Which Investment Strategy?

[itxrd]

Hey all. Hope you can give me some advice. I am an avid reader and have asked for advice once before a while back and that really helped change the way I thought. Am pleased that I asked you all for your input then and hope you can help now

Currently we have just the one IP in Marayong. GF is nearly complete and it will be slightly positively geared. We rent (750 pw) but we're at the stage where we need our own house

In 1 year we are looking to buy our PPOR ($1.1m budget) but before that we can buy another IP (around 400k budget).
We have 2 options:

1. Buy an IP in NSW out West say ? Campbelltown and surrounds or up on the Central coast (some place next to a beach where people retire and we could eventually too).
Then buy our own PPOR
Adv's - Have an good sized PPOR
Dis-adv's - Land tax in NSW. All our eggs in NSW

2. Buy an IP in Gold Coast or Adelaide
Then buy our own PPOR on a big block of land. Find one a bit run down, put a GF on it to rent out and we live in the main block. If it?s a bit run down the GF builders can fix it up as they do the GF.
Adv's - Help with our mortgage, Diversify states, reduce land tax,
Dis-adv's - Living next to a GF

Any advice would be most welcome. Maybe both ideas are dumb but just want to get your thoughts? also apologies if it's in the wrong thread. I wasn't sure which one covered Property Investment strategies

 

[macca446]

Hey all. Hope you can give me some advice. I am an avid reader and have asked for advice once before a while back and that really helped change the way I thought. Am pleased that I asked you all for your input then and hope you can help now

Currently we have just the one IP in Marayong. GF is nearly complete and it will be slightly positively geared. We rent (750 pw) but we're at the stage where we need our own house

In 1 year we are looking to buy our PPOR ($1.1m budget) but before that we can buy another IP (around 400k budget).
We have 2 options:

1. Buy an IP in NSW out West say ? Campbelltown and surrounds or up on the Central coast (some place next to a beach where people retire and we could eventually too).
Then buy our own PPOR
Adv's - Have an good sized PPOR
Dis-adv's - Land tax in NSW. All our eggs in NSW

2. Buy an IP in Gold Coast or Adelaide
Then buy our own PPOR on a big block of land. Find one a bit run down, put a GF on it to rent out and we live in the main block. If it?s a bit run down the GF builders can fix it up as they do the GF.
Adv's - Help with our mortgage, Diversify states, reduce land tax,
Dis-adv's - Living next to a GF

Any advice would be most welcome. Maybe both ideas are dumb but just want to get your thoughts? also apologies if it's in the wrong thread. I wasn't sure which one covered Property Investment strategies

Hi,
You really need to work out what you are trying to achieve,by buying a PPOR up to 1.1m and putting a granny flat there you say yourself living with others so close,think about resale point of view in time not to many people spending over 1m dollars would want that either so a huge negative there. Having such a huge non deductible debt will slow down your borrowings for investing unless you are on mammoth wages,or option 3 rent and why not invest in numerous properties in different states and in time you can sell down to buy your PPOR you have to look at how old you are and where you want to be at a certain time in life and work that into your strategy,just my thoughts.

Macca446
Macca446

 

[itxrd]

Thanks for the reply Macca446. Definitely some food for thought there

Strategy is to keep these properties for 20+ years. So resale wouldn't be an issue but you are definitely right. Not many buyers paying over $1 million don't want a GF in the back. I'm going to be 40 next year and while logically renting as you say is the way to go we just can't keep renting. Reasons are:

1) We need our own place and are sick of moving. Landlords wanting to sell etc. Its a big hassle with 3 kids
2) Rent where we live - Cammeray/Cremorne would be $1000pw+. I find that hard to justify. Right now we pay $750 in a 3 bed but there are 6 of us now and we need 4 beds.

To be fair we're not going to buy in the same area. Looking at moving out to Wahroonga probably. Hence the $1.1m figure.

Strategy wise it would ve get IP first, then PPOR. And you're right once we have that PPOR we will have to pay it down and not be able to invest for prob 5 years or so but we could live with that.

But you've put me off the $1m place GF...diddums. What else could we do...

 

[macca446]

At the moment being 40 and your family unit as it is quite large having a PPOR of your own for me yes I would do that and do your investing around that,you obviously are on a good income so paying down the home to use equity is a good Idea for further properties but make sure they are stand alone ,please this is only my thoughts only you need to decide what is best for you now and plan for your future as well.
You need to have direction and be decisive as you can miss out on good deals in all sorts of markets,I came from very humble beginnings and was up to now had a $2m dollar portfolio on a 60k wage built up over time so anything can be done you just have to know what you want in life and go for it and plan exit strategies and back up measures.

Macca446

 

[itxrd]

Thanks for that Macca446. Great advice.

When you say standalone do you mean don't cross-collateral loans etc? Just keep them all separate?

Thanks

 

[Terry_w]

Plan carefully how you can increase deductions while preserving cash for the non deductibel PPOR.

 

[itxrd]

Plan carefully how you can increase deductions while preserving cash for the non deductibel PPOR.

Yes very true Terry I am attempting that now. Things like:

slightly negatively geared property
Put in as little cash as possible for next IP
LMI isn't so bad
GF depreciation schedule

Hopefully I am on the right track!

 

[vaughan]

Yes very true Terry I am attempting that now. Things like:

slightly negatively geared property...

If you had a positively geared property you could put the profit directly into your PPOR debt. Also look into debt recycling strategies and follow these aggressively.

 

[Terry_w]

Yes very true Terry I am attempting that now. Things like:

slightly negatively geared property
Put in as little cash as possible for next IP
LMI isn't so bad
GF depreciation schedule

Hopefully I am on the right track!

I was thinking more along the lines of borrowing 103% for each investment property and leaving the cash for the PPOR.

 

[itxrd]

Thanks guys. Have been reading into debt recycling. Maybe I am a bit thick but it sounds like:

1) You put the rent from the investment property into your PPOR.
Is that allowed and how do you then pay the interest yourself?
2) You then borrow that money back out of your PPOR?

Well bascially I've made an **** of it and don't get it. Hope someone can help. Have read 3 different articles on it believe it or not

And Terry - I am not sure I can borrow that much as I am a contractor. My broker who's pretty good says maybe 96% + costs so for a $450k property looking at around $50-60k

 

[Terry_w]

Thanks guys. Have been reading into debt recycling. Maybe I am a bit thick but it sounds like:

1) You put the rent from the investment property into your PPOR.
Is that allowed and how do you then pay the interest yourself?
2) You then borrow that money back out of your PPOR?

Well bascially I've made an **** of it and don't get it. Hope someone can help. Have read 3 different articles on it believe it or not

And Terry - I am not sure I can borrow that much as I am a contractor. My broker who's pretty good says maybe 96% + costs so for a $450k property looking at around $50-60k

The idea is to borrow to pay investment expenses and use the excess cash to pay down the non deductible loans.

You need to rethink your loan structure.

 

[itxrd]

Thanks guys

Had a good meeting with Mark Coburn yesterday. Nice chap and gave me a few things to think about. His company Stepping Stone do a lot of Investment strategy and I think it would work very well for people who are time poor.
Best thing was there was no hard sell and he was transparent. Which I couldn?t say for the last property guy I met up with.