PPOR or 2nd IP

Ok, heres where I am at. Currently in the position to buy 2nd IP or a real dog box PPOR.

I will go into detail of my first IP.

Current value, approx 380K (if not more)
Rent as of mid Jan to rise to $400 P/W
Current loan approx 261K
Approx LVR 68%

Will be refinancing with a different lender and 30k will be taken to pay out a ex. This 30K is tax deductible as I have already cleared this matter with the ATO.

So after the payout and the break costs all up approx 32K new LVR sitting at about 77%

Scenario 1.

So if I just sit on the one IP with the current loan of 293K with Westpac’s 4.99% IO 3yr fixed rate, this property will be cash flow pos

Interest @ 4.99% $14620
Rates $1200
Insurance $900
Water $724
PM Fees $1700

Total Expense $19144
Total Income $20800
Left Over Cash $1656 Approx

Yes this is a good situation to be in, however will not achieve what I want by just sitting on the one property.

Scenario 2​

Buy 2nd IP in the Darwin market; this would likely be a higher end unit. Let’s say it will cost 330K,
Not to sure what loan I will be using as of yet… however it will be fixed.

Purchase Cost 330K
Stamp Duty $12,286
Other costs $2000
Deposit drawn from IP 1 $35,000

Total Cost $309,286
LVR 93%

Not including LMI as I am not to sure what this would cost, so possible LVR at about 95%

Rental yields are approx 5.6% for the properties I am look at.

So lets say by the time I get this property I can get a 5 yr fixed IO loan for 309,286 at about 6%

IP 1

Will take $40,000 out, use $35,000 as deposit and have a $5,000 buffer
So total loan on IP 1 will now be 333K

Interest + expenses $21140
Rental Income $20800
= neg $340 P/A

IP 2

Interest @ 6% $18557
Rates $1200
Body Corp $1900
PM Fees $1800
Insurance $800

Total Expense $24257
Total Rental Income $18720
= neg 5537 P/A

Total Expense $45397 (not including any tax benefits into these figures)
Total Income $39520
= neg $5877 P/A
$226 P/F

Total Loans $642,286
Total Value $713,000
Total LVR 90%


Scenario 3

I buy a bog box unit in Townsville for 180K, with the intention that it will become an IP once I get posted. Also I will attempt to improve the unit depending on funds and time left in location.

Once again I will use a $35,000 deposit and keep $5,000 as a buffer.
Being a defence member with more that 5yrs service I can utilise the Defence Home Ownership Assistance Scheme (DHOAS) http://www.defcredit.com.au/DHOASAdvantageHomeLoans

Purchase Price $180,000
Stamp Duty $2000
Legal Fees $2000

Total Purchase $184,000
Deposit $35,000

Loan $149,000
Total loans $482000

Loan repayment $1001 P/M
Minus DHOAS $220 P/M approx
= $781 P/M

On going costs would include rates and body corp. approx $3200 which is about $ $250 P/M

Total out goings for PPOR would be approx $1031 P/M, which would involve me downsizing from a DHA 3 bedroom house only costing me $600 per month into a small two bed room unit with no or very small yard. Keep in mind I have my daughter on weekends.

So for the same price as holding two quality IP’s, give or take a few dollars I could have a PPOR and 1 IP total value of 560K or 2 IP’s and I continue with cheap rent and big house with a total value of 710K… I am more inclined with the 2 IP option however if there is anyone that has some other ideas that I could take into account please share…..

Cheers,

Sorry for the long post
 
Hi burty85 ..

I think the numbers tell the story - if you're not feeling the need for a PPOR then Scenario 2 would be the way I'd go.

But I am not certain of the chances of capital growth in the property market in the next little while, so moving slowly from Scenario 1 to Scenario 2 might be a good idea? There's nothing wrong with taking some time to consolidate.

Cheers.
 
Hi burty85,

Just my 2c WTIW - which may be nothing :)

I personally don't like the idea of using Westpac’s 4.99% IO 3yr fixed rate. Its good for now but my suspicions are that in 3 years when you come off that rate (and the global meltdown is done & dusted) that we will be in a higher IR environment.....but I get the reason you have to refi.

I also personally don't like the idea of investing in a unit in Darwin atm. Others much better at it than I, say theat Darwin has peaked and units are about to be in oversupply.

