Strategy advice

[merlin6014]

Hi here is my situation:

- 32 yo, 3 young kids - salary approx 170K
- Wife works PT approx $30K
- Live in Sydney house valued at $1.2M owe $350k
- No investments.
- No cash, no debts.

I've researched property investment for about 12 months now and ready to take the plunge. I have the $850K equity to invest above, and pre-approved for IP loans.

Bit confused about strategy though...basically I just want to build wealth, and retire comfortably - I'm also happy to become an investor/developer/renovator full time in say 10 years time.

Although I work a white collar job I grew up with a builder father and picked up many of these skills while growing up and certainly enjoy getting my hands dirty (I've now reno'd 3 of my PPOR's myself to get to where I am now). So renovation is a bit of a passion.

So first plan was to invest in run down Sydney houses, do some reno work then rent out. I just don't see the value at present though - I see Sydney at its peak. I have now started looking at Brisbane as I see it about to grow - done a fair amount of research and have some suburbs in mind - can pick up a couple of houses for say $500K each and rent them out. Disadvantage is I would need to pay a BA (and its proving hard to find one at present) and also obviously very hard to renovate something in a different state.

Or wait for a Sydney correction before moving into that market. What do you think?

 

[tobe]

start with a couple of cheap fixer uppers in regional towns near enough to work on yourself? See if you are any good at it while you wait for the sydney market to turn or take the plunge into an interstate market.

 

[Neptune]

Why do you say it's hard to find a BA at the moment? Interested to hear your experiences.

 

[danwatto]

Hi Merlin,

Paying a BA isn't compulsory.

I've just purchased 4 properties in Adelaide all based on flying there for open houses, and then making offers remotely from Sydney after that. Those that I wasn't able to see, I used my PM to "rental appraise" them, and a building inspector. All fairly cheap properties so the risk was spread.

Going to do the same in Brisbane this weekend.

BA may be worth the money to some with lack of time, but I think there is a learning process in "doing" that you won't get from using a BA. You get to know the area better too by researching yourself.

 

[merlin6014]

Hi Merlin,

Paying a BA isn't compulsory.

I've just purchased 4 properties in Adelaide all based on flying there for open houses, and then making offers remotely from Sydney after that. Those that I wasn't able to see, I used my PM to "rental appraise" them, and a building inspector. All fairly cheap properties so the risk was spread.

Going to do the same in Brisbane this weekend.

BA may be worth the money to some with lack of time, but I think there is a learning process in "doing" that you won't get from using a BA. You get to know the area better too by researching yourself.

Useful advice - I was leaning towards a BA as with 3 kids flying up for a week isn't really an option unless I take a week off work and go by myself and even then no guarantee i will find a suitable property in that week. From my own research I've narrowed it down to a few Brisbane suburbs so was looking at a full service BA to just take care of it all for me - but yes perhaps you may have a point there...

Subsequent purchases would be in Sydney so no need for a BA.

 

[merlin6014]

Why do you say it's hard to find a BA at the moment? Interested to hear your experiences.

Well I've contacted two separate BA's in Brisbane via their websites and not even an acknowledgement email back yet (been a week). Was reading in other threads on here many aren't taking new clients at the moment as Sydney investors are flooding the Brissie market. Obviously next step is to call them but I'm in no rush.

 

[knightm]

Hi here is my situation:

- 32 yo, 3 young kids - salary approx 170K
- Wife works PT approx $30K
- Live in Sydney house valued at $1.2M owe $350k
- No investments.
- No cash, no debts.

I've researched property investment for about 12 months now and ready to take the plunge. I have the $850K equity to invest above, and pre-approved for IP loans.

Bit confused about strategy though...basically I just want to build wealth, and retire comfortably - I'm also happy to become an investor/developer/renovator full time in say 10 years time.

Although I work a white collar job I grew up with a builder father and picked up many of these skills while growing up and certainly enjoy getting my hands dirty (I've now reno'd 3 of my PPOR's myself to get to where I am now). So renovation is a bit of a passion.

So first plan was to invest in run down Sydney houses, do some reno work then rent out. I just don't see the value at present though - I see Sydney at its peak. I have now started looking at Brisbane as I see it about to grow - done a fair amount of research and have some suburbs in mind - can pick up a couple of houses for say $500K each and rent them out. Disadvantage is I would need to pay a BA (and its proving hard to find one at present) and also obviously very hard to renovate something in a different state.

Or wait for a Sydney correction before moving into that market. What do you think?

Personally I think buying in Sydney now is counterproductive as the cycle is nearing its peak. SEQ is an option but there is also the Sydney ripple out. You could have heaps of fun heading out to catch it. With your equity you could actually do a bit of both.

 

[WattleIdo]

I agree that the frenzy in Sydney is cooling off and things have settled back a little. I don't think it will be going backwards or will become a buyers market for a little while yet, though.
I reckon go elsewhere now and come back to Sydney later, unless you really need to buy there. There'd be some great renting in Sydney about now, I'd say.

 

[jackbak]

Or wait for a Sydney correction before moving into that market. What do you think?

It all depends on your strategy. If you're in for the long haul then I wouldn't have a problem buying in Sydney now.

