LOW INCOME How to invest on a Three youngsters tell how

Transcription

LOW INCOME How to invest on a Three youngsters tell how
EXPERTS' SECRETS TO MAKING
BIG PROFITS ON EVERY DEAL
NEWCASTLE VS TOOWOOMBA:
WHICH IS A BETTER INVESTMENT?
October 2013
$9.95 (GST incl.)
How to invest on a
LOW
INCOME
Three youngsters tell how
they built their property
empires on low wages
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771834 583007
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Hassan Najjarine
6 properties in
6 years, starting
aged 19 on just
$37,000 a year
GAME PLAN
How to use property to get
out of financial hardship
Tony Fleming
8 properties in 4 years,
began investing as a
19-year-old deliveryman
on $10 an hour
RENO SUCCESS
How we doubled our
money in two weeks
Michelle Alkins
$1.4m in property deals
over 3 years, started
saving for a deposit in her
teens, first deal at 22
TAX DEDUCTIONS
For your investment property (that
you are probably missing out on)
STRATEGY | MAKE BIG REAL ESTATE PROFITS
Real life
Contributing market drivers:
Infrastructure
$35bn coal seam gas project
(Origin Energy) – project life of
30 years in the Surat Basin
$15bn coal seam gas extraction
project (BG Group) in the Surat
Basin
Estimated 45,000 more jobs
to be created across the region
Yield variation
Rent approximated at $650pw
($325 per side)
Rent achieved $680pw
($340 per side)
Supply and demand
10,000 construction jobs at
its peak; 2000 permanent jobs
created by gas exploration in
Surat Basin
Population growth
Current: 155,000
Projected:
2016 = 180,000
2031 = 230,000
Economics
Case study 1: Lee and Lucy
The deal
Toowoomba City
Deposit: 13% (approx. $74,000
down on a total purchase price
of $542,500)
Market timing:
At time of purchase: 6.30 –
bottom of the market
Now: 8.00 – start of recovery
Vacancy rate:
August 2012: 1.6%
August 2013: 1.6%
Rental yield:
August 2012: 5.9%
August 2013: 6.0%
Strategy: Off the plan. Possible
subdivision after holding.
ee and Lucy were interested
in doing a build with a
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OCTOBER 2013
subdivision, with the option to
hold the property to maximise
depreciation benefits and capital
growth. They chose the duplex so
they could buy and hold
for about two years and wait for
capital growth. Once they had
achieved maximum growth they
would subdivide and sell.
Purchase price:
Stamp duty.................................. $4,290
Legal fees......................................... $550
Total ............................................. $4,840
Land .................................. $167,500
Duplex ............................. $375,000
Total ........................................ $542,500
End valuation before
subdivision: $570,000, with similar
properties in the area selling for
$600,000.
Capital growth: $22,660–$52,660
yourinvestmentpropertymag.com.au
Average growth over 10 years
was 10%
Demographics
26% of the population were
couples with children
Large portion of the population
worked in mining services or
agriculture
Positive cash flow after tax
$1,319
The build finished just over a
month ago. The area is still
growing, with lots of new
construction around the duplex.
Lee and Lucy had one tenant sign
on to move in before it was finished.
The other tenant moved in a week
or two later.
Lee and Lucy plan to hold the
deal for a few more years until it has
reached its potential. They will then
subdivide and sell the buildings
individually, unless the numbers
show that it would be more
beneficial to hold one and sell one.
STRATEGY | MAKE BIG REAL ESTATE PROFITS
big blocks of subdividable land. I’ve seen investors jack the
house up, move it over 10 metres, and then subdivide down
the middle. Other subdivisions have a driveway down one
side to access the large block of land at the back, known as the
battle-axe block. Subdivisions can be complicated, so be sure
to educate yourself beforehand. I recommend a mentor with
experience in subdivision and strata titling.
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Buying and selling or trading
Trading properties, otherwise known as ‘flipping
deals’, requires a minimum margin of 20% to be
considered profitable.
