Latest news with #propertyinvesting
News.com.au
2 days ago
- Business
- News.com.au
‘I know where I want to be in the next 30 years': 25-year-old reveals wild property plan
A young Aussie owes over a million in mortgages, but he isn't sweating it, because he believes rent-investing is his best chance at amassing wealth. Rent-investing involves renting where you want to live and buying where you can afford to buy. The property tactic has become more popular because the housing crisis has meant so many Aussies can't afford to buy where they live. Jett Elliot was born and raised in Sydney, where the median house price is over $1.7 million, and the median unit price is now over $800,000. Mr Elliot told that after looking online at real estate, it dawned on him that he 'couldn't afford' Sydney. 'I'd rather build a portfolio where I can afford to,' he said. The 25-year-old is a client of property investor Jack Henderson, who runs the buying agency Henderson Advocacy and is a rent-investor himself. Mr Henderson rents a $15 million mansion in Paddington but owns over 12 properties across Australia. He still rents because he wants to use the bulk of his income to invest, not just on a single mortgage. 'You can rent a home and have none of the expenses and none of the maintenance costs and then use the money you've saved to invest,' he previously told Mr Elliot, a fan of Henderson's podcast, is following his lead and putting his money into investment properties. However, even dodging Sydney's inflated property market hasn't made the homeownership dream easy. Mr Elliot, on paper, is living the Australian dream. He is in his mid-20s and already taking home over a six-figure salary. He works for the army, where he earns over $130,000, but even buying to invest has stretched him to the limit. The 25-year-old has purchased two homes in Newcastle, where property prices are lower than in Sydney. The average house price in Newcastle is just over $900,000 and the average unit price is over $600,000. Mr Elliot purchased a two-bedroom apartment and a three-bedroom house, but they're both negatively geared. He rents in Sydney's eastern suburbs, and both investment properties are tenanted, but it costs him around $1000 a week to cover the mortgages, because he owes a million dollar spread across two mortgages. 'I bought my first place at 22 and I bought my second place at 24,' he explained. Mr Elliot's first property was a two-bedroom apartment that he bought for $655,000, purchased with a 5 per cent deposit in 2022. He put $35,000 into the home and had about $80,000 in the bank but wanted to set aside some funds. In the first year, the property increased in value by $127,000. He refinanced, pulled out the $35,000, and had 'none of my own money' in that house anymore. He used the $35,000 to buy his second property and added an extra $55,000 to put down $90,000, securing a three-bedroom home on a corner block for $650,000. His plans include eventually building a granny flat and renting it out as well. At the moment, Mr Elliot's financial situation is tight. The mortgages cost him $1k a week, plus he pays over $700 a week to rent in Sydney. Considering he is earning $130,000 a year, which works out to be roughly just over $1850 a week, he is only left with $150. To earn extra cash and alleviate financial stress, Mr Elliot works on the weekends as a barista, which gives him an extra couple of hundred dollars to work with. It sounds like the mortgages would be a source of stress, but Mr Elliot said he lives simply and isn't racked with anxiety about money. 'I'm not worried, I'm not going out and buying steaks and I pretty much eat the same thing every night. I have a Mexican bowl and it's a long-term plan,' he said. 'A lot of people want it right now instantly. I know where I want to be in the next 30 years and the sacrifice it takes.' The 25-year-old lives by the mentality that as long as he can 'pay the mortgage every month,' he'll be fine. If that means he won't have the funds to go on a yearly overseas holiday or drive a nice car, but is able to afford his investment properties, then Mr Elliot says he is fine to live frugally in the short term. He drives a beat-up old car, rents, and hasn't ordered UberEats for so long that he doesn't even have the app on his phone anymore. It's a big contrast to the lifestyle that so many of his mates are living, where they're 'betting all their money on the dogs or buying brand new Land Cruisers that have a loan on them'. He said this isn't a lifestyle he wants to replicate. 'I drive a $10,000 car around because I know all my money is going into property,' he told Mr Elliot argued that a lot of young people have their 'priorities mixed-up' and are living beyond their means with no long-term plan. 'They like the flashy cars, they don't want to buy a place that might look rundown, and they're worried what their friends will think about them, they've got to live in a brand new apartment or a brand new house,' he said. The 25-year-old said that he finds it 'so interesting' when he sees Aussies reveal on social media how little they have in savings. 'They're interviewing 30-year-olds and 40-year-olds who have like $500 in savings. How have you gotten to a point where you have $500? You haven't been doing the right thing,' he said. 'What are they doing? They are blowing all their money on something.' The army employee is doing the exact opposite of blowing all his money – he is putting practically everything he makes back into investing. Mr Elliot said he knows the counterargument; he has heard it plenty of times. 'What if you die tomorrow?' but he argued it is a flawed point. 'Chances are you won't,' he pointed out. The long-term plan isn't set in stone, he just knows he wants to create a passive income and not have to worry about money. 'Maybe I'll buy six or so properties and sell them and buy a property in the eastern suburbs or leverage them to buy in the eastern suburbs,' he said. The 25-year-old made it clear that he isn't motivated by the idea of owning as many properties as humanly possible. 'I want $250,000 positively cashflowed, that is my goal, and I'll use property as a vehicle to achieve that,' he said. 'You have to have a plan in place.'
