I earn $55,000 a year have $200,000 cash from an investment.
How do i build wealth? i am 39 y/o.
SHould i buy a property and fulfil the Australian dream ?
I Have $200,000 Cash - Should I Buy a Property?
Sam Sharik on 04/12/2019 - 16:47
Comments
Answer effort = poster effort. Upvote granted.
whats difference australian dream vs american dream
Some snags on a barbie.
No. The Australian Property market is the most over-valued in the world.
You will end up in debt, without no assets. Allow me to explain:
Bank loans you 500K, which you bundle with your $200k, you buy a property for $700k.
Property bubble collapses and your property loses 40% of its value. Your property is now worth $420k, but you still have a debt for $500k.
Even if you sell the property (when you can't meet repayments due to unemployment), you will still owe the bank $80k-100k.
We are far to late to the game to make money from property. Don't be the fool and be left holding the bag.
Martin?
Bank won't loan $500k to someone earning $55k per year.
Property bubble collapses…. There has yet to be a property bubble collapse in Australia. They've been predicting one since the 80's. Meanwhile housing prices have grown exponentially since then.
There has been a property bubble collapse in Australia, it's just that no one is still alive to tell the horror story.
After the crash it took over 70 years for Sydney/Melbourne Property prices to reach the levels seen during the bubble.
"During the 1880s, there had been a speculative boom in the Australian property market. The optimistic climate was fostered by the commercial banks, and also led to the proliferation of non-bank institutions such as building societies. Operating in a free banking system, there were few legal restrictions on their operations, and there was no central bank or government-provided deposit guarantees. The banks and related bodies lent extravagantly, for property development in particular, but following the collapse of the land boom after 1888, a large number of enterprises that had borrowed money began to declare bankruptcy."
Sound familiar? History repeating…
https://en.wikipedia.org/wiki/Australian_banking_crisis_of_1…
https://www.afr.com/wealth/the-great-australian-property-cra…
@field1985: There has been a property bubble collapse in Australia, it's just that no one is still alive to tell the horror story.
So there's a good chance that we'll be long gone before the next? :)
@field1985: and why did it really crash? They ran out of people to sell to. That's why our market stays up. Just keep moving the immigrants in and all will be good.
@field1985: Where have you been?
Sydney property was in the doldrums for 10 years after the 2003/4 peak.
Prices went down until 2012 and then slowly recovered to pass their previous 2003 peak in 2014.
Now they are well beyond
You needed about $65,000/year to borrow around $300,000 when I last asked a banker, but it might be less now that interest rates are dropping.
We've never had almost 0% interest rates before. There's not a lot of room to move from 0.25%… Where to then?
That can's been kicked a long way along a steep road.
@iDroid: Where to? Quantitative easing (printing money) like the rest of the western world has done since the gfc.
The party isn't over yet
@iDroid: Actually we are still at 0.75% so still plenty of room to move for now.
Consider a 0.25% drop from 0.75% is ONE THIRD !But yes the gun powder has just about run out.
When we get down to ZERO thats when you start worrying about prices falling over because there will be nothing left to pick them up.But them the govt can always step in and make home loan repayments tax deductible again.
That was the case many years ago so dont underestimate the ammunition both the RBA and the govt have available to them to prop up this ponzi property market.
some institutions probably will lend it with a down payment of 200k. Conditions and interest will be cruel to reflect the risk.
I've heard this rubbish for decades and yet, I have made quite a bit of money buying and selling property since the mid-2000's and I still have a few properties that simply increase in value and pay me rent. Even a 50% drop in the market still sees me making money.
When my kids grow up, I'll give them a property each to help get them started.
I have a few mates who said the same thing to me back then "It's a bubble", "It can't last", "You'll be left holding a substantially devalued asset", yet here I am, able to retire comfortably in my early 40's and they're still spouting the same old thing.
Love it. Im in your shoes in my mid 20s. Have a couple of small properties that bring in decent rental yields. Care rating is very low if there is a crash, the entire plan is to be financially independent by my mid 40s.
If I had a $1 mil property earning a 1% rental yield id be worried. But then again, high risk high reward, kudos to those who pull it off.
I sold a house in 2003 and I had another one. The advice at the time from 'professionals' was sell everything, rent, wait for the crash then buy again.
I bought in peaks and i'm doing ok as well.
I say just get in. The first one is always the hardest.
Yep. Me too!
But I have never bought at the peak of a boom
Always buy when prices are depressed.
i.e When they pull back
dont listen to this fool who sounds like he never bought a house and is trying to justify his unfortunate life decisions by giving you advice to do the same so that you dont succeed with him, which makes him feel better about his current position of not owning a property.
they have been talking about a bubble for 20 years. there is no bubble here in Australia, the steady growth of population and ongoing demand does not allow any room for a bubble, its not murica. go for it mate, if you got the deposit, get in there, never too late, i am working to save up a deposit too and i will pounce at the opportunity to buy a house.
