Should I buy more houses or wait?

[New_Investor]

Hi Everyone,
I am a new investor. I just bought 2 IP's in October and December, I have 100K's in savings (offset againt my own house), and 2 loans for the IP's.

according to my income, my Broker says that I can borrow another 300K's. which is kind of good for the houses I am interested in.

I am trying to be in the safe side, this is why I am keeping some money aside just in case something wrong happens, also I am keeping in mind that interest rates won't be as low forever.

Should I go and buy another one, or settle down, and wait until those houses build equity to be able to buy the 3rd one with 10% equity built in the IP's I currently have.

My 2 IP's are almost neutral, one i bought for 290 (now evaluated for 320), renting for 350, and one bought for 235 renting for 300.

I am a bit worried to be involving myself in high risk, and at the same time, I do not want to be missing good opportunities.

I have loan of 350K's on my house, and the last valuation for the house is 520K's.

Your responses and experiences will be highly appreciated.

Thanks
Ram

 

[Lord Shanghai]

Hi Everyone,
I am a new investor. I just bought 2 IP's in October and December, I have 100K's in savings (offset againt my own house), and 2 loans for the IP's.

according to my income, my Broker says that I can borrow another 300K's. which is kind of good for the houses I am interested in.

I am trying to be in the safe side, this is why I am keeping some money aside just in case something wrong happens, also I am keeping in mind that interest rates won't be as low forever.

Should I go and buy another one, or settle down, and wait until those houses build equity to be able to buy the 3rd one with 10% equity built in the IP's I currently have.

My 2 IP's are almost neutral, one i bought for 290 (now evaluated for 320), renting for 350, and one bought for 235 renting for 300.

I am a bit worried to be involving myself in high risk, and at the same time, I do not want to be missing good opportunities.

I have loan of 350K's on my house, and the last valuation for the house is 520K's.

Your responses and experiences will be highly appreciated.

Thanks
Ram

You seem to have built a good, solid position. Rather than risk it all by joining the herd, take time to carefully search for bargains that meet your requirements. There is still plenty of opportunity out there for those who carefully search for exceptional value.

 

[Rixter]

What do you think you should do? You know your own personal risk profile and situation better than any of us.

We are all different, thus everyone's answer will be different.

Go with your gut and/or advice from your mentor who knows your exact personal situation/risk profile.

 

[Rolf Latham]

im all into gearing to the teeth...............................

but

if the portfolio is primarily neg geare growth asset, then youd want to make sure you have various risk management strategies in place such as rate risk management, income and trauma protection etc, AND obviously a commensurate cash or accessable equity buffer

ta

rolf

 

[Jess Peletier]

I agree with Rolf - figure out how much you need in the bank as a risk buffer, eg to cover the loans if both/all properties are empty for a period at the same time, and then see what's left for a deposit.

It's never a great idea to have no liquid assets and from experience it is the best thing ever when the situation arises that you need it. Takes all the stress away.

 

[Jamie M]

Hi Ram

I agree with the others - maintaing a cash buffer is very important.

How much you require depends on your own personal circumstances and tolerance to risk.

Rolf also makes a good point about having other mitigators in place like insurances.

Cheers

Jamie

 

[Redom]

Depends on the deal and plan - find a great one and go in. Be aware of the timing of the market (reasonable guestimating will do), and you can manage risk IN property by diversifying into different markets.

In terms of risk buffers, with 100k in the offset and looking for a ~350k PP - you should be able to close the transaction (at least at a 90% lend) - with around half left over. For a few IPs, 50k is a pretty healthy buffer (IMO).

Cheers,
Redom

 

[New_Investor]

Thanks Guys,
Thanks for all you responses. I have the insurance piece covered. we are a dual income family. I calculate repayments based on a 7% interest.

However, I didn't think of what happens if all houses are without rent at the same time. I need to think about couple of other scenarios you guys highlighted.

Thanks for all your help.
Ram

 

[Rolf Latham]

However, I didn't think of what happens if all houses are without rent at the same time.

youd be somoewhat unlucky for this to happen, AND continue for say 3 mths

thats why a risk management buffer is important. It makes such risks, lower risk

ta

rolf

 

[knightm]

However, I didn't think of what happens if all houses are without rent at the same time. I need to think about couple of other scenarios you guys highlighted.

