I can pay off my house in 4 years pretty much on poor blokes wage!

[EDManual]

I am pretty wrapped with how things have turned out I must say!
Get this :

I am on a measly $35 grand a year, and am able to pay off my house after 4 years with a wife (doesn't work) and a kid, and we havn't had a budget or been careful with what we spend! Or tried to pay off the loan.(just paying interest only, with a bit more here and there when I can)

I bought a subdividable block in 2004 for $85000, build a house for $125000 on one side of it in 2006. Subdivided for about 10ish grand. (had a loan of 180,000ish at that point)
Now its 2010, have a loan of 165000ish, house is going on the market for 330,000. If I was to quickly sell it for say 310,000 I'll have $145000 cash to spend on another house on the block next door that would be fully owned! worth about $330-350000!

How about that! :-D!

And some people complain about low wages!... We go to France every 2 years too.

[max]

It all added up OK in my dizzy head. That is really thrifty! Good on you!

[blackers10]

sadly for us on that kind of wage now(or even 10k more than that) still can't get a reasonable house within koo wee of work)
congrats on scoring a good value house in a growing area

[ea90gl]

That's the beauty of "investing" in property, almost always pays off and then some. Just need the first one to be sorted to get the ball rolling

[Pat Riley]

This happens all the time, so I'm not sure what the purpose of the thread is?

Speak to some people who bought blocks in 2007 and tried to do the same thing. I'm sure they will have a different opinion on things. In a upward market, of course you will make some money, but in a downward market, you will likely lose money.

Also you are going to have to pay agent's commission and other costs on the property you sell which would further reduce the total consideration you get You will also struggle to build a house for $145,000. Depending on what you go for, it will likely cost you over $200,000 after variations for something reasonable. So you will likely still have a loan for $80,000 when all is said and done, and that doesn't include a proportion of tax that you would eventually have to pay on the second house for the time that the other house was your main residence.

[Grippy]

You bought your block at the right time, try doing that in the current market earning $35k a year

[Pat Riley]

Also if you are left with a $330,000 and a $80,000 loan on it, that's $250,000. If the house is built in 2011, that would be 7 years from 2004. In 7 years, you would only have to put away between $25,000 and $30,000 into a bank account earning interest on it and you would be in the same position.

[EDManual]

Originally Posted by BA Falcon

This happens all the time, so I'm not sure what the purpose of the thread is?

Speak to some people who bought blocks in 2007 and tried to do the same thing. I'm sure they will have a different opinion on things. In a upward market, of course you will make some money, but in a downward market, you will likely lose money.

Also you are going to have to pay agent's commission and other costs on the property you sell which would further reduce the total consideration you get You will also struggle to build a house for $145,000. Depending on what you go for, it will likely cost you over $200,000 after variations for something reasonable. So you will likely still have a loan for $100,000 when all is said and done, and that doesn't include a proportion of tax that you would eventually have to pay on the second house for the time that the other house was your main residence.

I could build a cheapish house for 145000 and it would be worth 330000 ish, and yes I could spend over 200,000 on something, and it would be worth 400000ish, whats the problem with that? Also I would not pay any capital gains tax, as I would sell my house at the moment, it has only ever been my main residence, and the new one will be too. I wont have both at once.
I am thinking of keeping a loan of about 80,000 and spending about 230,000 on a nice 2 storey which would be worth well over 400 more towards 450,000.

Anyway, all I'm saying is I was lucky thats for sure! A bit of advice from an uncle put me on to it. Thanks to him.

[EDManual]

Originally Posted by BA Falcon

Also if you are left with a $330,000 and a $80,000 loan on it, that's $250,000. If the house is built in 2011, that would be 7 years from 2004. In 7 years, you would only have to put away between $25,000 and $30,000 into a bank account earning interest on it and you would be in the same position.

I would be left with $330000 and no loan.

Also put 30,000 (deposit) compounded at 10% interest for 7 years is about $ 50,000 in 2010 and 12000 interest for 4 years when there was a house and land ($48000) but I would have spent it in rent anyway and maybe 3 years with interest on land only = 4000 x 3 = 12000, so All I would have had was the deposit with interest at a total of about $50000 plus the interest on the payments of the land only for 3 years ~15000 = $65000 best case.

$65000 or $330,000 whats better?

[Pat Riley]

Well I can't really be bothered arguing with you - just tell me the bottom line when it is all said and done - it won't be as much as you think.

I am a tax accountant and can assure you that you will need a market valuation carried out on your remaining block as while you were living in the house on one of the subdivded blocks, the other block was not used for your main residence and the difference between $85,000 + $5,000 related to its subdivision and what is worth now will be subject to capital gains tax once you sell it. Only the portion between what the remaining block is worth, plus the building costs, less the eventual consideration will be the portion that is capital gains tax-free.

