Available $200,000 cash . What do I do ?
- Thread starter xQuIz8
- Start date
What would I do?
Easy, depending on how much I was earning and how much I would be happy to be paying each week into IP's, I would buy 2 or 3 IP's with as little deposit as I could, ie borrow 100%, 95% or what ever and then stick whats left over from the $200k into an offset account.
You should be able to buy 1 IP at $400k-$450k and haven it neutrally-positively geared with $200k in an offset account. 2 IP's and you'd be putting in money each week.
If you want to take tha Jan Somers approach you should have 20% of your IP's purchasors for a deposit or sitting in an offset account.
20%=$200k
100%=$1,000,000 so going by the somers bible you COULD get into as much as $1mil in IP's, but it would very much depend on the yield and your income.
Hiya
best risk management I reckon is
85 % Lend, IO loan, balance into an offset acct
No lmi cost, retain as much as possible for challenges or opportunities
ta
rolf
best risk management I reckon is
85 % Lend, IO loan, balance into an offset acct
No lmi cost, retain as much as possible for challenges or opportunities
ta
rolf
If you use the 200K cash to take out an 80% loan, you could conceivably control 1M in assets....but then you'd have to live somewhere, which would drain the cashflows enormously.
If you lived modestly to start with, you could purchase some small place outright for 200K and live there rent free for a good while 'til you established yourself.
You can then take that fully paid off 200K title and use it as a deposit on a much larger 1M asset that produced a decent return.
End result - living rent free with no NTDD, and controlling 1.2M worth of assets. Not a bad start to proceedings. Go from there.
If you lived modestly to start with, you could purchase some small place outright for 200K and live there rent free for a good while 'til you established yourself.
You can then take that fully paid off 200K title and use it as a deposit on a much larger 1M asset that produced a decent return.
End result - living rent free with no NTDD, and controlling 1.2M worth of assets. Not a bad start to proceedings. Go from there.
Hiya Dazz
You can then take that fully paid off 200K title and use it as a deposit on a much larger 1M asset that produced a decent return.
Nah, youd take an 80 % LOC on the free title and use the cash as a deposit, and get the core 80 % purchase loan perhaps maybe even with another lender if you were really paranoid.
ta
rolf
You can then take that fully paid off 200K title and use it as a deposit on a much larger 1M asset that produced a decent return.
Nah, youd take an 80 % LOC on the free title and use the cash as a deposit, and get the core 80 % purchase loan perhaps maybe even with another lender if you were really paranoid.
ta
rolf
Thanks for your constructive inputs guys.
..and KnightM, yes it is tax-deducted $. So its really just cash.
I have thoughts of buying an inner city 2br apartment that faces the waters for about 550k. Put 200k as the deposit and take a loan for the rest of it.
Perhaps there is a better way to go about this ?
I thought of renting out one room and living in one. This would help me with the monthly repayments as well.
Of course, in an ideal world, its best for me to rent/live in a small suburb paying minimal rent and then renting out the new 2 br apartment at a high rent. I've worked out and due to the substantial downpayment, the 2br property can actually be positively geared IF BOTH the rooms were to be rented out. However, if I were to live in one and rent out the other..it will be negatively geared..OF COURSE.
and this is okay for me as me and my partner are both currently paying a combined AUD21,000 per annum for renting a 2br inner city apartment. We thought since we're paying that amount, we might as well own a place ourselves and we worked out that we'd make a loss of about the same amount interms of outgoings if we were to live in one room and rent out the other room in the apmt.
Do you guys have any better suggestions ? I am by no means an expert and I'm sure there are many much more experience players out there who can perhaps give me a guidance or two.
..and KnightM, yes it is tax-deducted $. So its really just cash.
I have thoughts of buying an inner city 2br apartment that faces the waters for about 550k. Put 200k as the deposit and take a loan for the rest of it.
Perhaps there is a better way to go about this ?
I thought of renting out one room and living in one. This would help me with the monthly repayments as well.
Of course, in an ideal world, its best for me to rent/live in a small suburb paying minimal rent and then renting out the new 2 br apartment at a high rent. I've worked out and due to the substantial downpayment, the 2br property can actually be positively geared IF BOTH the rooms were to be rented out. However, if I were to live in one and rent out the other..it will be negatively geared..OF COURSE.
and this is okay for me as me and my partner are both currently paying a combined AUD21,000 per annum for renting a 2br inner city apartment. We thought since we're paying that amount, we might as well own a place ourselves and we worked out that we'd make a loss of about the same amount interms of outgoings if we were to live in one room and rent out the other room in the apmt.
