Did you overextend yourself buying 1st IP - Importance of Buffer

[Corey Batt]

Good work Alex, it's always a nice feeling to be moving forward at an increasingly strong pace.

What would I do from there?

I would remove the cross col on the two properties (if they're not fixed..), access enough equity to make 1-2 CF neutral to positive purchases over the next 12 months. Retain the savings in offset as your safety buffer.

Roll over any cash flow increases into the offset.

ANZ offers modelled estimate vals which can be used for their loans for <90% refinance/topups at no cost. If you're interested in knowing the vals, definitely worth ordering them.

 

[Alex P Keaton]

Good work Alex, it's always a nice feeling to be moving forward at an increasingly strong pace.

What would I do from there?

I would remove the cross col on the two properties (if they're not fixed..), access enough equity to make 1-2 CF neutral to positive purchases over the next 12 months. Retain the savings in offset as your safety buffer.

Roll over any cash flow increases into the offset.

ANZ offers modelled estimate vals which can be used for their loans for <90% refinance/topups at no cost. If you're interested in knowing the vals, definitely worth ordering them.

thanks


Yes, good tips thank you! I agree

To achieve my goal of buying a neutral to positive cash flow ip I'm considering purachasing in a major WA regional area like Bunbury.

I need to do a lot of research on different suburbs but if I can buy something new or near new with depreciation benefits and is bigger than 50 sqm I'd be pretty happy. I also dont want to spend more than $230 K purchase price.

I still think Perth and WA still has some room for more growth. For instance my Dianella unit has only gone up from $210 K to $250 K in 4 years however my highgate unit has gone up from $255 K to around $260 k in 5 years. I think if I do want to buy in WA then I need to do it in the next 6 months and not leave it until the middle of 2015 like I had first planned.

What do people think of Bunbury for an investment?

 

[Meisterin]

Congratulations Alex.

I think you have come a long way in terms of your investment value and your experience.

I don't know much about WA or Perth market, so can't give you any advice in that respect, but keep doing the research until you feel it's right.

 

[bez23]

well done Alex, it is amazing how you make goals and stuck to it all this time and achieving more than you set out for!~

 

[Alex P Keaton]

Thanks guys

 

[D.T.]

Good one Kim
Weightloss goals and investment goals ... big achiever all round

Hoping to get another myself in the next couple of months

 

[BayView]

Yep.

First IP was a "higher end" brand new 3x2 DLUG townhouse in a block of 4 in Mentone.

Great spot, beautiful property.

The rent was supposed to be in the $450 p/w range.

Took us 3 months to get a tenant and only at $350.

Sold it 18 months later due to cashflow issues..

After all costs and expenses came out about square, but it was no fun.

At least the tax returns (depreciation) were a blessing, to even the ledger.

 

[westminster]

Congrats Ms Keaton

i think you'll be able to find something here if you look carefully. On realestate.com.au use Perth - Greater Region and you can search all of Perth with your criteria.

You can sometimes find some worth investigating. I found:

Dudley Park (Mandurah) 2 x 1 $109k - I'm not sure if financing such a title is a problem?
http://www.realestate.com.au/property-unit-wa-dudley+park-109032416

Osb Park http://www.realestate.com.au/property-house-wa-osborne+park-114701671

Lynwood 2 x 1 $240k
http://www.realestate.com.au/property-house-wa-lynwood-115613591

My STAR pick is a 1 x 1 in Tuart Hill for $240k renting for $310 per week with renovation done for some depreciation
http://www.realestate.com.au/property-unit-wa-tuart+hill-115247003

 

[Brady]

Mine was far from extending myself.

Purchased for $175k and renting for $240p/w

With all costs included was costing me a cent.


I actually started looking into purchasing at my max to begin with and luckily I did a bit of reading and researching etc before and decided to purchase in a lower price bracket. I'm glad I did as now each property I've been purchasing for more as I go on.


edit - I like to try keep a buffer of 6months interest repayments. But last purchase I've used all my funds as didn't want to miss out on the deal. Come settlement though I'll be back to 1-2months worth of interest repayment as a buffer.

 

[D.T.]

Congrats Ms Keaton

i think you'll be able to find something here if you look carefully. On realestate.com.au use Perth - Greater Region and you can search all of Perth with your criteria.

You can sometimes find some worth investigating. I found:

Dudley Park (Mandurah) 2 x 1 $109k - I'm not sure if financing such a title is a problem?
http://www.realestate.com.au/property-unit-wa-dudley+park-109032416

Osb Park http://www.realestate.com.au/property-house-wa-osborne+park-114701671

Lynwood 2 x 1 $240k
http://www.realestate.com.au/property-house-wa-lynwood-115613591

My STAR pick is a 1 x 1 in Tuart Hill for $240k renting for $310 per week with renovation done for some depreciation
http://www.realestate.com.au/property-unit-wa-tuart+hill-115247003

Dudley and oosbore park ones would be tricky to finance.

Yield on lynwood would be crap (alex p keaton said she was looking for neutral / positive)

Tuart hill certainly warrants a look.

All of these just reconfirm how much better value adelaide amd brisbane are. Can get a better product and better yield for same buy in.

 

[Alex P Keaton]

Congrats Ms Keaton

My STAR pick is a 1 x 1 in Tuart Hill for $240k renting for $310 per week with renovation done for some depreciation
http://www.realestate.com.au/property-unit-wa-tuart+hill-115247003

hehe, Ms Keaton thanks

Sounds similar to my Dianella ip.