Thanks for all your help.
Ram

The best way to cover this risk is to have properties in multiple locations. Different economic trends reduce the risk of soft rental markets concurrently. As others have mentioned buffers are good too.

 

[Jess Peletier]

We've got the situation right now where we've kicked one of our tenants out cos we're moving into one of our rentals (we were renting ourselves previously) a tenant in one of our properties isn't paying rent very regularly AND a house we're building is 3 months behind schedule. Very very pleased we've got a buffer.

 

[The Y-man]

I am a bit worried to be involving myself in high risk, and at the same time, I do not want to be missing good opportunities.

Not enough info to make anything close to a judgment call....

How much of the house hold income can you put aside every month?
How long did it take you to build up the $100k?

You can appreciate that it's a very different scenario between someone for whom it took 5 years to build up $100k vs someone who can put aside that in one month....

The Y-man

 

[long88]

buy until you cant afford to buy.

you will lose out if the price of property goes up..

property never goes down... it always goes up..

PS: watch out who you taking advice from.

 

[pinkboy]

buy until you cant afford to buy.

you will lose out if the price of property goes up..

property never goes down... it always goes up..

PS: watch out who you taking advice from.

That is dangerous advice!

pinkboy

 

[SK Investments]

That is dangerous advice!

pinkboy

I agree, at least they said to watch out who you take advice from

 

[pinkboy]

long88, perhaps you need to read this thread to get a bit of a reality check:
http://somersoft.com/forums/showthread.php?t=104804

pinkboy

 

[long88]

thx pinkboy.

i got 2 there in US

that is why i said, watch out who you taking advice from.

broker always says you can borrow $XXX

it is up to yourself whether you want to sleep good at night, or have a sleepless night (and how you manage your perceivable "good debt").

US market is the example where the "good debt" turning against you.

long88, perhaps you need to read this thread to get a bit of a reality check:
http://somersoft.com/forums/showthread.php?t=104804

pinkboy

 

[pinkboy]

buy until you cant afford to buy.

you will lose out if the price of property goes up..

property never goes down... it always goes up..

PS: watch out who you taking advice from.

thx pinkboy.

i got 2 there in US

that is why i said, watch out who you taking advice from.

broker always says you can borrow $XXX

it is up to yourself whether you want to sleep good at night, or have a sleepless night (and how you manage your perceivable "good debt").

US market is the example where the "good debt" turning against you.

I was referring to this really cr@ppy piece of advice!

pinkboy

 

[unloadmymind]

property never goes down... it always goes up..

Once upon a time, there was a mining town (which we shall call "Perth") where the overlords discovered some metallic soil that can be sold to the Chinese.

It was called the "Wild West Iron Ore Rush".

Then everyone started coming over to dig the same stuff from the ground to sell to the Chinese, causing the "Great Iron Ore Glut".

The home builders thought, more will be coming over to dig more and more dirt, so they decided to build more houses for these future dirt-diggers.

The builders thought, "property always goes up," being the "Golden Rule of Property".

But these builders did not realise the dirt diggers were cannibalising each other.

And so as the dirt diggers succeeded in eliminating each other, the builders had no-one to sell their houses to, nor no-one to rent out their properties to.

It then became known as the "Great Perth Housing Glut".

So the remaining dirt-digging renters and housecavengers lived haplessly ever after.

 

[New_Investor]

got it now

Thanks guys,
I have re-calculated my risk based and I took into consideration all your comments.

My 2 properties are in Brisbane, next to train staitons, shops, schools. but in 2 different areas, Evaluation looks very good at the moment. 2nd one is well below market price as it needs some work (nothing major).

I will wait until those 2 build more equity, and I won't go for a 3rd one until I use the equity from one of those. My money I will try to keep as a backup all the time.

I don't have any other dept, no credit cards, no car loans,...etc.

So hopefully I can build equity more quicker. and my next property should be in another state to mitigate the risk.

Thanks
Ram