Good topic. A number of my friends have multiple IPs. Comically, the net yields are low and hassles are high. However they can’t bring themselves to sell because of the CGT they need to pay! Like you say, no thought about the exit plan
It's definitely one of the most overlooked topics. This doesn't make property a bad investment, it just means you need to consider the net return with the exit plan factored in.
Wow! ....... just stumbled across this. I live in Melbourne (the Land Tax Capital), retired two years ago and used my Super to wipe the debt. I honestly thought with 5 investment properties all paid off, would be sufficient to live off the rental incomes. But I was wrong - big time! Those costs you mention pretty much decimates the yield (1.5 -2%) leaving me in the situation of being asset rich, income poor. Maybe 5-10 years ago I wouldn't be having this exchange with you but, as one commenter has stated, the CGT is a significant chunk even with the discount in place. I am now starting the sell off with one on the market this month. My exit plan is to offload one every financial year. I am sick and tired of being seen (especially by the Greens) as some sort of criminal class. I've had it with all the compliance BS and non-stop talk around NG and CGT discount and of course, the dreaded phone call or email from the real estate manager that something needs to be repaired or replaced. I can get 5% in a bank deposit minus all the headfu#&*. At what point do you draw the line and ask yourself how important is my health??
Ha I’m in the same boat. About to build my 5th property. I have a small etf portfolio. I wish I put everything into that instead. Property is annoying as hell. But now I’m kinda stuck in property until I stop working because of CGT. I won’t buy more, I’ll just dump it all in ETFs
@@lengerer Yes mate, whilst still working you can if need be put part of your salary towards the acquisition and servicing of property. However, when you're relying solely on rental income as I am and yield is significantly decimated by Land Tax in Vic alone, I have little choice but to sell. My biggest concern is that the CGT discount gets scrapped as recent Leftist Govts keep bringing it up especially if Albo gets back in office with a minority govt with the Greens. Whether they grandfather it remains to be seen but, I honestly think it's on borrowed time. I'd rather take the hit now whilst it's in place because it will be a hell of a lot worse should the discount disappear. Should Labor win office again in Vic beyond 2025 I can confidently say the term "investment property" will exist no more.
@@m2comp369 yes, good points. I think you have the right idea. The government will see the results, might lower home prices but will worsen rental conditions.
You're spot on there. Investors ran for the exits early this year in Victoria following the 'death by a thousand cuts' approach of the State Govt, albeit we're starting to see this turn now. The Land Tax change in Victoria certainly caught many off-guard.
The ATO plays the long game with everybody with CGT as well making it difficult for people to change the makeup of their assets. In many ways Australian property has resulted in people building their net worth but it's of little use to you in retirement when you are looking to have your money working hard for you when it delivers such low returns. Unless people have exploited the primary residence exemption for CGT it's a very expensive exercise freeing up your net worth at retirement when you want to convert it to better income producing assets.
You raise a fantastic point, and the part of property investment that is most often ignored - the exit plan. Residential property as a retirement income stream is often terrible, but commercial property, shares and even some fixed income assets can deliver much better yields. This is where we need to be considering holding structures for property portfolios, tax deductions, timing of sales, and even property development to sell a portion of an existing asset rather than the whole block if possible.
Good topic. A number of my friends have multiple IPs. Comically, the net yields are low and hassles are high. However they can’t bring themselves to sell because of the CGT they need to pay!
Like you say, no thought about the exit plan
It's definitely one of the most overlooked topics. This doesn't make property a bad investment, it just means you need to consider the net return with the exit plan factored in.
Wow! ....... just stumbled across this. I live in Melbourne (the Land Tax Capital), retired two years ago and used my Super to wipe the debt. I honestly thought with 5 investment properties all paid off, would be sufficient to live off the rental incomes. But I was wrong - big time! Those costs you mention pretty much decimates the yield (1.5 -2%) leaving me in the situation of being asset rich, income poor. Maybe 5-10 years ago I wouldn't be having this exchange with you but, as one commenter has stated, the CGT is a significant chunk even with the discount in place. I am now starting the sell off with one on the market this month. My exit plan is to offload one every financial year. I am sick and tired of being seen (especially by the Greens) as some sort of criminal class. I've had it with all the compliance BS and non-stop talk around NG and CGT discount and of course, the dreaded phone call or email from the real estate manager that something needs to be repaired or replaced. I can get 5% in a bank deposit minus all the headfu#&*. At what point do you draw the line and ask yourself how important is my health??
Thank you for sharing your story - it's an important one for people to take note of.
Ha
I’m in the same boat.
About to build my 5th property.
I have a small etf portfolio. I wish I put everything into that instead. Property is annoying as hell. But now I’m kinda stuck in property until I stop working because of CGT.
I won’t buy more, I’ll just dump it all in ETFs
@@lengerer Yes mate, whilst still working you can if need be put part of your salary towards the acquisition and servicing of property. However, when you're relying solely on rental income as I am and yield is significantly decimated by Land Tax in Vic alone, I have little choice but to sell. My biggest concern is that the CGT discount gets scrapped as recent Leftist Govts keep bringing it up especially if Albo gets back in office with a minority govt with the Greens. Whether they grandfather it remains to be seen but, I honestly think it's on borrowed time. I'd rather take the hit now whilst it's in place because it will be a hell of a lot worse should the discount disappear. Should Labor win office again in Vic beyond 2025 I can confidently say the term "investment property" will exist no more.
Thanks for sharing this - it certainly highlights the importance of both diversification and planning ahead.
@@m2comp369 yes, good points. I think you have the right idea. The government will see the results, might lower home prices but will worsen rental conditions.
It's terrible now, especially in Victoria with land tax and all other expenses, taking a toll a lot of investors getting out.
You're spot on there. Investors ran for the exits early this year in Victoria following the 'death by a thousand cuts' approach of the State Govt, albeit we're starting to see this turn now.
The Land Tax change in Victoria certainly caught many off-guard.
The ATO plays the long game with everybody with CGT as well making it difficult for people to change the makeup of their assets. In many ways Australian property has resulted in people building their net worth but it's of little use to you in retirement when you are looking to have your money working hard for you when it delivers such low returns. Unless people have exploited the primary residence exemption for CGT it's a very expensive exercise freeing up your net worth at retirement when you want to convert it to better income producing assets.
You raise a fantastic point, and the part of property investment that is most often ignored - the exit plan.
Residential property as a retirement income stream is often terrible, but commercial property, shares and even some fixed income assets can deliver much better yields. This is where we need to be considering holding structures for property portfolios, tax deductions, timing of sales, and even property development to sell a portion of an existing asset rather than the whole block if possible.