250k Cash + Pre approved for 670k loan what to do

[celsioraus]

All,

I have managed to not buy a potential property and am back in the market. I am looking to buy property so I need some advise on what I could possibly do to maximise my investment.

I currenty have

250k cash
670k finance approved

920k total (on the basis i get 600pw rental income)
110k wage

Currenty renting for 160pw with no major outgoings in wage


I have always been trained to want a single property for about 850k with a sc flat to live in while renting out the main house however I am looking for more options on how to invest.

After being on this forum several people have stated why not have 1 PPOR and 1 IP worth 400k each although id have to buy a IP maybe on the central coast or liverpool and a unit for PPOR on the Northern beaches where I live.

Id like to know what my options are as im all pretty new to this and am feeling alot of pressure in deciding what to do.

 

[ianvestor]

am feeling alot of pressure in deciding what to do.

Why are you feeling pressure? Is there something that's causing you to rush?

There'll still be deals next week.

Who has 'trained' you to want an 850k house, and how are they doing financially?

 

[Rolf Latham]

Hi

Lots of pros and cons

The inner west folk will tell you the cap gain of their area cant be beat........so u need to spend that kind of money for a smallish block with an even smaller house, to get an average rent rtn

The 2 x 400 ips obviously places you into a different market, and likely a different demographic, with a likely higher rental rtn, especially with a lot of these properties on the CC that have granny flats attached.

Buying 2 @ 400 also provides for some diversification

So from a property POV, its chalk and cheese.

From a lending POV, and preservation of your TAX PAID capital, youd be better served to get 2 @ 400 k with a 90 or 95 % lend and park the balance of the left over cash in an attached offset.

At some point u might want to spend lotsa money on your own home,so holding back as much of that 250 k may prove useful

ta
rolf

 

[Indifference]

........

After being on this forum several people have stated why not have 1 PPOR and 1 IP worth 400k each although id have to buy a IP maybe on the central coast or liverpool and a unit for PPOR on the Northern beaches where I live.

.....

Why buy a PPOR at all?

Renting for 160 /wk..... mmmm.... keep renting, invest, keep some of your capital liquid, don't rush.... there's no need to make a decision you're not comfortable with, SO: instead of trying to decide "what option", how about you devise a personal long term investment strategy???

As for the question, "why not 1 IP and 1 PPOR", I can only shudder at such arbitrary questioning... the "number of properties" is relatively inconsequential.... how about thinking in terms of ROI rather than "number of properties"? Who cares if it is 1 or 10? Stop placing artificial investment barriers up & start thinking for yourself.... What are you trying to achieve through investing? Aim for that & you will go far!

 

[Propertunity]

Id like to know what my options are as im all pretty new to this and am feeling alot of pressure in deciding what to do.

It is interesting isn't it? Having no money means you have a lot of pressures. Having a bunch of money, and access to borrow more, like celsioraus does, brings a lot of pressures.

I currenty have
250k cash
670k finance approved
920k total (on the basis i get 600pw rental income)
110k wage

The good news is that you have plenty of options. Yes, you could spend it all on a fixer-upper in Sydney's Inner West. Getting $600pw would be a walk in the park - so no issues there.

If you are mainly looking for capital growth from investments rather than a PPOR for yourself, or putting all your money into 1 x IP, I'd buy either:
1. 2 x $400K IPs in different areas. That will give you close to $800pw rental income
2. 3 x $320K IPs. That will give you close to $1,000pw rental income.

As rolf said, I'd be preserving as much of that $250K cash as possible by using smaller deposits on the IPs. You can park it in an Offset Account to reduce your interest bill.

Currenty renting for 160pw with no major outgoings in wage

As others have said, if it suits you, I'd be doing this for a while to come. To build your wealth as quickly as possible, live as cheaply as you can for yourself and maximise your investing.

It all comes down to your personal goals as Indifference mentioned.

Also, why put it ALL into property? Perhaps consider starting a share portfolio as well to diversify a bit.

 

[celsioraus]

Why are you feeling pressure? Is there something that's causing you to rush?

There'll still be deals next week.

Who has 'trained' you to want an 850k house, and how are they doing financially?

My dad is pressuring me to buy a house for 800k + and to make a granny flat and rent them out. I dont mind the idea of it I just dont like the property he is suggesting.

Assuming there was property x i could buy for 800k and rent out for 1000 a week is there any dfference between property y and z for 400k each renting for 500 each?

 

[Propertunity]

Assuming there was property x i could buy for 800k and rent out for 1000 a week is there any dfference between property y and z for 400k each renting for 500 each?

Assuming you could achieve that rental return, which you can't at present, then the only differences would be:
1. The $400K properties will most likely be in a different suburb than you r $800K property.
2. 2 x lots of rates to pay. 2 x lots of PM fees. 2 x more of everthing to maintain - like HWS etc.

 

[Indifference]

Assuming you could achieve that rental return, which you can't at present, then the only differences would be:
1. The $400K properties will most likely be in a different suburb than you r $800K property.
2. 2 x lots of rates to pay. 2 x lots of PM fees. 2 x more of everthing to maintain - like HWS etc.

Yes, BUT, in this scenario, you could access 50% of your portfolio (if needed) without having to sell the lot... BUT, it still comes back to your investment philosophy...

What are your investment goals? (1,5 & 10 yrs...)
Are you buying for CF, CG, both, or not sure?
Are you in for a B&H or short-mid term?
Do you care about future portfolio flexibility?
Are you interested in future development potential from your purchase?
Do you have preference for house, unit, apartment, townhouse or don't care?
What would you do if you lost your job in 6 months time?