I just learnt that a renovated unit in my Dianella complex just sold for $245k. So if I were able to pick up one of those the rent is around the $300 per week mark. It would still be NG especially because of the management fees but it wouldnt be as ng as when I bought my first ip. Loan was for $200 k & rented for just $210 back when i bought it in 2009. I would rather get something with neutral casflow but I'm not ruling out this option as it could still be worthwhile. It would just mean a few years of ng before rents go up & help.

Hmmm anyway I have some more ideas. Had an interesting discussion with a work colleague over Christmas lunch today and I'm mulling over some things. There are a few options I can take. I'll post on the weekend some time & see what people think.

 

[redwing]

As per dtraeger

Why WA?

 

[Alex P Keaton]

As per dtraeger

Why WA?

Familiarity




I'm home sick today with bronchitis. Good news is I have time to come on ss. I'm spewing tough cos I had an interesting lunch planned and was to see a medium tonight hehe but had to cancel bummer. Will be having tommorow off too

 

[Alex P Keaton]

Finances are looking healthy

This is the story if I haven't bought my next IP. If I do buy before my next ip before moving back in then I'll have a larger ppor mortgage obviously as I'll have to release some equity for my deposit.

Here's what my finances will look like come mid 2015 when I'm living in my old place

PPOR (sv) mortgage $175 k
Offset $50 k

Small PPOR mortgage of $125 k.

Here's what it looks like if IR's go up.

At 5% IR
PPOR mortgage $130 per week

At 10% IR
PPOR mortgage $260 per week

If I were renting the same place (my PPOR) id be paying around $370 per week per week. So my plan is to syphon the difference towards investments. So I can easily afford to put $150 per week of my pay per week towards investments.

 

[Beanie Girl]

Good going, Alex!!!
Looks like you've done one helluva job getting stuck into that mortgage!

My first IP was a pretty dumb move.
I bought a brick veneer house in St Albans in 2004 for 205k.

I poured ALL my surplus cash into that mortgage, dumb, dumb, dumb.
I was so in love with the triple fronted brick veneer house (never mind you couldn't squeeze a modern car through the driveway)
and so in love with the 769 sqm land
(no point to the land if you couldn't build units behind the house as no car could squeeze through to get to the units)
We considered chopping half the kitchen off to widen the driveway....nah....cost more than it's worth....

Imagine all the wonderful places i could have bought back in 2004 that would have given me incredible CG now. Sigh!

 

[Alex P Keaton]

thanks,

Ah well. Everyone makes mistakes as a newbie. You'll learn from it.
Keep positive and theres plenty of opportunities for you in the future.

 

[Alex P Keaton]

and talking about not making the same mistake again

7 by 2020

Plan is to have 7 by 2020 and I realise I am not going to get there if I buy another unit for $250 K when I can only ask $300 per week rent for it. It wont be neutral until 4 or 5 years time!

I will need to buy something neutral. This means i'll have to get out of my comfort zone. I dont know if I want the hassle or stress of buying interstate so i'm thinking of buying either middle ring or outer ring perth. I need to start researching suburbs. I think Perth still has some growth coming too. Plus if I can get a good deal, put in some low ball offers i might be able to create some instant equity too.

 

[Brady]

7 by 2020

Plan is to have 7 by 2020 and I realise I am not going to get there if I buy another unit for $250 K when I can only ask $300 per week rent for it. It wont be neutral until 4 or 5 years time!

I will need to buy something neutral. This means i'll have to get out of my comfort zone. I dont know if I want the hassle or stress of buying interstate so i'm thinking of buying either middle ring or outer ring perth. I need to start researching suburbs. I think Perth still has some growth coming too. Plus if I can get a good deal, put in some low ball offers i might be able to create some instant equity too.

If you're planning to have 7 by 2020 are you planning to purchase all of them in Perth? I have purchase interstate twice and both times were very hassle free. Was similar process, B & P inspection, speak with local PM and the usual DD.

7 in the one state will likely give you land tax issues. So if you're planning to later purchase interstate why not do it now if you believe that interstate has better growth potential on offer.

Also think about the opportunity costs as well, if you're purchasing in a market that is having lower growth then another you are missing out. This would concern me more than the hassles of picking up a phone and speaking with local professionals and not seeing a property with my own eyes.

Best of luck.

 

[Alex P Keaton]

If you're planning to have 7 by 2020 are you planning to purchase all of them in Perth? I have purchase interstate twice and both times were very hassle free. Was similar process, B & P inspection, speak with local PM and the usual DD.

7 in the one state will likely give you land tax issues. So if you're planning to later purchase interstate why not do it now if you believe that interstate has better growth potential on offer.

Also think about the opportunity costs as well, if you're purchasing in a market that is having lower growth then another you are missing out. This would concern me more than the hassles of picking up a phone and speaking with local professionals and not seeing a property with my own eyes.

Best of luck.

But I think Perth is still moving. I wouldn't invest here if I didnt think so.

If I bought over east I would not be confident, I would have to employee a buyers agent. That could be an option though.

Maybe I could just put a bunch of low ball offers in the suburbs I know (in and around dianella) and I might get lucky, whilst also looking elsewhere.