For instance, if with the $250,000 property you chose to
add value through time on the market or with renovation, you
could potentially raise the value of the property by 20%.
This would leave you with a profit of $50,000 and an
instant increase to your cash flow. The principles for trading
properties are to buy when the market is low, hold as the
market rises, and sell when the market reaches the top.
The majority of investment property traders tend to be
renovators and developers. You would need to learn the skill
of renovating or developing for maximum returns.
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Building for profit
The idea is to find a complying development land area that
has the potential for better use of the land. Let’s assume we
have a block of land worth $150,000 and it’s registered. If we
haggle on the property and get a good deal for $120,000, we
will achieve an instant $30,000 gain, thanks to the discount.
If the cost to build is $1,300 per square metre and the
average home in the area is 200 square metres, we would be
building for $260,000. Haggle with the builder. Let’s make
them do the work for $1,200 per square metre. Instantly we
are better than the market at $240,000.
Now combine that with the land deal we did, and that’s
$360,000 for a home in a market that pays $410,000. Thus we
build our way to $50,000 profit.
Remember, investing is just a series of small wins over
time. There will come a day when you will reminisce about
your investments.
Don’t look back with any regrets because you didn’t have a
go. There is a strategy for all of us, and $50,000 extra per year
through property is achievable.
OCTOBER 2013
yourinvestmentpropertymag.com.au 29
STRATEGY | MAKE BIG REAL ESTATE PROFITS
Real life
Julie and Scott
were attracted to
the deal because of
the potential for
capital growth in
an area that would
appeal to families
End valuation: $520,000.
Contributing market drivers:
Case study 2: Scott and Julie
The deal
Hidden Waters Estate,
Fletcher, NSW
Deposit: Was 10% (approx.
$43,400 down on a total purchase
price of $432,400)
Market timing:
At time of purchase: 8.00 – start
of recovery
Now: 9.00 – rising market
Vacancy rate:
October 2011: 1.7%
August 2013: 2.1%
Rental yield:
October 2011: 5.1%
August 2013: 5.7%
Strategy: Off the plan. Bought
at a discount – savings totalled
$7,500. Buy and hold.
S
cott and Julie had been looking
within the Hidden Waters Estate
in Fletcher, NSW, for some months
prior to joining Positive Real Estate.
This was because the estate was
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OCTOBER 2013
close to the Newcastle CBD, and the
construction of the new expressway
was proceeding. Scott and Julie
secured free stamp duty on the land
purchase, saving $5,140. Negotiations
prior to the deal between Positive
Real Estate and Mirvac saved Scott
and Julie an additional $7,500 going
into the deal. The developer agreed
to a $5,000 deposit for the land on
exchange of contracts. The couple
plan to recycle their deposit for their
next purchase.
Julie and Scott were attracted
to the deal because of the potential
for capital growth in an area that
would appeal to families due to
its good-sized lots and proximity
to Newcastle CBD. The property is
currently being rented for $520 per
week. We are going to use the equity
achieved in the property for future
investments.
Purchase price:
Stamp duty..........................................N/A
Legal fees..........................................$500
Land .......................................... $190,000
House ....................................... $242,400
Total .......................................... $432,900
yourinvestmentpropertymag.com.au
Infrastructure
$8bn worth of infrastructure
projects commenced in Newcastle
region, including:
$1.65bn expansion of the F3
motorway to cut Newcastle
to Hunter travel time by 28
minutes
$1.2bn expansion of Newcastle
port
$1bn rail upgrade for mining
services
Supply and demand
Demand is increasing while
supply is limited as new land
allotments are becoming scarce
Homeowners and investors are
attracted to the area, as proved
by property sales in the last
24 months
Demographics
Working families
Fastest-growing sectors of
employment are wholesale
trade, manufacturing, and
healthcare and community
services
Population growth
Over the last 10 years, the
population has increased by 8.2%
(or 47,611 people) in the Hunter
Councils Region (from 580,594
in 1996 to 628,205 in 2006). The
region’s population is expected to
reach 730,000 by the year 2026.