Learning about Real Estate and Investments

Hansi on 09/08/2021 - 07:59

I am trying to build some knowledge around real estate investments, homes, mortgages, own homes etc. for my own consideration when looking at purchasing my first property.

To make an informed decision and maximise possible savings, can you recommend online resources to learn more about all things real estate?

I'm not after speculations on where the market is going to swing but gain an understanding of loans, things to look out for when purchasing, processes for purchasing, depreciation information, tax entitlements, grants etc.

Financial

Comments

  • rektrading on 09/08/2021 - 08:16
    +2

    Don't keep savings in fiat. Use the fiat to accumulate assets. Use the assets as collateral and borrow more fiat. Use the fiat from the loan to accumulate more assets. 🔃

    • dandosr on 09/08/2021 - 08:35

      I see the same thing in business, the less barriers to entry, the less a business a hope to profit from a market due to competition. the stock market and realestate market are now know investment vehicles with every man and his dog entering pushing the returns lower and lower and causing them to form "speculative bubbles". the returns of the past 50 years were only so because there were fewer market participants. watch and see the next 50 lol.

      • netjock on 09/08/2021 - 09:38

        Don't forget to include gambling mentality. Does anyone actually look at fundamentals?

        If you think about the average salary being $60k in this country and inner Melbourne, Sydney property houses at $1m+ and apartments at $500k then well you know something is wrong.

        I suspect just like London there is something dodgy going on. You know dodgy people also like to diversify their risk when trying to do their thing. They aren't flipping housing commission flats because that would just take too long.

        • p1 ama on 09/08/2021 - 10:51

          then well you know something is wrong

          Yes, and that something is that we've not been keeping up construction and development to keep pace with our population growth, zoning laws closer to the city are far too strict and most inner city folk are more interested in preserving the heritage and culture of where they live rather than building more affordable housing meaning that the only direction we can build is outwards, continuing to drive a wedge between the rich and poor.

          • netjock on 09/08/2021 - 11:58

            @p1 ama:

            construction and development to keep pace with our population growth

            We know that is a lie. We're going gangbusters building now with borders closed right now and prices aren't coming down.

            It is this perpetual motion machine the RE industry has built for themselves where prices keeps on going up. There is an article about negative interest rates the other day from Murdoch front business that property prices will explode. Even if interest rates go to -2% meaning variable rates go to 0% how many years you going to take on two average salaries to pay back an $800k loan. It is going into territory of the stupid now which is basically everyone hoping they can cash out, like the big short where everyone is buying what they can't afford and hope they can refinance at lower rate with no income, no job and no assets.

            • p1 ama on 09/08/2021 - 13:20
              +2

              @netjock:

              We're going gangbusters building now with borders closed right now

              We're not - we're building shoebox apartments in the CBD that nobody wants to live in and tiny houses on metro fringes which nobody wants to live in.

              I'm not doubting all of the other points you raise, however, the absolute fundamental issue at play here is that it is an issue with housing supply. People in rich areas area using zoning laws and regulations to keep others out and protect their asset values, protect the culture and heritage of their areas…etc.

              If you're doubting this, then I think you are simply just denying reality. Funny how everyone rails about house prices until they own a house themselves, or until developers come along and want to start developing in their backyard.

              • netjock on 09/08/2021 - 13:48

                @p1 ama:

                If you're doubting this, then I think you are simply just denying reality. Funny how everyone rails about house prices until they own a house themselves, or until developers come along and want to start developing in their backyard.

                Read my comment below about me having multiple properties. I have CBD, 20km from city, also international (London, UK). My super has more equity that all my properties. I really don't care about my property prices because I live within my means and basically every one is covered for. I just think people are just being irrational now. where as most people are using theirs like ATMs and hope they can refinance to cover their spending.

                We're not - we're building shoebox apartments in the CBD that nobody wants to live in and tiny houses on metro fringes which nobody wants to live in.

                Can't help it if every person wants to get into certain suburbs (in Melbourne those that are 15kms from the CBD such as Pasco Vale that is $1m is basically a facilities / amenities deserts). CBD is actually not bad.

                Just don't buy new build shoe boxes, buy good old blocks. I got a decent 2BR, 2 block from Queen Victoria Market and 2 - 3 blocks from full size Woolworths, Coles and Aldi. It is $500k cheaper than living in a 2BR in Carlton. Body corporate is $5k but then we have 2 pools, 2 gyms, tennis court for <50 floor building. That is cheaper than 2 gym memberships.

                tiny houses on metro fringes which nobody wants to live in.

