Can I buy 3 properties with 350k?

I have never invested in property before as an investor.
Instead f buying one property I'm thinking of buying 3 with a deposit.


Here's me ..live in Sydney... 45yo male single..Government full time job . Earn 60,000 year before tax
Own outright apartment that I live in worth approx $320-340k
Cash in bank-- about 10k... Superannuation 100k


I have come into a inheritance of 350k ... I could buy outright a IP say in Liverpool or outer suburbs but.... I'm thinking if I put 20% down on a property it would be better than paying the whole 350k for the IP.

My question is .. Ok I put 20 per cent down say on a IP worth 300 k.. That's $60,000 then rent it out ... Then get another one ?

Or should I just buy it for 100 per cent? But then I would only have about 20k left in my bank account.
Look I'm scared to get a loan in case I get sick or something could go wrong.
 
Think carefully about how you should do this.

Yes you could buy one for cash or 3 with 20% deposits. Leverage will mean gains (and losses) will be amplified by borrowing 80% and buying 3 properties instead of 1. Think what could happen if they grew 10% (or dropped by 10%!_)

Get some legal and tax advice as there are many strategies in improve performance.
 
Yes thanks Terry.. Probaly I would feel better buying one outright next door to me actually and then getting the rent but then if I would only have about 10k left in my bank account.

But then I would have two properties roughly valued at 320k each that I would own outright.

But then I wouldn't have 20 per cent deposit for another property so it's har to know what to do.
In some ways I would feel more relaxed knowing I owned another apartment outright .. But I want to progress too.
I will have to read up on this negative gearing and see if it's good for me as I roughly only earn 55000 to 60000 a year and about 40k after tax but at least it's a bit of a secure job.
If I was going to get another loan to buy the unit next door to me then probaly I would want to make sure I had insurance in case of getting sick or redundancy or whatever.
But of course it's risky.. What happens if you get the sack from your job?.... What happens if you get a major sickness ?

But then there's some positives I'm thinking I put 20% deposit down roughly 60k and I still will have 280k in my bank for emergencies !!! Does that sound like a good idea?
Because if I get sacked or whatever then I still have 280k to fall back on.
Good thinking???
 
The power of leveraging is simple. Let's assume you purchase for $300k in an area with 10% growth and 4% rental yield...

Buying 1 with all your cash will mean you enjoy rental income of $12,000 and growth of $30,000. You make $42,000 on paper.



You could also buy 3 properties with 80% lends. Currently they might be fairly close to neutrally geared, but let's assume they cost you $5,000 a year (and ignore the tax deductions).

You won't enjoy the rental income, in fact it'll be costing $15,000 a year to hold. On the other hand the portfolio is increasing in value $90,000 a year so on paper you've made $75,000.


Of course, these are all paper profits and you're not always going to get 10% growth either (10% on an ongoing basis is very optimistic). I'd say the holding costs are over estimated and the rents will increase over time to cover the holding costs and eventually put money in your pocket. Both examples gloss over a lot of things you need to consider.

Paying cash has a more comfortable outcome immediately. Leveraging is likely to make you a lot more money in the long run.

A balanced approach might be to purchase two properties instead of 3. Leverage to 60% - 70% so they're a little cash flow positive even if holding costs do increase. This way it doesn't get uncomfortable to hold the properties even if there's periods when the capital growth isn't as great.

Go through the figures looking at the best and worst case scenarios. You can then figure out what the right balance is for you.

PS. I reckon about half the forum members would look for high cash flow properties and leverage to 90%. Personally I'd go with the 80% option but everyone needs to figure out what they're comfortable with.
 
Hi

Would you consider purchasing 2 properties and having 50% loans on each?
Good on you for looking at the risks of each scenario.

Regards,

alicudi
 
Why not go slowly.

Buy one property with 20% deposit and see how you go. Renting out properties is not for everyone, and you will soon get an idea of whether you are comfortable with things.

If you get an offset account on the loan, you can either put the rest of the money into the offset ( effectively paying no interest) or invest in term deposits until you are sure.

Once you have a clearer idea you can then buy another property to two as you see fit.
Marg.
 
Yes thanks Terry.. Probaly I would feel better buying one outright next door to me actually and then getting the rent but then if I would only have about 10k left in my bank account.

But then I would have two properties roughly valued at 320k each that I would own outright.

But then I wouldn't have 20 per cent deposit for another property so it's har to know what to do.
In some ways I would feel more relaxed knowing I owned another apartment outright .. But I want to progress too.
I will have to read up on this negative gearing and see if it's good for me as I roughly only earn 55000 to 60000 a year and about 40k after tax but at least it's a bit of a secure job.
If I was going to get another loan to buy the unit next door to me then probaly I would want to make sure I had insurance in case of getting sick or redundancy or whatever.
But of course it's risky.. What happens if you get the sack from your job?.... What happens if you get a major sickness ?

But then there's some positives I'm thinking I put 20% deposit down roughly 60k and I still will have 280k in my bank for emergencies !!! Does that sound like a good idea?
Because if I get sacked or whatever then I still have 280k to fall back on.
Good thinking???

