Buying IP in 2014 - am I on the right track?

[Angel]

HI Tula
I see you are like me - itching to do something but not knowing which direction to go.

One day we will get around to setting up a SMSF but at this point in time we have already purchased three properties outside of super. The heavens haven't opened and the sun still rises. You don't have to do everything right the first time, I think that is often too much to ask.

We have made mistakes with each place we bought, but that is the learning phase anyway. We bought two places in Brissie at the start of the rising market in 2010 and bang they dropped at least 20% following the January2011floods. No-one could have predicted that. They have now come back to the price we paid for them, and the heavens still haven't fallen in.

As for travelling interstate, your hubby will get holidays over the course of the year and he can bond with his kids. You wont be taking young children on expensive long haul holidays at their current age, so you can use the time wisely but he has to be totally responsible for the children while you go hunting. I'll go with you maybe!


Here is another anecdote for you about lowset villas.
In 2011 we spent twelve months trying to purchase a villa for my elderly mother. This was at the worst of the recession and we could hardly give her big house away. (It was butt ugly) in what was a fashionable suburb at other times but no-one was interested that year. We concentrated on the northern suburbs she is very familiar with, and as I said it took twelve months to secure a lowset house or villa because they were being sold the moment they hit the market. We looked mostly at Keperra, Everton Park and Aspley and everywhere else near them and finally got one at EP. Retiring Baby Boomers may not mind steps now, but in future years they will all be wanting lowset. Builders build two-story as they can fit more onto a piece of land, but one day they wont be as popular as they are now.

The moral of my story is that I cant afford a house on a subdividable block of land in the BCC area, but I can afford an attractive townhouse or a villa. It's not such a bad thing.
Cheers

 

[MsAli]

Tulamalula, that is a great position to be in and some sound advice from Rixter there. With that much equity at play at 80% LVR and 5% purchase cost, you could purchase around 2mill to 2.4mill of property. Obviously it comes down to holding costs of your purchases, but if you buy close to neutral, and held some equity back for cash flows, you will come ahead with a solid starting portfolio of 7-8 properties at 300k a piece. Also, if I was in your shoes I would stretch my goal from two properties to more in 2014 given the growth is happening or about to happen ....so why not multiply this 600k in to much more. 2 mill worth of property if gains 10% in the next year will give you another 200k in equity.

You need a good broker to work with who knows what they are doing and have built a portfolio themselves. Some recommendations are TheFinanceShop (Shahin Afarin) or Cjay on the forums.

Also, I understand there would be SOME hesitation given the learning curve is great, I wouldn't hold back and given the funds, seek a Buyer's Agent for a deal or few...

As Rick said, it will come down to your strategy. Initially in our portfolio we targeted strata properties, even though lots of people rubbish them, for the savings we (my sis and I) had it made sense to start small. Now we are moving to more expensive properties with development potential......

Good luck with it. Make use of the position you are in. Another area I would look at is your life, tpd, trauma, income protection insurances. We found a great financial advisor in Sydney, if you are interested. You need these with so much debt...we got our bases covered for the sleep at night factor.

 

[HD_ACE]

With that much of a financial backing, you wouldnt have a problem developing a site into 3 villas/houses as per your goal of 1 per child.
Will create equity and should be cashflow positive on completion to move onto the next deal.

Cheers

 

[redwing]

Hi Jac

I am the wife

I have a whole $230 in superannuation - yeah, you're all going to be so jealous of me I know!

Hubby has a good one that actually went up during the GFC and from memory is still showing a good return.

SMSF is way out of my comprehension to understand right now, but something I have ratting around in the back of my brain. Re super, to have enough to live off at retirement we'd draw down on the super and sell off a property - hence the need to but some IPs well before retirement.

Rixter, this IP will go ahead, infact goal this year is one in Brisbane and one in Perth.

How's hubby's super performing now with the recovery in a number of markets?

Apparently engineers are the next worst investors after doctors but those that get it right more than make up for the rest

 

[Tulamalula]

Angel, I am itching to get started, but we have to wait until hubby is off probation at his new job, He's been there 3 months and he's already been given a payrise, when no-one else was, there's no way he's not going to make out his probation period, engineers in oil and gas are in short supply especially in Perth.

For some reason this company has 6 months probation not the normal 3 months. That will affect getting a loan I believe.

I also need to look into cost of insurances, so that will keep me occupied - I want to be able to sleep at night Then cost of insurances have to be factored into monthly costs. I've crunched a few numbers here and there and haven't found anything close to neutral, much less positive.

