Pre BA BA?

Discussion in 'What to buy' started by Johnny Smith, 10th Dec, 2016.

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  1. Johnny Smith

    Johnny Smith Member

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    Hello, complete amateur here. I am hoping to purchase my first property (IP) in the new year. Broker is working on pre approval and I am wanting to begin house hunting. My dilemma is not having a specific search area. I want to hire a BA to choose location, property and subsequently purchase as I am both time and knowledge poor. How do i find someone who will start large scale (East Coast Aus) and narrow down to a specific area for me to then employ a local expert?
     
  2. Wukong

    Wukong Well-Known Member

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    One thing to think about, outsourcing success generally won't lead to success.

    Outsourcing to professionals is to complement/ implement your vision. You'll need to do the hard work of gaining knowledge and doing the necessary research.

    Have used BAs before, but they can only focus in a certain area. It's really hard for them to provide you an unbiased location recommendation.

    My thoughts anyways, especially with the markets already boomed the last couple years.
     
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  3. spludgey

    spludgey Well-Known Member

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    Start with your goals and work backwards. Even the best BA in the world might buy the wrong property for you, as you don't know what you want at all.

    Here are a few criteria that could answer and we might be able to give you suggestions what you might want to consider:

    • Overall goal: (Retire early, just have one extra property to pass on to the kids, etc)
    • Current age:
    • Savings and equity:
    • Salary: (if you're comfortable disclosing this, but it would make it easier to give you some advice)
    • Current debt:
    • Saving rate:
    • Life status: (married, single, looking to start a family, etc)
    • How comfortable are you with debt:
    • Looking for growth or cash flow:
     
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  4. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    There's a few BAs that have multiple offices across the country. The problem is they're not specialists in any particular area. My observation is that BAs that are specialists in a general area tend to get much better deals than the generalists.

    You need to figure out what your high level strategy is as per spludgey's post above, then figure out where you want to buy. Then figure out who the best specialist in that area is.
     
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  5. Johnny Smith

    Johnny Smith Member

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  6. Gockie

    Gockie Life is good ☺️ Premium Member

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    Question. The $1mill. That's how much you are looking to spend, am I right?
    How much have you got saved?
    And what offset funds are you referring to? (Or do you mean rental return)? Which I interpret as you do actually want a decent cashflow return.
     
  7. Johnny Smith

    Johnny Smith Member

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  8. Gockie

    Gockie Life is good ☺️ Premium Member

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    Ummm... Hi Johnny..... Not sure you understand what offset is.....
    Are you saying you have that money to put in offset? If so, why not buy $5 mill worth of property?

    I think you mean a loan, not offset. A completely different kettle of fish.

    You have about $250k to use as savings now, is that correct?
    And I think your application of the stamp duty isn't right either... It's additional to purchase price (or else you have a hole elsewhere in your figures).

    I think you need to keep reading for now.
     
    Last edited: 10th Dec, 2016
  9. Johnny Smith

    Johnny Smith Member

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  10. Gockie

    Gockie Life is good ☺️ Premium Member

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    Hi @Johnny Smith,

    Got it. The issue with your proposal is that you arent going to be able to tax deduct except your rates, insurance, management fees etc. because you have your funds in offset. This means you pay no interest and that's usually the biggest tax deduction. If you do it this way, you'll be paying a lot of tax on any income coming from your IPs as you don't have much costs to offset against that income. It's ok to do it, but be aware it's not what I'd suggest as being optimal. The good thing though is you can pull the money out of offset at any time.

    You can buy assets to 1.8mill though. Normally I'd use leverage in buying property. You have some ability to leverage, I'd still use that. Maybe buy ~$1 mill in property and put what you were planning to put into offset into some income producing shares instead? That way you would get tax benefits of having the loan (claiming interest expense), extra tax deductions (so income from IPs won't be completely just adding to your income for tax purposes), and you should benefit from owning some shares (note shares tend to be more volatile than property).

    Up to you as to what you do though.
     
    Last edited: 11th Dec, 2016
  11. Tony Fleming

    Tony Fleming Well-Known Member

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    It would probably be best to talk to a financial planner and map out what you want to achieve and how you are going to do it. From there at least you can work out if you want to target cash cows or high growth type properties. As soon as you know what you need, selecting a region or state will be much easier.
     
  12. Player

    Player Well-Known Member

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    I wouldn't trust any bank to just park the remaining 800K of after tax ca$h into an offset to save interest.

    @Johnny Smith, how time poor are you that you can't have a quick read of the sub forums on Property Chat under where to buy and some others to see where the theme and sentiment are at the moment?

    Going to a library and borrowing a few (recent) property mags or buying some and (as much as I hate the term "hot spot") have a look at why some areas are featured over others by way of the price disparity they have with neighbouring suburbs and where the infrastructure is being put in. Where are people moving to and where are the jobs.

    Nothing wrong with using a BA, and there are some good one's here, however you cannot pass on this preliminary effort off to anyone else IMHO. You have some very good processes identified above by others to establish your rough goals/desires and work backwards from there.

    You need to read a bit and whatever you do don't rush. As for eastern seaboard locales, well Sydney and Melbourne are hot. Maybe look at Brisbane as a start of a macro view and narrow down from there

    Good luck
     
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  13. MTR

    MTR Well-Known Member

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    exactly
    and I will add ..... you don't know what you don't know.

    In other words its important to understand the risks of using a BA, this does not mean a BA is bad or giving you inferior advice, but you wont know if you don't understand property markets and how to interpret information.

    Instead of spending money on a BA spend time on educating yourself this will go a long way to creating a solid base for the future.
     
  14. Chris Au

    Chris Au Well-Known Member

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    Some great comments here and your first line starts with 'complete novice here'. Learn about the whole process. Buying a property is only the first step. As others have said, how will that fit into your overall goals and (most importantly IMHO) is how are you going to manage this asset to get the most out of it once you own it. The great thing about sites like PC is that is has forums on all aspects of owning a property - location, buying process, property management and selling, as well as other asset classes to round out the investing journey. I make this comment as it would be disappointing to say 'I own an IP, now what'. There's lots of great threads on here, and great books to understand what to think about when a property is presented to you, and what to do after you signed on the bottom line.
     
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  15. Johnny Smith

    Johnny Smith Member

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    Thanks everyone for your responses
     
  16. DaveM

    DaveM Well-Known Member

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    Maybe you need a Pre BA BA BA to tell you which BA to use to choose a BA? :D
     
  17. Bryan Loughnan

    Bryan Loughnan Well-Known Member

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    Hi @Johnny Smith - buying a property is one of the biggest financial decisions many will make. It pays to have a professional representing you. If for nothing else, do you, as a DIY investor really want to be trying to negotiate against a trained professional (Sales Agent) who is being paid by the vendor - they have an obligation to work in their clients best interests, not yours. Ultimately, it doesn't matter what industry you are researching or what professional you are looking to assist you in life, make sure you spend time researching what their business model is, what their methodology is, how they get paid, what their fee structure is but most importantly what you get for your money. Many Buyers Agents have different business models. Make sure you spend time understanding these. Make sure what ever you end up doing, DO NOT pay anyone a cent until you are 100% comfortable with what they do and how they do it. Best of luck!