My situation - thoughts before contacting broker/planner?

[YPG]

Hey guys,

I know there have been a number of threads asking questions/considering how one should use their money (feel free to comment on mine or not) but I thought I might put my situation out their for some general advice and consideration before contacting a financial planner, mortgage broker with vast experience and knowledge (most likely one from this website) and really setting some goals and strategies to achieve these.

Background info:
- 21 years old
- 75k income from job 10k income from family development investment property (owned outright that I manage and take care of maintenance, mowing etc.)
- 500k PPOR - owe 300k
- 250k cash sitting in 100% offset
- The first purchase (PPOR) was done through a few players from my parents "team" of solicitor, accountant, bank manager, etc. Now looking to develop my own "team"
- want to invest in a number of investment options: shares, bonds, property, etc.
- prepared to take some risks as I am young and have a little money behind me - however do not want to try anything too crazy with a real chance of losing it all

So basically if you were in my situation - what would be your next step? Save? Buy for CG? buy for cash flow? Invest in shares/bonds? Development? Commercial? Inner city? Regional? Term deposits until a brighter world economic outlook?

I guess I am just a little lost with all the various options and a little pessimistic about the world financial outlook in the immediate future. But before I contact a broker/planner I would like to have some of my own ideas to throw around and question them about so I thought I would start on somersoft. I am hoping to maximize a fortunate start to investing by getting it right the first time and while I am young and by drawing on older, wiser and more experienced investors and surrounding myself with these successful and knowledgeable people.

Thanks for taking the time for reading.
YPG

 

[Rolf Latham]

Hey guys,

I know there have been a number of threads asking questions/considering how one should use their money (feel free to comment on mine or not) but I thought I might put my situation out their for some general advice and consideration before contacting a financial planner, mortgage broker with vast experience and knowledge (most likely one from this website) and really setting some goals and strategies to achieve these.

Background info:
- 21 years old
- 75k income from job 10k income from family rental property (owned outright that I manage and take care of maintenance, etc.)
- 500k PPOR - owe 300k
- 250k cash sitting in 100% offset
- The first purchase (PPOR) was done through a few players from my parents "team" of solicitor, accountant, bank manager, etc. Now looking to develop my own "team"
- want to invest in a number of investment options: shares, bonds, property, etc.
- prepared to take some risks as I am young and have a little money behind me - however do not want to try anything too crazy with a real chance of losing it all

So basically if you were in my situation - what would be your next step? Save? Buy for CG? buy for cash flow? Invest in shares/bonds? Development? Commercial? Inner city? Regional?

I guess I am just a little lost with all the various options and a little pessimistic about the world financial outlook in the immediate future. But before I contact a broker/planner I would like to have some of my own ideas to throw around and question them about so I thought I would start on somersoft. I am hoping to maximize a fortunate start to investing by getting it right the first time and while I am young and by drawing on older, wiser and more experienced investors and surrounding myself with these successful and knowledgeable people.

Thanks for taking the time for reading.
YPG

Hiya

Commercial is out, we dont yet have enough equity to do kuch other than get into potential issues.

Development............maybe, but youd want to fina small development, OR do a JV, or you get a sensational site with great marging, do a bunch of pre sales and get a GRV based lend

ta
rolf

 

[Aaron_C]

You're probably not at the stage to do a proper development or invest in commercial property. These investments require strong cashflow to let you ride the bad times - your income is too low at this stage. Other options seem more plausible though.

 

[YPG]

Hi Rolf,

Thanks for reply. I have just graduated as a town planner in QLD so development could definitely be an option. I was considering something on a small scale like a duplex or maybe 3 townhouses in Brissy.

Wasn't sure if this would be too risky as a first investment and maybe a simpler first step could be to buy a unit, etc.

Other issue might be that this is my first year as full time work so not sure if this could be a problem when borrowing.

 

[YPG]

Aaron,

Yeah I think I have read a few of your posts saying that unless your buying a comm property 500k-1mil+ then its not really worth it?

I still think I would rather buy in 5-15km radius of a city with 5-6% yield looking for growth rather than buying in regional areas chasing cash flow positive properties below 250k. I am also am very unsure about investing in any mining towns.

