Planning my investment strategy

[GregW]

Hi All
I've been reading here on and off for a few years and found this site very informative.
I owned an IP with my brother several years ago and we sold it when I bought my own home, and now I'm looking to get back into property again.
Reading some posts here got me thinking about what I'm actually trying to achieve so I can get a plan together before I start, and I would like to get feedback and suggestions.
I currently live in a duplex in Sydney, I owe just under 200k, and estimate the value of the property at 750k - we bought it just over a year ago at 690, have made a few improvements and values in the area seem to be climbing steadily.
So I estimate I have about 500k equity in this place, but with 2 young children there is not a lot of spare cash flow currently.
Long term I want to achieve enough income from IP's that I can retire early or at minimum only work part time (I turn 40 this year)

So now I'm considering what and where, how much I should be spending ect.
I think I'd prefer to buy something within a few hours of Sydney to start with, something that I can keep a bit of an eye on myself to do maintenance.

Also on my mind is should I focus on paying of my PPOR first?

Cheers

 

[ellejay]

Jumping in to bump this up. Of course you could carry on paying down your ppor but sounds like you don't have much spare cash, or at least you have other priorities for spending your cash just now. Hopefully you've seen threads about property investing in NSW beyond Sydney. You could find a rising market to buy an ip in, or look for a reno to produce more equity, or both. Depends on your strategy but paying more off your ppor when you already have a lot of equity sounds even slower than my aproach.

I'm also interested in NSW. There are some threads re Nowra and surrounds which may provide some cheaper options depending on your comfort level, or you could spend around the 500s elsewhere for perhaps more chance of greater growth. Personally I don't like alot of debt so try to mix buying cheaper cashflow + properties and paying down debt.

 

[Jess Peletier]

Do you know what your borrowing capacity is - both what the bank will give you, but also what can you afford?

If you want a few properties in the future, it would pay to talk with a broker to plan out the next few purchases to see what your circumstances will allow.

 

[knightm]

Hi All
I've been reading here on and off for a few years and found this site very informative.
I owned an IP with my brother several years ago and we sold it when I bought my own home, and now I'm looking to get back into property again.
Reading some posts here got me thinking about what I'm actually trying to achieve so I can get a plan together before I start, and I would like to get feedback and suggestions.
I currently live in a duplex in Sydney, I owe just under 200k, and estimate the value of the property at 750k - we bought it just over a year ago at 690, have made a few improvements and values in the area seem to be climbing steadily.
So I estimate I have about 500k equity in this place, but with 2 young children there is not a lot of spare cash flow currently.
Long term I want to achieve enough income from IP's that I can retire early or at minimum only work part time (I turn 40 this year)

So now I'm considering what and where, how much I should be spending ect.
I think I'd prefer to buy something within a few hours of Sydney to start with, something that I can keep a bit of an eye on myself to do maintenance.

Also on my mind is should I focus on paying of my PPOR first?

Cheers

500k is quite a lot of equity to get started, as you said you have to watch your cashflow like a hawk with your next few purchases.

With little cashflow it will take years to pay off the 200k remaining and the opportunity cost of not being invested could be quite costly. It's low risk to pay off a house but also the slow boat to China.

A spread of a few properties with solid cashflow (and if you are nervouse about cf then consider 3 or 5 yr fixed interest only loans) could see you building a worthwhile portfolio and with your ppor in Sydney you would be exposed to a good range of markets with different drivers so you get growth in different years.

Where you buy really depends on how much you want to spend on each one, your tolerance for different kinds of location risks, and whether you want to take on active strategies like renovations etc.

 

[wombat777]

I'm also getting started. A good suggestion on fixed interest at the current low rates to protect cash flow.

Most Interest Only loan terms seem to be 3 or 5 years, whether or not they are fixed or variable.

What usually happens at the end of the term? Do lenders offer extensions at the end of the existing term, or do you just shop around for refinancing.

I am planning a buy and hold strategy.

 

[knightm]

I'm also getting started. A good suggestion on fixed interest at the current low rates to protect cash flow.

Most Interest Only loan terms seem to be 3 or 5 years, whether or not they are fixed or variable.

What usually happens at the end of the term? Do lenders offer extensions at the end of the existing term, or do you just shop around for refinancing.

I am planning a buy and hold strategy.

A good broker is a must and can talk throughs the particulars of loan terms but normally a loan will be 25 -30 yrs term, and 5 yrs fixed meaning at 5 yrs and 1 day it reverts to the variable rate prevailing at the time.

 

[wombat777]

A good broker is a must and can talk throughs the particulars of loan terms but normally a loan will be 25 -30 yrs term, and 5 yrs fixed meaning at 5 yrs and 1 day it reverts to the variable rate prevailing at the time.

Thanks. It was a bit of a newb question. I was able to talk to my broker about the intricacies of this further today. I used them for my PPOR a couple of years ago.

 

[GregW]

Thanks everyone, looks like my next step will be a meeting with my broker to discuss finance and borrowing capacity. I think I will be better off getting into something sooner rather than later, as on thing about things if I wait till I have paid down my ppor some more I could have used that time to also pay a bit of an ip.

Cheers