Rush of blood

[Ace]

I started investing just this year buying 3 apartments off the plan in Feb, a cheaper home unit in April, and an old fibro cottage in a beach town yesterday. None have settled yet, and I'm itching to buy again and have a couple of likely props lined up.

Is this normal for late starters? I feel like I've got to buy, buy, buy! I have a plan, and I'm not spending more than I can afford, but it is a bit disconcerting when I read of people who have been looking for years and can't find their first IP.

I'm kind of enjoying this, but I feel a bit like a sailor on shore leave!

 

[D.T.]

Hi,

IMO, a buying spree is great assuming you have the income/capital backing to support it. Diving in too deep can cause more problems than it can solve, but with this kind of habit perhaps you'll be the next Brenda Irwin

Sounds to me like you have it sorted. Well done.

-Regards

Dave.

 

[BUNDY]

Ace,

I'm with Dave. Yes buying properties is exciting and gives you an adrenalin rush. Congratulations on your investments, but don't be like a bull at a gate.

May be worth waiting to a few settle. Don't forget you have to pay all your legals, stamp duty, rates, etc - and don't forget the dreaded Land TAX. Always keep a bit inthe bank for a rainy day.

Murphy's Law when something goes wrong, it will happen with all of the properties at once.

Bets of luck

BUNDY

 

[WillG]

Hi Ace,

There is no such thing as normal or abnormal when it comes to property investing. It is all a mater of the amount of risk you are prepared to take.

May I ask what will your LVR (Loan / Value) ratio and net cashflow (before tax) be when all properties settle and are tenanted ?

What level of risk can you tolerate ?

Cheers

 

[Ace]

WillG

LVR is something like 70% at this stage relying on an old valuation of PPOR. New valuation will improve this, if needed.

I haven't yet done much thinking about net cashflow but total spend so far is approx $2.5m although I may use my super fund to buy $0.5m of this. Income from my business makes this level of debt manageable, even before tenants are considered.

I like Bundy's suggestion of settling a couple and seeing how that feels. My plan (today anyway) is to pay down the mortgages as much as I can afford rather than ramp up too much. Given the stage of the cycle, I'm pretty realistic about growth - it's more of a forced savings thing with any growth as a bonus. There is some lifestyle in their too as one of the IP's is suitable for retirement/weekender use later. That's if I can ever afford to retire!

Ace

 

[Queen Bee]

Originally posted by BUNDY
and don't forget the dreaded Land TAX. Always keep a bit inthe bank for a rainy day.



BUNDY

What is Land Tax and how much is it and why do you have to pay it?

 

[D.T.]

Hi Queenbee

Its different in every state of Australia - refer to the relevant state's Department of State Revenue website for more information.

-Regards
Dave

 

[Brenda Irwin]

Hi Queen Bee,
In NZ most land is lease hold hense no land tax?
In Aus we have to mostly pay for the land. When the land value increases to a certain threashold the gov taxes you land tax. It is tax deductable on ips.
Cheers Brenda

 

[Will1]

All power to you Ace. I'd throw in a caveat. We do not know much about your situation, but I would ask if you have thought about structures < super fund, family trusts etc>?


I would also suggest that you think about some diversification into other asset classes ( yes folks I know this is a real property forum).

Maybe some shares or commercial property into your portfolio.

Will1

 

[Peter_Tersteeg]

Originally posted by Ace

I like Bundy's suggestion of settling a couple and seeing how that feels. My plan (today anyway) is to pay down the mortgages as much as I can afford rather than ramp up too much. Given the stage of the cycle, I'm pretty realistic about growth - it's more of a forced savings thing with any growth as a bonus. There is some lifestyle in their too as one of the IP's is suitable for retirement/weekender use later. That's if I can ever afford to retire!

Hi Ace,

You seem to be doing very well for yourself. The only suggestion I'd make is that if you're planning to reduce the debt, do it via an offset account. This way you can still have access to the money you've paid off to help you through the times when Murphies law does strike, or even when you need cash for another oppertunity.

 

[WillG]

Hi Ace,

Sounds like you have the risks managed. $2.5mil properties in 1 year is amazing.

'I haven't yet done much thinking about net cashflow'
It may be worth your while doing some cashflow analysis.

@ 70% LVR,
6.5% * (.7 * $2.5mil) = $8k / month interest payments

I wouldn't mind a day job/business that could support $8k/month.

What sort of yields do you expect on your properties ?

Cheers

 

[XBenX]

Ace - you've got a plan - if it works, stick to it...no need for caveats, what ifs etc (they are all in the plan)

keep on truckin

 

[Ace]

WillG

I have pretty modest expectations re yields as 3 of the props are off the plan beachfront apartments (priced $450K - $860K)and I wouldn't expect the agent who sold them to me to be deadly accurate with his rental forecast if you know what I mean. (I'm sure they are a good buy though as all 16 in the group were sold within an hour of release -I got in before release). I hope to furnish one or two of them and go for a high priced corporate market and then maybe keep one of these for private use later if business etc goes well. Or I might sell one before settlement once the building is up if there is any gain.

I'm getting $185 pw on a unit I paid $200K for last month; it is worth more rent, but it was easier to renew with the sitting tenant for 6 months until I get used to this caper.

My latest is a country beachside block with barely habitable fibro cottage, but in a great spot and it is 1300 sq m. This one's about growth, not yield. I'll take anything in rent just to get the negative gearing benefit.

Thanks for the encouragement everyone.

Ace