Where to invest - Anywhere in Aus?

I can borrow $1M to buy investment(s) anywhere in Australia.

I'm mid 30s and single. Salary is $160K and have about $5k per month to contribute investments. I have 1 IP in Sydney worth $600k. costs $2k pa to hold. - Cash (in offset account) =$200k. - I also have $500k in shares.
I?m currently renting and don?t intend to buy a PPOR. (It doesn't make sense because I'm on long term contract and my rent is subsidised)

It seems that our capital cities are currently highly priced with lower population growth and more supply coming onto the market. Brisbane is hot, but yields are dropping and unemployment is high. Also, population growth is slowing and there are a lot of new developments in the pipeline.
Not sure about the regions since CG is limited.

I know people here can't give investment advice, but I'm interested to hear opinions and ideas. I'm still very new to property investing.

Goal is to earn a passive income of $80k after tax by age 45. (This may or may not happen, but it's what I'm aiming for).
 
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Welcome

Hi there,

Sure anyone can give advice here, I'll start...

Step 1 - have a plan/goal in mind, 2 years, 5 years, 10 years, it looks like you have already started this step.. keep working on it and expand it

Step 2 - build yourself a good team, a broker that understands and aligns with your strategies, accountant that specialises in IPs, lawyer, property manager etc... There are plenty of the above on this forum.

Step 3 - Where to buy...Once the above is sorted - you can start looking at places that fits into your criteria, always have the mindset "will buying this property get me closer to my goals?"

Personally, I am looking at Brisbane & Toowoomba.
Good luck!
 
I have $1M to buy investment(s) anywhere in Australia.

I?m mid 30s and single. Salary is $160K and have about $5k per week to contribute investments. I have 1 IP in Sydney worth $600k. costs $2k pa to hold. - Cash (in offset account) =$200k. - I also have $500k in shares.
I?m currently renting and don?t intend to buy a PPOR. (It doesn't make sense because I?m on long term contract and my rent is subsidised)

It seems that our capital cities are currently highly priced with lower population growth and more supply coming onto the market. Brisbane is hot, but yields are dropping and unemployment is high. Also, population growth is slowing and there are a lot of new developments in the pipeline.
Not sure about the regions since CG is limited.

I know people here can?t give investment advice, but I?m interested to hear opinions and ideas. I'm still very new to property investing.

Goal is to earn a passive income of $80k after tax by age 45. (This may or may not happen, but it?s what I?m aiming for).

Care to share some of that cash? lol
If you can afford to negatively gear go Melbourne within 10km of CBD. Considering it's a long term hold, I rate Melbourne higher than Brisbane due to population growth..

If you're looking for better yields, i'd say go outer Brisbane suburbs south and west..

or be creative and buy as many pieces of land as you can from different estates in sydney and then sell them right after you sign the contract haha they'll go for 20-30k more each..
 
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...Considering it's a long term hold, I rate Melbourne higher than Brisbane due to population growth..

..

I think I read somewhere recently that the 10 year CAGR for Brisbane was higher than Melbourne. Cant remember where...but I think that's probably because of sustained resource prices and mostly because of the low base Brisbane is coming off.

I personally think both Melbourne and Brisbane will have about the same cagr 10 years from now, maybe Brisbane just a bit higher than Melbourne again due to the lower base [ and thus higher % potential] than Melbourne.
Melbourne does have the jobs and economic strength, and that attracts skilled workers and thus pop growth. Already seeing that.
Brisbane however is developing and is in transition into non-mining sectors- the success of that transition will greatly influence the CAGR in 10 years. The resources are still there in Brisbane, and they think LNG will be the next big resource driver. All commodities are cyclical and eventually LNG , along with oil prices, will go up.

I like Melbourne as well, but its just a bit too highly priced at the moment. Sydney , like Melbourne, bigger and better [ subjective I know], and need to win a lottery to buy an equivalent type of property in a similar location as compared to Brisbane.

I don't like any of the other capital cities as they just don't have the economic strength and jobs that the above 3 have.
 
