Looking to Make a Move on a Second Investment Property!

[The Donners]

Well, after we told ourselves we'd wait at least 2 years before re-entering the market (to work up finances again) we've decided to look for a second investment.

We currently have a rental property in Frankston North (bought in Feb '10) and a PPOR in Upwey (bought in Oct '10).

The property we're looking at is acerage in the region of Ballarat. It would be a far smaller loan to cover any potential purchases (2 or more acres for < $100k-$120k). I have a fair idea of where and it is a little bit out of Ballarat proper but I'd like to ask people whether, on face value, a purchase in the general region (say max. 20mins out of Ballarat proper) would be seen as a good move? It'd virtually reach the limit of our current borrowing power as I've recently taken a substantial pay-cut for permanent work while I build a small business on the side.

Could we be purchasing elsewhere for that price that would give more bang for our buck? Keeping in mind I'm looking at a long-term investment (10-20 years) before considering any residental developments.

 

[Rixter]

Donners,

This is what I do.....

Ask yourself is buying this particular property getting you closer to your reason why you are investing or is it taking you further away?

If its towards your reason then you are one step closer.

If its away then keep looking for the property that does.

I hope this helps.

 

[The Donners]

Thanks Rixter, sometimes it's the simple things.

 

[BuildingBlocks]

Maybe a stupid question, is there a house on the land or will the land be sitting there eating cash flow?

 

[wobbycarly]

20 minutes from Ballarat is half-way to Geelong! Which puts you in the middle of not much. (I know there are other directions than South)

Are you betting on this one being a change of zoning to increase value? Also, as BuildingBlocks has alluded to, vacant land (if it IS currently vacant) is generally a vacuum cleaner sucking cash, as you cannot claim any costs on tax (unless it's actually earning income, say with adjistment)

 

[Rixter]

Also, as BuildingBlocks has alluded to, vacant land (if it IS currently vacant) is generally a vacuum cleaner sucking cash, as you cannot claim any costs on tax (unless it's actually earning income, say with adjistment)

Not necessarily true..you can still have vacant land and claim expenses as taxation deductions. The ATO's determining factor is if your 'intention' for it is to be income producing. Time factor for this intention would be under the microscope.

 

[wobbycarly]

True, Rixter. Thanks for the clarification.