Hi everyone, my husband and I are currently looking at what our strategy should be over the next few years. We want to make sure we plan well for the next step, so we put ourselves in the best position for success down the track.
Our current situation: PPOR with approx value of $450K, current loan of $327K. We're nearly finished a renovation, which we hope will add 30K or so of value. We've got 40K in savings, and are adding to that at approx 1-2K per month.
Ultimate goal: to be able to have a comfortable passive income from property in 15 years time.
We also want to start a business in the next couple of years, which will involve approx 20K of capital investment. This business would be in a different location to where we're living now, so would also involve a move to a regional area. We'd like to keep our current place (inner city apartment) to rent out as an investement.
Clearly our first step is to finish our renovation and get our current place revalued.
But after that, we're not sure what the next step should be to help us get closer to our goal. Should we keep saving so we can buy our next PPOR in a year or so and then rent out our current place as the investment property?
Should we look sooner (next 6 months) at buying a cheaper IP in a regional centre (approx 200K)? And then rent for a year or so when we move out of the inner city? But would that just tie up our funds too much?
Is there something else that we totally haven't thought of?
I think we probably need to go see a financial planner or someone similar. I'd really like to map out a couple of scenarios so we're in a good position to be able to make the best decision for our future.
Any advice or suggestions would be most welcome! Thanks in advance.
4. You need to figure out whether the strategy is cashflow or CG
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Oh yes, thanks for reminding me about that! At this stage we think the best strategy for us would be cashflow. Possibly looking to add value through simple renovations to create CF positive.
Anything else I've forgotten?
You mention you want to start a business – from a finance perspective it is important for you to understand that lenders will require a minimum of 2 years financials and they will require the ABN to be registered for at least 2 years. This means that you will not be able to use the income from the business if it falls under this rule. There are some exceptions to the rule if the LVR is under 80%, application is strong and it is the same line of work when you were a PAYG.
Make sure you are on an IO loan with a linked offset particuarly if you are converting the property to an IP.
Finally most lenders provide free upfront valuations so you can get an idea of how much equity you have to use and to fund for further IP purchases.
Who is your current lender?
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
What you really need is a properly structured property investment plan. But to start with, have you thought of using your Super via a SMSF to purchase your next investment property?
Modernity Investing
Email MeVery interesting thread. I would be super interested to understand the balance each of you have in super, what your current salaries (and living costs) look like. This will make the whole equation much clearer, and will shine the torch on the best path forward. Investing in super is indeed an awesome opportunity. With that said, the order in which investments are done is important. In some cases, if there is intention of buying both inside and outside super, it is better to do the outside super acquisitions first. This is due to the fact that smsf lending often requires a personal guarantee, which can in turn make borrowing money outside of super (after taking out a few smsf loans) harder. With that said, I would be very surprised if the current LVR permitted in smsf lending (80%) doesn't get lowered. If it gets lowered to say 70%, then smsfs have to come up with substantial more money for deposits. So it is a good idea to get on board with a smsf loan sooner rather than later, if intending to go down the smsf route anyhow.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
starsoid wrote:We've got 40K in savings, and are adding to that at approx 1-2K per month.We also want to start a business in the next couple of years, which will involve approx 20K of capital investment. This business would be in a different location to where we're living now, so would also involve a move to a regional area. We'd like to keep our current place (inner city apartment) to rent out as an investement.
But after that, we're not sure what the next step should be to help us get closer to our goal. Should we keep saving so we can buy our next PPOR in a year or so and then rent out our current place as the investment property?
I think we probably need to go see a financial planner or someone similar. I'd really like to map out a couple of scenarios so we're in a good position to be able to make the best decision for our future.
Any advice or suggestions would be most welcome! Thanks in advance.
First step would be to go interest only on your PPOR with a linked offset. Place ALL savings in the offset as well as salarys and any other form of income . In fact any $$$ you have should be consolidated into the offset account. Get the RIGHT broker to help you do this.
Seeing the RIGHT financial planner could be helpful. Many are not pro property and many don't understand lending structures, from my experience.
All the best with your journey.
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
Totally agree you need to find the right Broker especially one who has a bit of experience in property and maybe purchased 1,2 or 40 + himself.
As a Financial Planner i see it all the time so many planners only recommend property where they feel they can earn a nice fat commission from the developer and surprise surprise non of them recommend second hand properties. Both my business partner and I are also Buyers Agents and are licensed in QLD, NSW & VIC.
We find the ability to act for the client gives you opportunity to be more objective and cater solely for the clients goals rather than having to worry about how much you get paid from the developers kick back etc.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
starsoid wrote:so would also involve a move to a regional area. We'd like to keep our current place (inner city apartment) to rent out as an investement.Clearly our first step is to finish our renovation and get our current place revalued.
The first step is converting your loan to interest only. Since it's going to become an IP and you may end up purchasing another PPOR – there's no point in paying down any more of the principle against the current property given that it's going to become a deductible debt soon. Instead, place all of your spare cash in a linked offset account – this will save you some interest in the mean time and when you purchase a new PPOR – you can move the funds from the offset onto the new PPOR. This effectively reduced your non-deductible interest whilst boosting your deductible interest.
This article I wrote for API magazine explains the concept in greater detail.
Which lender are you currently with?
Is the current loan set up as variable or fixed?
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]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