I have no issues with your buying a PPOR or a 2nd IP - only you can decide that. If it was a PPOR it gets turned into an IP when you're posted anyway. I'd be using the cheapest sources of finance that you can and locking it in for as long as you can - if that means the DHOAS stuff - then fine - use that. Don't you also get some cash grant from the def force ppl to help you buy a PPOR?
 
Hi burty85,

Just my 2c WTIW - which may be nothing :)

I personally don't like the idea of using Westpac’s 4.99% IO 3yr fixed rate. Its good for now but my suspicions are that in 3 years when you come off that rate (and the global meltdown is done & dusted) that we will be in a higher IR environment.....but I get the reason you have to refi.

I also personally don't like the idea of investing in a unit in Darwin atm. Others much better at it than I, say theat Darwin has peaked and units are about to be in oversupply.

I have no issues with your buying a PPOR or a 2nd IP - only you can decide that. If it was a PPOR it gets turned into an IP when you're posted anyway. I'd be using the cheapest sources of finance that you can and locking it in for as long as you can - if that means the DHOAS stuff - then fine - use that. Don't you also get some cash grant from the def force ppl to help you buy a PPOR?

Hi Propertunity,

Yes I also believe that the CBD has a lot of units currently under way. However the units I am looking at will be in Palmerston, approx 17km from the CBD. There are no high rise apartments so to say. From memory the highest residential buildings in Palmerston are no more than 5 or 6 stories... I also feel the market has peaked for maybe the next say 1-2yrs, but once the INPEX plant starts construction I believe that prices will pick up and yields will become even higher than they are now. This is the reason I don’t mind jumping into the market with in the next month or so. I could be wrong, but its better to do something than to do nothing...

Yes the ADF will also help you buy a PPOR as long if it is your first home, its called Home Purchase Assistance Scheme (HPAS) and it is quite a large sum of cash, but I have already used this 2yrs ago so cant not claim it again...
 
However the units I am looking at will be in Palmerston, approx 17km from the CBD. There are no high rise apartments so to say. From memory the highest residential buildings in Palmerston are no more than 5 or 6 stories... I also feel the market has peaked for maybe the next say 1-2yrs, but once the INPEX plant starts construction I believe that prices will pick up and yields will become even higher than they are now.

Looks like you've done your DD!

and well done on taking the HPAS - my son's in the Navy and I'm trying to get him to do the same.
 
A choice between unit in city and a unit in Palmerston normally I would say the city but there are a lot of new developments in the city and this looks like it will create an oversupply.

One thing possibly wrong with your figures is you are expecting full rent and no vacancy. To be on the safe side reduce your figures by at least 1 months rent. Also noticed you haven't made allowances for any repairs etc.

Not sure if 330K would be considered higher end. Is the unit in LL Tce?

Darwin feels as if it hasn't peaked and if the last quarter is anything to go buy went up 6% overall. The market still looks strong for another 6 months and with high rents and low interest rates, bottom end properties are still moving upwards.
 
A choice between unit in city and a unit in Palmerston normally I would say the city but there are a lot of new developments in the city and this looks like it will create an oversupply.

One thing possibly wrong with your figures is you are expecting full rent and no vacancy. To be on the safe side reduce your figures by at least 1 months rent. Also noticed you haven't made allowances for any repairs etc.

Not sure if 330K would be considered higher end. Is the unit in LL Tce?

Darwin feels as if it hasn't peaked and if the last quarter is anything to go buy went up 6% overall. The market still looks strong for another 6 months and with high rents and low interest rates, bottom end properties are still moving upwards.

Y33,

Bakewell is more my hunting ground at them moment, due to the fact there is going to be some great deveoplments under way... will be great for that suburb IMHO,

I also believe that that streach of suburbs from Gunn all the way to Rosebery and including Farrar will contiune to do very well due to no Housing commission and lower class bogans/ welfare slackers being able to afford to live in these suburbs...

LL Tce I will not rule out, there is some great units that are in that street and some bad ones too, tho it is the closest housing to Palmerstons CBD and is always in demand for rentals.

Yeah I think that 330K may just be a little short on what i was looking at, it all depends what happens in the next few weeks with my bank, however I am in good postion to start doing my DD's and contacting REA's to get a feel of the market....

and with a little luck there mite be some new stock on the market from over the chrissy break, more choices for me:D
 
Looks like you've done your DD!

and well done on taking the HPAS - my son's in the Navy and I'm trying to get him to do the same.

