Hi All,
We need your advise to achieve our goals.
We are in 40's with two children age 9 and 13. Currently owning a Property and two IP?s in South Eastern Suburb. Both of us are earning 150K (after tax).Our yearly expenses is around $100K.
Our Goals:
1. Pay off our home mortgage ( 304K)
2. Retired in Age 55
3. $150K plus net passive income
Our Strategy so far:
Invest in two Properties
Mortge Balance: 1.1M
Prop Values : 2.0 M
We can barroe 1.0 M Now. So how do we archive our goals? Where do i invest to get positive cash flow?
i like to invest in Inner Melbourne.
MI
Hi MelbInvestor,
I use to be in your shoes few years back ,my accountant told me to buy negative geared properties but he never told me where to buy and how to structure my finances lucky one of my friends reffered me to his Mentor and he told me to buy to buy positively geared properties he even showed me where he was buying and why ,I really thanks this guy otherwise my accountant would have put me in a very steep position . I am happy to recommend this guy but not happy to recommend any accountants advise.
MI very unlikely to be able to invest directly to get positive cash flow more a matter of putting the bricks together to create it over time.
150K passive income (assuming no interest expenses) is going to take a while but absolutely no reason with the right mix of property and strategy whilst it can't be achieved.
Have a read of my API interview and you will see what can be done (more than happy to email you a copy of you don't but the magazine).
Also be patient, we work with clients who have taken 5-7 years to get there and are still often in the accumulation phase of buying.
Rome wasn't built in a day so set a goal and stick to it.
Finally whatever anyone tells you capital growth alone will not buy your groceries you need cash flow.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Richard's spot on. It doesn't happen over night.
As a start – surround yourself with some good people – a decent accountant, finance person and a BA if required.
I'm not sure how you're going to go with finding CF+ properties in Melb – you may have to look at other areas (but happy to be corrected).
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]
No need to be corrected Jamie you will NOT find + cash flow properties in Melbourne itself.
Starting to see a few more in Brisbane but certainly not on every street corner and you have to be creative.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
You don't Find the cashflow, you make the cashflow, via improving the asset that you buy,
I think the phase of purchasing a positive cashflow property in inner city areas/ even most regional has passed.
Other options to look for to get positive cashflow include
– dual occupancy
– rent to buys
– subdivision and development
– residential Into commercial or vice versa
– granny flats
– renting smaller spaces in larger commercial buildings
– sweat equity in renovations
and then the smaller things
– cheaper finance
– paying off debt
– bulk insurances
– interest only
– cheaper rental management
– paying council rates yearly upfront if you get a discount.
Wilko has outlined some of the strategies we use but there are more.
As i say matter of working the numbers and spreading your investments.
I own 98% of my properties in a single State and you can imagine what my Land Tax Bill is.
I have seen so many client who have 3 properties in a single state and never consider LT.
All about strategising the plan to move forward.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Big Thanks to all of you.
I have 10-15 years to Invest but i need a Plan or Strategy to learn.
If i have $ 1.0M to Invest where do i invest or how?
Two or more properties in growth suburb or one in Inner city suburb?
MI
When you say $150k net income, are you talking about after tax and after maintenance and running costs of the investments?
Are you talking about $150k on todays value, or the value when you retire at 55? On 3% CPI, in 15 years you'll need ~ $230k
Some extremely basic numbers in my head.
To earn $150k net, you need to earn ~ $100k each, or $200k in rental income. ie. $200k split across 2 people, less tax ~ $75k
To earn that much a year on a 7% rental return, you need about $2.8mil in investment property paid off. You'd still need to pay 'running / maintenance' costs.
In this scenario any capital increase will need to be offset against CPI to keep the $150k salary in today's value.
In order to pay off $2.8mil, you'll need to average principle repayments of $185000 a year…
Anyone know how to do this? I'm keen to know as well
As an FYI, I'm in a similar position, but younger and less equity (similar salary). I'm hoping to achieve $100k GROSS income, and I'm happy to wait 25-30 years.
Property development -Building multiple houses on sites.
Renovations on very high end properties
Renovations on Unit blocks in high value suburbs
Building Commercial buildings
Can make that type of money easily in a year.
My 2 cents worth. With a strong capital base behind you I don't think residential property (unless you are developing) is going to do that much for you except provide a management and potentially cash flow headache. I would strongly suggest you look at commercial property, you can buy very good quality properties with that amount of capital. As a passive investment quality commercial property, with a well written lease and good tenant, provides a much higher quality cashflow than resi property. Development is another area you could consider if you want to be more active.
