The Next Step

Discussion in 'Where to Buy' started by The Scumfactor, 10th Feb, 2015.

  1. The Scumfactor

    The Scumfactor Member

    Joined:
    13th Jan, 2014
    Messages:
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    Location:
    Glenmore Park
    Hello all
    I would appreciate any advice from you guys in the know! I have been a long time lurker on these pages
    I am 34 years old and currently have my own home and 2 Investment properties and although my friends think im some sort of investing guru, that could not be further from the truth!
    I owe 200k on my PPOR in Glenmore Park, NSW that is valued by the bank at 540k
    My first investment was acquired in Feb 2013 also in Glenmore Park a duplex for 317k. The loan on this is 288k .
    This has now been valued at 435K and is rented for 400p/w
    My second IPO was purchased in March 2014 a townhouse in St Marys for 330k, the loan on this is 264k .
    This is now valued at 360k and rented for 380p/w
    I also have a 120k line of credit that was used to help with the first 2 Investments
    Here lies my issue I have been very lucky with the booming Sydney market.
    I basically bought where I knew for the first 2 and feel as luck more than anything has gotten me to this point.
    I am aware that I should diversify my holdings in different markets
    My goal is to have enough passive income in 15 years to live off ( approx 60k -80k a year in todays terms) I dont expect a champagne lifestyle!
    I have been approved a loan for 500k. I dont know if I should buy one property or buy 2 separate units/townhouses etc.
    I am looking at QLD but have no idea where the best place to buy would be?
    Anyone got any suggestions?
    Prob sounds like a how long is piece of string type question but I dont know who else to speak to for advice!
    Cheers everyone and thanks for reading any advice is welcome
     
  2. Michael_X

    Michael_X Member

    Joined:
    10th Jun, 2013
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    Location:
    Sydney, NSW
    Hi Scumfactor,

    You are in a really good position, 2 IPs along with a PPOR!

    My suggestion is do the numbers and find a suburb which meets your criterias in terms of cost and yield. This thread has some good discussion on Brisbane http://somersoft.com/forums/showthread.php?t=100334

    If you are after yield areas like Logan and Beenleigh is good too.

    Don't have your financials so hard to say but suspect you might be able to go further than a $500k loan. Suggest speaking to a broker on SS, they may be able to map out your journey to go further.

    Cheers,
    Michael
     
  3. The Scumfactor

    The Scumfactor Member

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    Location:
    Glenmore Park
    Thanks for the help and advice Michael
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

    Joined:
    23rd Apr, 2014
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    Location:
    Perth WA
    Hey Scumfactor :)

    I can't offer much more insight into Brissy than Michael did, but before you buy again it'd be worth making sure your loans are structured properly to maximise borrowing and allow you to expand down the track.

    If they're X-coll, now would be the time to untangle them and get the equity released at the same time for your deposit.
     
  5. MIW

    MIW Member

    Joined:
    16th Oct, 2011
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    Location:
    North Shore, Sydney NSW
    Well done!
    If you are unsure where in QLD then read up on this forum, there are lots of ideas and suggestions? What is your strategy, what level of LVR do you feel comfortable with to progress further? It would seem at the moment your total loans are $872K against $1,335K equity, so LVR would be approx. 65%.
    It would seem you can duplicate again if it lies in your risk... I would always allow some buffer as a LOC, for unforseen circumstances, that's just my low risk taking!
    Basically, the generalised concept is that if you buy an IP for $500K, in well located area, then you hope for good CG, say to increase to $1m in 10 years. So the rough costs would be, it would cost you about 1/3, 1/3 pays the taxman, and 1/3 the tenant. So for $15K a year x 10 years = $150K would cost you to hold this IP, hopefully for $350K gain (this is just high level advice).
    I prefer the strategy in Monopoly, buy few average IPs, then when rents and equity increase, buy a premium one IP (hopefully for the better CG, easier said than done but it can work!).
    Do some research on suburbs where incomes are rising and if you can buy at median cost with potential to add value down the road then that's the place to invest -IMHO.
    You see no one can give you specific advice as we all follow different strategies, so that should be your priority, deciding what is yours? Also pointing out the suburb is useless if the number or the deal does not stack up, right? At least at this stage you are on the right track growing your asset base!
    I hope this helps a little and good luck!:):)
     
  6. knightm

    knightm Member

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    Good job Scumfactor - and nice post (and nice name)

    You have lots of options, I would suggest don't just rush to somewhere like Logan because it is the flavour of the month on Somersoft. Granted this forum is generally ahead of the curve you need to have a good hard think about how you want to get to that cashflow position in 15 yrs. If property is your vehicle, then the income is likely to come from rents. Getting there is going to be a combination of rent and capital increases.

    I like to to think in REALLY basic terms. Imagine a time in the future when you have some houses fully paid off. Imaging they provide you with 5% net return on average. Imagine say 6.5-7% return gross but after rates and insurance etc 5% net. It might be a combo of inner city, suburban and country properties. Just 5% across a portfolio. You with me?

    Ok now to hit 80k per annum, you need 1.6 mil worth of unencumbered real estate yielding the above rates.

    Ok no to get 1.6 mil worth of real estate you could do a number of things:
    1 Buy 10 160k houses and wait for them to double (as long as they all double within 15 yrs you are sweet)
    2 Buy 5 320k houses and with for them to double as above
    3 Do something like 1 or 2 but do renovations to increase speed
    4 As above but add small development, granny flats etc into the mix to generate your own equity.
    5 Any combo of above but end up selling some, buying commercial real estate
    6 As above sell and buy a cash cow block of units, hotel or higher yielding asset that is more specialised.

    All of the above have their pros and cons and specific risks.

