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We’ve identified 22 different residential property strategies
Introduction
Property Strategies
• Buying land
• Land banking
• Positive gearing
• Strata Titling
Negative Gearing
Negative Gearing
• Brand new• Paid $155k in 1993 and renting for
$190pw• 6.3% gross rent (interest was 8%
pa)• Lots of depreciation
Negative Gearing
• The best thing about holding a negatively geared property…
• Eventually it becomes positively geared!
• Eventually it becomes a renovator!
• Now valued at $650,000 and rents for $450 pw (15% return on purchase)
Negative Gearing
Cons of negative gearing:
• Potential for ‘negative equity’ in the short term if prices fall
• Costs may become unmanageable
• Can become a liability if only purchased for tax advantages
Property Strategies
• Buy, Develop, Sell
• Paper Developments
• Joint Ventures
• Individual Units/Apartments
Buy, Renovate, Hold
Buy, Renovate, Hold
• $295,000 in 2001• Reno Kings Style Reno…$6k• Polish floors, paint and turned from
3 to 4 bed
Buy, Renovate, Hold
• Rent went from $220pw to $320pw
• That’s $5,200pa extra rent for a $6,000 reno!
• Now worth $750k and rents for $475pw
• But wait, there’s more…
Buy, Develop, Hold
Buy, Develop, Hold
• The buy, renovate, hold was also on a double block.
• It is also a buy, develop, hold!
Buy, Develop, Hold
• The proposal:
• 2 x 5 bed, 5 bath houses
(Artist’s illustration indicative only)
Buy, Develop, Hold
• Total development costs $800k
• Plus original purchase of $295k
• Rent 2 x $1000pw
• 9.5% pa
• Plus huge depreciation
Property Strategies
• Niche Markets
• Unit blocks
• House & Land Packages
• New Houses
PPOR = Principal Place of Residence
Principal Place of Residence
$514k November 2008
Principal Place of Residence
• Why not make it an investment too?
• Investment components:
– Location
– High land value
– Renovation
Principal Place of Residence
• Renovation cost $120k
• Current value $750k
Principal Place of Residence
Pros:
• No capital gains tax
• Reduced buy costs
Cons:
• No depreciation
• Interest/costs aren’t tax deductible
• Easy to spend too much
Property Strategies
• Property Options• Vendor Finance/Rent to Buy/Rent to
Own/Wrapping/Lease Options• Lease-back• Overseas Property• Granny Flats / Secondary Dwelling /
Dual Income / Rent by the Room• Holiday letting
Summary
• There are at least 22 residential property strategies
• All have pros and cons
• Don’t take our or anyone else’s advice on which to do – pick the right one for you!
• Get educated
