My financial Plan for the next 10 years

[Alex P Keaton]

I have a decision to make which will effect me financially! Its a financial versus heart decision and I think I know which one will win because I've gone over the different scenarios and I have realised this 1 factor is the most important. I'm currently living with my parents for the next 2 years so I can save some money.

Ok anyway I'll give you a little background and I'll try not to make this too long a post because it might keep away people lol.

PPOR in Highgate (Converted to IP #2)
Bought for $257 K in 2008
Loan $177 K
Valued at approx $280 K
Loan Repayments - $1000 per month
Rental Income - $1280 per month

IP in Dianella
Bought for $210 K in 2009
Loan $199 K
Value $210 K
Loan Repayments - $1050 per month
Rental Income - $920 per month


I have realised that it would be silly for me to move back into my Highgate property after the 2 years are up living here with mum and dad. I am much better financially off to keep it as a rental. I can see its going to be a real money spinner for me.

Fast forward two years and here is what it might look like!

Highgate
Rental Income - A conservative estimate (maybe more) of $1440 per month
Repayments - $1000 per month

Dianella
Rental Income - Estimate of $1040
Repayments - $1050 per month


So as you can see I'll be $440 per month better off if I keep renting out my Highgate unit. So i've been contemplating moving into my Dianella unit and the mortgate ppor payments for me will be managable and this would be the best move to make financially for me however I have come to the point in my life where I want to and need to settle down into a home that is permanent for me. If I moved to the Dianella unit I cant see myself lasting more than a few years as its too tiny doesnt have a courtyard, doesnt have its own laundry. Hmmm but maybe I could see about sticking a washing machine in the kitchen.

Anyway heres the thing. Its really going to end up a personal decision rather than financial i'm thinking. Here are my options:

1.
In 2 years time and just before I move out of my parents house I buy a villa with courtyard near my family. I would have to get a $300 K loan and this loan will be unaffordable for me but what I'm thinking is I could buy it as an IP in 2 years time whilst prices in Perth are hopefully still at the bottom and whilst I can afford the shortfall (because i'm still living with my parents)

Then when I move out of my parents house and move into my new PPOR villa I could sell my Dianella IP so that I dont have too much debt on my new PPOR villa. For a while there I thought its the last thing I wanted to do was to sell a property but in this case I think it could be an option as I dont want to live in a PPOR with too much non deductable debt and there is no way I can afford to pay for a $300 K loan even if it was tenanted or if I lived in it!

The loans are crossed. LVR about 75%
Total loan - $376
Total Value - $470

However like some people pointed out in Andrews topic. I'm not going to gain much financially if I sell the Dianella ip when you take into account the fees, commissions, stamp duty of next ip. Come to think of it I think this #1 Option is not a good idea to go ahead with in 2 years time.

This leaves me with:

2. Living in my PPOR (Highgate)
I was quite happy living there and it was handy to everything. But financially I cant justify moving back there!!


3. Moving into Dianella unit
Perhaps this is the best option for me. lol I've gone from deciding on option #1 to option #3 whilst typing this. I keep changing my mind! Only thing is with the Dianella unit. I'll have to stick it out there and live there for at least 5 years or there is no point because I am tired of having to move. But if moving into this unit will propel me forward financially I think its the right move to make, and it'll mean I'll have a smaller loan repayment to worry about and which I can afford. If I move there my Highgate rental income will continue to rise and I'll be able to save some money in those 5 years I'm living in the Dianella unit. Then in say 7 years time when both ip rental incomes have increased I'll be able to afford that villa unit because the 2 lots of rental income will help to pay for my new ppor villa repayments. Either that or I could sell the Dianella unit and upgrade to new ppor and have less debt on new ppor and a smaller mortgage I can afford.

Now I just have to check out if there is room for a washing machine in the kitchen and I'm set. I think I could make this work. I didn't mind this size of my highgate studio (it was 48 sqm) and this Dianella unit is just a bit smaller so thats no problem. How will I know I could be happy there. I think I could be and the main thing is my SANF. I do not want to have to be struggling like before and worrying. I wont be making the same mistake and get too heavily NG like before!!

I also have to bear in mind that my car is now 16 years old and will need replacing at some stage in the next 10 years.

I have always wanted to fit in a 2nd job but just never had time for it because my 2nd job is keeping fit and exersing. It takes up a lot of time. My solution haha is to combine the too. Fitness training and get paid for it. Umpiring. So there is extra cash coming in. I'm umpiring AFL and there is this new AFL 9's that is pretty much played year round that you can umpire mid week. It is also great for socialising too!