You can get a property in Tas for $100k if that fancies you.
Maybe in 2012 ???
All the major towns in Tas have gone up
Alternatively and more realistically:
The Aussie property market is 2nd most overvalued in the world by international valuers who do not understand our market nor our demographics driving our property market.
Yes you put in $200K and borrow $500K to buy a $700K property.
Property market goes up for at least the next 2 years due to interest rates going even lower and govt providing heavy assistance to first home buyers. Negative gearing remains as a driver as well.
Yes Likely to be a 20% correction in the next 3 years but over the next 10 years property recovers and goes up another 40% to 60%.
And field1985 might lose his job due to extreme pessimism (nobody likes a pessimist) but OP is positive, keeps his job and even goes on to get a promotion so loan gets even easier to pay off.
Property is always a long term buy.
I think OP knows that
Short term prices are definitely up.
Medium term dip in prices (3-5 years) but OP might still stay ahead considering prices will keep going up for the next 2 years.
Long term prices keep going up and upThe same old story goes on over and over again
As long as Australia relies on huge migration to keep GDP figures positive the property market will keep rising due to our ever growing population.And let me say the RBA and all levels of government rely too much on rising Australian property prices to keep the economy going and the coffers filled with property taxes.
So they wont let property fall very much or for too long. Trust me! Just look what happened over the last 2 years.
You dont need any more evidenceAs mention before will a bank lend 500k to someone earning 55k ?
@Eeples: LVR is only 70% so very conservative.
But a good question which OP needs to find out.
But otherwise the response is the same.
Just the amount borrowed changes.@HeWhoKnows: https://tools.anz.co.nz/home-loans/borrowing-calculator
Says OP can borrow 381k with no kids and no car. (331k if he owns a car).
"And field1985 might lose his job due to extreme pessimism (nobody likes a pessimist) but OP is positive, keeps his job and even goes on to get a promotion so loan gets even easier to pay off."
I prefer to think of myself as a realist. My job is permanent full-time with the state government, I also perform a secondary role in a State Emerygency Control Centre and I've had a promotion and pay-rise this year. So yeah, I really can't see myself having too many issues with "losing my job". That said, I do agree with most of your observations. And OP should take my "pessimism" with a grain of salt. I was just trying to add some balance to the discussion.
There is endless commentary from both sides about the bubble, but denying one exists is simply delusional by any international or historical standard. As long as OP is buying property as residence, then they would not be nearly as negatively impacted as if the were holding a bunch of investment properties.
The bubble will burst at some point, it's a matter of when, not "if". I honestly wish everyone the best of luck.
And you don’t think Trump/Brexit would be indicative that Australia will not maintain super high immigration? Further the relationship with China is turbulent. I predict an anti-immigration labor leader who will make house prices crash. (Thank God).
Also, I can’t believe the RBA keeps reducing rates, it is ridiculous.
But what if you buy a $250-400k house? Why do you have to buy a 700k house just because you have a 200k deposit?
That is one mistake i have seen so many people do. Borrow more than they can afford.
@Sam Sharik: If it was possible, I'd buy a modest 250k-300k house (assuming that bank would loan the rest) and enjoy having a tiny mortgage.
Or invest the 200k until you have enough to buy a modest house outright with no mortgage.
I've heard of others refusing to buy and just investing the lot and letting it grow.
The choice is yours, but I certainly wouldn't be looking to use the money to get yourself into more debt!
Property as an investment only works with leverage (as very few can buy a property for cash)
So it's not property that the investment. It's the potential return on the bank's money.
99.9% of people on forums don't understand this or mention this.
You can by shares on leverage too and would make more than in the property market in say an index tracker
Leverage is a double edged sword (as the saying goes). Negative equity can destroy lives. Property investors are betting on higher and higher prices. It is concerning when they think it is foolproof.
There are better places to invest (better returns) and all without the headache of dealing with tenants, maintenance and buying and selling costs.
That is all (I own properties as part of a diversified portfolio)
We are far to late to the game to make money from property.
They said that 20 years ago also.
But the thing is hindsight allows us to see the mechanisms that house prices were able to keep increasing. There is simply are no mechanisms left!
@Slo20: Right, exactly. My thoughts were:
What can increase demand?
1. immigration
2. lower interest rates
3. Wage growth following QEWhat can decrease demand?
1. Interest rates increasing (eventually…)
2. Wage growth continuing to stagnateWhat can increase supply:
1. house building / subdividing
2. baby boomers dying off
3. People jumping out of investment when negative gearing is stopped
4. People jumping out of investment when they are not making satisfactory returnsWhat can decrease supply:
1. Not much at this point
Setup a meth lab
i like the idea
apparently a mobile one is a good idea
.oh didn't know you can get a mobile one
Look up "Breaking Bad" early days for your early research
Doesn't end well I've heard…well for one of you.
