Any thoughts from the Gurus

[Scoop]

Hi All.
Great forum guys... you all make it what it is! Well done!

As a first time investor I am looking for some opinions about a deal I am about to do(pending all of your thoughts of course).

The deal:
In a southern NSW coastal area of medium size.
Land.......$107,000
House...$192,000, 4 Bed/2 bath/3 living areas/3 car garage including landscape etc..
These same properties are selling for between $340,000 $365,000 ..
so around 40-60k profit after completion.
I am intending to hold the property for the long term and rent is $300/week.
Residex rates the area as a 6-8% growth/year over the next 8 years and rent at 3-4% pa.

I am in a medium/high tax bracket so figure I can gain from max depreciation over the first 7 years and hope for predicted capital growth.
To make all of this work I am putting in $100k myself and taking $200k IO from a bank.
I figure this reduces my repayments to a stress free level if the property is vacant.
This is where I am not sure if I am making a mistake...Should I go the whole hog and borrow the max on the property.And not use my own money.
As it stands I am not using the IP as collateral so it will be unincumberred for future investment...
Does that sound like a sound idea?
Should I keep on looking for lower value ,higher return ,less cash input deal ,if they exist?

Sorry about the length of my ramble.
Thanks for taking time to read it.
Look forward to hearing your opinions.
Thanks
Scoop

 

[Jase H]

Hi Scoop,

I'm not Guru, but i'll put in my 2cents worth anyway. IMHO 107k land to 192k build leaves you with a fairly low land % for a freestanding H&L @ 35.8% (not terrible but not great either)

A good comparison where land % is a lot higher for H&Ls would be south east qld where you can typically buy block for $175k and probably $140k-165k build (much lower building costs) for total of around $315-$340k and reval of over $375k-420k plus and rental $360 per week to $450 plus. In this situation you'd end up with closer to 50% land value or more and still an even higher rental yield, for arguably as good if not better CG. We have just prucashed land in Brissy for H&L after 2 almost complete H&L in Adelaide and Melbourne. Briisy, Adelaide and Melbourne all have lower building costs than NSW in my opinion which is a big bonus. QLD also has very low stamp duty and good land tax free threshold.

My opinions only.


Jase

 

[Scoop]

Thanks Jase,
You make perfect sense on numbers.... just what I was hoping someone would say.
More research required by me!

 

[sunshine]

Hi Scoop

Welcome to the forum.

IMHO I reckon you borrow as much as possible for this deal, on this deal, especially if it is a Buy and hold. Keeps it tidier at tax time. And keep your funds as your backup. Possibly in an offset account, or if you get the "bug" you will purchase another

I'm sure some MB's around here can explain the how to's a bit better than I can.

Props are cheaper to build here in Qld, but I reckon when you are starting out (especially developing or renovating) it is much easier to do in your own backyard.

Well done to you for having a go.

Sunshine

 

[Scoop]

Cheers Sunshine,
That is part of the attraction to this one.My first new build and within stricking distance. Food for thought on the cash input levels.
Thanks