Yeah its a great kick start, however tho I sure that your aware of it only gets paid after the settlement (and also after the defence loses your paper work twice :mad:) ) so it can not be used as a deposit. And will be taxed, but there is a loop hole for the tax...

If you read into the conditions of the HPAS, it can be submitted anytime after the purchase of the house ( not sure if that applies if you are posted out of location ), so if your son has a up and coming deployment with tax free dollars, submit the paper work while he is away, that saved me over $5,000 doing that on my deployment... :D:D:D

Also if he has severed over 4 yrs service, he could also be entitled to DHOAS which in its self can be used to gain a lump sum payment, so combine that will the FHB grant, all up you could have close to 35-40K for just buying a house, not a bad way to kick it off....

Tho you will have to re read into all of that as it has been two yrs since I used the HPAS.

Good luck to your son and his purchase
 
What makes you think no housing commission? I don't know if it still exist today but there was a % of houses in all new suburbs to be HC to avoid creating suburbs of socio-economic groups. The hard part now is picking some of the HC as they are given to GW who really shouldn't need HC but get it as part of their salary packages or incentives to move to Darwin. When they move out the house then gets put back into the normal pool of HC if no other suitable GW are interested.

My understanding is that during the early 2000 quite a few HC in northern suburbs were sold off and new ones brought in the outer Palmerston areas. Some of these new ones were used as crisis housing or safety houses.

One of my IP's is in LL a 3Br. Picked it up for about 85K and is well over triple that now.
 
What makes you think no housing commission? I don't know if it still exist today but there was a % of houses in all new suburbs to be HC to avoid creating suburbs of socio-economic groups. The hard part now is picking some of the HC as they are given to GW who really shouldn't need HC but get it as part of their salary packages or incentives to move to Darwin. When they move out the house then gets put back into the normal pool of HC if no other suitable GW are interested.

My understanding is that during the early 2000 quite a few HC in northern suburbs were sold off and new ones brought in the outer Palmerston areas. Some of these new ones were used as crisis housing or safety houses.

One of my IP's is in LL a 3Br. Picked it up for about 85K and is well over triple that now.

Well my main defence to this is having lived in two of these new suburbs ( Rosebery and Farrar) I did not see any of the problems that were apparent across the road (Chung Wah Tce) into the slums i.e. Gray, Woodroffe, Moulden etc,

I have also lived in Moulden and Driver...

I haven’t seen any properties in the new estate where old matey itinerant and his 4 brother, 2 aunties, 6 cousins and 4 dogs drinking piss and punching on in the front yard. :D...

The new suburbs are really trying to pick up the name of Palmerston.

As for new suburbs having a % of HC, I am not to sure if that has changed, but from what I have personal seen up there over the yrs, it seems unlikely… Something I will have to get my old man to look into for me.
 
I haven’t seen any properties in the new estate where old matey itinerant and his 4 brother, 2 aunties, 6 cousins and 4 dogs drinking piss and punching on in the front yard. :D...

QUOTE]

Tho this I have seen in many other Palmerston suburbs on many different occations, sure would not like to be living there...

Going back a few yr when I was living in Moulden,

just happened as I was on the bus just about to get off at my stop, all of a sudden BANG,

the window next to me shatered, I almost sh*t myself...

low and behold there is a drunkern itinerant which she managed to push over a concret bin and it broke into pices

then proceeds to throw ( lets say boulder size) pices of the bin at the bus.

Still to this day I dont know why I didnt get off at the next stop, guess It was a common thing to living in Moulden to see what some may think as random acts of stupidness...
 
burty85,

You may have confused HC with being just lower socio-economic. I was pointing out that even GW are given HC accommodation and they are normally spread through out the suburbs. I think your father will confirm this.

I think I lived across the road from your friend with the 4 brothers, 2 aunties etc but there were over 30 of them living there sometimes. Had to laugh one day when 3 empty mini buses turned up and everyone came out from inside the house. Quite interesting to see how they decide who site where and in which vehicle.
 
The government own land in Farrar and Rosebery which is set aside for HC. The new suburb Bellamack also has a small area set aside for hc. You can't avoid it.
 
The government own land in Farrar and Rosebery which is set aside for HC. The new suburb Bellamack also has a small area set aside for hc. You can't avoid it.

Actually now that I think about it I do remember that as you drive into Farrar though Farrar Bvd, the first group of units on the right hand side are only for a group of disadvantaged ppl...

I stand corrected...

Cheers
 
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