 

[Rolf Latham]

Bit confused about strategy though...basically I just want to build wealth, and retire comfortably - I'm also happy to become an investor/developer/renovator full time in say 10 years time.

if you are looking to use your portfolio and its growth to further expand that portfolio, then it would be worth spending some time to ensure that what you have on the table will suit you.

Typically, a bank or simple transactional broker derived strategy will allow to grow to a portfolio of X.

A finance structure designed to take into account longer term growth goals will allow for 1.8 to 2.5 X. I will let you work out the NPV differences of those 2 outcomes over a couple of cycles........

If you dont need to purchase more than your current pre approvals provide for then there is generally no need to optimise what lender to use why and where in your growth cycle, since you just focus on paying down your loans and happy days

If its your goal to grow to much beyond the current path, ask your banker or broker to take you down the path and show you how it can be done, and what you need to do to make it happen.

I often find people will spend months or years doing IP based research and then walk into their current finance provider and simply accept whats on the table, without realising that for many investors growth strategy financing is as important as IP selection, and in some cases more so.


ta
rolf

 

[knightm]

I often find people will spend months or years doing IP based research and then walk into their current finance provider and simply accept whats on the table, without realising that for many investors growth strategy financing is as important as IP selection, and in some cases more so.

rolf

+1 for Rolfs thoughts on Finance. With your equity a rubbish broker or bank will get you a few loans. A really good one with the right structure will get you MUCH further.

Several of the brokers on this forum (rolf, jamie m, peter t etc) are some of the absolute best in the business and so much better than the garden variety that my eyes water.

Build a good team, work with them, you will do well.

 

[LeoT]

- I see Sydney at its peak. I have now started looking at Brisbane as I see it about to grow - done a fair amount of research and have some suburbs in mind - can pick up a couple of houses for say $500K each and rent them out. ?

I think your on the money here, Brisbane is most likely the next place to see the best CG.(no one REALLY knows 100%) .

I think if your looking within 10km to the cbd (I certainly would) then its more like going to cost 550k to 600k. I certainly would not be buying in Sydney now.

 

[LeoT]

Personally I think buying in Sydney now is counterproductive as the cycle is nearing its peak. .

Thumbs up for this post.

 

[LeoT]

I often find people will spend months or years doing IP based research and then walk into their current finance provider and simply accept whats on the table, without realising that for many investors growth strategy financing is as important as IP selection, and in some cases more so.


ta
rolf

Agree. And that's because most 'investors' still don't have a clue what their doing. I find it mind blowing that many people think they can just buy properties without really reading a few books on the matter. I call it pure gambling. That's the reason why only a very, very small percentage of Australian investors are able to build a large enough portfolio to achieve their goals.

 

[LeoT]

It all depends on your strategy. If you're in for the long haul then I wouldn't have a problem buying in Sydney now.

Even if your in it for the long haul, most people would still want to maximise their chances of building a large enough portfolio as soon as possible (no rush, just not waste any time). Therefore buying into a market such as Sydney is in now is not a maybe.. or perhaps.. its just a simple NO. For so many reasons. I think people need to remember that PROPERTY is not the goal. Its just the vehicle to help you get to the goal in the timeframe you would like. I don't see how buying a property in Sydney now is going to help most people get to their goals faster

1. Inflated prices
2. Valuation might require you to put in more equity
3. Very hard to buy below intrinsic value (if impossible) so forget discounting. Don't forget, ALOT of equity is made when buying at a 'discount' price
4. You will likely have to wait a loooong time for CG,
5 Which then means you cant extract the equity sooner to further expand your portfolio
6. hence it means you will get to your goals slower. Much slower, if you ever get there at all.

If people are serious, dead set serious about achieving their goals...this stuff is key.

 

[LeoT]

Several of the brokers on this forum (rolf, jamie m, peter t etc) are some of the absolute best in the business and so much better than the garden variety that my eyes water.

.

2 thumbs up to that!

 

[Rolf Latham]

That's the reason why only a very, very small percentage of Australian investors are able to build a large enough portfolio to achieve their goals.

One of the main reasons many dont is that they dont have a quantifiable goal to commence their journey

"financial freedom" or "retire early" are way way to loose to be useful


for many, both can be achieved by selling all we have and going on centrelink..........


Defining what you want, why you want it, what you are willing to risk and/or give up will allow you to form a strategy to head down the path

Nothing really worthwhile comes from working within your comfort zone

ta
rolf

 

[LeoT]

One of the main reasons many dont is that they dont have a quantifiable goal to commence their journey

"financial freedom" or "retire early" are way way to loose to be useful


for many, both can be achieved by selling all we have and going on centrelink..........


Defining what you want, why you want it, what you are willing to risk and/or give up will allow you to form a strategy to head down the path

Nothing really worthwhile comes from working within your comfort zone

ta

rolf

Kudos to the above post !!! Its spot on, Couldn't be more spot on. You know.. the few words above are really largely the secret to building not only massive wealth, but also massive success. The major problem is the vast majority of people will read your comments and think..hmm yeah yeah..sounds too simple airy fairy stuff and ignore it..BUT IT IS FREAKIN KEY!!! ahh..