Ok so after typing this very long post I have decided whats best for me, happiness wise and that is to move into the Dianella unit in a couple of years time. I can be happy there and I'll be able to save some money from my 2nd job, my full time job i'll be getting a pay rise soon and in my highgate rents will keep on rising and will be able to save a bit of that too eventually. Then say in 7years time I'll be able to afford that villa. Eventually I do want that villa and that courtyard but I have to look at things realistically and I no I cant afford it right now.

But will I be able to hold onto both IP's in say 7 years time and still be able to afford a new PPOR villa mortgage. Do you think my rental income in 7 years time will be cashflow positive enough to help me pay for my new mortgage?? If I have to I guess I could always sell 1 property so that my new ppor has less debt on it. But I'd really like to hang onto all properties!!

Thanks for reading I know it was a long one but I kind of use this a journal too to help sort things out in my head lol

 

[Ausprop]

the 2 properties are basically neutral so just forget about them. you sound emotionally attached?

when you move out go flatshare for $150 a week or whatever it costs now. save up deposit for next PPOR, something that you can value add such as subdivide, use that to pay off the debt. even better try buy it now and lease it out. whenyou move in rent the spare bedrroms. 2 years is a very long time to expect the perth market to stay low. i give it 6 monhts - the population is ballooning yet no one is building. (subject to the world ending and movements in the Baltic Dry Index of course)

 

[investor2009]

Nice to see you getting together a plan Alex, congratulations!

And what a loooong post. .
Anyhow, 2 years seems a long time to wait without making an investment decision, or rather conciously staying out of the market. What are you doing with the cash you save? I assume it will go on the mortgage if you move into one of your rentals.

It looks as though your rents are ok, what are the fees ie: rates, body corp, water, insurance, PM fees equate to? Are you about neutral after tax?

What is your main goal (financially) and what timeframe do you set yourself to achieve this?

 

[lizzie]

How much are you looking at saving a week while at your parents? How much extra will ref-ing bring in? Can you do your RSA or barrista-ing as these are both hot demand jobs for evenings or weekends.

How big a deposit will that give you in 2 years time ... or are you better off buying something now, renting it out and making extra payments against it now instead of "saving" (in an offset account - in case your situation changes by then)?

It's great to have a plan, but don't carve it in stone. Be flexible. No one knows what the future will bring ... might meet some wonderful new partner from another country and end up overseas ... might get promoted to a new job in a different state ... might need to stay with your parents for personal reasons (their's or yours).

 

[Alex P Keaton]

the 2 properties are basically neutral so just forget about them. you sound emotionally attached?

when you move out go flatshare for $150 a week or whatever it costs now. save up deposit for next PPOR, something that you can value add such as subdivide, use that to pay off the debt. even better try buy it now and lease it out. whenyou move in rent the spare bedrroms. 2 years is a very long time to expect the perth market to stay low. i give it 6 months - the population is ballooning yet no one is building. (subject to the world ending and movements in the Baltic Dry Index of course)

Great!! Combined they are neutral Thats good!

save up deposit for next PPOR, something that you can value add such as subdivide, use that to pay off the debt. even better try buy it now and lease it out.

Hmmm... this gives me an idea. On my salary of 55 k pa normally I wouldn't be able to afford to buy an ip that I can subdivide but maybe I could afford a larger loan whilst living here with my parents! Perhaps whilst living with mum and dad I could buy something in a cheaper suburb that I can subdivide, then sell it make a profit and use the cash as my deposit for my ppor. Would I make much profit though after all the selling costs are taken into account?

Would the banks loan me more seeing that my living costs are less atm?

Do you guys think this is a realistic opportunity for me? How long does it take to subdivide? and approx what kind of money would I make subdividing? What suburbs do you think could be worth looking into? Any tips? And how do you know you are going to be able to subdivide the property. Its not always known. Do they sometimes tell you if its subdividable?

I wonder if the banks will allow my LVR to go up to 90%? Its currently around 75%. There is always LMI I guess.

 

[Alex P Keaton]

Nice to see you getting together a plan Alex, congratulations!

And what a loooong post. .
Anyhow, 2 years seems a long time to wait without making an investment decision, or rather conciously staying out of the market. What are you doing with the cash you save? I assume it will go on the mortgage if you move into one of your rentals.

It looks as though your rents are ok, what are the fees ie: rates, body corp, water, insurance, PM fees equate to? Are you about neutral after tax?

What is your main goal (financially) and what timeframe do you set yourself to achieve this?

thanks

I'm saving the cash. Need to increase my buffer. Its going into my offset account. I'm not sure but i'm thinking combined they could be neutral soon.

