Too hard, too fast?

Good afternoon ladies and gents,

After many hours of reading through this incredible forum I'm two years into developing my portfolio. But now I'm not sure where to go from here, hopefully someone can offer some insight?

I currently have two properties that are essentially neutral/positive:

IP #1 - Loan: $165,000 - Rent: $250 p/w
IP #2 - Loan: $385,000 - Rent: $480 p/w

I have the loans set up as interest only with an offset account which I throw all my income into with the balance sitting around $30,000 at present.

My predicament is: as I'm still in the acquisition stage of my portfolio, my understanding is to go as 'hard and fast' as possible to gather the largest asset base possible to take advantage of compounding capital growth. If that's the case I would use the $30,000 in the offset account to purchase another property (as I've had insufficient capital growth in the other properties to draw from at this stage).

I'll have to purchase something either either cash flow neutral/positive as I'm on a low income (around $35k p.a) and I'm worried if interest rates go up to say 7-8% I'll probably struggle to service the loans. I'm also worried about having no cash buffer to drawn from in an emergency if I use the offset funds until I recoup the savings.

Essentially, I want to grow my asset base but not sure if it's wise to commit all my available funds at this time however I don't want to sit on the sideline for too long again...

I'm 24 this year and don't have a PPOR (boarding with parents currently) an no bad debt (car or personal loans or credit card debt) to pay down in the meantime.

Any advice my friends? Is there a thing such as too hard too fast?
 
I currently have two properties that are essentially neutral/positive:

IP #1 - Loan: $165,000 - Rent: $250 p/w
IP #2 - Loan: $385,000 - Rent: $480 p/w

I have the loans set up as interest only with an offset account which I throw all my income into with the balance sitting around $30,000 at present.

I'm 24 this year and don't have a PPOR (boarding with parents currently) an no bad debt (car or personal loans or credit card debt) to pay down in the meantime.

Any advice my friends? Is there a thing such as too hard too fast?

You're going pretty hard and fast IMHO...... :)

The Y-man
 
Hi,

Great work on the portfolio. May I ask, how did you purchase 2 loans with a $35k/annum income. Also how much LVR do you have?

I would suggest always to have a cash buffer equal to at least 6 months of expenses. Interest rates will also rise in the not too distant future. Definitely take action, yet remember patience is also an action. The way to win this game is to have a solid foundation as you build up, otherwise it may collapse.
 
Doing your best and staying with the oldies is a great help.

Be patient, and maybe work some more hours for more cash flow.

At 24, you have plenty of time, and time is what it takes.

Soon enough you will be ready to buy again and then again and after awhile it will snowball. Just keep your eye on the risk and be prepared with a cash buffer.

Going well, keep up the good work!

;)
 
I've seen people purchase 5 or more properties within 12 months. I've seen people buy an IP ever 3 years. Neither is wrong, they're doing what they feel comfortable with and in a way that suits them and their lifestyle and means. I don't think you're going hard and fast but I don't think you're taking it slow either.

By all means go as hard as you want, but keep it real. After each purchase reassess your means to purchase another property. Your income isn't very high so you're probably already very close to an affordability issue from the banks perspective. I'm willing to bet there's room from another property but not a lot more until your rents or income increases.
 
Hi,

Great work on the portfolio. May I ask, how did you purchase 2 loans with a $35k/annum income. Also how much LVR do you have?

I would suggest always to have a cash buffer equal to at least 6 months of expenses. Interest rates will also rise in the not too distant future. Definitely take action, yet remember patience is also an action. The way to win this game is to have a solid foundation as you build up, otherwise it may collapse.

Thanks for the feedback everyone.

The low income is definitely a factor, I live in what's considered a 'rural' city so wages are naturally much lower.

The bank has given me the loans I think primarily because I have no existing debt apart from the investment properties and the rental income covers the interest charged on the loan so it must seem pretty safe for them.

Again, due to my income I had to do a 90% and 95% LVR respectively for each loan with LMI capitalised onto the loan. I had to use savings for the deposit, stamp duty and settlement costs.

I haven't had the properties revalued since purchase as the market here hasn't really moved so the LVR should be the same as I haven't paid any of the principle. I don't want to affect my cash flow and hope that time will devalue the loan for me.

Hopefully this is a fair strategy at this point.
 
Well done.

Go hard as you can and when you 30 years old...you will be laughing!

Agreed!

You've done well so far Kookie, keep growing your investments whilst you can. You don't need to take on excessive risks because of your age thankfully, but at the same time you may as well keep the momentum rolling before you enter the 'spending' phase of your life. If you do the hard yards now, you will have a large asset base which can work for you while your enjoy the fruits of your labour later on.