                Fringes like Craigieburn aren't tiny houses. They are 20sq+ basically large 3BR or 4BR houses that takes up the whole 300sqm block.

              • dandosr on 09/08/2021 - 13:53

                @p1 ama: Have a look at population growth vs supply of dwellings. You will actually find that supply has outstripped population growth in all capital cities but for Sydney which has a slight shortage. Who is sitting on all these properties, that is the real question we should be asking the government.

  • p1 ama on 09/08/2021 - 10:48
    +1

    Are you purchasing a property to live in, or are you purchasing a property to invest in? Two very different goals and will be judged by two very different criteria.

    If you are purchasing a property to live in, then the first consideration is what your budget is. Your budget will be determined by 2 things - how much savings you have and how much you can borrow. In general, your safest bet is to assume that you will need a 20% deposit on any property you wish to purchase plus stamp duty (this is important, and can be a significant amount!).

    A good rule of thumb is to take the amount you have and divide it by 0.25 to get how much your deposit is limiting you. E.g. if you have $200K, then realistically, you can look for a property that is around $800K and you'll have enough to pay for stamp duty and other purchasing costs.

    Next, you need to figure out how much you can actually borrow. So plug your financial details into a borrowing power calculator and figure out what your maximum loan amount is. Now you can see whether you are actually able to afford the loan.

    For example, if you have $200K, and you borrow $900K, then you can continue looking for a property around $800K. If you can only borrow $500K, then you will need to decrease your budget, increase your income and/or deposit accordingly.

    Once you've figured out your budget, start thinking about priorities that are important to you in terms of figuring out where you want to live - do you want to be close to friends and family, do you want to live in a certain direction, do you want to live in a smaller place closer to the city or a bigger place further away…etc. You can then open up Google Maps and start shading in regions where you think you can start shopping.

    Make sure that you take into account your priorities, e.g. if you work in the CBD, then living 5 min walk from the train station, but a 60 min train ride is actually much better than living a 30 min walk, but a 40 min train ride, for instance. Not to mention that the former will likely be cheaper than the latter. However, if you drive to work, then the former will be much worse…etc. Are there any requirements with respect to schools and other amenities. You need to make up your mind.

    Once you've figured out a suburb, looked at some properties online, then it's time to apply for pre-approval and get in contact with some agents and engage a conveyancer. The process from there is pretty much standard.

    • netjock on 09/08/2021 - 12:14

      Are you purchasing a property to live in, or are you purchasing a property to invest in?

      The problem is when you are an investor you can use negative gearing to pay a higher price. The system is rigged against those who is buying it to live in and I have multiple properties. I would be much happier to see owner occupiers get tax deduction on their interest and investors to carry their losses, that would be a lot of fun.

    • salbee28 on 09/08/2021 - 12:51
      +1

      I mean you don't NEED a 20% deposit these days, yes it is preferable but if people are wanting to get into the market & don't want to be saving for 10 years to do it, you can have the Lenders Mortgage Insurance included in the mortgage, it just means your mortgage will be include an extra percentage of what you need to borrow to make up the difference between the deposit you have & the 20% desired.

      If you are a first home buyer & eligible for the government raft of schemes, this all becomes slightly more enticing cost-wise in some cases (building or buying newly built) & can really affect the decision making process.

      • netjock on 09/08/2021 - 13:51

        I mean you don't NEED a 20% deposit these days

        True but then at what point does it all end?

        In the UK they have 5% deposit mortgages with government guarantees. Before the GFC they even had 105% mortgages so you can pay for the place + stamp duty too but you know it is just going in the wrong direction.

        • salbee28 on 09/08/2021 - 14:29

          The bare minimum banks will look at with responsible lending criteria in place (which isn't going anywhere, if anything will get tighter again) is 5%. They would also only look at this amount if you are able to claim a place with the FHLDS.

          If you aren't able to get a place on the FHLDS scheme, they would probably only accept it with an external guarantor. Even with a high income - $150K+ they still wouldn't approve at 5% without these things.

          I just recently went through this process with someone & this is the advice we received from multiple mortgage brokers, they all recommended a deposit of at least 9% but said 20% was definitely not required these days & fairly impractical for most people to achieve.

          • netjock on 09/08/2021 - 14:34

            @salbee28: Reducing deposits just shift the buck. It isn't like it doesn't need to be paid.

