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Mike kicks off the episode with the first listener question. Josephine writes in... she and her partner have just secured their first property with the help of the First Home Guarantee, and the purchase is about to settle. They were initially planning to reside in the property, but after discussions they are wondering if they have made the right move. They are keen to continue building a property portfolio and they are worried that they should have considered an investment first. Was it a mistake? Should they revise their strategy? And is it costly to switch the property to an investment now?

The Trio unpack this dilemma... or is it a dilemma? 

Dave breaks down the questions and congratulates Josephine and her husband on a great achievement. They have navigated the purchase of a potential family home that could be improved/extended, getting "the big rock in the jar." Dave concedes that they have actually got the purchase mechanism in the right order. 

Our listener is planning on moving out and renting the property out for a while before moving back, and while there are tax considerations and critical dates to consider, their overall strategy sounds feasible. Moving back in with parents will enable them to manage their cashflow optimally and continue saving hard. Cate acknowledges their Lender's Mortgage Insurance advantage also. 

Dave addresses the burning technical question: Are there big implications to switching from owner occupier to investment and back again?  Paying interest only and preserving all of the debt is an important consideration if they are considering this property as a stepping stone to later be converted to an investment property later on. Cate's sage words about the importance of getting great tax advice before making firm decisions that can't be reversed, resonate.

Mike revels in sharing some tax details with our listeners. There are two main elements of depreciation topic; Division 40, (Plant and equipment) and Division 43 (Structural components). Both are treated differently when a borrower renovates and Mike sets out some examples of how each are treated. 

"You're 26 and you've got a house. You're crushing it!", says Mike. 

Catherine's listener question is all about the optimal configuration of a character dwelling in Melbourne. She wonders if she should be targeting two bedroom, one bathroom cottages, larger three bedroom houses or improved dwellings with ensuites.   Cate details the styles, eras and historical timeframe of Melbourne's growth during the turn of the century through to pre-war. Where can you find the different categories and styles? How do they perform? Why are they so special? And what changes did COVID create to demand for Victorian cottages? The Trio discuss the variables, from price points, to the work from home phenomenon, and renovation opportunities. Yield, (cashflow) and Land to Asset Ratio are important considerations when an investor is considering layouts and configurations.

Dave tackles the strategy-piece that Catherine should be considering as she devises her purchase plan for this purchase. 

Cate shares some A-grade period property selection tips... tune in to catch them!  .

... and our gold nuggets! 
 
Cate Bakos's gold nugget: If a buyer can identify a property that has no obvious detractors to a mainstream buyer, they are poised well for capital growth.

Dave Johnston's gold nugget: Getting the big rock in the jar sooner, the better. For most people it's the most expensive asset they hold, (and for some, the only asset they hold). Getting the big rock in the jar early enables borrowers to get the debt down sooner, and allows them to focus on their investment plans for retirement. 

Mike Mortlock's gold nugget: "It's all about strategy, and Dave and Cate are all in for the period homes!"

Shownotes: https://www.propertytrio.com.au/2024/07/22/winning-strategy-and-asset-selection/