ABC News
4 days ago
- Business
- ABC News
Higher interest rates smashed landlord profits, but negative gearing means few sold up
Eddie Dilleen is a 33-year-old who claims to own 150 properties. His confidence in property investing cannot be overstated. "To me it's definitely a no-lose game, it's the best way to create wealth in Australia," he says. Mr Dilleen runs his own buyers agency, and his holdings make him one of 166 mega landlords identified by the ATO as owning 20 or more rentals in their own name during the 2022/23 tax year. Mr Dilleen says despite amassing immense property wealth on paper, his personally held rentals run at a loss. "The biggest thing that I would focus on would be the capital growth and the ability to take that equity out from those properties and further expand," he says. Cash flow "would be the last thing" Mr Dilleen says he would focus on. It is an approach that appears shared by most of the country's largest investors. The ATO data, released exclusively to the ABC, shows the only investors making an average rental loss in 2022/23 were those with 19 or more property interests, both on an individual investor and individual rental basis. The losses put mega landlords at the extreme end of a trend that swept through the rental market that year. In 2022/23, profits from investor-owned rentals plummeted 73 per cent. In dollar figures, that equated to net rental income (income after expenses) falling from almost $5.9 billion in 2021/22, to less than $1.6 billion in 2022/23. Despite the drop, investor numbers, and the number of rentals they owned, shrank less than 1 per cent, suggesting falling rental profitability did not trigger any significant rental sell-off. Rachel Ong ViforJ, professor of economics at Curtin University, says she was so shocked at the collapse in rental revenues, she had to check it twice. "It's quite astounding," she says. Professor Ong ViforJ put the fall in profitability down to surging interest rates, plus rising rental management and repair costs. According to Reserve Bank figures, the average interest rate on variable-rate loans to property investors in 2022-23 was 5.7 per cent, up from 3.4 per cent in 2021-22 and just 3.5 per cent in 2020-21. The rise put the interest paid by investors at its highest since 2018-19, when it averaged 5.89 per cent. Although total net revenues remained positive, it was likely many rentals became loss-making that year, Professor Ong ViforJ says. She puts the lack of a widespread landlord sell-off down to two things: negative gearing rules allowing investors whose rentals were losing money to reduce their personal tax bills, and the promise of a large payday when rentals are sold, sweetened by the 50 per cent capital gains discount. The combination of these two tax breaks makes property investing attractive, she argues. The drop in rental profitability occurred despite a period of rapid rent increases, when rents jumped 7-9 per cent annually. Tim Lawless, chief analyst at property analytics firm Cotality, says the significant rise in rents from mid-2020 had "very little to do" with the interest rates expenses investors were facing. "The underlying forces of demand and supply were at play," he says. Independent economist Saul Eslake says some investors will have "welcomed" their rentals losing money in the higher interest environment. "They wouldn't have planned to have been positively geared during the COVID years, because that defeats the whole purpose of negative gearing, which is to reduce tax payable on other income," he says. The ATO data showed mega landlords with 20 or more rentals were the only group that made average losses throughout the COVID era of record-low interest rates. Mr Eslake says this underscores the importance of negative gearing to the wealthiest investors and scuppered the argument that it was predominantly used by "mums and dads trying to get ahead". "To which I always ask, ahead of whom?" Mr Eslake says. "The answer — their own children and grandchildren, or their children's and grandchildren's peers." Mr Eslake says other data from the ATO's 2022/23 Taxation Statistics reinforced it was the wealthiest investors capitalising most on negative gearing rules. "18.8 per cent of individuals in the top tax bracket report net rental losses, as opposed to just 6.3 per cent of those who are not in the top tax bracket," he says. A Parliamentary Budget Office (PBO) analysis, prepared at the request of former Greens MP Adam Bandt, confirmed the greatest negative gearing advantage goes to the highest-earning Australians, as do benefits gained from the capital gains discount. The PBO analysis estimates in 2025-26, the bottom 10 per cent of wage earners in Australia will get back just $152 million from these two tax breaks, while the top 10 per cent will get back over $2.9 billion. The same analysis shows investor tax savings, and government revenue lost, from negative gearing did jump as rental returns fell. It shows in 2022-23, negative gearing led to lost tax revenues of $3.5 billion — $1.4 billion