Newbie to investing in Perth

[DuuK]

Hi guys,

I've been trowling these forums for a little while now and have now had the opportunity to go through some of the recommended books and the many threads online. I'm up to the stage where I have saved 30K for a deposit. Got a pre approval of finance to borrow 325K from finance broker on 42K PA and looking to buy my first IP.

I have been looking around and thinking to buy in a suburb like coolbellup or south lake or ferndale within the 300k-350k mark. But at these prices I can only seem to find very old 3x1 houses with decent land content. Though it does seem expensive for me, I'm still living at home, so that can cut down the expenses and help with the cash flow.

I plan to get my FHOG and live in it for before renting it out to get the maximum advantages. I'm not sure how exactly this works, so I get no stamp duty and 7k back from the government is this correct... but my finance broker said that I have to get it afterwards... is there something wrong with this? Also is there another 2k I can claim from another organisation (I heard there is another first home owners grant kinda thing from another organisation)

I am still looking at properties but haven't found one that I like yet, as the prices are really very high, maybe I need to look elsewhere? Am I spending too much?
What options do I have?

Advice and discussion appreciated

Thanks

 

[yo yo ma]

Hi Duuk
Well done one taking the first step in getting pre-approval. I've never been to WA so can't comment on any of the suburbs. We can't answer if you are spending too much... only you can do that. Work out the figures on how much you spend & can save... Can you afford it?

When I had pre-approval & was looking for my first IP in 2005, I went around for months looking at places... just keep looking & you will find one.
Maybe post some figures on here on how much it costs, the rent return, what is the interest rate, is it interest only etc.

Have you considered lenders mortgage insurance?
Good luck
Steve

 

[Yerfdog]

Hi Duuk,

If you have a look a the REIWA released price guide map, you will find there are some suburbs in Perth are still within your price range. You might want to look into N.O.R., e.g. arround Marangaroo, Girraween, Balga area. Those suburbs are in a pocket surrounded by higher price suburbs, e.g. Dianella, Morley, Darch, Greenwood. I heard City or Wanneroo is planning to sub-divide some lands in Girraween area as well, but please do you own research.

I guess once again no one has a crystal ball, but I hope my message help a little bit.

 

[Aaron Sice]

get a 1 or 2bed in scarborough.

in fact anything in scarborough.

THE NEXT BOOM suburb in perth - all the developers i know are tring their damndest to get in.

 

[Francesca C]

Hi There

I am from Perth... and agree with both comments from Yefdog and Bluecard.

They are planning to rezone all the land in Girrawheen, try and find yourself a big corner block. Call Wanneroo shire and talk to their planning department.

Scarborough in the next 5+ years is undergoing massive changes and will become a prime place to own property.

WA like QLD is and always will be a great investment.

The market has cooled off now so you use your negotiating skills to get a bargain!

 

[jaycee]

1 or 2 bed in Scarborough ? so you would be talking those hirise type flats..? someone I know jsut moved into one and the FOR SALE sign out front of the complex called Scarborough "arguably the most exciting investment opportunity in WA" I wouldn't have normally thought about it.... but might.....

 

[attrill]

Scarborough has always been popular as a rental area and always will be as it's close to the city and surf and will always be more affordable than say Cottesloe due to the number of units.

Saying that however, there are still suburbs in your price range with good houses on blocks that within a few years will be a 3-4 unit site. At the moment that is exactly what I am looking for to add to the units I have. Thornlie, Gosnells, Kelmscott, etc just to name a few. I am sure there are plenty more, it's just that those are close to where I live and I can potter around easily to get a feel for them.

 

[sebsez]

Hey All,

I think because the market has cooled and will continue to cool in WA, anyone investing over here and wants to make some money really needs to pick their suburbs with more discretion and create value rather then waiting for the market to naturally appreciate.

But yeah, Scarbs with their proposed beach side redevelopment is a good move as well as places where you are prepared to take gambles on future rezoning.

The belmont area is another one, although slightly higher priced, it is closer to the city (8km) and only takes 10 minutes to get into CBD via Graham Farmer. Plus it is Riverside, next to Ascot plus the Rudd Government has promised funding to expand the Great Eastern Hwy to 6 lanes which will make the area even more accessable.