From what I have been looking at lately perhaps outer suburbs in sydney could be a good option - however again I am unsure about first purchase being interstate - do you see this as a major issue?. Another thing is pricing takes me a little time to get my head around because in Brisbane 500k goes a lot further than 500k in Sydney. I guess it is just psychological comparing a house to a small 2 bedroom apartment.

 

[JWR]

How did you make/get so much money?

No point in saving imo - you've already done that.

Buy some IP's with 80%+LVR and you will be fine.

 

[Aaron_C]

Yeah I think I have read a few of your posts saying that unless your buying a comm property 500k-1mil+ then its not really worth it?

Yes that is correct. The higher the price, the better the commercial property usually as it drives away a lot of people who pay a lot of money for crap quality.

Yeah I think I have read a few of your posts saying From what I have been looking at lately perhaps outer suburbs in sydney could be a good option - however again I am unsure about first purchase being interstate - do you see this as a major issue?

If the numbers stack up I generally would prefer to buy in my own State because I understand it better. I guess if you educate yourself property there isn't a reason why you can't buy in another area.

 

[redwing]

Background info:
- 21 years old
- 75k income from job 10k income from family development investment property (owned outright that I manage and take care of maintenance, mowing etc.)
- 500k PPOR - owe 300k
- 250k cash sitting in 100% offset
- The first purchase (PPOR) was done through a few players from my parents "team" of solicitor, accountant, bank manager, etc. Now looking to develop my own "team"
- want to invest in a number of investment options: shares, bonds, property, etc.
- prepared to take some risks as I am young and have a little money behind me - however do not want to try anything too crazy with a real chance of losing it all

Hi YPG

Is the PPoR the only property?

i.e.

The $10k additional income comes from management/handyman work, but you have no stake in the family development investment property?

You have an LVR of 60% with $200k equity in the PPoR but a net equity of $450k if you add in the $250k cash?

A good mortgage broker maybe able to give you options regarding accessing your equity

 

[YPG]

Hi YPG

Is the PPoR the only property?

Correct - the only property

i.e.

The $10k additional income comes from management/handyman work, but you have no stake in the family development investment property?


Hi Red,

Correct the 10k comes from the rental from a family friend's son. I manage/look after maintenance and my parents let me have the rental income - I will also pay for the DA costs for the subdivision which I am estimating around 50k. The house was sitting vacant for a number of years so they were happy for me to try and find a tenant and try make some cash out of it. The property is owned outright and is in my parents name. It is a 5 acre site on the gold coast that can be developed into 15-25 lots depending on various factors. Their plan was always to keep this property as a scapegoat in case any of their businesses failed - however they have been lucky enough to do well and recently sold one that allowed them to pay off all debt from business and PPOR. They want to get DA approval through myself/my work of the land and try to flog it off to a developer - they don't have the risk appetite to develop it themselves. They are looking at a way to divide the profits 4 ways to each 3 children and themselves, they obviously need to talk with their accountant/planner how best to structure this and even if its possible? family trust? My parents "team" have a funny way of getting the results they want by twisting/using the system to reach their goals. Due to the gold coast market conditions and the fact the property is producing money there is no race to develop and they can afford to land bank. I/work will start working on the DA approval sometime this year assuming it will take 6-12 months to get and it can last for up to 4 years. Which by that time the GC may have recovered a bit. However I will assume in my plan that I will not receive any 1/4 of profits as this will still need to be worked out with my parents team and if I do get anything it will just be a great bonus.

You have an LVR of 60% with $200k equity in the PPoR but a net equity of $450k if you add in the $250k cash?

Correct - the house will be the PPOR for the foreseeable future for my girlfriend and I for 4 years - after that not sure what the options will be. Looking back perhaps it wasn't bought in the best area for an investment but it was for lifestyle and close proximity to family, friends and girlfriend work. I have 450k equity and the house is currently on a P&I repayments over 20 years.

A good mortgage broker maybe able to give you options regarding accessing your equity

Yeah very true - looking like I will need to engage one soon. Am not relying on the opinions of people on this forum to make any solid decisions - however I am really impressed with the knowledgeable information/persons on SS.

Thanks for the comment

YPG

 

[YPG]

How did you make/get so much money?

No point in saving imo - you've already done that.

Buy some IP's with 80%+LVR and you will be fine.

Hi JWR

Although I have always had a part time job for the last 7 years since I was 14. I am lucky enough that this initial boost of funds is solely due to my parents wanting to help me out and give me some money while I am young to see what I can do with it.