$30,000 may translate into $50,000 in 7 years time, but if you dumping $30,000 a year into a bank account, interest isn't calculated on $30,000 throughout this period, you need to be added $30,000 in principal each year onto that total, plus any interest received during the year. You will find $30,000 a year over 7 years at the standard savings rate would translate into at least $250,000.

Now I'm not saying that you would be in a better position having flowed your money into a bank account instead. I'm just saying that you need to compare your position today with what you would otherwise be in. In any case, what we have seen in the property market between 2004 and 2007 is essentially the doubling in value of most properties and tripling of value in some case, which is extremely rare and will likely not happen again for some time.

I've done that many people's returns between 2007 and 2010 to know that often on paper that may have sold developments for more than what they paid for them, but when we actually go back through and work out the interest, the stamp duty, the agent's commisions, the rates, land tax, repairs and maintenance and so forth, they have in most cases actually lost money on developments from 2007 onwards.

I would also strongly discourage anyone from having an interest-only loan on their main residence. It's okay if it is a rental property or commercial property and you are therefore receiving a deduction for it. But, you would generally be far better renting than owning your own house with an interest-only loan. I don't think I've really ever seen someone with an interest-only loan on their main residence ever for this reason.

[cant]

Good for you pal

Buying a property is sort of like forced savings really, you have to pay the loan or the bank *#^$$ you

Saving is hard, thats why whats left over each week is known as "disposable" income ! Cause you more often than not SPEND it.

If you can save money each week you will be better off in the long term, and it doesnt have to be much, $30 a week adds up to $1560 a year or $15,600 after 10 years (then add compounding interest to that.............)

I bought a house in 2000 for 74K, paid it off 5 weeks ago, now worth 6-7+ times what i paid !!!!!!!!

Going without has its rewards !!!!!

[EDManual]

Originally Posted by BA Falcon

Well I can't really be bothered arguing with you - just tell me the bottom line when it is all said and done - it won't be as much as you think.

I am a tax accountant and can assure you that you will need a market valuation carried out on your remaining block as while you were living in the house on one of the subdivded blocks, the other block was not used for your main residence and the difference between $85,000 + $5,000 related to its subdivision and what is worth now will be subject to capital gains tax once you sell it. Only the portion between what the remaining block is worth, plus the building costs, less the eventual consideration will be the portion that is capital gains tax-free. What if I was to have only subdivided very recently? as is the case. The land value of the 2 blocks as 1 gained the value as a primary residence, wouldnt that get me out of CGT? Plus I will live in the new house on the other one anyway, not wanting to sell instantly.

$30,000 may translate into $50,000 in 7 years time, but if you dumping $30,000 a year into a bank account , interest isn't calculated on $30,000 throughout this period, you need to be added $30,000 in principal each year onto that total, plus any interest received during the year. You will find $30,000 a year over 7 years at the standard savings rate would translate into at least $250,000. I never put money into it apart from the deposit at the start! Interest only to me is the same as rent money, cost about the same so cant count it as capital anyway, plus its only 12000 a year.




I would also strongly discourage anyone from having an interest-only loan on their main residence. It's okay if it is a rental property or commercial property and you are therefore receiving a deduction for it. But, you would generally be far better renting than owning your own house with an interest-only loan. I don't think I've really ever seen someone with an interest-only loan on their main residence ever for this reason.


I wanted to be as flexible as I wanted, so interest only allows me to at the least pay interest, or more if I want. I never really wanted to pay it off either. Was planning on buying and selling a bit.

.....

[Scott]

Good for you mate, regardless of the finer details I like to see people getting ahead.

Congrats to you

[GTPete]

Originally Posted by EDManual

I am pretty wrapped with how things have turned out I must say!
Get this :

I am on a measly $35 grand a year, and am able to pay off my house after 4 years with a wife (doesn't work) and a kid, and we havn't had a budget or been careful with what we spend! Or tried to pay off the loan.(just paying interest only, with a bit more here and there when I can)

I bought a subdividable block in 2004 for $85000, build a house for $125000 on one side of it in 2006. Subdivided for about 10ish grand. (had a loan of 180,000ish at that point)
Now its 2010, have a loan of 165000ish, house is going on the market for 330,000. If I was to quickly sell it for say 310,000 I'll have $145000 cash to spend on another house on the block next door that would be fully owned! worth about $330-350000!

How about that! :-D!

And some people complain about low wages!... We go to France every 2 years too.

Well done on making it happen on an income of 35k, imagine what you could do with the start you have.....

[adelaidecrows02]

Originally Posted by BA Falcon

This happens all the time, so I'm not sure what the purpose of the thread is?

