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My Strategy... Thoughts ??

Discussion in 'Investor Psychology' started by KJB, 28th Aug, 2016.

  1. KJB

    KJB Active Member

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    Perth/Bangkok
    I wasn't sure what Forum to post this under, as it covers a few things, but as its mainly about my strategy I figured here :)

    My head is a bit of a mess, mind is going 100km an hour in all directions as I have been trying to figure out what to do concerning my wealth creation strategy. Ill try keep this as concise and too the point as possible.

    I'm 28, a PAYG chef, currently have 2 IP's in Perth, am on reasonable money in the second highest tax bracket. As I'm not sure how forthcoming capital gains will be over the coming years I've based 2 future purchases on money I can save for deposits. With any actual CG funding further 'bonus' properties.
    My initial time frame/End goal is 3mill gross assets by 40 (which I think is fairly realistic just on the 2 future cash deposit IP's )
    These 2 would preferably be sites with sub div potential, which I would subdivide sell off the blocks and put the funds toward debt reduction and index funds/stocks of some sort.

    As (assuming NG rules haven't changed by then) these property purchases will all be moderately neg geared, so it would be best to have them in my own name, plus the CGT 50% exemption when it comes to selling the block - Plus with tax creep ill end up in the top tax tier 8-10 years, more argument for having it in my own name for those glorious glorious tax deductions.:D

    Next phase would be to see where I'm at by 40 and look invest further (as im sure it gets addictive) via trust structures as ill have a lot of capital/security by then to fund bigger projects (pending copious amount of study) - or to start paying down debt and possibly LOR?? ill have more of an idea on the next step in 12 years o_O

    My main concern is that with the intended above prop portfolio and my contributions to an index fund ill be soon to set up, ill have millions of dollars in gross assets (moderately geared) by 40 (if it all goes well) and,as all the experts say start with the end in mind ..am I leaving house of cards open to be pulled down? -I've read up a little on trusts structures and get the jist of them, for asset protection, tax etc, so is it really smart to be aiming for all of this in the initial leg of life/strategy in my own name?

    As I said I'm still trying to figure all this out and Ill be seeking prof advice in due course. I'm just curious to see what the PC peeps think of this? + I'm a bit greedy for constructive criticism. please rip it to shreds and point out things I've missed or where I'm wrong and any general advice would be great :D
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Some random points to consider:


    If there will be no capital gains would it be a good time to invest?

    What happens if you buy in your name and then sell? You will save interest from the negative gearing but pay higher CGT when sold.


    Whats the end goal in terms of income. How many properties do you need to achieve this and what debt level. Consider other income you may have as well from super and shares.


    Do you have non-deductible debt? Have you considered paying this down and borrowing to fund investments?
     
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  3. KJB

    KJB Active Member

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    I'm not discounting capital gains completely - in fact im hoping for them!! it just feels more real/attainable that I know that even if there aren't any CG's I can still have the deposits for required prop with savings alone. if that makes sense?

    In a perfect world would not be selling anything, but its on the cards.. and I thought it was better for CGT in personal name ?? would a corporate trustee/trust situation be better for this?

    End goal was $3mill $ by 40, then top up offsets for a decade or so and maybe sell down then thinking of switching to casual work until 65... I worked it out on somers PIA (don't have the info handy) , but it worked out to 2 $550,000 properties in addition to the 2 I already have. with a portfolio growth rate of 5-6% But that was all in todays $$ Ill have to assess it again inclusive of inflation now that I think of it!!

    Getting my head around index funds, ETF's and LIC's at the moment and possibly SMSF once the balance is high enough

    Just 1k or so on my credit card... I rent. Just loading up the higher loan IP offset with cash at the moment

    thanks for the feedback terry :)
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If you rent then you should carefully consider structuring so as to maximise tax effects later. Spousal or related party loans may assist in this regard. You would eventually want to move into a main residence that you own or a related party owns and at this point you would want to pay as little interest as possible.

    A discretionary trust would assist in saving CGT - but this is only one aspect to consider and may not be suitable overall.
     
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  5. sanj

    sanj Well-Known Member

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    Good salary for a chef in cureent perth environment, nice work!

    Just a couple of thoughts:

    1) i wouldnt be as focused on your goal gross assets position as i would your net asset and possibly income position when 40. Gross assets dont mean a whole lot as someone with 3m of assets and 30%lvr is a hell of a lot better off than someone with 4m and 70%lvr so firstly work out where you exactly want to be.

    2) as for asset protection etc, its a tough one and a bit of a how long is a piece of string question. Is there even a small chancr of you taking on a potentially risky venture? Eg your own restaurant which would come with you giving a lot of personal guarantees? If that happens anf, touch wood, it fails and you personally end up in the red the properties in your own name are up for grabs. Others you structured better arent.

    3) id be wary of falling into the trap of being comfortable with no cap gain and neg gearimg for a few years, if you think that has a decent chancd of happenimg then youre better off not buying yet instead of spending $1 to aave $0.38 in tax.

    As for cgt, if you have no possible other beneficiaries of a family trust then i suppse there woildnt be any potential cgt savings having it in a DT but youre also discounting the future possibility of beneficiary/ies dowb the track, eg spouse, kids etc.

    I personally think its worth you gettinf a bit of basic understanding on here then paying someone for an hour og their time and letting them run through the pros and cons of each option generally aa well as specifically for your present and possible future scenarios. Youll then be in a better position to make an informed decision.

    It looks like youre thinking long term and planning ahead which is excellent. Doing so from an informed and properly adviced POV is extrmely powerful and something the majority of penny wise pound foolish investors neglect early on
     
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  6. KJB

    KJB Active Member

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    Location:
    Perth/Bangkok
    Thanks Sanj,

    1) The 3 mil was just the goal for my acquisition phase, then the next 10-15 years was to lower LVR and let rents rise. but yeh I need to figure out what my net sum would be - it seems to come to that magical number of 100,000

    2) no plans at all to go into restaurant business, I work off shore (oil and gas) pretty sweet gig and equal time off - hence the good coin too

    3) good point

    I'll have to suss out a few scenarios and possibly hit terry up at some stage in the future.

    This whole property education journey is a bit sadistic ..in the way that you learn a little only to realise there's a whole lot more on so many more things that you don't know!!

    Thanks again! :)