Cheers

Seb

 

[Rixter]

What options do I have?

Advice and discussion appreciated.

Hi Duuk,

First off, welcome to the Somersoft Forum , this being your first post.


Im also in Perth and personally have a multi $M+ property portfolio spread across Australia.

This is a recent post that describes my investment strategy that involves Villas & Townhouses. It may be of interest to you.

The capital growth averaging (CGA) strategy I employ utilises a regular purchasing cycle similar to what Dollar Cost Averaging is to the sharemarket. The major underlying principle to its success is it relies on your "time in" the market, NOT "timing" the market, and never never sell. So in other words it does not matter whether you buy at the top of a boom or at the bottom, just so long as you purchase good quality, well located property in high density areas ( metro area capital cities), at or below fair market value, on a regular basis. I've been purchasing IP per year and currently into year 6 of this 10 year plan.

I've been purchasing new or near new property over older style property for several reasons, the main ones being (in no particular order) -

1/ To maximise my Non-Cash deductions thereby increasing cash flow

2/ To minimise my maintenance & repair costs

3/ More modern & Attractive to tenants - thereby minimising potential vacancy rates

4/ Ask a higher rent - thereby Maximising yields

Without getting into the "which is better debate, houses or Units??", I preferr to purchase Townhouses & Villas with a 30% or greater land component thereby eliminating multi story units or high rise apartments, for several reasons. The mains ones being (in no particular order) -

1/ lower maintenance & upkeep for the tenant

2/ lower purchase or entry level into a Higher capital growth suburb area

3/ rapidly growing marketplace (starting both now & into the future) wanting these type properties. This is due the largest group of people to ever be born (being the Babyboomers and Empty nesters) starting to come into their retirement years.

They will be wanting to downsize for the following main reasons - lifestyle & economic.

4/ greater tax advantages & effectiveness thus maximises cashflow.

5/ able to hold more individual properties spread across your portfolio - thereby minimising area over exposure risks by not holding all your eggs in only a few baskets, so to speak.

I look to buy in areas with a historic Cap growth of 7%pa and/or are under gentrification. I look to where the Govt, Commercial, Retail, private sectors are injecting money. This ultimately beautifies the area and people like the looks so move in creating demand.

I have found this works well if you are looking for short to medium term capital growth so as to leverage against and build your portfolio faster.

Getting back to CGA, as the name suggests it averages out the capital growth achieved on individual properties with your portfolio throughout an entire property cycle, taking into account that property doubles in value every 7 - 10 years. Thats 7%pa compounding.

The easiest way to explain what Im meaning by this is to provide a basic example taking into account that all your portfolio cashflow will be serviced via Rental income, the Tax man, an LOC and/or Cashbond structure.

For ease of calculation lets say we buy a property for $250k, so in 10 years its now worth $500k. Now lets say we do that each year for the next 7-10 years. Now you can quit the rat race.

So in year 11 ( 10 years since your 1st Ip) you have 250K equity in IP1 you can draw out (up to 80%) Tax free to fund your lifestyle or invest with. In year 12 you do exactly the same but instead of drawing it from IP1 you draw it from IP2. In year 13 you do the same to IP3, in year 14 to IP4, etc etc etc. You systmatically go right through your portfolio year by year until you have redrawn from each property up to year 20.

So what do you do after you get year 20 I hear you say ?? hmmm..well thats where it all falls into a deep hole - You have to go get a JOB - nope only joking!

You simply go back to that first IP you purchased as its been 10 years since you drew upon it first time around and its now doubled in value ($1M) yet again - so you complete the entire cycle once again. Infact chances are you never drew each property up 80% lvr max , so not only have you got entire property cycle of growth to spend you still have what you left in it first time round that compounded big time. Now you wealth is compounding faster than you can spend it! What a problem to have

Getting back to what I said in my opening paragraph about it does not matter where you buy within a property cycle just so long as you do buy, This is because you will not be wanting to draw upon it until 10 years later after its achieved a complete cycle of growth.

Well thats the Basic Big Picture of CGA. Once its set up its a self perpetuating, TAX FREE Income Money Machine.

Duuk, I hope this has helped you.