Hi, First I would personally never buy a 2 bedroom house unless the land had potential for subdivision. You are restricting your tenant base too much. Try to stretch for a 3 bedroom.

As Sydney is coming to the end of a boom rental yields are low. This will change. Rents (like prices) go in waves. Prices go up, then rents go up.
So your rental yield is not stagnant.
Your yield will increase as the house prise goes up (just don’t expect much growth in the next 6 years.Now is not the idea time to buy in Sydney because of that. You may even experience some negative growth (be very careful).

Work out your expenses on more than a guess.
Rates are low at the moment but will rise so 5% is the minimum I would work on. You need to add land rates, water rates, insurance, management fees.

No you don’t sell in 5 years (in Sydney you would go backwards if you did that). Selling costs money (stamp duty, CGT etc) so it’s always best to hold on to your property. Some people are of the NEVER sell philosophy.

Assuming you bought a property that has risen in value you withdraw the extra equity for your deposit on your next purchase. Your cashflow should be better due to rent increases so you can afford another.
A good way to increase your yield is to buy something that needs some work. Do a reno to increase equity and yield. Don’t get caught overpaying for something that needs work though. I’ve seen people pay the same amount for a dump as a place that doesn’t need a reno because they watch The Block and think they can make money in a week.

Go to your library and borrow a few books and magazines. There’s lots of stuff out there for free.

Keep asking questions. Happy investment journey. Be careful it’s addictive. LOL

I could live on $30,000 a year if I sat home and didn’t go out anywhere. What sort of life is that?
My mum lives on the pension and saves $100 a week (since she gave up smoking) but I need more than that.
im not a big spender but my travel budget blows that out if the water.

Risky why not just retire and go in the pension if you wish to live on a low income. Easy!

Hi, I only paid P&I off my first home. Then I found out my mistake.

I have a low LVR, but I have a very low risk threshold. Plus that gives me good cashflow, which was my aim so I can retire. Very difficult to retire with a high LVR but people have high LVR’s to build a portfolio faster. Some then sell down to increase equity and cashflow to retire. But there are many different strategies to get to your goal.

I’m confused by what you are saying here:-
I see the benefits but also see a lot of risks but I am sure there is reward due to this. It sounds like you could get away
loosing $25,000 (currently) in one year because of no income from a property or loan increase dramatically or whatever I cant.

I would not be in the same financial Situation if I did Interest only??
PnI = Worth 550k Loan 380k = 170k Net worth
IO = Worth 550k loan 450k = 100k net worth.

What have you done with the other $70K (in the IO example)? It sounds like if you pay IO you are throwing away the money you would be paying if P&I. You still have $170K net worth if you have it in the offset account (or better still have invested it in something that returns more than the interest you are saving.

I think you are over thinking it. Where are you located? PM me and I’m happy to have a chat if you like.

• This reply was modified 9 years, 5 months ago by  Catalyst.

Jaxon it seems you don’t understand how an offset works.

You still paying the same amount off the loan but instead of GIVING the money back to the bank you are LENDING it to them. It sits in the offset (which reduces the amount of interest you pay, the same as if you were paying it down) BUT YOU have the option to pull it out if you want.

eg a) Loan of $300K- you’ve paid down $200K = you pay interest on $100K
b) Loan of $300K, you have $200k in your offset = you pay interest on $100k.

The difference is a) you can ASK the bank if they will lend you say $100K to buy yhour new PPOR or
b) yo9u TAKE the $100k out to buy your new home (NO asking for permission, it’s YOUR money to do with as you please.

Also if you then change the first property to an IP in a) only $100K is tax deductable. in b) $200k is rax deductable. That is a HUGE difference at tax time.

If loans went to 10% nothing changes your loan is at the same level that it would be if you had paid P&I.

And interest only is not a fixed period loan. google to help yourself understand how it works. Of the hundreds of people I know who invest in property I only know one that has P%I loans. It is just too restrictive on your ability to grow a decent property portfolio.

Of course if a person is hopeless with managing money then IO is not a good idea, but then they will never be rich anyway so it doesn’t matter.

One of my favourite quotes which has helped me on my investment journey. You don’t know what you don’t know.

• This reply was modified 9 years, 6 months ago by  Catalyst.
• This reply was modified 9 years, 6 months ago by  Catalyst.

Tom@SadhanaConstructions wrote:

Can you elaborate on the particular situation?