I'd say for both really hah
Teletra or optus mobile?
Might as well buy a laundromat instead of a house then
You can make $500,000 every 3 months if you fill a house with "pot" plants; you just have to steal the electricity needed for them to photosynthesise. Crie really does pay.
Acquiring good assets requires
- Capital (which you have some.)
- Cashflow (which you have stated your income, but not your expense).
- Knowledge (which we can only assume curiosity but general lack of.)
Assess the level of liability/gearing you're comfortable with then assess the market/area you're looking to buy into.
Check back in to get better quality advice.
thanks Tshow
Why do you need cashflow to acquire an asset?
You may need cashflow to sustain an asset.
Not just repayment of interest and principle, but maintenance, maintenance, maintenance.
And why would you acquire if you can’t sustain?
Plenty of people pay $50k + for a BMW only to regret every time when the car is due for service.
Some people only think of the upfront cost without accounting for the ongoing costs.
An asset in property generally requires a mortgage.
Approval for a mortgage requires reliable income.
Two door property?
I see you're thinking high yiel..
Sorry I won't open that.
Merc C63 AMG
will this be a good car to live in?
Yes, it would be
:) Copy that
@Sam Sharik: Do you rent apartment or sharing accomodation?
If you rent property then buying propery might be good idea because it could be cheap then rent. Because of interest rate is down, and will stay down for longer.
Some apartment buying value plus maintaining cost are cheaper then rent or breakeven.@Zonty: Not in the popular high demand areas Im afraid.
Renting is far cheaper!Current GROSS RENTAL YIELD in the major cities is about 2.7%. Its never been so cheap to rent.
Or inversly the rental yields on property have never been so low.Then you have annual outgoings of 1.3% plus repairs and maintenance.
Not much left to pay off a 3.6% loan.
Wasnt much to begin with.So one is far better off renting in the current market.
Hmmm they do have presets for the front seats, so you could have one set all the way back for sleeping, another for all the way forward and away when you need to get dressed in the back seat. Pretty handy I reckon.
Enter a high stakes Poker tournament
unfortunately not into Poker
Oh great, you'll have beginners luck! ;)
Take a portion of that and Invest in yourself first (financial education? - degree? - masters?), you are the most important asset.
It sounds like your yearly income is just below the average, I would try to increase that one first.finally some good advice.
I have two masters under my belt.
I work part time (my choice). I dont want to work full-time.
I have been thinking for doing UBER for additional income.
Why do people think Uber is a sustainable income?
Most people know its not - But Its still income.
@Sam Sharik: Not if you are really honest with yourself: Depreciation of car, servicing of car, consumables of car, petrol and insurance
If you take all that off your income, you either have negative salary or you are around the $3-$4 per hour.@cameldownunder: Not to mention their ridiculous 25% cut, then 10% GST that you have to absorb and they don't and then after all of the above, income TAX ftw!
@Altitud: Let's work out a week in the life of an Uber driver in a relatively fuel efficient car with some numbers jammed in:
Gross total revenue in one week doing 40 hours work $1500 (If you smash a whole week out with great rides - this figure is what the customers paid)
Minus Fuel (2 tanks @ $80 each) $160
Minus CTP/Rego $1500 / 52 = ~$30
Minus Insurance $1500 / 52 (Higher premium due to rideshare) = ~$30
Minus Maintenance (3 minor 1 major service per year being generous @ $1000) / 52 = ~$20
Minus UBER's Cut (25%) = $375
Minus 10% GST on $1500 = $136.36 (You pay GST on UBER's cut because the customer gets charged the full amount including the cut)
Minus 27.5% Income Tax ([Gross $1500 - Uber Cut $375] * 27.5%) = $309.37
End of year expense claim for the week $240 of which you get back 27.5% = $66Total immediate take home (after Tax): $439.27
Total take home after expense claims: $505.27
Total take home per hour after all negatives and tax return: $12.63@Altitud: You have to pay those maintenance costs as long as you own a car, whether you do the uber job or not. At least you get to claim business expenses.
@Altitud: So many things wrong with your post. 27 upvotes too lol.
INSURANCE: He (my brother who i sent the link to this thread to) pays $250 insurance premium (on top of what he used to pay anyway before driving uber) Not the $1500 you've mentioned.
REGO: His rego and CTP is pretty much the same as pre-Uber. So you quoting another $1500 as a cost when instead it should be ZERO.
FUEL: is in the ball park.
SERVICING: $1000 is luxury. If you're driving 40 hours a week then you should service it yourself or have it serviced it once a year. The car won't be worth much in a few years anyway
DEPRECIATION: Claim back 15%-30% a year as a tax expense of the value of the car from the ATO
GST CREDIT: Buy a car from a garage and get the 100% of the GST back into your pocket if driving 40 hours a week ie 100% use.