Speak to some people who bought blocks in 2007 and tried to do the same thing. I'm sure they will have a different opinion on things. In a upward market, of course you will make some money, but in a downward market, you will likely lose money.

Also you are going to have to pay agent's commission and other costs on the property you sell which would further reduce the total consideration you get You will also struggle to build a house for $145,000. Depending on what you go for, it will likely cost you over $200,000 after variations for something reasonable. So you will likely still have a loan for $80,000 when all is said and done, and that doesn't include a proportion of tax that you would eventually have to pay on the second house for the time that the other house was your main residence.

Obv for someone to share their jubilation.........you must be a tax accountant.

[jono.chil]

$35K / yr ain't poor mans $$
you're way richer than I am
try being on gov benefit payment(disability pension)
it's impossible to get a home loan to buy a house or even land in the first place
even on maximum benefit $$ paying for rent, bills, fuel & food is hard enough

If I had a chance to get a full time job(or could work full stop) & be off of benefit payments then I would jump on it.

[Spudz27]

wow I am on 42k and my mrs on 35k and between daycare and **** we can't afford a house. Although due to a death in my family I have a large inheritance coming which will pay off my debt completely so I will own my car etc. The rest will be put somewhere and when both my kids are at school (1 is in pre school next year) we will look at buying.

[reece1]

gk.ood on you ed, you having a red hot go and its paid off. dont worry about the could of wouldofs and didnt's. especcially if done you that on 35k its great. dont get carried away on next project just do what you thinks right and stay/live within your means. you done well. just keep doin what you doin an you will be o

[FPVF6X201]

Originally Posted by BA Falcon

I would also strongly discourage anyone from having an interest-only loan on their main residence. It's okay if it is a rental property or commercial property and you are therefore receiving a deduction for it. But, you would generally be far better renting than owning your own house with an interest-only loan. I don't think I've really ever seen someone with an interest-only loan on their main residence ever for this reason.

This is not quite true. I have an interest only loan. Bought the house in 2002 for 330k. It's now worth 440k ( at last bank valuation). The way i see it i'm in front. Granted i could be more in front if i also paid the principal, but i have lived a great life over the past 8yrs including annual holidays, 3 new cars and the ability to provide for my 2yr old son without worrying where the money will be for the next bill.

To the OP, good onya mate. Enjoy your life doing what pleases you. Maybe ask your uncle who advised him, lol.

[Iggypoppin']

Originally Posted by BA Falcon

This happens all the time, so I'm not sure what the purpose of the thread is?

Speak to some people who bought blocks in 2007 and tried to do the same thing. I'm sure they will have a different opinion on things. In a upward market, of course you will make some money, but in a downward market, you will likely lose money.

Also you are going to have to pay agent's commission and other costs on the property you sell which would further reduce the total consideration you get You will also struggle to build a house for $145,000. Depending on what you go for, it will likely cost you over $200,000 after variations for something reasonable. So you will likely still have a loan for $80,000 when all is said and done, and that doesn't include a proportion of tax that you would eventually have to pay on the second house for the time that the other house was your main residence.

Jeez, someone's a negative Nancy. Why don't you be happy for the bloke, it's far better that we get a quick thread about how good his life is going than hear of him going bankrupt(just the opposite end of the scale).

[ST]

Good on you mate, to any naysayers; to be ahead or to break even at all in todays financial climate is something absolutely worth celebrating, especially when it's an everyday bloke like the rest of us.

[Iggypoppin']

Originally Posted by ST

Good on you mate, to any naysayers; to be ahead or to break even at all in todays financial climate is something absolutely worth celebrating, especially when it's an everyday bloke like the rest of us.

Hear hear!

[seduced_xr]

sounds like you made a few good decisions along the way! cant see myself getting my own place for a while :(. works un reliable.

[Pat Riley]

Originally Posted by FPVwannabe

This is not quite true. I have an interest only loan. Bought the house in 2002 for 330k. It's now worth 440k ( at last bank valuation). The way i see it i'm in front. Granted i could be more in front if i also paid the principal, but i have lived a great life over the past 8yrs including annual holidays, 3 new cars and the ability to provide for my 2yr old son without worrying where the money will be for the next bill.

Have a chat to your accountant or financial advisor. You seem to be in a situation where some advice could definitely put you in a better position. What they may advise you to do is link your mortgage to an offset savings account. This will mean that rather than paying interest on the loan balance, you will only pay interest on the loan balance less the amount that is in your savings account that you are receiving your pay in and would otherwise be earning interest on at a lower rate than that which you are paying on your mortgage.

