First IP Dilemma

[Pesty]

Hello everyone! So following our PPR valuation (HTW, not a RA appraisal), this is our position:

PPR $585,000
Owe $434,000

Estimated 2013 taxable incomes:

Husband: $60k+
Me: $40k+

We have been self employed for 4 years (2013 will be our fifth return in self employment)

Our strategy is to buy and hold for the long term with casflows increasing our passive income, grow our portfolio, sell down a few and retire in 10-12 years.

We built last year on land we bought in 2011 on a 90% LVR, so if we go to 90% to buy an IP, we have $92,500 for deposit and costs.

Bank has said they could lend is a total of $300-$350k for an IP if our 2013 income looks good. As our risk profile absolutely needs our first IP to be a positive cashflow IP, we are going around & around in circles looking for the right area to invest in without negative gearing and staying sub $300k.

I'm really liking the prospects for certain suburbs in Perth (Cooloongup/Rockingham/Hillman/Armadale even) Some of these have already started to move. They have a lot of growth drivers & potential IMHO.

We've been looking for a solid 3 bedder on a decent size block with dev potential (isn't everyone these days with new planning laws in play!). They seem to be quite rare in these areas, more so villas and new builds on tiny blocks are popping up everywhere. As they are so new and many aren't built yet I wonder how the rental market will be impacted by all of the newer stuff? To spend up to $350k, we would struggle due to a lower yield and we would have no buffer in place.

Are we targeting the wrong type of property? For those that know these areas, is it these smaller villa/unit types of property that are in demand more so than a house in these outer Perth suburbs?

I worry that if we save and wait til we have a bigger IP budget, we will miss the boat in Perth. Have also been looking in southern Adelaide and Western Sydney but there's no $$$ left once purchased to improve an IP for higher rent return & value.

Is it really so hard to manufacture cashflow and growth sub $300k total??

Any advice would be very appreciated

 

[Propertunity]

......have also been looking in southern Adelaide and Western Sydney but there's no $$$ left once purchased to improve an IP for higher rent return & value.

Is it really so hard to manufacture cashflow and growth sub $300k total??

One of my BAs purchased a 4,1,0 in Western Sydney recently for $260K that rents for $340pw. That's 6.8% yield......and that's without adding anything like a granny flat or doing a cosmetic reno. What kind of yield were you looking for?

 

[Pesty]

Thanks for your reply Prop! We are looking at achieving a 7%+yield (although more would of course be better!) sub $300k including a BA fee if we were to take that route. 6ish could be doable if there was room to increase the yield within our first year. I've seriously been thinking a BA would be a wise decision, but then again we aren't about to spend a massive amount of $$$ in order to justify the fee.

Property investing has been our aim for about 5 years now, every area I have done DD in has performed but we were'nt in a position to purchase before now.

 

[Propertunity]

I've seriously been thinking a BA would be a wise decision, but then again we aren't about to spend a massive amount of $$$ in order to justify the fee.

Just a thought (and not to be taken as self-promotion, which is not my intention here), but you should not always see a BA fee (from whatever BA, in wherever place you are buying) as needing, "a massive purchase price" to justify the $'s spent on a BA.

For example, we recently purchased for a client, a property from an out-of-area agent (who obviously did not know his values properly), for at least $40K under true market worth. We exchanged contracts on a Thursday before the first Open planned for a Saturday. The purchase price was in the mid $300Ks - but would have easily achieved in the early $400K's if left to the open market. Do you think our client, thinks the BA fee was worth it?

 

[Pesty]

No self-promotion perceived I do know the value in a BA and what they can achieve. I guess with me being home with school & preschool aged children I'm not as time poor as others who may need a BA more so?

Not ruling out consulting a BA at all, just plugging away at the research and DD like I oughta

Oh magic IP where are you??