Based on your situation you probably wouldn't be negative gearing. You would be making money.

The properties should pay for themselves, immediately or quickly after purchase. If you were to get sacked from your job, there would be little effect - except you may have tied up your cash. You could always sell 1 or more.

Why not consider this. Buy one property with an 80% IO loan and park all your cash in the 100% offset account. This property will be making you money as if you had purchased it for cash.

After you see how it goes and start to feel more adventureous you can pay the 20% deposit on the next property and see how that goes. If all goes well you may then consider a 3rd. maybe even a 4th soon after.
 
Why not go slowly.

Buy one property with 20% deposit and see how you go. Renting out properties is not for everyone, and you will soon get an idea of whether you are comfortable with things.

If you get an offset account on the loan, you can either put the rest of the money into the offset ( effectively paying no interest) or invest in term deposits until you are sure.

Once you have a clearer idea you can then buy another property to two as you see fit.
Marg.

+1 Exactly the sentiment I was planning convey.
 
Westminster would buy 10 developments sites, some with options. Have a chat with her. She's super keen to help.
 
The good thing is you have options, the bad thing is you have options. The difference is taking considered action or not acting at all. By all means research your options, do the numbers based on conservative assumptions but most of all, work out what your goals are.

There are essentially three asset classes to invest in, fixed interest, real property and shares. You can invest in your own name, in a separate legal entity (trust) or use a superfund as a tax effective investment vehicle. The choice will depend on your goals, your age and desired time to retirement and risk appetite. Risk can be mostly mitigated, so it leaves goals (generally retirement and lifestyle goals) and age. If you are in your 20's say, the preferred choice may be to invest outside super, if you are in your 50's, then consider boosting your super. How you allocate assets or leverage in super is a further discussion.

If you have not owned an IP before, a conservative start may be the best way to do it, buy a median priced property in a decent location with prospects of good capital growth based on location to facilities, transport etc, reasonable rent yield for the area, use an 80% LVR loan with a 100% offset and see how it goes. You will have the option of buying again later if it fits your goals, you will have a healthy safety net, get risk insurance for peace of mind and consider an after tax super contribution if it makes sense and the timing is right for your lifestyle age.

Unless your financial goals require rapid action, I generally suggest a reasoned and conservative approach for first time investors is a better way to go.
Good luck with it.
 
hi

Hi
Good to see you are thinking about using the money wisely
Every one is different and even a mortgage broker I am tending to use a bigger deposit these days.

Why not first buy one property, use 20% as a deposit and leave the cash in a offset account?
 
As long as you buy high yielding properties, you'd even be able to buy up to $2.5M of property without having to pay LMI.

I'm definitely not saying that you should rush out and do this now, but this is an option of what you could do a little way down the road, once you've done your research. Start slow and it will seem much less daunting after the first or second investment property.

Quoted $2.5M calculations were done as taking 80% of the equity in the PPOR plus the $350k inheritance, plus the $10k in savings. I then multiplied this by four, assuming 20% deposits and 5% purchasing costs.
 
What others have suggested is sensible. But if it were me, I'd also be considering NRAS as an option...

The additional cash flow it injects would provide a very strong buffer against a change of income, loss of job, injury or illness - which you appear very concerned about. You could comfortably invest approximately 190-200K of your available 350K in 20% deposits + stamp duty for 2 x NRAS approved investments to the value of @400K. Because they are new properties and offer strong depreciation , each should generate @ 18-20K of deductible losses, which would see your 60K taxable income reduced by @ 36-40K, to an almost tax free income of @ 20K . And you'd also be generating an additional 15K or so of extra tax free income from the 2 x NRAS, which could be used to boost your superannuation.

You'd still have plenty of buffer left as you wouldn't have spent all your 350K, so you could also invest in an old, established non NRAS dwelling as a 3rd INV if you wished to, at some point, using the other 150K at your disposal.

This would see you with 3 x INV properties, no out of pocket holding costs, paying little or no tax and earning @75K tax free ( or close to) per annum rather than 60K taxable.
 
Why not go slowly.

Buy one property with 20% deposit and see how you go. Renting out properties is not for everyone, and you will soon get an idea of whether you are comfortable with things.

If you get an offset account on the loan, you can either put the rest of the money into the offset ( effectively paying no interest) or invest in term deposits until you are sure.

Once you have a clearer idea you can then buy another property to two as you see fit.
Marg.

Based on your situation you probably wouldn't be negative gearing. You would be making money.

The properties should pay for themselves, immediately or quickly after purchase. If you were to get sacked from your job, there would be little effect - except you may have tied up your cash. You could always sell 1 or more.

Why not consider this. Buy one property with an 80% IO loan and park all your cash in the 100% offset account. This property will be making you money as if you had purchased it for cash.

After you see how it goes and start to feel more adventureous you can pay the 20% deposit on the next property and see how that goes. If all goes well you may then consider a 3rd. maybe even a 4th soon after.

+1 Exactly the sentiment I was planning convey.


I'm with these guys. Dip your toes in the water on one. Leave your cash in an offset account. Build on the experience.
 
Top