INCOME TAX: 27.5%??????? At $1k net a week, Uber is your fulltime job and so after depreciation and expense claims (fuel etc) I would estimate the income tax to be closer to 10%
Uber still sucks and I tell my brother to get something else but no way are the figures as bad as you have portrayed.
@Altitud: A 27.5% cut and ATO wants gst on gross fare. The can't find husband beauty who tries to run this state has made 26 car categories, wants endless extra drip on fees so fix costs are considerable. Full timers can split it over more trips, part timers usually end up sub $10 an hour if driving outside capitals. You can rent a car from an uber related firm and then you will get better or more trips but paying rent still lowers your hourly rate.
@Sam Sharik: It is usually very poor income, well below minimum wage. Even flipping burgers will pay better.
Uber can work out to be profitable IF you are doing it to supplement other income. You could just choose to work peak hours Friday/Sat or when you have free time.
If you are trying to Uber full time you aren't going to be making much money over costs.
@Sam Sharik: I do Ubereats (part time) after work and on the weekends. I make an extra $1000 a week (after UBER fees) I have a small, super eco car which cost me near nothing and uses 5l/100km. No maintenance, and only third-party insurance.
People never believe me when I say I make on average $12 per order which takes less than 10 mins. I just show them my account and they ask me how to sign up..
My base salary is $70k, 45k with uber, $115k per year. I pay my fair share of tax but its still good.
I love it when people give me $1 tips and they have no clue I'm actually making bank.
@Sam Sharik: It certainly has less overhead - never tried normal Uber. You need to find a spot with few apartments (they take too long) and good parking at restaurants. I make most of my money at the local 24/7 McDonalds between 10pm - 1am. There's 30% extra late at night per delivery and most of the people are drunk teens that meet you outside so you don't wake the parents!
@FreddyMerc: Yeah but that's the problem with the food gig jobs. It's easy to make bank, relatively speaking, but you need to work hours when you're supposed to be asleep to do it. I easily pull in $60/h 4hrs a week bumming around on the bicycle between 7-9pm, but I don't want to do those 11pm-1am shifts even if they're lucrative because you're just (profanity) your health up for cash. Not worth it.
@FreddyMerc: I do uber too and you make $12.00 per delivery then you just be extra ordinary driver, there is now way for 10 min drop off you can make $12.00 . Uber eat pays per km, 2 km ride $8.00,3 km $9.00, 4 km$10.00, 5 km $11.00 etc,
If you saying you making $12.00 include pick up order and drop off 6 km in 10 min and you get 2nd order where you drop off straight away you are lying yourself to make other jealous.Some time drop off order far from restaurant you need go back to other restaurant to get more orders so you drive 10km for $12.00 plus parking traffic and waiting for order.
@Zonty: I've made $19,768.32 from 1651 deliveries as at 06/12 3:25. I said on average I make $12, not the median. Some deliveries are $8 and some are $25. I also get boost and quest promotions weekly.
Your per Km rates are also incorrect - It's closer to 2 km ride $9.50,3 km $10.50, 4 km$12.00, 5 km $14.00, 6 km $16.00
My 10 minutes was the time it takes from picking up and order to then delivering it to a customer. Does it take you longer than 10 minutes to drive 4km? I don't consider the time I spend watching netflix whilst I wait for orders to come through as "working".
You need to find a better location if you are struggling with parking, traffic and waiting for orders - these are all things you can control. Find a place with lots of houses, minimal units, away from low income/high density populations. I'm from Sydney and find the affluent areas of the Upper North Shore and Northern Beaches are prime.
I also make at least $50 per week in tips. Helps to have a friendly attitude - do you ever ask how the customers day was? Try patting their dogs, they love that.
You might not have figured out how the algorithm works either. I'll share this with you. When you deliver food to someone you get the opportunity to give them a thumbs up or thumbs down. This is important. If you both thumbs up each other you will get priority for this persons orders if you are in the area over all other drivers. I only thumbs up people that don't live in units and have a driving distance greater than 3km. Because of this 90% of my orders are for high km, well paying and easy drop off areas.
Don't appreciate being called a liar, try to consider that just because you are not achieving something, doesn't mean it's not possible.
Hope these tips help you become a more productive driver.
@Sam Sharik: I do Uber as a 2nd full time you can make $160k a year easily, take away all taxes and expenses no benefits leaving you around $60-70k. Uber pays you around $30-$100 p/h depending on days.
People who are saying full time is waste of time are idiots, it’s the other way around even mentioned on Uber forums. Get to know your pax and have private rides, if better et HC plate and make extra few thousand a week, people just don’t want more antz on the road.
Yes