I am assuming the salary for my work as a town planner will never be particularly high. I think around 70-140k - however I will only have to work 40 hours a week. So I am pretty keen to create wealth through property or even generate income in my spare time.

 

[Rolf Latham]

Another thing is pricing takes me a little time to get my head around because in Brisbane 500k goes a lot further than 500k in Sydney. I guess it is just psychological comparing a house to a small 2 bedroom apartment.

Yes and no

Hebersham as an eg is 50 k from the main cba and 30 ks from Parra will get you 2 places for 250 k

Similarly you can get 2 x 250 basics out past Inala or Redbank

ta

rolf

 

[DaveM]

I am assuming the salary for my work as a town planner will never be particularly high. I think around 70-140k

Not having a go here, but a fairly sizeable portion of australias workforce can only dream of an income of $70-140k.

 

[Aaron_C]

Not having a go here, but a fairly sizeable portion of australias workforce can only dream of an income of $70-140k.

And a sizeable portion of Australians won't even invest...

 

[peter chun]

investing is a lot about planning first!

Hi,
Talk to a financial planner who is pro property (we have one if you like) you have good leverage, now is a good time to enter and personally my take is an investment property is good debt not like your home. Our planner is also a mortgage broker so we have received the benefit of both at once which is proven most beneficial!

Cheers
Pete

 

[sanj]

No point in saving imo - you've already done that.

Buy some IP's with 80%+LVR and you will be fine.

to me that is EXTREMELY dangerous advice and way too simplistic



re the OP, im curious about why youre so keen to find your own team instead of utilising what youve got in front of you, especially as it seems they know what theyre doing.

 

[JWR]

Obviously there is more to it than just buying anything at 80%+ LVR.

The OP has read my posts so knows what I really mean - the msg was more to spur him into action than just keeping his balance sheet lazy.

 

[BMan]

Not having a go here, but a fairly sizeable portion of australias workforce can only dream of an income of $70-140k.

im one of them

 

[Graemsay]

re the OP, im curious about why youre so keen to find your own team instead of utilising what youve got in front of you, especially as it seems they know what theyre doing.

+1.

If you've got access to a family company / operation that can provide cash, expertise and contacts then it would make a lot of sense to leverage that. I understand that you might want more independence, but it would strike me as being a way of reducing risk.

 

[YPG]

+1.

If you've got access to a family company / operation that can provide cash, expertise and contacts then it would make a lot of sense to leverage that. I understand that you might want more independence, but it would strike me as being a way of reducing risk.

Thanks for your post Grae

I should have mentioned that I will be keeping the core players such as the family solicitor and accountant. However I will be looking to make some additions - a mortgage broker and others specifically specializing in property investment. You see my parents have never used a mortgage broker and have never invested in property apart from their own PPOR (exception of development block kind of fell into their hands). I feel my parents have always thought that mortgage brokers weren't worth their cost - i now disagree as I have come to understand that a good mortgage broker can be really beneficial and is not just another expense. I think it was one of those cases were they aren't ignorant or stupid - they just havent wanted to get into property. For example they would always favour P&I over IO just because it is what they are used to - when really in a lot of cases IO is better for investment properties (or so I have come to understand). Little things like this.

My parents have been very successful but this is due to their professions and both owning successful businesses (including building up and selling and starting again)- no exposure or really understanding towards property - this is why I feel I need to create my own team that has the relevant experience and knowledge that I need to rely on to successfully invest in property.

 

[YPG]

Not having a go here, but a fairly sizeable portion of australias workforce can only dream of an income of $70-140k.

Hey Dave,

No offence taken just I intended no offence hah.

In no way am I trying to belittle that amount as it is still a lot better than the average australian.

I completely understand that a number of Australians with this salary would be very happy.

Indeed I feel very content with my salary and I enjoy my work and only working 40 hours a week. I just wanted to point out that my profession of town planner is not as prestigious and high paying as some other degree qualified professions.

But when I see a few of my dentist friends that are 25 and are on 150-200k I am trying to explore my options to try and catch up to them (however unlikely hah!) so I can bring my boat to the broad water party and not just go on theirs haha.

My main reason for pointing it out is that it seems to build any substantial portfolio say 10+ blue chip properties you really need a high income to continue the serviceability and afford to take a few loses and use the tax benefits that are available.