APWPG wrote:Hi MelbInvestor,I use to be in your shoes few years back ,my accountant told me to buy negative geared properties but he never told me where to buy and how to structure my finances lucky one of my friends reffered me to his Mentor and he told me to buy to buy positively geared properties he even showed me where he was buying and why ,I really thanks this guy otherwise my accountant would have put me in a very steep position . I am happy to recommend this guy but not happy to recommend any accountants advise.
An accountant is not supposed to give financial advice. You need to be a qualified financial advisor for that.
Hi Catalyst, most financial advisors will try and sell you insurance product thats what they know , i only belive in people who have done it themself .Street smart people are the best ones ,and ofcourse later down the track you will need good property servey accountants ,they are hard to find but there are some out there .
Hi MI,
Great position to be in, and great goals to aim for !!
Quote:If i have $ 1.0M to Invest where do i invest or how?Two or more properties in growth suburb or one in Inner city suburb?
Lots of ideas already – perhaps consider a number of options to see what suits your temperaments/situation.
1. Reno to lift rental Incomes
2. Invest in potential growth areas – Brisbane is starting to look real good to me.
3. Create "chunk deals" – e.g. develop a large block to create a second Income and/or a chunk of cash by selling it off (separate dwelling at rear, granny flat, etc)
4. Buy a mixture of +ve and -ve geared – the +ves help pay off the -ves while growth happens.
5. Learn to develop, or become a JV partner to someone already doing it.
6. Someone said Commercial – sounds like it works for them, but I have no knowledge that I can impart – still…. worth considering.
By "chunk deals", I am borrowing a term I have heard Dymphna Boholt use – create a chunk of cash that could be used for further investing, OR to pay down your PPOR quicker.
In the end, any deal you do must make sense to you – and the deal should drive you closer to your goals, not further away.
With more than a decade up your sleeve, your goals look to be attainable, I would think.
Benny
My .01 worth – having over $2million in secured debt would scare the crap out of me. If I am reading this correctly, combined you have $200k in available funds annually. I'd be looking for deals I could get into with the cash that I had coming in. Be very cautious with the borrowing right now. How much in savings do you have right now? You may want to broaden your horizons somewhat and take a peak at what some of us are doing in the states. In your market, you can't really do anything without borrowing. In the states, a $30k to $100k investment in a rented & managed property can do pretty well….ours do 10%. If you get on the front end of things, you can see even higher secured returns. There are lots of options for you. As others have mentioned, you may wish to consider a commerical property…..if you do, you might want to create a shared office where you break the building up and rent to smaller professional tenants. I loved shared housing and office space as it gives me max in rents & min in risks….I love that and the returns are phenomenal! Happy investing
APWPG wrote:Hi Catalyst, most financial advisors will try and sell you insurance product thats what they know , i only belive in people who have done it themself .Street smart people are the best ones ,and ofcourse later down the track you will need good property servey accountants ,they are hard to find but there are some out there .Yes I totally agree. You stated though that you were disappointed with your accountants property advice, and as I stated they are not supposed to give advice..
I did the financial advisor run around and came to the conclusion that I had wasted many hours of my time with NO benefit.
Now I only listen to those that have what I want. Their strategy may not fit exactly with mine but they made it and have a lot of knowledge.
It took me a while to find a great property savvy accountant. A good accountant is worth their weight in gold. I LOVE tax time (except the paperwork bit). LOL
If you want to achieve the goal of '$150K plus net passive income', figure out the monthly net income that you need. Then from there, allocate your 1.0million to buy enough positive cashflow properties that progressively get you closer to your target monthly net income. That's what I'd do. Start with the goal in mind, then work backwards.
Not true catalyst, there is an excemption to that rule for accountants although given the light training they have on everything I would not act on accountants advice unless they have a portfolio themselves. Similar to a financial advisor as well.
Hi All,
Thanks, Ok thought of going in this path and let me know your views.
This year buy 1 -3 Properties – purchasing price of around $500,000 in Melbourne Inner City Apartments
Looking these apartment market is forecasted to grow 6%-8% over the next five years
MI
Hi MI,
don't be mad come to sunny brissy , market is very affordable ,i have already bought 2 ,with 8% guaranteed return for next 5 years .
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