The rough plan is to buy and hold as much property in growth areas as I can safely afford. I am keen to diversify across Australia to take advantage of the different cycles. I?m conscious of cashflow in the case of interest rates rising or my situation changing.

I?m developing a good team of professionals.

I like the idea of Brisbane and Melbourne. I would need to use Buyer?s Agents.

I?m very nervous about investing large amounts of money and potentially not seeing much growth over the long term. Boom times are fun, but Sydney?s long term average growth is only 4.9%pa (Residex), which means after interest and expenses, you would only just break even in real terms. Am I missing something?

The only way I could get the figures to add up for my first property was to buy a 2 yo property with great rent and depreciation. Maybe my calculations are wrong.

http://blog.residex.com.au/2015/02/04/property-market-update/
 
I think I read somewhere recently that the 10 year CAGR for Brisbane was higher than Melbourne. Cant remember where...but I think that's probably because of sustained resource prices and mostly because of the low base Brisbane is coming off.

I personally think both Melbourne and Brisbane will have about the same cagr 10 years from now, maybe Brisbane just a bit higher than Melbourne again due to the lower base [ and thus higher % potential] than Melbourne.
Melbourne does have the jobs and economic strength, and that attracts skilled workers and thus pop growth. Already seeing that.
Brisbane however is developing and is in transition into non-mining sectors- the success of that transition will greatly influence the CAGR in 10 years. The resources are still there in Brisbane, and they think LNG will be the next big resource driver. All commodities are cyclical and eventually LNG , along with oil prices, will go up.

I like Melbourne as well, but its just a bit too highly priced at the moment. Sydney , like Melbourne, bigger and better [ subjective I know], and need to win a lottery to buy an equivalent type of property in a similar location as compared to Brisbane.

I don't like any of the other capital cities as they just don't have the economic strength and jobs that the above 3 have.

If you look at 10 CG rates the winner very much depends on the start/end period, over the last 10 without looking it up I bet BN was close to the bottom but change the window slightly and it's a different story
 
The rough plan is to buy and hold as much property in growth areas as I can safely afford. I am keen to diversify across Australia to take advantage of the different cycles. I?m conscious of cashflow in the case of interest rates rising or my situation changing.

I?m developing a good team of professionals.

Well I think you are on the right track. You have a clear cashflow goal. Presuming you are happy to LOR (live off rent) for the majority of that then there is absolutely no reason you can't achieve your goals with a well balanced portfolio of capital city and sensible outer ring and/or regional properties.

The key to safety in the market I think is owning across a few areas which means your cycles are running at different times. Also a few different property types and yield profiles.

Personally I see problems with inner city apartments in Bris, Melb and Syd right now.

If considering suburban capital city homes I would think something in middle ring Brisbane could be good value with reasonable medium term growth prospects. I think Sydney is too far gone for good buying.

There have been numerous posts on the Sydney ripple starting to move out up and down the coast and into the regions a few hours out of sydney. I am seeing this everyday in South Coast and Southern Highlands.

Capital growth may not be quite as consistent each year but can be spectacular a few years in a row when so many Sydneysiders have money to burn. If you stay ahead of that wave you can do very well indeed. Understanding where various markets are at is quite critical to your buying plan if you are going to buy a few properties in a short timeframe with a view to the best performance.

Growth is also impacting the large regionals but in very different ways at different times. I wouldn't focus too heavily on country towns in your situation but some exposure if the cashflow is good enough might not be a terrible thing.

A balanced approach will see your portfolio heading in the right direction.
 
The rough plan is to buy and hold as much property in growth areas as I can safely afford. I am keen to diversify across Australia to take advantage of the different cycles. I?m conscious of cashflow in the case of interest rates rising or my situation changing.

I?m developing a good team of professionals.

I like the idea of Brisbane and Melbourne. I would need to use Buyer?s Agents.

