Building a Property Portfolio - Mid 20's

Hi All,

Long time reader, first time poster here. I really value the insights and discussion that this forum provides to fellow investors and I hope I can contribute in the future!

A bit of background information about myself.

*26 Years old currently earning 60k pa;
*1 IP on the Gold Coast - Purchased $185k and owe $165k (negative geared approx $3k pa);
*1 IP in Toowoomba - Purchased $210k and owe $185k (negative geared approx 3k pa);
*Approximately $30k sitting in offset account (no other savings as I have been directing savings into this offset account);
*Want to retire at age 50 with $52k income (In todays Dollars)
*Live on the Gold Coast and would prefer to keep IP in SE QLD but this is not a necessity.

So... after not purchasing anything for 12 months I have been sitting on my hands not knowing what to do from here :confused: Should I pay down debt and wait for values to grow in current IP's? Should I buy another negative geared IP? Should I look at cash flow neutral/positive IP?

I would really appreciate some feedback and any advice is welcome!

Cheers

Cash Flows :)
 
H
*26 Years old currently earning 60k pa;

*Want to retire at age 50 with $52k income

So... after not purchasing anything for 12 months I have been sitting on my hands not knowing what to do from here :confused: Should I pay down debt and wait for values to grow in current IP's? Should I buy another negative geared IP? Should I look at cash flow neutral/positive IP?

Assuming around 3% inflation, you'll need 100k income in 24 years. Assuming 5% inflation (remembering that inflation on day to day things like food is probably higher than the official rate), you'll need 167k a year.

Using the 167k a year figure, assuming 8% return, 3% cash, 5% inflation, you'll need about 5.5m in net assets outside the PPOR in 24 years.

Does paying down debt and waiting for your current IPs to grow give you 5.5m in 24 years? If not, what will get you there? Everything should be thought of in terms of 'will this get me to my goal'.
 
Assuming around 3% inflation, you'll need 100k income in 24 years. Assuming 5% inflation (remembering that inflation on day to day things like food is probably higher than the official rate), you'll need 167k a year.

Using the 167k a year figure, assuming 8% return, 3% cash, 5% inflation, you'll need about 5.5m in net assets outside the PPOR in 24 years.

Does paying down debt and waiting for your current IPs to grow give you 5.5m in 24 years? If not, what will get you there?

Hi Alexlee,

Happy to use 3% inflation for this exercise ;) what would the net assets need to be in 24 years?

Unfortunately paying down debt would not give me the desired net assets.
 
Hi cash flows

Is there any scope to add value via renovations?

Cheers

Jamie

Hi Jamie,

I recently renovated IP on the Gold Coast - Approx Value $210k based on comparable sales.

IP in Toowoomba was already renovated when I bought it so not much scope to do much there. It is on 1/4 acre block with development potential but I don't have the funds or knowledge behind me to go down that path.

Cheers

Cash Flows
 
Happy to use 3% inflation for this exercise ;) what would the net assets need to be in 24 years?

Assuming 8% return, 5% cash and 3% inflation, 2 million on top of the PPOR.

Better to aim higher, though. Do you really want to run out of money at age 70 because you underestimated how much you needed?

Unfortunately paying down debt would not give me the desired net assets.

There you go. So what will? You don't have to know the answer yet, but you need to be asking the question.
 
There you go 28 minutes later...you have a lot of things to consider :D

Congratulations on being in a much better position than a lot of people.
 
You're doing a good job with 2 properties at the age of 26, 2 more than the majority of people your age. I'm a year younger than you and currently have one (but one slightly higher valued property rather than two).

My questions for you are: Why limit yourself to the SEQ markets? How are the loans for your two properties currently structured?
 
Thanks Alexlee, I will go with a figure somewhere in between the 2Mil and 5Mil mentioned.

I know property will get me there but I am just not sure on what the next step should be. Have I got a sufficient buffer to purchase another IP now? Where should I purchase if I am going to do so? Should I go for unit/townhouse/house?

Cheers impala67, definitely a lot to consider! Accumulating 5Mil in net assets seems like a lifetime away!
 
You're doing a good job with 2 properties at the age of 26, 2 more than the majority of people your age. I'm a year younger than you and currently have one (but one slightly higher valued property rather than two).

My questions for you are: Why limit yourself to the SEQ markets? How are the loans for your two properties currently structured?

Hi NorwoodMan

I am not limiting myself to SEQ market but it is my preferred location. I have looked into investing in Tamworth, Bendigo and other interstate regional markets so I am open to that as well.

The loans are completely separate from each other and not cross col. i have majority fixed with a variable portion attached (average rate is 5.2% currently).

Cheers

Cash Flows
 
Cash Flows,

If you have property that is able to be developed, I would look look at that avenue before buying more property. You're likely to be able to turn it into a positively geared investment and as building costs will always rise, it will never be cheaper to build then right now.
 
Cashflows, it's all about cashflows, investors get tapped out buying loss maker after loss maker, so you will need a means to steer you back on track
 
Cashflows, it's all about cashflows, investors get tapped out buying loss maker after loss maker, so you will need a means to steer you back on track

I would mostly agree with this statement.

I started at 26 with a similar income and I went for a very aggressive strategy for cashflow and added value (subdivision and/or renos). I knew I needed the cashflow to keep going and also equity since I didn't have massive savings.

I think its okay to have something negative geared, but then you would want to be making some guaranteed equity and possibly a quick exit strategy so you can keep investing.
 
26 Years old currently earning 60k pa

http://www.abs.gov.au/ausstats/[email protected]+2013~Main+Features~Key+Figures?OpenDocument

According to the ABS, the average adult full time ordinary wage is $ 1,437 per week, or $ 74 K per annum.

This makes your salary well below average, but look what you have done with it and where your sights are trained. Well done.

The national experts (union leaders, welfare groups, social experts and the media) all predict that you cannot afford even one average property.

Are you the exception that disproves the rule, or is the rule complete rubbish ??

The fact that you have purchased 2 already, and are looking to acquire more doesn't make their prediction any less accurate or them any less expert.......it just means you don't swallow their philosophy that underpins their inaction.

Keep heading northwards Cash Flows. You've already been given some very valuable advice from some very switched on investors.

Like the name !!
 
Agree with Ausprop and thatbum.

If you are on a low income, better focus on properties which are cashflow neutral/positive. That way you can keep buying.
 
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