My goals are to retire when im 67. I'm ok with this. I have 27 years to do it in. I'd like to retire with 5 fully paid off ips.

 

[investor2009]

Thats cool, you have plenty of time to do that then!
One thing I might look in-to depending on the times would be to be a little more aggressive if you can early on. The reason behind that is the purchase price. It's much easier to achieve your goal if you pay less for each property. ie: purchase price of $300,000 in 2012 vs $600,000 in 2019 lets say.

 

[Alex P Keaton]

How much are you looking at saving a week while at your parents? How much extra will ref-ing bring in? Can you do your RSA or barrista-ing as these are both hot demand jobs for evenings or weekends.

How big a deposit will that give you in 2 years time ... or are you better off buying something now, renting it out and making extra payments against it now instead of "saving" (in an offset account - in case your situation changes by then)?

It's great to have a plan, but don't carve it in stone. Be flexible. No one knows what the future will bring ... might meet some wonderful new partner from another country and end up overseas ... might get promoted to a new job in a different state ... might need to stay with your parents for personal reasons (their's or yours).

I'm looking to save around at least $1300 per month (before tax return). I can make around $120 per week umpiring. If I didnt play footy on Sundays it'd be even more.

I'd rather keep the money I save in my offset as a buffer. I really dont want to have to use this cash for my next deposit if I can help it.

Thanks everyone. Its given me some things to think about.

 

[Alex P Keaton]

Thats cool, you have plenty of time to do that then!
One thing I might look in-to depending on the times would be to be a little more aggressive if you can early on. The reason behind that is the purchase price. It's much easier to achieve your goal if you pay less for each property. ie: purchase price of $300,000 in 2012 vs $600,000 in 2019 lets say.

Yeah I agree, and also If I can buy another property soon before Perth's cycle starts to move again I'll be in a really good position! Ideally I'd love to have 3 properties to ride me through Perths next wave. Not sure how big the wave will be (im not saying it will be huge like the last one but there will be another wave coming soon and I want to make the most of it.)

 

[Sunfish]

I hope you are doing more around the house than my stay at home son. If not you may find your choices suddenly limited.

If you DO help, both physically and financially, your parents may have grown used to having you around [they must be "of an age" now] and appreciate some help. It may not be too long before you have to do the maintenance etc anyway, even if you don't live there. Could you just do a "bachelor pad" improvement to gain a little privacy and separation?

ps Don't talk incessantly about your properties if they aren't investors themselves. Be polite and let them know but leave it at that.

 

[Alex P Keaton]

Could you just do a "bachelor pad" improvement to gain a little privacy and separation?

Yeah I have the solution. I close off both doors and I have my own quite little space to myself (when i want it) at the back of the house. Its not too bad.

 

[BMan]

have you filled out a tax variation form to help get small amounts of tax back during the year rather than a big lump sum at the end...

 

[Alex P Keaton]

This has all got me thinking!

Maybe I will be able to afford to buy the villa afterall in 1 years time and before prices start going up. Then what I can do is after I move out of my parents place in a couple of years time I can move into my little Dianella unit for a few years and when I can afford to I can move into ip #3 villa.

It would be ng for a while but by then my highgate rental income would have increased to help with the repayments. If the s*** does hit the fan I would have a back up plan and that would be to sell the little dianella unit to pay down some of the debt on the new villa ip. So there is that option! I'd only sell it as a last resort though. But its nice to know I'd have that safety net because i'm sure in say 5 years time both my units will have increased in value and I'd be able to pay off some debt if needed.

 

[Alex P Keaton]

have you filled out a tax variation form to help get small amounts of tax back during the year rather than a big lump sum at the end...

No I didnt do this because I was scared I might spend it.

If I do buy again though I'll be doing this!

Anyway I have to run.

 

[jaycee]

No I didnt do this because I was scared I might spend it.

If I do buy again though I'll be doing this!

Anyway I have to run.

....Discipline....

 

[Mike F]

What about if you meet a boyfriend/girlfriend and move in with them or buy something together?

 

[Jake D]

What about if you meet a boyfriend/girlfriend and move in with them or buy something together?

I have a friend who once told me of his plans to "get a girfriend next year and buy a house with her", It was one of the most bizzare and ambitious things I've ever heard.

They've been together for 5 years now.

 

[fokas]

I have a friend who once told me of his plans to "get a girfriend next year and buy a house with her", It was one of the most bizzare and ambitious things I've ever heard.

They've been together for 5 years now.

Where can I find one of those?

 

[shuggy]

Where can I find one of those?

Message me with a pic

 

[Jake D]

Message me with a pic

I expect to hear about your future joint ventures.