There’s lots of options but at the same time if you’re “exiting” you will no doubt be selling the place…

Why do you say that? I assume the OP means exit strategy by exiting the workforce (the end goal), not exiting property.

There are quite a few different exit strategies. Everyone is different. It depends on your timeframe, structure etc.

One strategy is buy heap of properties, wait for CG then sell half and live off the rent.

Some Live off Equity (or a mix of rent and equity)

Others sell everything and invest in shares.

If time permits (or if you manufacture CG) you can just live off the rent without selling. That’s what I’m doing, mixed with some income from shares.

You need to figure that out yourself because that will in turn define your start strategy and your goals along the way. But keep in mind things change along the way so your goals change as you learn and grow.

• This reply was modified 9 years, 6 months ago by  Catalyst.

Yeah, had to laugh at Joe Hockey telling everyone that this is a great time to borrow and invest. Some people will though with no thought about interest rates going up. In a few years some people are going to be in great pain. Especially those negatively gearing properties.
I’ve got cash at the ready for when it happens.

We’ve done quite a few in Sydney. How do you post photos on this site?

We typically paid 2,500- 3,500 for each one. We installed a few ourselves and paid for a couple to get installed.

If you are willing to demolish yourselves and you don’t move the plumbing it’s not expensive. Did you want to do some yourself or have someone do the whole thing? PM me if you need assistance. I’m having reno withdrawals at the moment.

Do you have photos of yours?

• This reply was modified 9 years, 6 months ago by  Catalyst.

Good points Benny.
I wasn’t impresses with the sales push back then and wouldn’t consider buying there myself.

Property Box- never heard of the 2 guys running it and looking at their past newsletters there are only 2, the first being Dec 2014 so I’d be VERY wary of investing with such a new company.
When property is in the news and the hype is there (as it is now) these companies come out of the woodwork. Investors are rushing to Queensland as Sydney has peaked.

Do a LOT more research before buying, especially in new estates. You can make money if you get in on the ground level, but this is definitely not the case with Coomera.

Jeh do some more reading and post any questions here for some unbiased answers.
I’m always wary of companies that sell properties. Always consider who’s interest they are caring for. If they are selling a property obviously it is in THEIR interest. Maybe your needs are secondary??

OK You are right in the fact that the person suing you needs to prove fault.

That does not stop people from trying, which can be very costly for you.

There are many things which a home owner may not be aware of (but could be proved that they should have been aware of, and therefore liable).

Example- Smoke alarms. Do you know your legal responsibilities regarding maintenance?

If a tenants reports an issue -light switch faulty (later causing electrocution), tap leaking on floor (later causing person to slip), cracked window pane (later causing injury) etc etc. If you know about the problem and were deemed to not have fixed it in a reasonable time you ARE liable. What if you don’t get someone there quick enough? or you think, oh it’s only a little crack. I’ll leave it.

I know these things are likely never to happen but really! to save a few hundred dollars a year? I don’t have landlord insurance on my houses because I have stable tenants and the money I save on multiple properties would be enough to cover if one did as runner. But I do have it on units and villas only because of the public liability. It allows me to sleep at night knowing I’m not going to lose everything if some go getter decides he can sue me for slipping over.

The cost in the scheme of things in property investing to me is minimal and just part of the cost of my business. If a few hundred dollars makes or breaks a property deal, you are doing it wrong.

I know of one person who had steps at the front of their property where the treads were not legal height. Unfortunately for the person, they knew this when they got as building report when buying but didn’t replace them).

Up to you.

RussianAussie (QLD) wrote:

<div class=”d4p-bbt-quote-title”>Catalyst wrote:</div>
pree-vyet
If it is legal to rent out the granny flat you could rent out the main house instead. I have a friend who rents out his granny flat. He intends to move into it later in life and rent out the house.
Great idea which will bring a good income.

It’s illegal actually :(
Gold Coast Council says very clear that you cannot separately rent-out a granny flat in the Gold Coast Municipality.
Can I rent out main dwelling instead of granny flat? And live in granny flat myself?

Best regards
Sander

As I said IF IT IS LEGAL. You piggy backed this thread and did not say where YOUR granny flat was located. Hence my statement about IF IT WAS LEGAL to rent the granny flat. If it is not legal then that is your answer. If you read the legislation it will state the rules. Probably along the lines of not renting to an unrelated party. So the same would be true whether renting the house OR the granny flat.