more than the year before. The PBO analysis predicts the amount of tax income lost to negative gearing will rise significantly in the coming years, increasing to $5.2 billion in 2023-24, $6.5 billion in 2024-25, and will keep rising to an estimated $14.1 billion per annum by 2035-36. Australia Institute chief economist Greg Jericho says falling rental profitability in the ATO data shows negative gearing was becoming "a much more common situation" and investors are "winning both ways". "We've got a tax system that is geared towards making buying an investment property a pretty risk-free proposition," he says. Mr Jericho says theoretically investors shouldn't be able to negatively gear long-term, because it means they are losing money every year. "The only reason that is now a viable option is because of the 50 per cent capital gains discount," he argues. "You can afford to cover those losses, and live with the rental losses for a period, reduce your overall taxable income, and then when the price of the property goes up to a worthwhile amount you can sell it and get a 50 per cent tax discount that way." Mr Jericho says the ATO data should reignite discussions of limiting negative gearing to one or two rental properties per investor — a move that would not affect roughly 90 per cent of current investors. The ATO data shows about 817,000 properties were held by investors with interests in three or more properties in 2022-23. Despite this, Mr Jericho did not think limitations on negative gearing would dramatically affect house prices, as demand remained high. "Presumably those properties would mostly go to owner-occupiers, rather than investors [if they were sold]," he says. Mr Jericho's call echoes those of the Australian Council of Trade Unions, and the Australian Council of Social Services, both of which are calling for bold changes to negative gearing and the capital gains tax, with the latter wanting to see the tax revenue generated by changes invested into social housing. Property Investment Professionals of Australia (PIPA) chair Lachlan Vidler argues against changes to negative gearing, saying it would disincentivise investment, which would mean fewer rentals and reduced house building. Mr Vidler argues it would still damage sentiment across the sector, even if the majority of investors would be unaffected. "Considering we are in a rental crisis, the last thing we need is less rental properties on the market from investors," he says. Mr Vidler says Labor took negative gearing reforms to the 2019 election — an election the party lost — and voters would be shocked to see reforms back on the agenda so quickly after the recent election. In response to the added tax revenue negative gearing reforms would likely deliver, Mr Vidler questions why rises in government spending lead to discussions of who to tax more. "Why can't we look to be more efficient with the revenues we do create?" he argues. The vast majority of investors (a little over 1.6 million) own one rental, and a little over 423,000 investors own or part-own two rentals. Roughly one-in-10 investors own three or more but, because of the size of their portfolios, this relatively small group owns about a quarter of all rentals in the country. There are 2,529 investors who each have interests in 10 or more properties, and this group owns or part-owns more than 32,600 rentals. There are limitations on the ATO data — it doesn't capture rentals held in companies and trusts, and there is the chance some commercial properties are captured by the dataset, although economists say these numbers would be small. To estimate how many rentals and large investors the dataset might miss, the ABC contacted multiple property investment advisories. Data from these advisories showed roughly 70-75 per cent of clients held their rentals under their personal name, while the rest held rentals in trusts, companies or self-managed super funds, suggesting the ATO data was missing up to a third of rentals. Amanda Turner, director of Queensland-based investor advisory Opulence Property Group, says trusts are sometimes preferred because they protect the asset if, for example, the investor is thinking of handing property down to children. Eddie Dilleen says he holds most of his properties in trusts and companies, meaning most would not be captured in the ATO data. Mr Dilleen speaks at length about his own childhood growing up in public housing, and how it drove his determination to buy property. In his opinion, those struggling to buy a first home should not hate the investors — they should hate the tax rules that made the market. However, he doesn't think those rules should change. He says the key was figuring out the rules and how to take advantage of them. "It's always been like that, and always will be like that." Negative gearing was introduced in 1936, while the 50 per cent capital gains discount was introduced in 1999 and, before then, capital gains were taxed in the same way as other income, although only the "real" gain, over and above inflation, was taxed.
