IP#1. How to accelerate/refine my investment strategy.

[Richard Feynman]

Yes but a) the number is based on 80% purchase costs instead of 105% and b) you have only taken the loan repayments as the outgoings - what about the insurance, water rates, strata, etc?

Thanks heaps, and all good points.

I imagine the $75/$120 weekly cost difference would cover outgoings, bringing the equation into equilibrium. Sound about right?

(not to mention, the added bonus of deductions from converting my PPOR into an IP).

From the input of others, I'd be very hard pressed to go beyond an 80% lend. Was the 105% figure you mentioned 100% lend + purchase costs?

Thanks.

p.s. Once again to clarify, just putting ideas out there for feedback.

 

[Shahin_Afarin]

Yes 105% is purchase plus costs. What is wrong with going to a 95% lend? I use this strategy with my portfolios even though I have adequate equity.

LMI is tax deductible for the first five years and the equity allows you to fund for further purchases (if of course that is part of the strategy).

 

[Richard Feynman]

Yes 105% is purchase plus costs. What is wrong with going to a 95% lend? I use this strategy with my portfolios even though I have adequate equity.

LMI is tax deductible for the first five years and the equity allows you to fund for further purchases (if of course that is part of the strategy).

I'd definitely borrow as much as possible for the reasons you mentioned. I'm aware anything under 50m² can create hurdles from lenders though and if I were to buy a studio under $250k, I'd be seeking to finance something 25-35m².

Peter, Terry and Aaron have mentioned maximum lends (with difficulty) of 70-80% on somewhere of that size. Are you aware of any cases of lenders being willing to go beyond 80% on such a small space? Thanks!

 

[cimbom]

What is your main motivation for such a purchase, if you don't mind me asking? I live in a 1 bedroom apartment atm and that's the total size of our lounge room and kitchen. I can't imagine too much demand for such an apartment in Australia

 

[Richard Feynman]

What is your main motivation for such a purchase, if you don't mind me asking? I live in a 1 bedroom apartment atm and that's the total size of our lounge room and kitchen. I can't imagine too much demand for such an apartment in Australia

As stated, I'm just exploring scenarios. However, to clarify, the idea of buying a sub $250k "tiny place" to live in (for a few years at least) in order to rent out my PPOR as an IP is that the mortgage repayments (plus outgoings annually) on the "tiny place" would be approximately equivalent to the cost of me renting a 1 bed place.

So I'd be holding an asset that is likely to appreciate (slower than typical stock, admittedly) for the cost of renting.

As for the size, I would thrive in such a space (w/at least 2.7m ceilings). My current place of 50sqm is double what I desire. It's remarkable how efficient use of a space can make it functionally enormous.

 

[MIW]

It's time to buy IP#1. I'd love some input on my strategy, and how I may best accelerate the growth of my portfolio from day 1. Essentially, I want to be in a position to buy IP#2, #3 etc as soon after the first as possible. Whether that's by buying cheap CF+ properties, renovating for equity or something else.

Having a strategy means you stick to one approach and if it works you continue with it.
So are you after CG or CF, are you for long term 10, 20 ,30, 40 years, are you planning to grow your asset base (it's not just about buying X number of properties) ASAP, but duplicating, say when you have 20% in equity, are you going to concentrate on few suburbs to become a specialist or will you look for the latest trends and hotspots, will you add equity via renovation, or what, etc....? I could go on and on....
I think you need to decide what is your strategy. For me property is a long term strategy investment, if I can generalize, where the first 10-15 years I try to accumulate, then I allow the cycles for growth...
It took me about 15 years to understand what my strategy should be and changing times and more knowledge and experience also dictated changing approaches.
Good luck in what you decide....

 

[Richard Feynman]

Having a strategy means you stick to one approach and if it works you continue with it.
So are you after CG or CF, are you for long term 10, 20 ,30, 40 years, are you planning to grow your asset base (it's not just about buying X number of properties) ASAP, but duplicating, say when you have 20% in equity, are you going to concentrate on few suburbs to become a specialist or will you look for the latest trends and hotspots, will you add equity via renovation, or what, etc....? I could go on and on....
I think you need to decide what is your strategy. For me property is a long term strategy investment, if I can generalize, where the first 10-15 years I try to accumulate, then I allow the cycles for growth...
It took me about 15 years to understand what my strategy should be and changing times and more knowledge and experience also dictated changing approaches.
Good luck in what you decide....

There are still plenty of details to iron out in my longterm strategy, but the end goal is to have the option to retire within 12 years on no less than $50,000 (today's dollars). I'm very likely to continue investing for decades more though but in 12 years, I don't want to be so negatively geared that a big drop in day job income would be a problem.

I see things going like so:
- Buy and hold everything
- Initially accumulate as swiftly as I can (allowing me to spread risk across more assets)
- Early investments to be low risk, not too negatively geared (if at all), with aims of accelerating subsequent purchases (whether this means CF+ or chasing CG, I'm still discerning, hence this topic)
- Later investments all chasing capital growth (income will increase over time so I can hold more CF- stuff in a couple of years)
- Willing to take elevated risks with enough assets under my belt
- I will look to manufacture equity in later purchases via renos when I have more equity to play with