$85K pa? growth or income or a combination of both?
best way to invest 150k
- Thread starter JustaDreamer
- Start date
$85K pa? growth or income or a combination of both?
Ideally income but I would be happy with growth. This is what I don’t really understand owning a property is income but everyone is saying you don’t want to own it you would prefer capital growth.
If it was a matter of owning the properties 4 250 p/w properties is what I would be after, but that would take closer to 25 years not 10 years.
If it was a matter of owning the properties 4 250 p/w properties is what I would be after, but that would take closer to 25 years not 10 years.
For $150K you can own one property. or you can control 3 properties worth $150K each (simplistic example only)
Given that they grow at 10% which do you think would be better in the long term?
Esp if you consider that rents grow as well?
In 7 years time your single $150K property would be worth $300K. if you had controlled 3 properties worth $450K they would have grown to $900K.
another 7 years - $600K vs $1.8M.
Just some examples using some commonly accepted growth patterns. Doesn't matter if it is more or less.
Unless the growth is negative for a sustained period then you are in a world of pain. Historically we haven't experienced that yet.
Some investors seek never to own property - just to keep buying more while they can. Inflation will whittle the debt down.
I'd tend to agree with Simon, I like having more less expensive properties than say 1 bigger one. Also means you should have more consistent growth, while one stagnates for a couple of years, the other ones may still increase - therefore not forcing you to postpone your strategy waiting for that 1 IP to start increasing again.
Especially Justadreamer if you're looking at the Adelaide market where you can get cheaper houses anyway for say around $200k.
With your $150k cash I'd get 2 IP's at around $200k each (or even 1 for $250k and one for $150k etc), then put the rest into managed funds (as others have mentioned, I personally think cash in a savings acc. is a total waste, you just end up treading water with inflation & tax)
This way you have at least 2 IP's increasing in value, and therefore decreasing the reliance on equity build up in only 1 IP. You also then have an income from the Managed Funds that you can either roll over and let it increase for the next time you get itchy trigger fingers for another IP, or you could use the interest to help fund any shortfall in cashflow on the IP's.
Cheers
Steve
PS Although if it was me, I'd put some money directly into some good shares I know too, now just managed funds
Especially Justadreamer if you're looking at the Adelaide market where you can get cheaper houses anyway for say around $200k.
With your $150k cash I'd get 2 IP's at around $200k each (or even 1 for $250k and one for $150k etc), then put the rest into managed funds (as others have mentioned, I personally think cash in a savings acc. is a total waste, you just end up treading water with inflation & tax)
This way you have at least 2 IP's increasing in value, and therefore decreasing the reliance on equity build up in only 1 IP. You also then have an income from the Managed Funds that you can either roll over and let it increase for the next time you get itchy trigger fingers for another IP, or you could use the interest to help fund any shortfall in cashflow on the IP's.
Cheers
Steve
PS Although if it was me, I'd put some money directly into some good shares I know too, now just managed funds
Buying two properties for 200k using 75k deposit on each, you would come close to making them positive gear so wouldn’t if make more sense to get a P&I loan still no plans of owning them but when they just pass that boarder line and become positive geared use the money you were spending out of your own pocket to buy a 3rd.
Personally if it was me, and with the income you have - I would buy as many IP's as I could with an LVR of 80/90% as it looks like you could afford the shortfall.
So I would buy maybe 4 IP's @ $150k-$200k each (this is the price range of the IP's I'm buying in Adelaide), let the $150k cash handle the shortfall and fees, then you have 4 properties increasing in value for you, probably each losing about $2k pa (maybe less) after tax - so $8k per year, which as I said, on your income should'nt be too uncomfortable - but you have 4 houses, which even @ 5%pa capital increase = $35kpa (assuming cumulative purchase price of $700k).
So for $8k pa out of pocket you're making $35k pa capital gains or 400%.
Bare in mind these figures are rough and off the top of my head, although I think I'm also being conservative with 5% pa cap gains.
Cheers
Steve
