Hi QM,

I would personally use the $100k to invest in a different area that has a better chance of getting good capital gains in the short term.

The northern beaches may be a great area to live, but it is expensive.  Having two properties in the same region also increases your risk because if prices stagnate or go down in that area then you are going nowhere fast.

You may also be eligible to pay land tax if you have a combined land value in one state exceeding a certain threshold.  You would want to avoid this where possible because it is just a blatant money grab out of your pocket (much like stamp duty).

$100k could get you a $500k investment property (at 80% LVR, avoiding mortgage insurance).  If you can find such a property that provides a good rental return, it may cost you nothing to hold the property.

I recently asked my broker about a 97% loan because I had seen them advertised by RAMS and some other lenders.

My broker said (like the other replies above) that these are not genuine 97% loans, they are actually 95% loans with a 2% lenders mortgage insurance added to the loan amount.

So, you actually need the 5% deposit but you end up with 3% equity in the property due to the capitalising of the LMI.

I am hoping to get a 95% loan soon for a PPOR, hopefully it won't be too difficult.

Btw, I can definately recommend my broker, but he is Brisbane based (aussie home loans).

Cheers.

Your figures look reasonable, and there certainly are opportunities out there to make a profit in properpty development.

I think you just have to evaluate the risks and work out whether you're willing to go with them.

What happens if bad weather blows out the project by 6 months?

What happens if you can't sell the vacant blocks in a reasonable time?

I think if it's your first time doing such a development, aim to make a profit but be prepared to make nothing and learn a lot of lessons.  Then you can carry that experience into your next venture.

Good luck.

Invest where the jobs are, to put it simply.  If you're buying property near where people are earning good incomes, you will always have a supply of tenants and there should also be demand for sales.

If interest rates go up sharply then this will hurt affordability and possibly see a longer period of stagnant prices.

But current view is for interest rates to go down in the short term.

I'm probably biased, because that method worked for me.  You are right, if you go for the PPOR you will probably have to sacrifice investment factors because you need to buy where you can live too.

I didn't know you could buy an IP first and then use the FHOG later on a PPOR.  It's been over 7 years since I claimed the FHOG so the rules must have changed (or I was ignorant in the first place).

Ok then, $140k all included is a great price.  I haven't built before but my parents are building at the moment and their costs are going to be around $240k, all included.  Not sure why there is such a large gap.  I was going to build at one stage and my costs were going to be over $200k as well (but I ended up not going through with the project).

You did say you were planning to subdivide down the track, which is why I recommended against it.  But if you subdivide and split itno 2 blocks before building, then that would be different.  You could quite easily seperate it out as a PPOR and an IP.

Maybe, you go just for the PPOR for now (and position it so that there is room for the subdivision later)…see how that pans out…re-visit your finances…and then look into getting the subdivision done.

It would be less stressful than trying to 2 both projects at the same time.

Good luck, whichever way you go

Yeah, that's my site I started about 4 months ago.  Thanks for the compliment!  And thanks for commenting on the post too, I approved it.  I don't get very many genuine comments related to the content of the post (lots of spam though!)

That's a bit of a lame reason to not be a fan!  So you only ever take advice from the richest person in Australia?  Buffet's been investing about 40 years longer too…Hmmm….

That's an interesting concept.

Obviously, buyer's agents are looking to get property below market value for their clients.

But since you won't be paying any commissions to the buyer's agent, you can probably afford to come down below market value.

However, if you won't the absolute best price for your properties, a sellers agent works to get that.

Hi Chazz,

Some areas that are expected to be good buying (based on some of my own research and hearing other proprerty commentators):

– Hunter Valley NSW (Maitland, Muswellbrook, Cessnock)
– Northern Adelaide suburbs
– Port Lincoln (used by new mines in the SA area)
– Gladestone area (although already risen alot, may not be much left in it)
– Ipswich, Logan City, Brisbane (look for undervalued suburbs, you can still buy houses mid $300k less than 10kms from Bris CBD)
– Perth, one of the biggest declines along with Brisbane, but should still be in good demand in the future
– Western Sydney

Areas to Avoid:

– Gold Coast Apartments (huge oversupply at the moment)
– Melbourne (for the short term, it's already seen big gains last year)

Of course this is just an overview, and really, you can find opportunities in most cities or towns as long as you follow the infrastructure, make sure there is a wide spread of industries to support jobs in the area and the population growth is significant.

Oh, if you're into shares as well, I would recommend taking a look at Roger Montgomery's "Value.able" book which teaches you how to identify high quality companies and buy them for below what they're worth (intrinsic value).  RogerMontgomery.com.  Before reading that book, I was investing blindly and even though my portfolio is down in the past 12 months (who's isn't right?) my losses could be alot worse if I had not of start using his advice.

Cheers.