That will give you some flexibility so that you can keep your savings in a bank account and use those funds to go on holidays and so forth, while at the same time using the balance of that bank account to offset your interest payments. This may allow you to build up your savings account much quicker as less money would be going towards interest payments, and would effectively be a means of you indirectly paying off your mortgage, whilst still having those funds available to use at your discretion.

You will also have the benefit of not having to pay tax on interest you receive, as you will now just be paying less interest on your mortage instead, interest that wasn't tax deductible anyway. So in effect you are earning interest from what is in your bank account at the rate of your mortage and it's tax-free!

[Pat Riley]

Originally Posted by Iggypoppin'

Jeez, someone's a negative Nancy. Why don't you be happy for the bloke, it's far better that we get a quick thread about how good his life is going than hear of him going bankrupt(just the opposite end of the scale).

Unfortunately I speak from experience. Whilst this worked out for most people up until 2006, I've seen too many people having to file for bankruptcy and go through the stresses that go with that being they overexposed themselves from 2007 onwards.

Generally their predictions are overly optimistic, and additional costs are often left out of their original calculations, and there's very little meat on the bone left after all is said and done. Just be careful is all I'm saying and get professional advice - it is worth it.

[04redxr8]

EDManual, congratulations on your achievement, and good luck with moving forwards. Its always nice to hear of people who work at a goal and then succeed in makiing it happen.

@ BAFalcon.

Reading your posts here has given me the impression that you are posting from a self centered view point as opposed to a proffesional one as you are trying to imply. Your initial post comes across with a degree of jealousy outlined specifically in the opening remark.

While I appreciate that you are an accountant, and deal with figures daily, you seem to have forgotten that every persons situation is different. The OP has actually worked at his goal for 6 years, and it is now coming to fruition. At $35k pa he obviously hasn't been out drinking, taking drugs, gambling or being frivolous with his money. I also doubt he has been living beyond his means either, or he would have lost the lot.

As for the GFC, and other related matters that accountants and economists all cry over, history has shown that markets fluctuate. As an accountant i would have assumed that you could have see the merit in the fact that the OP has tried to do this overnight. He even gives me the impression that he was suprised himself at his great fortune.

The property losers of 2007 and onwards? are you for real? Property has never been a get rich overnight proposition. It never will be. If you buy a property and expect to double your money annually, you are a fool. Property is a long term investment. Always has been, always will be. In the past property has shown to be about a 7-10 year cycle.

These are merely my personal observations. I enjoy hearing of people success. I hate seeing jealousy. Your posts have attacked the OP's achievements while giving no usable or beneficial advice. I am not 100% on the capital gains law, but if he holds the land until such time as he can afford to build on it, and the land has not been used to earn profit, then why would it attract capital gains?

Further more, if an investment property is held for 15 years or more, and then sold, is capital gains no longer applicable?

[dave289]

Well done ed .You had a go ,and have done well for your efforts. You are obviuosly proud of what you have achieved and wanted to share this with us. Most of us are happy to see this sort of thing and it gives hope to others out there. Yes you got in at a good time , and timing in the market can make all the difference as you have seen.

@bafalcon... unfortunately there are the others who have to try and belittle your achievements and make negative comments, why ,why,why?
As my mum used to say to me, if you have nothing good to say then shut your mouth.

Once again well done ed ,you should be very proud of your achievements and thankyou for sharing that with us.

[RedHotGT]

Housing is still very affordable in a lot of areas... Unfortunately a lot of people (particularly the young ones) want it all now.... they want to buy in the 'leafy' and 'trendy' areas...

I bought my house in 2006 for $168,000... a modest 3br home in Sunbury VIC
http://www.news.com.au/business/rich...-1111114248023
(Herald Sun actually ran an article on me / vs an investor)
Had it valued around 12 months ago... and the BANK called it at $260,000.... not a bad return on 4 years - given that I haven't done a great deal to the house (maybe tipped about $10,000 into paint/small renos)

I'm on a modest wage.... 3 kids (1 on the way) and a stay-at-home wife...
Its way cheaper to have my house than it is to rent!!!
And at the end of the day... I'll probably NEVER sell the house... just leverage off the equity to buy the next house... and keep it as a renter...
For the mortage that I owe on it... a renter could pay my mortgage - and give me some money to give to the tax man each year... but they'll be paying for the house not me...

It can be done... people just need to live within their means...
For the record - I just spent $25,000 on a Territory, and we go on a holiday every year also with the kids...

Find a balance where you can live and enjoy life...
And have a 'toy car' also...

[sarrge2001]

Well done mate, nice to see a "good news story" on here.

Thanks for sharing.

Ignore the naysayers and enjoy the congratulations!

[deesun]

ED manual Well done matey.
BA Falcon , correct you obviously are an accountant.