Here is a great opportunity for you to ask your property investing questions to our property women team. The best questions will be answered and published each month. Please send your questions to rachel@propertywomen.com.au
This month Rachel Barnes answers your questions.
Q - I am almost 62 and still working fulltime and would like to get out of what I am doing now.
What would your advice be to a person my age about stepping into the Property Market - your readers stories are so tempting - but something is holding me back.
My husband and I already own a negatively geared property but find that we seem to be paying out more and more each year. Sure the value of the property is going up but our out-of-pocket expenses are more than what is going into the bank.
I was reading a book today called ‘The Power of Now’ and the author (Eckhart Tolle) made quite a profound statement…“you see and judge the present through the eyes of the past and get a totally distorted view of it”.
You have a negatively geared property and the outgoing cash flow means that you tend to judge all property investments in that way which is probably why you’re being held back.
If you’re not happy with negatively geared properties – perhaps you need to think about looking for the opposite types of investments…positively geared properties.
Also it might help you to consider your property from a different perspective. Calculate your net worth now, taking into account your equity and reducing it by the net cash flow you’ve put into the property over the years. I would expect that you are still way ahead in equity. Then the question is – would you have saved that amount of money if you hadn’t purchased the investment property, and would you have even saved the money that you’ve spent on the property?
At least with some assets like property behind you, you have more choices than many other people. You could borrow the equity, sell some of the equity, or sell the property, or keep the property, or improve the property to increase the equity…so many choices.
At the age of 62 you’ve obviously learnt a lot already, but I think the beauty of being more mature is that you realise that the older you get, the more you have to learn – and learning keeps you feeling young! Your age is certainly not a barrier - unless you want it to be.
So if you want life to be different – think differently.
Q - My husband and I are looking to buy our first home to live in. We currently live in Sydney.
My husband has a $150K investment property in St Kilda, VIC and a $230K investment property in Potts Points, NSW. They are both positively geared.
I have inherited a property which I now own outright in Rosslyn Park, SA worth $600K. I have family obligations to keep this property but could use the equity.
My husband owns his own business and earns around $150K. His business currently pays for our rental property in Darlinghurst which is about $45Kp.a. My salary is $90K but we are looking to start a family within the next 12 months leaving us on a single income.
We would like to use the current market to our advantage and are looking to buy a home. We want to stay in the eastern suburbs and not have to renovate in the future. I think we could maybe afford a $1.2M property which doesn't really get you that much around here. I think we would have $100-200K deposit and the rest we would have to borrow.
I am now starting to wonder whether we would be better off to stay renting and get a couple of investment properties instead. We are both very inexperienced and I want to get my knowledge up quickly so that we don't potentially miss out on a good deal in the market.
You seem to be in an excellent position to make some choices, and it seems to me that you are considering a wise one.
In my opinion, it does make more sense to buy investment properties with your equity and then rent a home to live in.
You have the opportunity to get a tax deduction and claim depreciation on investment properties which will obviously be of value to you.
If you borrow money for your own home you can't claim the interest.
Also it's not unusual these days to be paying a lot less rent for a top end property, than the interest would cost you if you purchased it.
One of the things you will need to be aware of before you buy your investments, is how best to purchase them to protect your assets and make the most of your tax position.
Overall, I think you're on the right track.
Hope to see you at a Property Women Workshop our Final One Day Workshop is in Sydney on the 21 September 2008, click here for more information about our one day event.
Q - I am 53 years old and live in Melbourne. I am about to get a divorce after 36+ years, not quite where I thought I would find myself at this point of time.
By the time everything is finalised, I don't expect to end up with much more than $300,000 which in my view would not secure a roof over my head and that scares the hell out of me.
I have the potential to earn up to $70,000p.a but for now my income is hovering around $45,000 due to unforeseen circumstances.
The thought of renting for the rest of my life is disappointing after I have worked all my life and supported my ex and my family, I feel somewhat cheated.
As I will end up with no property to borrow against and only cash and a low income, I don't expect the bank or any financial institution to support me with more than a minimal amount which means I will be forced to live miles out of my way or to rent.
I am lucky that my boys are in the plumbing and building industry so if I do get an older house, I would have assistance in renovating, but the lack of funds hinders me from taking a chance, but my gut feeling is telling me to take a chance.
How and where do I start?
Sounds like one chapter of your life has closed, and another is about to open.
I remember when my husband left me many years ago, I was shocked and a little angry but also scared that I had all the debts left to pay and just my wage coming in. Although it took a few years for things to settle down, I realise in hindsight that it was one of the best things that could have happened to me.
Going forward from your perspective I think you are in a good position. You can earn a decent wage which will help you initially to access funds from Lenders. You have a good deposit of $300,000 to cover 2 or 3 investment properties (at least!) and you can probably find a really nice house to rent for less money per week than the mortgage would be if you purchased it.
What does it matter if you don't own your home, if you own a number of investment properties?
If you choose to renovate some properties, you have qualified family to help which is excellent - you can work together towards your new future. Just think how proud you will be of yourself in a few years time when your life is back on a better track - and you'll have yourself to thank.
You are the person you can trust.
You are the person you can rely on.
Why not trust your gut-feeling?
Listen to others, consider their advice and opinions, but do what you think is best.
You Go Girl!
If you'd like to submit a question for the next newsletter, send an email to rachel@propertywomen.com.au Disclaimer The information, statements and opinions expressed in this email are only intended as a guide to some of the important considerations to be taken into account relating to property investment. Although we believe that the statements are correct, they should not be taken to represent accounting, taxation, legal or investment advice and you must obtain your own independent advice from an appropriately qualified professional.
Neither the publisher nor any people or organisations involved in the preparation of this material give any guarantees about its content or accept any liability for any loss, damage or other consequences that may arise as a result of any person acting on or using the information and opinions contained in this email.
