Property Investor - Summary of Properties
I am a property investor in Australia. I currently own 3 properties and my goal is to own more. I have a long term goal however when buying property just buying the next property is the obvious goal.
Actually I am planning to take a break in terms of buying new residential properties and I am looking at commercial property.
I am giving a description of the problems I faced with each property so that those that are looking to get into the market or expand will have some idea of what is ahead of them.
Property 1
The main problem with getting this property was the deposit. The solution is budgeting. Writing down what you plan to spend and then executing the plan. Give up luxuries.
I believe I had beginners luck with my first property as it has now doubled in value.
Property 2
The second property was a disaster. Essentially I paid an overvalued price for a property and the value has not risen over many years. It has gone down more than up. Only now is it getting to a reasonable value. This house was off the plan and built in a newly developed suburb.
What I should have done was reference check the sellers and spruikers. I should have applied common sense that this development was on the edge of a development corridor. This meant that as soon as my suburb was completed and new suburb would be built adjacent which would pull down the property value due to oversupply in the area and creating a renters' market.
When the seller flatters you with comments like "you must know someone high up in the company to get such a good deal", watch out. It's obvious in hindsight.
I decided to bite the bullet and just hold and pay down the debt. Over many years this property has stayed flat.
Property 3
I have purchased this property off the plan and it is only now nearing completion of construction. This time this property is on land which is a very small area less than 20km from Brisbane CBD. This means that no new developments around the property will flood the market with new supply. The property is in an area where new land is scarce. I believe the area was a farm prior.
Based on common sense the property should rise in value due to scarcity. Also the rent should be high due to being less than 20kms from the city.
The jury is still out on this property but I did not repeat the mistakes of the second property.
Financial Position
My financial position is healthy. I have good equity and good income. Income is due to nearly double with the new property coming on line. I am not in financial stress even while building the new property.
Going Forward
I intend to take the rent from the third property and pay down the debt also. I am not into high risk strategies. I have a lot of equity and and prefer it that way. I could probably buy another property or two right now but am just going to pay the debt down a bit before taking the next step.
Commercial Property
I am looking into commercial property. I purchased a training course on commercial property in order to find out more about it. Commercial property has more yield than residential property so it is worth a look. I have been doing residential investment for a while now and I am thinking that it is taking too long and I require a different strategy. This is why I am probably not going to buy another residential property.
Negative Gearing vs Positive Gearing
I have been negatively geared and I have been positively geared and I believe positively geared is better. My main reason for saying this is that if I lose my job (which I am not planning on doing) then I have net money coming in. With negative gearing there are payments to be made to make up the loss between the rent and the loan payments. This means that no job will create huge financial stress over and above not having an income. For the unlucky - bankruptcy can occur in 90 days.
There is an illusion of being a sophisticated investor with a lower tax rate.
Positive gearing means that I pay tax to the government every tax return however if I lose my job then I have some money coming in.
Family Trust and Company
I am looking at getting a family trust and company. If anyone has any advice regarding how I can move my properties into a structure like this and if it is worth it - please make a comment down below. I know there are disadvantages to moving properties into a trust but I am not sure of the details.