Hi,
I'm just after some general advice / hoping to be pointed in the right direction as I'm not really to sure which direction to head in.
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Brief background, I'm 27, earn about $85kpa (gross) and have owned a house since April last year. It was (and still is to some degree a renovators delight, but I'm handy on the tools and have tradie mates so not that concerned) It was my PPOR until January this year when I moved in with my fiancee to her PPOR. Bank value as of December 2009 – $340k. I owe $299k. Main reno's required are a lick of internal paint, updated fixtures, reno'd kitchen/bathroom and some external prettying up all of which I plan to do for less then $20k. House next door just sold for $380 and its only marginally better then mine at the moment, so I assume (yes I know what they say about assumptions) that it will be valued around the $400k mark when completed. Completely renovated similar size houses in the area are advertised for about $420 – 450k. Rentals in the area are good and I'm led to belive there is a low vacancy rate (haven't confirmed this with stats etc), once completed I should get $400 – 420pw.
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As I stated above I have moved into my fiancees PPOR. She is 28 and also earns about $85kpa (gross). She has owned this for approx 3 years, owes about $300k and we assume it would be valued around the $400 – $420k mark. The location it is in also has fantastic rental returns and low vacancy rates and if we rented it out we should get around $450pw. We are both starting to think long term, obviously with getting married and planning on having children in the next 2-3 years. My goal is to be debt free and have 3-5 IP's as well as our own PPOR by the time i'm 40. I enjoy what I do for work and could quite happily continue doing so until retirement (though it would be nice to retire at the age of 40
) My partner enjoys what she does however would like to at least reduce her hours when kids come along. We will also need to move into a bigger house when kids start coming as her place at the moment isn't really suitable for children.
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We are both eager to invest in property to assist with financial freedom, we just aren't sure which way to go about it. From the figures above I don't believe either of us has a lot of equity with which to access and re-invest in other IPs?
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My strategy is purchasing vacant blocks of land and building houses or duplexes before selling them and using profit to pay down existing loans and then re-drawing on the new equity to start the process over and also to purchase 'renovators' delights that in actual fact only need a clean and paintjob on big blocks of land, subdivide the land and then sell or even build and sell subject to finances. Eventually when I have paid down my debt enough I plan on keeping one of the duplexes or the house built on subdivided land in order to acquire my goal 3-5 debt free houses. I'm a beginner so this strategy may be a big mistake, please offer any criticism / advice you have.
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Should we attempt to combine whatever equity we can muster and use it as the deposit for an IP?
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Should we sell one of our houses to release profits with which to invest and if so your advice on which one? I am of the opinion that my place when completed will probably be a better investment, however as above it will take about $20k and probably at least 8 months of hard work as well as planning a wedding to complete….. whereas hers is in great condition and requires no repairs at all to sell. As far as rentals go they are much of a muchness, both will get similar returns, only diff is hers is a strata townhouse with fees. But again mine would need completing prior to being able to command the market rent. We are able to live in either house as they are both pretty central to our work.
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Should we sell both? This isn't really an option as we both hate renting and in the areas we would be living in our mortgages are on par with repayments anyway.
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Sorry for the lengthy post, but I'd love some advice on the above info from the experienced people of this forum.
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Regards,Nathan
Hi Nathan
It's an exciting time and I wish you all the best with reaching your goals.
Have you considered accessing some of the equity in your partners home? You could refinance that loan and use the proceeds towards renovations on your home.
Once the renos are finished on your home, have it revalued and access the equity in it- you can then go shopping for IP 3.
Cheers,
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Your current scheme of taking blocks of vacant land and building on them is great.
Except its not.
Reading between the lines, you have a good job, are building equity in your house (a big beautiful TICK – its always good), have a partner who is building equity in her house, and you really just want to get moving in the property world.
Well, congratulations .. actually MOVING in the property world is the first step. But the way you are doing it and NOW is wrong.
I'm betting (and i'm rarely wrong) that the interest rates will still be moving a year from now .. upwards. This will take any bracketed investment profit you have on a block of land and either minimise it or nullify it. And so in 5 years time of the property doing nothing you can be one of these people who turn around having got burnt by an interest rate rise and say .. PROPERTY? BEEN THERE DONE THAT ITS A MONEYPIT. Woo hoo all that time and effort peed down the drain. And didnt it feel good?
Building on vacant land adds value, but you still trade on margin over and above money invested. In times when money is flowing and property is booming its great, sometimes you fall into a boom and the margin is doubled or tripled. But in steady or downtimes its almost like laying a fiscal egg. You'll plug money into it and the margin u want just evaporates, or even worse, the properties fall below a level and the banks call in their loans. Or you'll sit there waiting for your price to come back .. waiting .. waiting … waiting …
Life is too short for that kind of stuff.
There are deals to be made still and there is money to be made. But how you do it is the key. I suggest grabbing Steve's book (260k) and reading what to do in down times. Keep the fire for doing stuff in property alive. But do it different. Most of the time its the only way you make money .. working AGAINST the grain.
) My partner enjoys what she does however would like to at least reduce her hours when kids come along. We will also need to move into a bigger house when kids start coming as her place at the moment isn't really suitable for children.
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