I?m very nervous about investing large amounts of money and potentially not seeing much growth over the long term. Boom times are fun, but Sydney?s long term average growth is only 4.9%pa (Residex), which means after interest and expenses, you would only just break even in real terms. Am I missing something?

The only way I could get the figures to add up for my first property was to buy a 2 yo property with great rent and depreciation. Maybe my calculations are wrong.

http://blog.residex.com.au/2015/02/04/property-market-update/

Yes the growth may look slow and it may get slower

But...

It's all about leverage - what's 5% growth of 3 million of the banks money ?

What's 10 % growth of the money you actually have - say 300k


Also even with no growth - if you could get a portfolio going of a few million that is neutrally geared and in 25 years you have a few mill in equity for 300k in deposits then it's still happy days - and that's worst case scenario
 
This $80kpa could easily be achieved under 2 years in your position:

Current liquid equity: $700k ($500k shares, $200k cash)
2yrs PAYG income contribution: $120k ($5k x 24mths)
Current equity in Sydney house: $100k (estimate?, could be more?, what is your LVR here?)

Scenario:

Put your $700k worth of shares/cash to work straight away. Any stocks you hold that are not income producing, move those funds to income producing shares or ETF such as VHY etc. Assuming you have got some good dividends coming in from half/most? of your current portfolio already.

Spruice up the Sydney house and sell, unlocking your deposit/equity. ^^^ Put into income producing stock.

Each month, continue to punch into your portfolio over the next 24 months your surplus funds.


In 2 years you should have well over $1mil in income producing stocks as long as you keep reinvesting the dividends. If that portfolio is earning 6%ish ($60kpa), and allowing grossing up for Franking, will be over $80kpa.

Risk: Concentration risk of one asset class.

Pro: No pesky tenants, no toilets to unblock or trees to cut down. No Property Managers to manage, no depreciation schedules etc. No loans, no margin lending. Print one statement at the end of the year and hand to accountant. Receive healthy refund (Franking Credits).


OR, you could buy property all over Australia, dipping into funds for Stamp Duty, Solicitors, damage to property, non paying tenants, insurances, rates............



pinkboy
 
This $80kpa could easily be achieved under 2 years in your position:

Current liquid equity: $700k ($500k shares, $200k cash)
2yrs PAYG income contribution: $120k ($5k x 24mths)
Current equity in Sydney house: $100k (estimate?, could be more?, what is your LVR here?)

Scenario:

Put your $700k worth of shares/cash to work straight away. Any stocks you hold that are not income producing, move those funds to income producing shares or ETF such as VHY etc. Assuming you have got some good dividends coming in from half/most? of your current portfolio already.

Spruice up the Sydney house and sell, unlocking your deposit/equity. ^^^ Put into income producing stock.

Each month, continue to punch into your portfolio over the next 24 months your surplus funds.

In 2 years you should have well over $1mil in income producing stocks as long as you keep reinvesting the dividends. If that portfolio is earning 6%ish ($60kpa), and allowing grossing up for Franking, will be over $80kpa.

Risk: Concentration risk of one asset class.

Pro: No pesky tenants, no toilets to unblock or trees to cut down. No Property Managers to manage, no depreciation schedules etc. No loans, no margin lending. Print one statement at the end of the year and hand to accountant. Receive healthy refund (Franking Credits).

OR, you could buy property all over Australia, dipping into funds for Stamp Duty, Solicitors, damage to property, non paying tenants, insurances, rates............

pinkboy

I like your thinking!

I only have $55k in the Sydney property as I only bought it recently. I'm hoping it will become cashflow positive in a few years so I will keep it.

But I could put all other cash flow into shares and not purchase any more property. Or I could buy just one property for $500k rather than spending the full $1M. Then I could put all further $ into shares.

I'm finding it difficult to get the numbers to add up with property, but it may be my calculations. My figures project only just breaking even, which makes my wonder whether shares is the way to go.
 
Thanks for all your comments, This forum is really interesting!!

Yes the growth may look slow and it may get slower

But...

It's all about leverage - what's 5% growth of 3 million of the banks money ?