    All of the above rely a bit on you and a bit on the market. The more active options require more of you, the more passive options are more market based.

    Personally I would want a spread of locations.

    I would want to catch the ripple of capital growth and do a little value adding as best I could to avoid long lulls in the early years as you need to keep refinancing in the early days to purchase more (unless you can very quickly save deposits from you job)

    Queensland presents many options but try to ride the trend so you get some growth in yrs 1-3. Personally SEQ looks ok to me - Bris and Gold Coast but do plenty of due diligence on suburbs and properties to avoid the duds there are plenty.

    The Sydney ripple is also worth considering as it is pushing out into other areas of NSW.

    Keep reading here there is lots to go on. You will do well. There is nothing wrong with being the "guru" to you friends just keep that attitude that there is more to learn and you will keep growing. This place has libraries full of property knowledge.
     
  7. datto

    datto Member

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    I'm with knightm....love your name bro! (unfortunately I didn't read the rest of knightm's post lol)
     
  8. knightm

    knightm Member

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    DATTO!
    :mad:
    :p
    :D
     
  9. datto

    datto Member

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    I'll get around to it soon. I promise.
     
  10. Colin Rice

    Colin Rice Perth Mortgage Broker

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    Theres plenty of us that can relate to that if we are honest ;)

    Fortune favours the brave.
     
  11. CosmicTrevor

    CosmicTrevor Member

    Joined:
    15th Nov, 2014
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    Location:
    Sydney, NSW
    You have been fortunate to ride the Sydney wave.

    Your instincts with your first 2 IPs have served you well, but in an alternative market you may start to doubt yourself. The reality is you probably know more than you realise (ie it is more than your instincts, you actually have real world experience and have been successful). My suggestion is to identify both quantitative and qualitative pros and cons for your PPOR and IPs ie what do you like and what don't you like about them. You should end up with a list of objective/provable facts (quantitative) and instinctive/emotional/subjective thoughts (qualitative). This combined with your objectives, borrowing capacity and specific taxation advice should help you narrow down the types of property, markets, budget and purchasing structure to look at.

    Having your current success is a double edged sword, with the downside being the possibility that you will approach other deals with a degree of optimism that may be unrealistic. For this reason I think it important that you approach your next transaction with a sceptical eye - ie look for information to support what you are being told and then check again with another source.

    Having just bought 2 IPs in Brisbane I'd recommend you get up there and connect with agents in person as in my experience many great opportunities never make it to mainstream marketing and are sold to their "investor network".

    Good luck
    Trev
     
  12. Redom

    Redom Mortgage Broker

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    Location:
    Sydney (West) and Canberra
    Well played with the Sydney purchases - i had similar gains associated with being in Sydney and having the market wave do the trick (which i also associate more with luck than genius).

    Definitely a good idea to diversify.

    I'd start by crystallising your plan a little further and working out how to get there. If you seek a passive income target in 15 years, what sort of asset base v debt position will you need to have to get that? This should in part guide you for your next few purchases.

    I may be biased here, but be sure to match your finances to get to that goal. Common mistake is to go to the same bank you always bank with and when they say no, you think its over. The reality is, after you've got a few loans with one bank, its highly likely you'll be able to borrow drastically more by switching lenders. Having all this information available to you will guide you through what to purchase and how to get you to the asset profile required to achieve your income goals.

    Goodluck - you definitely start from a great position. Plenty of equity to use.

    Cheers,
    Redom
     
  13. The Scumfactor

    The Scumfactor Member

    Joined:
    13th Jan, 2014
    Messages:
    6
    Location:
    Glenmore Park
    Thanks everyone who has offered there advice and opinions thus far. I really appreciate the feedback! You guys are awesome:)
    I will find out the exact pre approval amount next week.
    I am also seriously considering a BA for these the next buys.
    Does anyone know if I get 2 separate properties through the same buyers agent if a discount applies?
     
  14. Colin Rice

    Colin Rice Perth Mortgage Broker

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    If you ask then highly likely.
     
  15. Daviid

    Daviid Property Scout

    Joined:
    11th Jan, 2013
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    5
    Location:
    QLD
    Brisbane areas -

    Curiously Morayfield is tipped to do well this year, a new business park and being fairly under valued for where it is and it's proximity to services, transport etc
    North Lakes is also going great but can be expensive to get into, look around it - Dakabin, Rothwell, Mango Hill. They should all experience growth from the North Lakes spill over.
    Logan - Marsden, Loganlea and the Stocklands estate in Logan Reserve are all going through price growths. Keep an eye on valuations, they're coming in up to 10% out. 5% out is about the best you'll do in this area.
    In Ipswich - Springfield Lakes is going nuts, land pre-selling months prior to registration and each release seeing price increases. Nearby is Augustine Heights and Bellbird Park - both seeing steady price rises and very strong demand not only from buyers but also renters.
    Northern Gold Coast - builders saying all new builds tenanted from day 1, some property managers reporting over 100 enquiries on new properties and over 20 genuine applications per property. Rents have jumped $30/wk in Pimpama in the last 6 months.

    You can still buy <$400,000 in:
    Morayfield
    Dakabin (3 bed)
    Bellbird Park
    Pimpama (3 bed)

    You can buy <$450,000 in most of the other places listed above.
    >$450,000 - no point as there are cheaper properties with same rents, size etc

    Yields for off the plan in SEQ right now - if it's not at LEAST 4.5% don't touch it as there are plenty that are. You can even hit 5% yields on single income new builds.

    Keep away from - Dual key properties in the Ipswich area, they're being crucified by valuers ($50k - $80k under contract price) as this area has been over supplied and the banks have fallen out of love with these things.
    - Highset new builds, you don't get a lot more rent right now for the extra cost of construction

    Hope that helps.