I personally wouldn't do this. 

It must be a big block of land to fit two houses side by side?

I also think that you are underestimating the build costs.  $140k is probably the bare minimum to build a 4BR house which would not include site costs (add extra $10 to $30k) or flooring, outdoor area, driveway, fencing, gardens etc.

I'm not even sure you could class the 2nd house as an independant property since it is on the same title as your PPOR and therefore it might be considered just an extension of your PPOR (and therefore cannot deduct expenses).  Like having someone board in your house. 

Not only that, you would be the first point of call of these renters when they need something.

As a renter, I would not want to be living right next to my landlord.

Honestly, I'd go get a full quote for just your house build and make sure you include everything to make it liveable…including site costs.  Then if you think you'll have some cash left over, look at using that for a deposit on a seperate, already built, investment property.

It sounds like you've not built before and if that's the case, you don't know how easy it is to go over costs in 1 build let alone 2 builds.

Not trying to dismiss your idea altogether, but it just sounds too challenging and complicated for first home buyers.

Good luck anyway

I have previously bought a top 10 NSW hotspots from Hotspotting.com before, I think it was around $90.  Although I did not end up following through on buying an IP based on this report, I thought it was worth the money.

I'm personally a fan of Margaret Lomas and she has quite a few books out.

I read "How to create an income for life" a few years, which really made me look at the concept of buying property for cashflow (instead of focusing soley on capital gain).

I want to read another of hers "20 Must Ask Questions" before I buy my next property.

I watch her on Sky Business channel too and she really has a wealth of knowledge of the Australian market.  Whenever a caller asks about a certain area, she wil be able to give specfics about it 99% of the time.

I think she's been investing for 20+ years so she has the experience too.

Hi Ryallsy,

Are you planning to use equity in your townhouse to fund the purchase of the next property?

The reason I ask is I have a 2 year old townhouse on southern outskirts of Brisbane and it was recently revalued by my bank to be less than what I payed for it in 2009.  I think the bank is being too conservative because I saw a sale only a month ago in the same complex for the same type of townhouse and it sold for $30k above my banks valuation.

Anyway, just saying, even with your renos, you might get a shock if you only purchased the property last year.

As for investing in Miles, I don't know the area but if you are confident with that the infrastructure is going ahead, then it could be a good bet.

Based on RP Data tables from YIP mag for houses:

Current Median: $295,000
12 Month Growth: 5.45%
3 Year Growth: 9.35%

For 2 years, I would say 6 to 7% based on those figures.

I can't give you advice on using a trust, but I think I have heard that you cannot tax deduct your losses against your main income if the trust owns the property (somebody correct me if I'm wrong).

As for accessing the equity in your existing IP, you should be able to get at least 5% (taking the LVR back to 80%) and therefore not have to pay lenders mortgage insurance.  You may even be able to take it back to 90% LVR giving you 15% to invest, but I think LMI will be due then.

So if your property is worth around $400,000, then 5% = $20,000 and 15% = $60,000.

Before you go any further, I think you should clarify with your existing lender how much equity you can access and then get pre-approval through a mortgage broker about how much money you can borrow for another IP.  It's difficult for us to speculate your lending position.

If you are also concerned about how you will buy an IP whilst living in central QLD, maybe check out using a buyers agent assuming you want to buy elsewhere in Australia.  I've never used one, but I would consider it if they can provide good value (such as negotiating a below market value).

Darren.

It probably depends on what you are looking for in an investment, but I will assume you mean the best suburbs for future capital growth?

You can probably find plenty of suburbs that have good potential for long-term capital growth (eg. undervalued suburbs in the inner ring of Sydney) but you will not find very good yields on houses here.

I have done some research on the Hunter Valley region and there are a few commentators recommending towns like Singleton and Muswellbrook due to the new mining operations in the region creating a high demand for rentals and employment opportunities.  You can yield 6 to 7% in these areas.

If you can provide more info about your investment strategy, we might be able to recommend some areas.  For example the top 5 suburbs for a positive cash flow investor may be different from that of a capital gains investor.

Cheers.

Yeah this happened to me as well, I had a property years ago and I never got charged a "re-let" fee by my agent Ray White.  However, with my second property, the management was by an on-site manager and when he first charged me a re-let fee of 1/2 week rent I was surprised and I questioned him about it.

When I went back to my written agreement, sure enough this fee was listed, so I either did not read the agreement properly at the time or did not understand the full implications of this fee.

When you think about it, if your tenant keeps renewing 6 month leases, you are losing a full week's rent every year due to this fee.

In future, I will definately be checking my agreements with property managers and making sure I don't have to pay this fee (or at least pay alot less for it).

Darren.

Hi Michael, I feel your frustration, I also bought a property in 2009 in Logan (Underwood) and just had it revalued.  It came in $15k less than what I paid for which is disappointing but not surprising considering the property market in Brissy.  It could be worse, lucky I didn't buy in some gold coast areas! At least the rent has gone up though.

Anyway, first thing I'll say is that your proposed strategy is not technically investing but is more of a flipping/development type strategy which is riskier than just buy and hold.  The main reason is you can't really buy outside your local area, because you need to be closeby to do the renovations and this means you are tied into that market (which is currently in a downturn).

Even if you did more renovations on your PPOR, the fact that it's value has probably dropped might mean you spend all that money and the value is still not greater than what you paid for it.

The best thing that I can recommend if you are really keen to get into an investment property is to re-evaluate your family's budget, cut costs and put the extra savings into an offset account against the PPOR.  This will reduce your mortgage payments in the short term (by offsetting the interest) allowing you to save even faster.  Look for cheaper IP's around $200-$250k so you would need to have around $35k saved (10% deposit plus costs).

I know this option is not desireable because it will take you a while to save that much money when you currently don't have much to spare, but I don't see many other options at this stage.

Darren

Good to hear you have been re-evaluated to buy both properties.

Personally, I would not have gone for the option of putting a contract on both properties without finance approval.  If you had done that and then renovated both properties (and then finance fell through) you would be deeply out of pocket and the owner would keep all your nice renovations.  That would be a disaster!

Good luck with it.