So if the property grows at 5%, but inflation is 3%, does that mean the real gain is 2%pa minus costs?
Does that leave enough of a profit to cover the effort and risks taken by the investor?
 
Thanks for all your comments, This forum is really interesting!!



So if the property grows at 5%, but inflation is 3%, does that mean the real gain is 2%pa minus costs?
Does that leave enough of a profit to cover the effort and risks taken by the investor?

Inflation is your friend when you own assets with borrowed money. The bank doesnt inflate the value of your debt by 3% when we have a 3% inflation year. You still only owe the original amount borrowed. Any profit over inflation is good as your leverage keeps you ahead and you want to be paying back the bank much later when those original deflated debt dollars seem insignificant compared to your earning power.

Remember how your grandparents bought a house for 2 pounds, or 200 bucks or 2000 dollars, how easy would those loans be to repay today? Easy. Investing lets you access that.

Money in the bank is much more vulnerable to inflation than property. The other thing is that rents grow with inflation meaning income produced by the assets will continue to increase, that wouldn't happen with interest in the bank.
 
Inflation is your friend when you own assets with borrowed money. The bank doesnt inflate the value of your debt by 3% when we have a 3% inflation year. You still only owe the original amount borrowed. Any profit over inflation is good as your leverage keeps you ahead and you want to be paying back the bank much later when those original deflated debt dollars seem insignificant compared to your earning power.

Remember how your grandparents bought a house for 2 pounds, or 200 bucks or 2000 dollars, how easy would those loans be to repay today? Easy. Investing lets you access that.

Money in the bank is much more vulnerable to inflation than property. The other thing is that rents grow with inflation meaning income produced by the assets will continue to increase, that wouldn't happen with interest in the bank.

Oh, that makes it a lot more clear. Another way of explaining why people have interest only loans IPs.

So does that mean it's better to get something that's neutrally geared rather than negatively geared? That way you are not maKing payments in today's dollars. My advisor prefers low yielding properties in expensive suburbs eg a 2 bedded in the eastern beaches in Sydney. She says that CGs are higher. I understand the tax benifits, but is there any data to prove that expensive suburbs have higher growth? I guess it comes down to supply and demand. Her theory is that there will always be someone with a high enough pay packet to rent in these suburbs, even in a downturn, but wealthy people can lose their jobs too.
 
Thanks for all your comments, This forum is really interesting!!



So if the property grows at 5%, but inflation is 3%, does that mean the real gain is 2%pa minus costs?
Does that leave enough of a profit to cover the effort and risks taken by the investor?

5% growth + 6% yield is a 11% gross return
So real return can be higher depending on yield, expenses and leverage
 
Oh, that makes it a lot more clear. Another way of explaining why people have interest only loans IPs.

So does that mean it's better to get something that's neutrally geared rather than negatively geared? That way you are not maKing payments in today's dollars. My advisor prefers low yielding properties in expensive suburbs eg a 2 bedded in the eastern beaches in Sydney. She says that CGs are higher. I understand the tax benifits, but is there any data to prove that expensive suburbs have higher growth? I guess it comes down to supply and demand. Her theory is that there will always be someone with a high enough pay packet to rent in these suburbs, even in a downturn, but wealthy people can lose their jobs too.

According to Residex the 7 year capital growth for houses in Cronulla from 2006 % was -1,0,9,1,1,6,4 and -9% in 2013. The median value increased from $1134000 to $1272000 for a total gain of $138000 over seven years. This was a return to less than 2% and was below inflation if the property was then sold prior to the recent growth spurt. High pay packet demographics don't always equal great returns
 
Sometimes I wonder how accurate these stats really are.
I know the Cronulla market pretty well on the ground and really can't see how houses would have had a -9% CG in 2013.
From what I saw, the figure should be more like +9% rather than negative 9.
That's a massive difference and probably why I never buy based on stats, just gut.
But I'm not a qualified statistician so could be wrong with my interpretation.
 
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