Do you guys have any better suggestions ? I am by no means an expert and I'm sure there are many much more experience players out there who can perhaps give me a guidance or two.
I have never had $200,000 cash available, so im very keen to see some of the opinions that are posted here.
Good luck with the decision.
For the fun of it, if I was given 200k cash, id use half as deposits for 2 IP's and put the other half in a high interest term deposit and see what the return was after 3 years. Just to see the real difference between a cash and property investment.
Good luck with the decision.
For the fun of it, if I was given 200k cash, id use half as deposits for 2 IP's and put the other half in a high interest term deposit and see what the return was after 3 years. Just to see the real difference between a cash and property investment.
I would depending on your risk factor either invest in 1mill+ asset with a decent return or option 2 is learn to trade on the forex market
this is of course higher risk and you want spreads at 2pips fortunetly you can start with a demo account I would then after being confident in my trading invest around 10-20k and manage the trades.
this is of course higher risk and you want spreads at 2pips fortunetly you can start with a demo account I would then after being confident in my trading invest around 10-20k and manage the trades.
Why not rent out that other room now and cut down on that significant rental expense today? It is difficult, when starting out on this investing journey, to do much investing with high existing outgoings like that so reducing those really needs to be the first focus.
I like having a PPOR for lifestyle and CGT exemption reasons. However, this should not be at the expense of it causing you significant cash flow problems so that your IP investing is hindered too much. Two ways to achieve this - either buy a cheap PPOR with good land content somewhere or buy what you would like and rent rooms out to help with the cashflow. Even better is buy somewhere cheap and rent rooms out as well if you can find good flat mates in the area! I know it seems like hardship now but this leg up, combined with the power of compounding (the 8th wonder of the world?) could do some pretty stupendous things to your net worth over the next ten years if done correctly IMHO. The value of living in a trendy apartment for a few years pales in comparison really...
You could buy the cheap PPor with a minimal mortgage and be well on the way to paying it down / off with flat mates as you look for good IPs. What Rolf said is pretty important IMO if ur not into x-colling everything together, which really seems to depend on how big you want to get and how fast. You can get bigger faster with the x-coll approach but there are risks and pitfalls later on... Rolf's suggestion gets you the majority of the exposure without having the extra risk of tangling everything up.
To me it's all about cash flow - what options are going to put the most money in your pocket on a regular basis in ten years time?
Thanks for your suggestion James, but currency trading is a little bit too risky for me. It also requires a lot of research and time on it. I may not have time to be as committed as needed. Same goes for shares. All I own with shares are bluechip ones. Again, I do not have enough time to analyze ups and downs of the sharemarket everyday.
Mainly too because I wanna pour more effort into property investing which I became very fond of over the past one year. Reading Jan Somer's book was one of the best thing that could happen. I actually bought the book from a charity fare for $2 ! Thats the best $2 spent in my life. Anyway, thats another story for another day.. not to mention, it also lead me to this great forum. Priceless..
HIEquity, I do agree with you. Thanks for you reply.. Ideally, best thing to do will be to buy a small cosy home in the suburbs say 8km from city centre. And pay that off.. then look into an IP. However, one of the main reasons why I'm purchasing an apartment in that area(Docklands) is because of the lifestyle factor and also the fact that both me and partner works in the city. And we both do not own a car (trying to cut expenses and liability)...so access to public transportation is critical in our selection criteria.
and..also, buying a 1mil asset would be top notch but thinking that I have to take 800k loan.. it would be quite impossible for me to service the loan. Thats almost $6,000 per month. Hmm... . . . . I wish I was that rich, then problem solved !
Mainly too because I wanna pour more effort into property investing which I became very fond of over the past one year. Reading Jan Somer's book was one of the best thing that could happen. I actually bought the book from a charity fare for $2 ! Thats the best $2 spent in my life. Anyway, thats another story for another day.. not to mention, it also lead me to this great forum. Priceless..