When you go book a holiday, do you ask yourself where you want go before looking at flights???? Or do you randomly compare every flight option???

Where do you want to go, why, how long is this journey, what happens if something goes wrong along the way etc... etc... <-- these are investment Q's you need to ask yourself before you start comparing journey A with journey B.


my 2 cents...

 

[deejay]

My dad is pressuring me to buy a house for 800k + and to make a granny flat and rent them out. I dont mind the idea of it I just dont like the property he is suggesting.

Assuming there was property x i could buy for 800k and rent out for 1000 a week is there any dfference between property y and z for 400k each renting for 500 each?

The difference between one property and two is risk mitigation.

- Two properties makes it very unlikely you'll be completely without rental income at any one time.
- Two properties makes it possible to sell one if you need to, and unlock some capital gain, without unlocking it all and being liable for all the tax.
- Two properties aimed at middle-income earners are often easier to rent than one expensive property.

The main downsides are two lots of rates and two lots of landlord insurance. How significant that is financially depends a lot on the properties you choose.

Also, tell your father to get stuffed, in whatever polite (or not) terms are suited to your relationship. It isn't his money or his financial risk, so he doesn't get a say.

 

[The_Bludger]

also, Tell Your Father To Get Stuffed, In Whatever Polite (or Not) Terms Are Suited To Your Relationship. It Isn't His Money Or His Financial Risk, So He Doesn't Get A Say.

Lol.






.

 

[ianvestor]

The Bludger has quoted this but I think it's worth quoting again:

Also, tell your father to get stuffed, in whatever polite (or not) terms are suited to your relationship. It isn't his money or his financial risk, so he doesn't get a say.

 

[Jacque]

After being on this forum several people have stated why not have 1 PPOR and 1 IP worth 400k each although id have to buy a IP maybe on the central coast or liverpool and a unit for PPOR on the Northern beaches where I live.

You wouldn't get much of a unit for $400K on the Northern Beaches but I'm assuming you're single so perhaps a 1 bedder would suit?
Something like this might suit:
http://www.realestate.com.au/property-unit-nsw-narrabeen-107050027

As to an IP you're certainly not limited to the coast or Liverpool for $400K. Lots of suburbs out west around Parramatta where you can still pick up a house or nicer townhouse for sub $400K- check out the suburbs along the rail line between Parra and Quakers Hill going west.

 

[cadence]

There are some 2br units in Lane Cove in early $400k's. Not northern beaches, but it's lower north shore and close to the CBD!

 

[jaycee]

The difference between one property and two is risk mitigation.

- Two properties makes it very unlikely you'll be completely without rental income at any one time.
- Two properties makes it possible to sell one if you need to, and unlock some capital gain, without unlocking it all and being liable for all the tax.
- Two properties aimed at middle-income earners are often easier to rent than one expensive property.

The main downsides are two lots of rates and two lots of landlord insurance. How significant that is financially depends a lot on the properties you choose.

Also, tell your father to get stuffed, in whatever polite (or not) terms are suited to your relationship. It isn't his money or his financial risk, so he doesn't get a say.

Yeah right - tell your dad who's suggesitng things about a subject you don't know enough about and want help... but take adice from strangers on an internet forum cause they are the ones who honestly want to help you more We don;t know the dad is a numpty non investor without a clue, he could be anything, including, gasp !, as succesful as some forum members !

Why tell anyone to get stuffed ? Why not learn from the advice and then detemine what's best.

God knows, dad might be the first one to agree with you and say why not, do it that way then....

 

[Sunfish]

I currenty have

250k cash

Would buy a nice parcel of BHP. No neg gearing, no mongrel tenants, no rates, insurance. Think about it.

 

[profit]

Would buy a nice parcel of BHP. No neg gearing, no mongrel tenants, no rates, insurance. Think about it.

Mmm, I kinda cringed when I saw that nice 250k cash amount all being used for property.

 

[celsioraus]

lol Thanks all for the replies.

Ive actually made an offer on a property for 890k with a definite sale of 920k with guaranteed rental return of 6000per month for atleast 12 months and it is seeming like a never ending lease.

For me thats my number 1 mission at the moment. If this falls through my hands ill start considering other options however my loan pre approval runs out on saturday so I told them it all needs to happen quickly.

if so ill be borrowing 720k @ 7.25 fixed which is about 4900 a month repayment and I can pay an extra 4100 a month off the principal so around 9k a month can repay

 

[Sunfish]

Oh! Forgot to mention that I did not "recommend" BHP. I am not a licensed advisor. I simply put it forward as a proxy for the market.

 

[deejay]

Yeah right - tell your dad who's suggesitng things about a subject you don't know enough about and want help... but take adice from strangers on an internet forum cause they are the ones who honestly want to help you more We don;t know the dad is a numpty non investor without a clue, he could be anything, including, gasp !, as succesful as some forum members !

Why tell anyone to get stuffed ? Why not learn from the advice and then detemine what's best.

God knows, dad might be the first one to agree with you and say why not, do it that way then....

Because dad is "pressuring" the original poster, not "suggesting" or "advising." Huge difference. Who pressures a third party to chose a particular investment? If the OP had said "financial planner" rather than "dad," everyone would be saying to run a mile!

 

[alexlee]

Ive actually made an offer on a property for 890k with a definite sale of 920k with guaranteed rental return of 6000per month for atleast 12 months and it is seeming like a never ending lease.

How are you making the determination that it 'looks neverending', and what would be the market rent if there was no guarantee?