Join Australia's most dynamic and respected property investment community

A nervous genius from Perth

Discussion in 'Introductions' started by Polony, 13th Jun, 2016.

  1. Polony

    Polony New Member

    Joined:
    13th Jun, 2016
    Posts:
    4
    Location:
    Perth
    I bought my first scungy flat in Perth last year, a few decades too late. I think I was right as its a $310,000 flat in Glendalough, in a complex (311 Harborne) that doesn't feel like a prison. It was the cheapest flat in the complex since 2012, nothing has sold for cheaper since then, and the only problems were fixed by $10,000 of kitchen and flooring.

    I could have bought in the 1990s, but I was smart enough to work out that Perth was ridiculously overvalued and prices must come down. I repeated similar thinking over the next 20 years, but my real problem was self discipline, not reasoning. I now wish I listened to parents. Apparently grandma did well out of 10 pounds blocks in Mandurah.

    I saw lots of property investment spruikers over the past few years, but only gave money to Pat Mesiti who was good for me because I needed to fix my self discipline.

    I convinced myself to buy my first flat in Excel: basic property investment economics makes your first property purchase effectively a 24%pa return on capital invested with conservative assumptions. Conservative assumptions are 3% inflation, rent and property goes up with inflation, 5% interest rate, net rental yield 1% less than interest rate, 5% deposit plus 2% lender's mortgage insurance, no capital gains tax as first property, and no stamp duty or land tax as first property.

    I would be grateful if I could please borrow a time machine as some idiot needs some explaining. Thanks.
     
  2. Blacky

    Blacky Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    1,103
    Location:
    Bali
    Welcome on board.
    Some of us bite more than stamp duty, but not many.

    Whats your strategy? "buying the cheapest property" isn't a strategy.
    What are you in this for? whats the long term plan?

    Personally I think Perth has a bit more pain to be felt. But tbh, I think most of Australia is going to feel some pain in the near future.
    Ive never been good at making predictions though.

    I don't think you will go too far astray in Glendalough, but it depends on what/where you bought.
    What is your rental return?

    If your first property gives you 24% What do properties 2-20 give you?

    Blacky
     
    legallyblonde, Polony and MsAli like this.
  3. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,576
    Location:
    Adelaide, SA
    So you've moved into it and living in it? Why the mention of rental return then?
    Don't we all :p
     
    Balman likes this.
  4. Polony

    Polony New Member

    Joined:
    13th Jun, 2016
    Posts:
    4
    Location:
    Perth
    Rental return is relevant as it reflects the alternative cost of renting for the long term, and I intend moving in a few years. Thanks.
     
  5. Polony

    Polony New Member

    Joined:
    13th Jun, 2016
    Posts:
    4
    Location:
    Perth
    Thanks.

    I bought my cheap flat in Glendalough because:
    • Glendalough is a lot cheaper than adjacent suburbs and with good infrastructure so the crappy state housing stigma should disappear like it has elsewhere,
    • the imminent royal assent on losing the $3,000 first home owner grant encouraged a bit of haste,
    • It only needed about $10,000 of work to be about average quality for the complex, but was much cheaper than same condition in complex in 2012 and since.
    • As a scungier property, the relevant market is mostly the lower end of employed people, not wealthy people. Based on WA labour force statistics available at 6202.0 - Labour Force, Australia, Apr 2016 higher paid male employment rates have flatlined, but lower paid female
      employment has increased - hopefully reflected in the market for cheaper properties.
    • I faffed around for a few decades with more opinion than action, finally starting to learn self discipline in my 40s and needed to put my foot down on my own stupid behaviour.

      Blacky[/QUOTE]

    I will get back to you on this with upload. The tax benefits are a lots less on properties 2-20 because of CGT.
     
  6. Blacky

    Blacky Well-Known Member

    Joined:
    25th Jun, 2015
    Posts:
    1,103
    Location:
    Bali
    I very interested to know your strategy.

    Sounds like you are living in this property - so its not an IP (currently).

    Dont concern yourself with the last few decades. Theyve gone. Look forward at the next few. Plenty of time to 'catch up'

    Blacky
     
    HUGH72 and Polony like this.
  7. Username86

    Username86 Well-Known Member

    Joined:
    31st May, 2016
    Posts:
    62
    Location:
    Perth
    I could be wrong here but I'm pretty sure just being your first property doesn't make it CGT exempt, you have to live in it to get the exemption. If you move in later you would need to apportion it between investment purposes and PPOR. I'm sure one of the many accountants on here can verify this.
     
  8. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    903
    Location:
    Qld
    Congratulations on your purchase. You are heading in the right direction.
    Marg
     
  9. sanj

    sanj Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,142
    Location:
    Perth
    Looks like this complex consists if 2x1 double storey units and if so i think you have a decent buy on your hands, subject to condition of the unit and complex overall