HIEquity, I do agree with you. Thanks for you reply.. Ideally, best thing to do will be to buy a small cosy home in the suburbs say 8km from city centre. And pay that off.. then look into an IP. However, one of the main reasons why I'm purchasing an apartment in that area(Docklands) is because of the lifestyle factor and also the fact that both me and partner works in the city. And we both do not own a car (trying to cut expenses and liability)...so access to public transportation is critical in our selection criteria.
and..also, buying a 1mil asset would be top notch but thinking that I have to take 800k loan.. it would be quite impossible for me to service the loan. Thats almost $6,000 per month. Hmm... . . . . I wish I was that rich, then problem solved !
Hi xQuiz8
Ah this is where it gets interesting. I think the suggestion was to buy a $1m asset "that produces a decent return". Thereby not costing you anywhere near that much to service from your own pocket. If I had to guess from Dazz's posts I would guess he means commercial / industrial property with better yields than residential. Alternatives would include resi properties that are at or close to positive cashflow - they can still be found but you have to make sure they stack up from a risk point of view as well.
Anyway, IMO you should be able to get a $1m exposure for an after tax cost of circa $1500/month depending on your marginal tax rate if you put a little research into it and buy the right properties, especially with some of the opportunities coming up in this market. If you want to make it all positive you could probably do that too although that will take a bit more work and may involve some extra risk, depending on where you can find them. If you think it can't be done then it definitely can't be done...
I certainly wouldn't suggest anyone get a $1m exposure that was costing them $6k per month!
Hope this helps...
You'll probably find that the general consensus here is that its the increase in value of the dirt that you control that makes you the most money over time. So the aim is to control as many pieces of dirt as you can comfortably afford.
Again you'll probably find that most people here say that you dont make much money from paying off a property, it's the capital gain over time where you make the bulk of your wealth.
So Interest only loans, minimal deposit or 20% if you want to avoid LMI (Lenders Mortgage Insurance) stick the left over cash into an offset acocunt for a rainy day or for when another opportunity arises.
Again you'll probably find that most people here say that you dont make much money from paying off a property, it's the capital gain over time where you make the bulk of your wealth.
So Interest only loans, minimal deposit or 20% if you want to avoid LMI (Lenders Mortgage Insurance) stick the left over cash into an offset acocunt for a rainy day or for when another opportunity arises.
I will need just under AUD200,000 p/a salary to have a AUD800,000 loan with the current market. Frankly speaking, I dont earn that kind of money. I'm just in my mid 20s now but hopefully one day, I will be on that kind of salary.
60% of me tells me to go ahead with the initial plan of purchasing a half a million 2 bedder with water views ...1km from the city.. 40% of me is listening to several of you guys who adviced me to go for a house in less posh and high end suburbs..
Sigh, this property investing is tough !
60% of me tells me to go ahead with the initial plan of purchasing a half a million 2 bedder with water views ...1km from the city.. 40% of me is listening to several of you guys who adviced me to go for a house in less posh and high end suburbs..
Sigh, this property investing is tough !
Where did that come from? I'm not talking about one big PPOR - I'm talking about IPs here. Buy a cheap PPOR no problem if you want. But the point is you can get a $1m IP exposure by buying 4x$250k properties, all with decent rental yields that won't cost you much to service. No need for any six figure salaries here, or anything near that - especially given you have that $200k to start with. Why buy just one property? Cash flows will generally be much better if you buy four or so. Your income would have to be pretty low if you can't do this with $200k to start with...
Property investing is only as tough as you want to make it...
WHA?
Ignoring negative gearing or depreciation.
4 x $250k IP's or 2 x $500k or what ever.
If they're returning you 5.2% per year, thats $52,000 p/a
You interest bill at say 9% of $800,000 is $72,000 p/a
The difference is $20,000 that you will need to put in.
Where did you get a $200,000 salary needed to service the debt?
yes was talking about a 1mill+ commercial eg:
one I am currently looking at 20 yr lease with national tenant income $152000
tenants pay outgoings etc after repayments of 9.85% loan would be 1050000
giving a $49000 pear year return while it pays itself off these types are hard to find but are there if you look hard enough
good luck with your endevour.
one I am currently looking at 20 yr lease with national tenant income $152000
tenants pay outgoings etc after repayments of 9.85% loan would be 1050000
giving a $49000 pear year return while it pays itself off these types are hard to find but are there if you look hard enough
good luck with your endevour.
Did I read that right - you're saying this property has a 14.5% net yield? That's pretty spectacular - would love to know where you go looking for deals like that coz I can't find 'em... getting anything to yield the 9.85% interest rate seems to be a feat in itself if you want a good tenant. Is there a catch?