Good work. :)
 
Is there a thing such as too hard too fast?

If you're going to go hard & fast (and you probably should with few serious responsibilities) you need to manage your risks. Think about cash buffers, fixing rates, preventative maintenance, spreadsheet of 'what if' scenarios, etc.
 
Hi Kookie7,

Well done on your acquisitions @ 24!

Imo contact a decent mortgage broker and get a valuation/s done from a another lender.

You maybe able to gain more equity from another lender be it desktop or walk through.

Good luck and rely on equity rather than your own cash.

We all need a buffer but as Ufc presenter Bruce Buffer would say lol "It's Time"!

Cheers Spades.
 
Hi Kookie7,

Well done on your acquisitions @ 24!

Imo contact a decent mortgage broker and get a valuation/s done from a another lender.

You maybe able to gain more equity from another lender be it desktop or walk through.

The issue with this of course is that at high initial LVR purchases substantial LMI has been paid, and would need to be paid all over again. It may still be beneficial to go down this route, but the costs/benefits need to be fully weighed up.
 
Where abouts are your properties ?

Prospects for growth ?

If you are saving at the rate you have been , and can still do that with another IP in tow , I'd be tempted to buy another one and save quickly to build up another buffer .

One way to do it .

Cliff
 
Where abouts are your properties ?

Prospects for growth ?

If you are saving at the rate you have been , and can still do that with another IP in tow , I'd be tempted to buy another one and save quickly to build up another buffer .

One way to do it .

Cliff

The properties are in Coffs Harbour and Toormina.

The primary reason for investing that location is it's where I grew up and currently live so I'm very familiar with the sale and rental market. The suburbs have experienced moderate growth over the last 5 years and average growth over the last 10 years inclusive (according to RP Data). I know the market has been trading sideways for a while from experience and it is hopefully due for some growth soon.

Does it usually cost to have valuations done? They don't affect credit ratings do they if they come in lower than expected?

Perhaps I should also look at properties outside of my local area for additional growth and diversification? Due to my income I am somewhat limited to cash flow + properties which are typically rural which worries me for extended vacancies and low capital growth prospects - conversely I cannot afford to negative gear and can't see any reason to due to my low taxable income.

P.S - Thanks again for all the positive feedback everyone, has put me at ease.
 
With Sydney moving strongly , I'd be expecting growth in Coffs at some stage soon . TYpically the coast will follow Sydney .

The Central Coast and Newcastle are moving .

This cycle has been different to previous so it's hard to be certain when things will move , but given the markets liking for el cheepo properties , if I was in you shoes I'd be happy to be buying in Coffs at this stage .

I spent three months in Coffs 20 odd years ago and Liked it . How much does it take to get a two bedder in the Jetty area and what would they rent for now ? I'd assume that area would have a low vacancy rate . I'd be going around making low ball offers and see who blinks .

Much easier to work locally . If you have good local knowledge in a market that hasn't moved yet I'd be tempted to stay there .

Cliff
 
Kookie7,

I seen an article recently where coffs was 1 of top listed as the place to invest.

Will the new highway help?

Cheers Spades.

Ps.I agree with sea_change above.
 
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Well Done Kookie

Have you thought about an NRAS property? Maybe a one or two bedroom unit .

I haven't really looked into NRAS properties at this stage, I'm not too familiar with them but it's certainly worth looking into further. Thanks for the recommendation.

With Sydney moving strongly , I'd be expecting growth in Coffs at some stage soon . TYpically the coast will follow Sydney .

The Central Coast and Newcastle are moving .

This cycle has been different to previous so it's hard to be certain when things will move , but given the markets liking for el cheepo properties , if I was in you shoes I'd be happy to be buying in Coffs at this stage .

I spent three months in Coffs 20 odd years ago and Liked it . How much does it take to get a two bedder in the Jetty area and what would they rent for now ? I'd assume that area would have a low vacancy rate . I'd be going around making low ball offers and see who blinks .

Much easier to work locally . If you have good local knowledge in a market that hasn't moved yet I'd be tempted to stay there .

Cliff

I hope it moves soon. I'm a little priced out of the Jetty unfortunately, typically you have to pay quite a premium to enter that market and the yields are generally lower as a result making a commitment to that area a concern for cash flow.

Kookie7,

I seen an article recently where coffs was 1 of top listed as the place to invest.

Will the new highway help?

Cheers Spades.

Ps.I agree with sea_change above.

I've read the same article and still have my reservations. We've had a large reduction in the vacancy rate dropping to 3.0% in February from 4.1% in January. Probably as a result of additional highway upgrades, constriction of the new justice centre etc however these are all contractual jobs, long term sustainability and employment level are the one to watch in this region.
 
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