Strategy Game: How would you start your property portfolio if you had $1.5 Million?

Great stuff. Is there a reason why you go on a single title? I suspect it avoids and hassle and expense associated with a sub-division. And there is nothing preventing the investor from subdividing in the future if they wish (eg. Down the track, you want to sell one and not the other).

 

There are some great points to your theory but it's not so easy to convert a house into a 2 because you need quite a bit of structural/construction work to fireproof both sides. It's not impossible but it's going to be harder than building a detached GF in the rear.

Granny flats haven't taken off that much in Perth yet because you used to only be able to rent them to a family member. Once they took that restriction off they became more viable as a yield accelerator.

Perth is also fortunate to have a dwelling type similar to a GF that can have it's own title and therefore be sold separately and is mortgage friendly. We have a Single Bedroom Dwelling which needs 2/3rds of a plot of land that you would normally need to subdivide. So if you are in an area where the zoning isn't great or have a block that isn't quite the right size then it can be an option to build a 70sqm single bedroom dwelling to get 2 incomes from one site.

 

for sure euro. It all comes down to what the person is willing to do with their time. and yrs you do need to know what you are doing as well. These are all different theories at the end of the day. If you grab a very negative cash flow property you can find yourself in trouble with the repayments, unless you have no repayments, which is the case here. What you could do is mix the two approaches, buy the best stuff in a blue chip you can find for your money cashflow negative (because essentially it will be cash flow positive for you since you own it outright) until your money runs out and once you need to borrow start borrowing against it and go for cashflow positive stuff like the ones you suggested here.

 

Ahhhh...I always get that question from Victorians...where dual occ isn't actually dual occ

In NSW there is a piece of legislation called AHSEPP... without boring you with the details, one of the provisions within the legislation allows for granny flats up to 60M2 to be added without the need for subdivision or council approval.

The Victorian Govt has been talking about introducing the same kind of thing for several years now.... but nothing has happened. If they ever do ( and I hope they do - I'd love to offer this in places like Shepparton for example) , you'll see the concept Victorians call dual occ ( but really isnt) where they subdivide and build a 2nd dwelling on its own title ( hence, its not dual occ) become less popular, and this will take off....

It's just a smarter, cheaper, faster solution to 2 incomes from 1 block of land - by far

 

yes that's true... but you are introducing speculative outcomes now, reliant on growth - which it should be clear by now - is reliant on credit . This is a pure dividend reinvestment approach that doesn't rely on growth or credit cycles . While I'm not suggesting properties cant or wont grow, ( they are valuing 10% above purchase price after all) I am suggesting that this approach ensures a debt free, 6 figures income for life in @ 15 years even with zero growth...IF that were to occur. I think thats a pretty smart and safe way to play things in a credit era thats contracting not expanding, and where there are wives and kids involved.

 

Same issue in Vic - they are only allowed as DPU's - dependent person units

Same issue in SA

can be done in QLD but in limited LGA's... unfortunately the areas where they are allowed are starting to get flooded now. Every property group is pushing SEQld Dual Occ now. The numbers are great right now, but when 3000,4000,5000 of them have been built the rents will be cannibalised by oversupply. It's the Brisbane apartment market all over - just wait a few years and see ....

NSW is where this works best.... wish I could do them in regional VIC. One day, maybe.....

 

I'm not sure why they aren't more popular here yet but it may be because there is a lot of progressive zoning and infill projects and affordability so GFs aren't such a desirable product yet. The whole Perth metro area can have GFs and in some LGAs they are allowed bigger than 70sqm. I've seen nice 2 bedroom 2 bathroom GFs here.

 

I’d buy a place that will likely go up 30% in next 12-18 months. Probably not Syd/Melb therefore

 

and where and what would that be in your opinion?

 

Not sure, probably certain parts of HK. London definitely judging by capital movements but not familiar with market.

 

I'm not sure what you mean here, I've been building two, and sometimes three 3 bedroom houses on one single titled block in Vic for at least 20 years.

Yes, but they are rated separately though........

 

hi @euro73 great posts there and thank you for contributing to the forum. I am also considering of getting a property that has a granny flat already built in. Being new in investment property, may I ask do you ask an agent to manage the rent for both?

My mate did this, but he does sort of airbnb for the granny flat. I am looking in VIC btw. Thank you, Ben.

 

Cant do granny flats in VIC and rent them to anyone you choose. You can only use them as Dependent Person Units ( DPU) .

Yes, a tenancy manager manages both. Separate leases. Separate water, gas, electricity, internet etc...

Yes, but that's two houses- not a house + a granny flat. That can be done anywhere. I'm talking about granny flats. They cannot be done in VIC unless you use them as a DPU

Yes.

 

Is it easy to switch between PPOR and IP if I keep all proper records? i'm fairly new and try to understand this.
would you be able to claim two main residences at the same time to avoid/reduce CGT due to 6 year absence from main residence rule?

 

Yes
no

 

Lending to a discretionary trust - does that make your interest costs deductible? The ATO could argue because it's a discretionary trust, there's no fixed / guaranteed income, therefore interest cost not deductible. How would you get around that?

 

Only if 'you' had a fixed entitlement - see my legal tip on this with links.

OR

if you lend to the trustee and charged them at least the same interest rate as you were charged by the bank.

Seek legal advice.

 

yeah I ran into this exact situation - the whole point and advantages of a discretionary trust hinges upon there being no fixed entitlement (asset protection, optimal income splitting year to year etc) meaning if you lend to the DT there's generally no deductibility

lend to trustee - do you mean lend to trustee entity in their own capacity and not as trustee? same problem, while it's deductible in your personal account, what does the trustee then do with the cash? if the trustee then lends to the trust, it is not deductible at that step.

 

Perth depends on suburb and product
It has not hit bottom if you are talking apartments and burbs in whoop

If you are looking at primary residence and think you are from Perth?

You will do very well buying in inner city location, period home, on large block. Very much sort after now with multiple offers.

Blue chip got hammered in 2007 but now starting to move..... its not booming but momentum and competition is happening..... yay

If you can add value even better

 

A trust is not a legal entity so you can't lend to it, you have to contract with the trustee.