Scubaemma

We're selling our flat in London before we move to Brisbane - we made a bit of money out of it and want to release the equity so we can buy a place in Brissie (although we'll rent for 6 months first to check out areas etc).

We're getting a decent price for it, more than we thought we would. We were wondering whether we should keep an amount (£30k?) back, use the rest to buy a place to live (hopefully with a small mortgage) and then use the £30k to put a deposit on another place which we could let out. This would be as an investment and something for our future, like a pension.

We don't really know what we're doing, so wondered if anyone thought this was a good idea or not? Would we be sensible to think about getting a buy to let property? And if we did, would we get a place in the UK (keep a foot on the UK property ladder?) or in Australia?

Or would we be better off not complicating things and just putting all the flat sale money into the house we buy to live in in Brisbane?
(obviously we'll get proper financial advice etc etc... just wondered if anyone had any initial thoughts)

Ozzidoc

I have no real thoughts, only that no matter what investments you may make, always have an exit plan. Or three.





Edit: that's exiting the investment, not the country LOL

Timber Floor Au

for a decent rental property in Oz, the basic factor is if its worth 450k ( aussie ) then rental per week is approx 450 bucks.

so you put down 30k GB appox 75k ( allowing for stamp duty fees etc lets say 60k ) but you will get full tax relief on 2nd property i believe.

450k -60k=390k mortgage.

approx cost per month 3600 bucks.
renal / month 1800 bucks

shortfall 1800

if that makes economic sense then go for it.

Ste

Siren & Brian

That doesnt but borrow the full amount including fees then the repayments will be slightly higher which will all be negativly geared to reduce your income tax. Providing the house price goes up over time the capital appreciation can be quite good.

Another thing about buying investment properties is that its a forced saving. You have to pay the mortgage or the banks will sell the house. If you were to just save and invest then some people may be slack with this and not save the same amount as money gets spent on new clothes, holiday, more partys food boat etc.

Ozzidoc

Sigh. Again. Why negatively gear if/when you can positively? ie why aim to lose money.

Siren & Brian

Well was using TF example but you do have to look a the whole picture not just what you have to put in to pay the mortgage. You may pay $10,000 in mortgage repayments out of your own pocket in a year but how much more or less is the house worth.

Jan4kids

As my understanding goes you not only recoup tax from owing on a second property, but you reap the rewards when you sell on the property later, so for a small extra monthly outlay (in the beginning) you can make yourself financially future secure..especially if you own (and manage sensibly) quite a few properties.

Jan

Jan4kids

Apparently also the reason the Government, make it easy with tax incentives for investors to 'buy to let' is so the public generally fill the hole where there is no Government 'Council Housing' schemes.

I was sceptical of it as it seemed too good to be true, but now I am convinced.

Jan

Ozzidoc

Yes. But why not reap the rewards as you go along. Most Aussies get this wrong, as I did until I was 22 when i finally understood! This is why Aussie rents have traditionally been so low compared to the cost of holding the property.

Make a profit as you go along and make a profit when you sell.

Siren & Brian

Well, do tell how then?

Ozzidoc

It's all about the entry price. There have been a few people on these boards who have explained this quite well.

Essentially, you need to look at the purchase price and make the numbers work. So, super low price offered with the cash (mortgage) ready to go. One mate never pays more than 3/4 the advertised price. (Another never pays more than half his intended sale price, but he renovates/develops: a different game.)

A good look at the property - how can it be optimised? What is needed to get top/high rent. Can anything be done to the property to increase the number of bedrooms? What type of person/people would be the tenant?

I've only done this with four properties - not enough to be able to offer much advice.

I really don't know why, but the rental returns in the UK are higher than in Oz. When I first looked into doing this in the UK (where I moved to 10 yrs ago), I couldn't believe that the banks were wanting a rental income of 120-135% of the mortgage payment. I was then astonished to discover that - at that time - this was possible. It's remained possible in my situation - last place was bought six years ago.

I guess what I'm saying is that you need to do loads of research and find what works for you, and what level of risk (and discomfort - see below) you're prepared to take.

After I bought my first place, I had cash stashed away to cover a year's worth of all my expenses. I now prefer to have cash for a longer period of time. That's how I try to buffer my risk.

I made lots of changes in my life to make this happen - I went out for dinner approximately six times in two years...instead meeting friends for a coffee, a drink, a movie.....at one stage lived in a one bedroom place and sublet the loungeroom - this covered the mortgage!

alicecat

Have you got jobs in Brisbane yet? My OH and I took over a hefty amount from the sale of our property in the UK but ended up spending it all on rent and living expenses as jobs were so hard to find. (i.e. it took me a year as a QLD trained teacher to even get a day's supply work and OH could only get a couple of hours casual work a week in his field, social care)

Scubaemma

Thanks for your comments guys. As I said this was just an initial idea and we don't really know what we're doing, so it's good to get your opinions and obviously we need to do some proper number crunching and learn a bit more about how it would work in reality.

Really we just thought this might be the only time we'll ever have £30k (or whatever amount it would be) available quite like that to use. So want to make sure we try and make some good decisions if we've got options open to us.

Alicecat - to answer your question, no we haven't got jobs lined up yet, although OH is an engineer and has got some contacts and it looks like he should be able to walk straight into a job, so that should be alright. He can also transfer with his current company if he wants. It'll take me longer to find one though. We'll also be able to stay with his family when we get there until we can secure jobs and find a rental etc, so hopefully we'll not have to use too much of our flat sale money when we first get there.