Just paid 10% on 2nd IP

[tigerGT]

Hi Everyone,

Its been around 4 months since my last post. I have been very busy getting married and setting up my new residence for my wife and I. Anyway All settled now and just about to settle on IP No. 2. Its only my second IP but I believe I have come a long way after my first IP (http://www.somersoft.com/forums/showthread.php?t=21826&highlight=chester+hill) as it was a very big mistake that I made. I was holding a property with negative equity and was highly negatively geared. I bought at the end of the boom.

Anyway rather than put me off property it made me want more and more. I believe I know share the aspirations of many fellow investors who would like to achieve financial freedom through property investment.

This is the house I have just purchased:

http://www.raineandhorne.com.au/pro...ckSearchPropertyType=Sales&agent=chesterhill1

.
Unlike the first purchase I have done my research with this property and I will list them here.

1. It has a council approved 1 bedroom granny flat. This is not one large room rather a 3 bedrroom granny with a separate lounge/kitchen, bathroom and bedroom. This has its own electric meter. [helps out for rent time].

2. It is a 3 bedroom house with 2 bathrooms as opposed to my first 2 small bedroom purchase. As well as this house has 2 air cons, bars on windows, and has insulation on the roof.

3. The frontage is 16 metres wide. This land is zoned for duplex which i can subdivide and sell seperately or hold onto both. Not only this but it is zoned for a child care centre also.

4. There is a small reserve next door. Council has advised me that I can buy this land from them as they are not using it and others on the street have done the same. However since this is a corner block the land that council is offering is around 500m2. This could or could not be useful depending on what I can or cant do on it..

5. finally the rental return. I am currently ( granted pre settlement access) clening the yard. I have put a colorbond fence between the granny and house. I have given the granny flat its own side access meaning both renters will not have to be affected by other party. Compared rental return is around $450.

I purchase the house for 366k.
I only used 10% and I have an offsett acount. The loan is a 100% offsett with reducable interest meaning repayments are offsett as oposed to the amount of principle paid off. Reason i put 10% is because I can negative gear the LMI over the next few years whilst keeping more funds available in the long run for further investment.

I hope to acquire a 3rd IP in the next year. I hope you guys dont think i am being greedy but I have a goal to acquire 10 in the next 10 years. It will be hard because sooner or later (God willing) my wife will eventually be a mother and then apparently things get expensive but will have to wait and see for that part of my life before i assume too much.

anway thanks to all for your valualble advice with special mention to geoffw, rolf, alexlee, skater and rixter!! You guys helped heaps around 2-3 years ago with that other property. You showed me how to turn the negative (which it still is ) into a positive.

Anyway, look forward to any feedback. Feel free to advise if you believe I have done anything wrong or could have done something better. Cheers

 

[twobobsworth]

congrats very well done.

 

[Oscar]

Hey tigerGT, what a great turn around. Looks like your research has paid off with a good yielding property. From memory I think you kept your 1st IP despite its challenges, and your a young bloke - now with a couple great assets. Or should that be three great assets

10 in 10 years is not greedy, as long it falls in line with your strategy of creating X amount of equity or Y amount of cash flow or whatever your long term goal is.

I don't have any number of IP's in mind as a goal, as long as I reach my goal which is to basically replace my salary with pasive income. I plan to do that with a mix of blue chip property assets and shares, and probably convert most of the property to a higher yeilding asset class in good time.

 

[FrankGrimes]

Good work mate, looks like a good buy. Especially the option of going for a duplex in the future. Good on you for keeping to your plans even after purchasing at the peak of the boom, many people would have discounted property after such an experience... I have no doubt you will look back in 10 years and laugh about what all the fuss was about ;-)

 

[DavidMc]

Well done. Fall down seven times stand up eight.

I'm sure over the next 3-5 years you'll see some great stuff happen in Sydney.

 

[tigerGT]

I certainly hope so. Its funny though when I think about the fact that in my whole time investing I am yet to experience capital growth. Thats just the market I have decided to purchase in. I am looking long term anyway so it doesnt bother me considering the condition of current sydney market as a whole. The aim is long term for me as it is for most. Right now my attention is going towards smalll renovations for this property to maximise rental return.

 

[tigerGT]

Hey guys,
Quick question. What is an appropriate LVR that most investors take on when starting out? Ie buy 5 houses at 90% LVR or buy 3 houses with 80% LVR???

I know it depends on time in the cycle that the purchases are made however what about in times like now?

We are seeing little capital growth in these times and hence cant really rely on capital gain. I would think that most the experienced investors are relying on savings in between purchases. Is this true? And how much would you generally thing is a safe deposit if your long term aim is to acquire more IP's?
thanks in advanced

 

[FrankGrimes]

I have 4 (well 2 and 2 being built) and just starting out, LVR is around 90%... It really depends with what you are comfortable with... I'm young, reasonably good income, so the higher LVR doesn't really worry me.. But everyone is different

 

[tigerGT]

Hi Frank,
I am in the same boat as you (young etc etc) and I share your views. The way I look at it is that as long as the yield and cash flow position is sustainable then I am happy with 90%LVR at this stage. I am just hoping that i can see some capital gain in next 10 years and then ill be laughing...

 

[DavidMc]

I have 4 (well 2 and 2 being built) and just starting out, LVR is around 90%... It really depends with what you are comfortable with... I'm young, reasonably good income, so the higher LVR doesn't really worry me.. But everyone is different

Same. Young, 4, good income, total LVR around 80-90%. This is made up of 2 x 95% loans and 2 x 80% loans and some cash buffers. It's what's comfortable for you. For me, as long as I have the buffers in place, the higher the LVR the better

 

[fjficm]

be careful

hi guys
be careful
cash flow=blood, capital gain=muscle
the minute it stops you die
so its like if you do not have capital gain, you look like a skinny weed but still healthy and alive, but if cash flow is minimal or poor, you look like a dead Scwarzernegger.
u lose job ur in deep doo doo
still time to check things out, always remeber what if
income protection only kicks in after 60 days
im still young but i don't try to be too aggressive in this market
im early 30's equity 1.9mil, LVR 9% just with 1 prop/yr
especially if youve got family, be even more careful
i'm not very pessimistic like the guys on globalhousepricecrash.com but read their posts, they have a point

 

[tigerGT]

Hey,
9% LVR? on a 1.9 million dollar property? Do you mean 90%.
If your on 9% your laughing!!

 

[fjficm]

its 9 not 90

 

[karina]

great yield for a sydney property well done!

I think you have bought a great property, congratulations.

 

[skater]

Wow! What a massive turn around. It looks like this property is a winner. I'm jeolous!!

From a brief look at the map, I presume the reserve that Council has said you can purchase runs down the long side of the property next to the road. If this is the case you may be able to purchase this, subdivide current property & squeeze as much land as possible into the front house & still have a property large enough to be a duplex site at the front with the second (now stand alone) property at the rear.

Keep up the good work.

 

[tigerGT]

Hi Skater,
good to hear from you. Yes its the reserve area along the side. And your idea is exactly my plan. Will see architect once I acquire the adjacent land. Untill then I need to renovate. Might even post up some before and after shots. Currently doing landscaping whilst waiting for the settlement. Then a partioning fence and new fence on side. After settlement will work on the inside. New kitchen, floor boards, 1 built in and I will see what else needs working on.
Thanks again