            Don't worry. Responsible lending laws won't be needed when interest rates go negative. In fact you'll be buying a $2m property with the bank paying $0.5m over 30 years. But you just need to try to sell it to someone for $3m and tell them the bank will pay $1m over 30 years.

    • Hansi on 09/08/2021 - 14:56

      Whilst I think many people can gain something from this thread my personal situation is probably very different to others here.

      I'm looking to buy a property to live in, knowing that I will need to move interstate for work at some point in the next few years due to work commitments. At that stage my primary property will become an investment property unless I decide to sell.

  • nephilim on 09/08/2021 - 12:16

    Join your library, use the free ebook access to read the last 12 months of Money Magazine

    I think simple terms:
    1. House that will go up a lot
    2. Stable house aka new house in new area or a poor area (like Elizabeth SA), 4-12% yearly growth. guaranteed rent for life.
    3. House to split land, these are becoming harder to find and less profitable. (As why would a real estate agent sell you a house, they know themselves can make 100k on).

    • netjock on 09/08/2021 - 14:00
      1. House that will go up a lot

      If you tell people enough people will believe in anything. It is like inflation. You tell people enough that QE is going to make inflation go up because more money chasing products then yes people will go out panic buying chasing products. If you don't explain QE is given to the banks so they can lend out to credit worthy borrowers. To be credit worthy you got to be able to manage your money (not spend it chasing products), yes there is a portion that will chase and become non credit worthy very quickly.

      1. House to split land, these are becoming harder to find and less profitable. (As why would a real estate agent sell you a house, they know themselves can make 100k on).

      A REA can't buy every house that they sell. That is like saying Elon Musk is going to buy every Tesla because he knows FSD will work and turn them into Robo taxis so you're $60k car will be worth $300k.

      But you are also right. Buying an established house and building a unit at the back is almost unprofitable. (Been looking into it). Example a $600k house, $30k stamp duty, $30k to sub divide, $20k for plans and permits, $300k to build (20sq), plus 1 year of interest ($20k?) is $1m total. How much can you sell the front and back for? Only way it will work is if house prices go up say 5% which means you will make $50k. That is a lot of work for 1 year dealing with a lot of pricks, number of things can go wrong.

      Although I have been told if you can stump up $1m for highly prized suburbs then build densely you can probably make a good profit. $1m (knock down) + build 3 units ($500k each) then sell each unit for $1m upon completion. $2.5m cost, $3m sell. $400k profit in 2 years.

  • miwahni on 09/08/2021 - 22:28

    The internet is awash with the kind of information you're looking for but it's pretty fragmented.

    A couple of sources to get you started, which have reasonably basic sorts of articles about finance and real estate:

    https://mozo.com.au/ - Mozo is a good comparison site but they do have info as well.

    https://www.savings.com.au/ - more than just savings but articles on loans and finance also.

    https://www.realestate.com.au/ some fairly basic info on real estate.

    For information on depreciation and tax entitlements, have a browse around the ATO website. Grants are usually state-based so have a look at your state's website and see what you can find.

    • Hansi on 10/08/2021 - 06:32

      Thank you very much I will have a look around those sites to see what I can find and learn!

    • Hansi on 10/08/2021 - 06:34

      Awesome, some of the forum topics cover exactly what I'm looking for, cheers!

    • Hansi on 04/09/2021 - 13:33

      It has been very helpful, I have read lots of posts on there.

      • Team Ozgiftcards on 04/09/2021 - 17:20

        Great, so what do you think your next step should be?

  • texx on 10/08/2021 - 07:31

    Property planner, buyer and professor podcast.

  • exceladdict on 10/08/2021 - 09:31

    I am a big fan of Martin North and Digital Finance Analytics (Walk the World on YouTube). He and his guests covers a range of topics but is generally objective.

  • Str8up71 on 10/08/2021 - 12:24

    You're requesting big data…with 25+ years experience in the Property & Financy Industry I'm happy to discuss, direct and/or help you navigate through the myriad of online information if you'd like to contact me.

  • rowdy on 12/08/2021 - 06:20

    It's a huge ponzi scheme - why do you think interest rates are zero? End game.

  • i like free on 12/08/2021 - 23:24

    I highly recommend podcasts!! They are such an amazing resource and easy to understand. The property coach, smart investment property group, my millennial property etc. I learnt a tonne of information and basically binged listen

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