            On the paying tax thing, I'm not so concerned about the absolute level, but that it's fairly applied. Your speculation isn't increasing the total amount of tax paid, it's just pushing down the tax that you pay and pushing up the tax that others pay. That seems to be inconsistent with your statement that you think "we should all be paying more tax", could you clarify your thinking here?

            • RubenM on 11/12/2018 - 09:25

              @ely: I've got the same problem with it being a long thread, so I'm not quite sure where it is, but it's very close to the start of the thread.

              One thing that I have to agree with you on is that I'm not entirely sure that negative gearing for example is justified. My personal preference would be to keep negative gearing, but restrict it to one asset class. So you can offset losses on one property to gains on another, but you can't claim those losses against your salary.
              While I don't really like the rules, I play by them.

              I feel your initial post was not targeted at government rules though, but at investors doing the wrong thing, this is where I disagree. If there were NO investors, who exactly would provide rental properties? The government, which would have much less revenue, due to missing out on billions of dollars that property contributes to the economy every year.

              High prices are increasing the total amount of tax paid. You seem to think that I don't pay much tax, but that's not true at all. If you add up all the stamp duty that I've paid, it's probably around the $100k mark. Plus land tax, higher council rates (if councils charge more than twice the normal rates, I see that as a tax), etc.
              I'm paying far more in total tax than I would be paying if I didn't invest.

              • ely on 11/12/2018 - 16:50

                @RubenM: I'd agree with you on negative gearing, but would restrict it to the same asset not just the same asset class. You can use your losses to offset future gains from the property, and at the same discount (e.g. if the CGT is 50%, then a 50% reduction must also be applied to the losses - ideally the CGT would also be reformed).

                I don't blame you for playing by the rules, I'd do the same - except that I refuse to speculate in property for moral reasons.

                My OP is targeted at both; the rules (government's fault) are stupid and they encourage speculation (speculator's fault). I don't think that investors should be eliminated, as those investing for rental returns provide some value, but if the rules were revised to largely eliminate speculation then that would reduce the speculators while having minimal effect on those buying to let.

                I disagree about the government income from property speculators. Property speculators do pay some tax (discounted capital gains, stamp duty, personal income on net rental income), but overall the enormous amount that we sink in to property is quite unproductive. If the same money was sunk into more productive investment, almost any other business activity, then it would provide far more activity (and tax income). In a similar vein, high house prices tie up an enormous amount of owner occupier money that would otherwise flow into the economy as well, so they're a constraint on economic activity in multiple ways.

                High prices increase the amount of tax paid to some extent, but you're trying to have your cake and eat it in your accounting there. If you weren't paying the land tax and rates on those properties, then the other owners would be instead. That's no change in tax take, just a change in who pays it (and ultimately it's really your tenants paying that tax as well).

                Stamp duty is substantial and one of the few taxes that I'd like to see reduced (or eliminated entirely). Transaction taxes are generally bad and stamp duty in particular makes entry into the market for first home buyers far more difficult.

                I don't know how much tax you pay, just that you almost certainly pay less tax than if your means of income was purely through labour rather than capital gains. Stamp duty is a one off cost that, over the time you hold your properties, is probably not going to be that substantial, while you can negative gear indefinitely, and (current market conditions not withstanding) the CGT discount is likely to dwarf the stamp duty charges.

  • renster72 on 09/12/2018 - 18:15

    What year did you buy your Principal residence and do you owe much on it? I have 5 investment properties + Primary Residence and my Goal was to get principal residence to 0. What sort of income from working yours & Wife do you have? do you have all properties in joint names?

    • RubenM on 09/12/2018 - 18:43

      I'm not going to give specific numbers, but PPOR has around $700k owning, with $150k being a second tax deductible loan that I used to buy an IP with.
      Bought around 4 years ago.
      I won't go into exact salaries, but I'm pretty much at the bottom of the pay scale for an engineer and my wife has only made a few grand this year, but should be at least $20k next year.

      Two or three are joint names, the rest are in my name. I started a few years before I met her.

      Edit: Actually, according to this, I'm near the TOP of the pay scale. I know lots of engineers thought that earn way more than that! https://www.payscale.com/research/AU/Job=Mechanical_Engineer…

  • fritzsticker on 09/12/2018 - 18:45

    Thank you so much for this information spludgey..

    Got couple questions regarding wills
    question.
    1. Have you done a will already??

    1. How did you set up the will and the trust in the will??

    2. Did you do 2 wills , one for you and one for misus?

    4.How much did it cost you for the will with 10 properties??

    1. When did you make the will? After birth of second child??

      Cheers

    • RubenM on 09/12/2018 - 18:49

      It's one of those things that we keep talking about. Should really do one! I didn't have live insurance before my son was born, but once he was, I signed up again.

      We'll do a free will when we do it.

      • fritzsticker on 09/12/2018 - 20:12

        Cheers..

        You meant life insurance in super or in a 3rd party??

        • RubenM on 09/12/2018 - 20:39

          Super.
          I don't see any reason to have any outside of super.

  • LXE3 on 09/12/2018 - 19:23

    I’m self employed and support myself, my hubby and three kids. We own our home, cars and have the 2 kids in private school and one still at home. While we’re mortgage free our living expenses are quite high. I’ve got a bit of money just sitting in the bank and we’ve been thinking we’d like to buy some properties but have been holding off because of the declining market. The money isn’t making anything at all but it’s not going backwards either. Do you think we should hold off another six months or so or just buy now? How much do you put into the property to start off - 20% or would I be better to buy two or three and put down 10%? We’d be investing for the future with a view to gifting the properties to the kids - we have a tax problem as it is without being too cash flow positive. That said, we don’t want to put a ton of money in to the houses as we want to enjoy life now.

    • RubenM on 10/12/2018 - 06:51
      +2

      My answer would be the same as it always is: "Start with the goal in mind."
      What are you actually trying to accomplish and how soon?
      Also, markets aren't declining everywhere.
      I don't think you should buy right now, I think you should join propertychat and do lots of reading before you consider buying.
      It's harder for self employed people to get loans, particular high LVR ones, so you might not get a choice in how much to put down.

      I'm not going to start the private vs public school argument here, but if I was you, I'd be taking a very serious look at my outgoings. The easiest way of getting financially comfortable is by reducing your expectations.

  • MrMoo on 10/12/2018 - 15:13

    Thanks for the good read.

    Just trying to be original and ask a question you haven't had yet.

    Your thoughts on properties that are 99 year leases?

    • RubenM on 11/12/2018 - 08:14

      I hope you're not just asking for asking's sake.

      Assuming that's not the case, here's my answer:

      I hadn't given it much of a thought. I haven't considered buying in the ACT and I don't own commercial properties, so it's not something that has ever been on the table.
      A quick gut response would be that I would invest in 99 year leases if that's the only option, but I would much prefer buying. Given that I'm buying for the long term and might hold property for the next 40 years, I would suspect a bought property would be worth far more than a 59 year lease at the end of it.

      • MrMoo on 11/12/2018 - 11:32

        Thanks buddy. The opportunity has arisen in the past for such purchases and we have always passed even though the price has been tempting. They always give you the price first then they throw in the "BUT" lol. Just wanted to see if other buyers have similar sentiments, which in turn results in a lower selling price XX Years down the track.

  • johndowy on 11/12/2018 - 13:45

    How much rent do you get a week if everything is 100% occupied, before you take out any deductions?

    • RubenM on 11/12/2018 - 19:57

      $160k-ish

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