News.com.au
04-08-2025
- Business
- News.com.au
Aussie finance guru's disposable income tips
An Australian property investing expert has left thousands of his followers bemused after a seemingly innocent post about looking forward to babysitting his granddaughter morphed into advice on working hard to build wealth. Scott Kuru, founder and CEO of Freedom Property Investors, posted an image of a portable baby cot, change mat and play area to his company's Facebook page on August 1. The image showed all the gear next to a window overlooking Sydney Harbour Bridge. Kuru started the post by describing how his granddaughter would be staying with him during the week. 'I was able to go out and buy a set of baby stuff to accommodate her and keep her safe happy and comfy. Made it super easy for her parents,' the post read. What appeared to be the excitement of a doting grandfather quickly turned into a philosophical line of thinking about money and advice for Australians to build their own wealth. 'Having the funds to do that is a true blessing. Yes, money is not everything. But it sure as hell gives (you) options and ability to make some really special moments happen,' the post continued. 'Remember, whether it's your career or property investment or your business it's gonna take 10 years of focused concentrated effort to make real gains. Plant seeds today and reap the blessings tomorrow.' Kuru's Facebook page has more than 32,000 followers and more than a few of them were happy to share their views on the property expert's advice to Aussies. 'Reminds me of the photos of people in car looking outside and happen to get the Rolex or Ferrari badge in the picture,' said Matthew Porch. 'Imagine being this much of a w**ker you turn an innocent post about your granddaughter into a flex,' Deb Leung said. 'Said from the penthouse overlooking the harbour and bridge,' Michelle Mancini said. 'This is what grandmothers do but don't need to post about. The audacity,' Michelle Wentworth said. Kuru founded Freedom Property Investors alongside business partner Lianna Pan. The duo utilise research data and insights to identify property locations in Australia they believe to be primes for growth. 'Scott has personally managed more than $4 billion in property transactions on behalf of over 10,000+ Freedom Members, helping them unlock wealth and financial freedom,' Freedom Property Investors' website reads.
News.com.au
17-07-2025
- Business
- News.com.au
A beginners guide to commercial property investing
In the world of property investing, commercial property has its own set of unique opportunities that sets it aside from residential property – but it may not be the best strategy for everyone. WHO IS IT SUITED TO? 'I often find people get started after having an existing residential portfolio,' says REBAA buyers agent Zoran Solano from Hot Property Buyers Agency. While residential property investing usually requires a deposit size of about 20 per cent, or possibly less with LMI, commercial property is different, says Solano. 'The barrier to entry with commercial property often requires a larger deposit – often 30 per cent or more depending on the style of the property,' he says. Often, investors will use some of the equity they have built up from investing in residential property over time to fund the deposit for their first commercial purchase. BENEFITS OF COMMERCIAL PROPERTY It's a purchase that appeals to many residential investors because of its potential for stronger yield – both gross and net, Solano says. 'Often a lot of your outgoing costs as a commercial landlord are passed on to the tenants themselves, depending on the lease agreement,' he says. 'Outgoings, even down to the rates, insurance and even land tax, potentially, can be charged to the occupant of the commercial property rather than the landlord themselves.' Buyers agent Steve Palise from Palise Property says commercial property tends to drive much greater returns than residential property when it comes to cash flow. 'Five years ago there were no books or podcasts about it. It was only known by business owners and high net worth,' Palise says. 'Now that people realise you can get three times the cash flow and the same capital growth it is becoming popular.' There is also the potential for longer lease terms, which can create more stable income, as well as higher depreciation tax benefits, he says. POTENTIAL PITFALLS But with any investment, there are also negatives – and risks. 'Vacancy is the biggest killer when it comes to the commercial property sector,' Solano says. 'All we need to do is look at Covid in the last few years and how it's dramatically changed the way people invest in commercial property.' Vacancy rates rose in CBD locations as people relocated to home-based businesses during the pandemic. Industrial property has also seen a rise with the need for warehouses due to online shopping, he says. Investors need to have a clear understanding of who their tenant is and how stable their business is as well as wider economic factors at force, he adds. 'People can run reasonably large and successful businesses remotely or from home as well these days, so that is potentially a bit of a disrupter or a risk that commercial investors need to consider,' he says. There are 'more moving parts to understand' when investing in commercial property, says Palise, which means there are more things you might get wrong. 'There are also different types of property with their own intricacies,' he says, listing retail, industrial and office as three distinct examples. It's also worth noting that zoning and regulations can change over time which makes it hard to forecast how your property will perform, he says. 'Commercial investing needs to be done only once you are educated or using a reputable buyers agent,' he says. RESIDENTIAL VS COMMERCIAL Steve Palise from Palise Property says there are several things that set residential property investment and commercial property investment apart. Here are some of the main differences: * Deposit size – You usually need a deposit of 20-35 per cent for commercial property compared to a deposit of 10-20 per cent for residential property * Yields – Commercial yields tend to come in at a much higher average of 5-8 per cent net, compared with the 3-6 per cent gross yields of residential, according to Palise's calculations * Lease terms – Commercial leases are usually much longer than residential leases, and can be as long as 30 years depending on the contract * Outgoings – While the landlord pays most outgoings, such as repairs, renovations and council rates in the world of residential property, the occupant pays for a lot of these things in commercial leases * Vacancy – Vacancies can be much more drawn out in commercial investing, as long as two years, while residential tends to be one to two weeks on average