HD - love that idea, but no way will hubby be interested in tackling something so big.

Redwing - he's not a bad investor, he just isn't an investor at all, doesn't have it in his conscience to invest, very old school, pay off your debts then save money and decide what to do. I showed him the numbers on a unit in Spring Hill, I was being conservative, as if I paid asking price and got the minimum rent suggested - he couldn't believe it would almost pay for itself.

Ms Ali - Believe me, I am thinking more than 2, I am up to 4 in my head ... for 2014, hubby would have a flip. But it doesn't change anything, I always get my way Will just start with one, have a couple more months to do my DD.

 

[Tulamalula]

Redwing, not sure how the super is doing now, it's one of those things we have to sit down on a child free day and work out a budget, look over insurance costs, mortgages, current assets ..

One practical step, I have a REA coming this week to appraise potential sale value and rental value of our PPoR, not that we're going to move, just want to know.

 

[HD_ACE]

For some reason this company has 6 months probation not the normal 3 months. That will affect getting a loan I believe.

You should sit down with a broker. With some lenders probation wont be a problem as hes been in the same industry.

Cheers

 

[Tulamalula]

Thanks HD, I have a broker in Qld, just waiting for him to get back fro holidays, he's done well by us over the years.

 

[Darlogus]

I have 5 out of those 7 on my saved list. The only 2 I don't like are on or close to main roads.

I also spotted a few in Kedron, slightly higher in price, but it's doable.


Hi Tul

I invest, work and live in the northern suburbs you mentioned. My last 2 IP in 2013 are in Chermside and that is where I am based also.(no coincidence here) for the reasons you mentions on future development.

I am familiar with most of the properties listed in the post and agree with your thought on main roads, and most if not all are sold. The one in Pechey was sold straight away and was a great buy under market value.
I put several buyers onto it the first day it came on as it was cheap (out of area agent) The Nielson property sold months ago and has been rented out for a while now, but the agent has left it on. Hamilton rd property is on a very busy road and I would avoid, and Leiper st is across road from older unit block and not very appealing for some house renters.

I regularly recommend properties I see come up that stack up or are good buys to investors. Properties under market value are usually sold within a day or two and market value within a few weeks at the moment.
With your time frame of 3 months, your property will not be on the market for a few months yet but keep doing the DD.

also worth mentioning that Other than NT, Queensland that the highest threshold for land tax at $600,000. This has allowed us to acquire a few properties with no or little land tax.

All the best with your future investing and 2014 should be exiting for you.
cheers Gus

 

[Tulamalula]

HI Gus

Thanks for your feedback, good to know I am looking in the right areas and choosing decent properties. I am a Brisbane girl, but living in Perth. I feel much more secure buying in Brisbane given I know much more about the market, and have personally experienced CG with my first property in Auchenflower (went under in the flood, but I'd sold it long before then). Depending on whether we can get a loan as hubby is on probation for 6 months and is only 3 months in, I may be in Brisvegas for a family holiday ie mum can babysit while i look at properties this month.

What do you think about Zillmere, given it's so close to Chermside?

 

[Darlogus]

HI Gus

Thanks for your feedback, good to know I am looking in the right areas and choosing decent properties. I am a Brisbane girl, but living in Perth. I feel much more secure buying in Brisbane given I know much more about the market, and have personally experienced CG with my first property in Auchenflower (went under in the flood, but I'd sold it long before then). Depending on whether we can get a loan as hubby is on probation for 6 months and is only 3 months in, I may be in Brisvegas for a family holiday ie mum can babysit while i look at properties this month.

What do you think about Zillmere, given it's so close to Chermside?

I don't think Zillmere is quite as good as some of the other suburbs you mentioned. It is cheaper though. I just don't know if the cheaper price tag makes it a better investment when you are looking long term and CG. I started investing 50km out of Brisbane in 2001 and have purchased closer in as I could afford to and as I became more comfortable with high debt.
My last IP in Chermside which settles next month was $495k. 3-2-1 renovated post war. I think Stafford, Chermside West and Everton Park band has better long term prospects than Zillmere. Of course everything is an opinion and no matter how much DD we do we also need some good fortune.

 

[Tulamalula]

I was thinking Zillmere due to the proximity to Chermside and the development going on there, not proximity to the city. Prices are 100K lower then Stafford, S Heights,, Chermside, and when you look at it on a map it's only a short distance away.

Anyway, I have my areas selected for the first IP, close to Chermside will be the second IP - just worried I may miss the sales as I am in Perth and can't easily get to view properties. the good ones disappear fast!