Howdy folks,
I am looking for some advice from the forum from those of you who know what they are talking about.
Here are the facts:-
Married
30 and 30
Live on Sunshine Coast in QLD
2 kids and 2 dogs
Brand new home – Bank Value 500k
Debt 300k
Nett income $4400 per monthMy Ideas:-
1. Buy Commerical ( Generate income )
To use avail equity to purchase Commercial Property in hope to achieve 10% yield. I have done the sums and based on $300k purchase, $15k purchase costs, 75% LVR which = $78,750k deposit. Int only loan of $236,250k at 7.5% = $17718. Nett Rental return of 10% = $30k. All outgoings inc land tax and rates paid by tennants inc 3% tiered annual rent increase, = $12,282 pa or $1023 per month. This monthly income would then support the undeductable home loan debt to extinguish it quicker than normal. or
2. Buy and Hold residential ( Capital Growth )
Use equity to Purchase Positive Cash Flow residential properties, hoping to achieve 6% to 7% yield in order to Achieve Capital Growth over the long term.( 7-10 ) yrs.
3. Build Spec Home ( Capital Growth )
Buy land, build spec home, then sell after completion for immediate capital growth. Pay CGT and walk away with $30k to $50k. These figures are supported by previous exp in doing this option. The only problem I have with this option is that the loan will be a construction loan which requires regular drawdowns which then requires mortgage payments until completion, then hope that I get a contract asap after completion.
My immediate questions are these?
Can anyone see through these ideas or do they appear achievable. If they do appear to have holes in them, where are they and what do I need to do to in order to achieve success.
My ultimate goals are to achieve higher amounts of income, increased equity through capital growth and reduce undeductible debt to a point where the debt on PPOR is extinguished in under 10 years or sooner
I look forward to your replies,
Many thanks
Drewboy.[
]Hi Drewboy
I’ll have a crack (in the absence of anyone else).
1. 25% deposit for commercial – do you have this? If not then can use equity in your property @ 6%. Therefore net cash flow is $12,282 – $4,500 = $7,782. Commercials ok but you could probably get a residential at 10% yield. The good thing is the cost of debt for res. is much cheaper than commercial.
2. Ok – not bad but it’s a bit of a “slow” strategy.
3. No idea on this one (no experience or knowledge).
What about looking for a high yield property that is undervalued. That way you should get some good capital growth in first year (or so) and still have a good yield. You can then use the equity in that property to purchase your next one.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.au4. Well if your own house is brand new, move out of it and find a nice house to rent ( long term lease if possible ) and then rent out your house. Gear it neutrally or slightly positive if possible. Then buy a second brand new residental, gear it negatively to get max tax benefit. in 6 months buy another brand new and neg gear. CG will take care of cashflow. in the second two. Any spare cash go towards moving the last two towards neutral gearing. Once your tax benefits dissapear, make the last two positive geared then start looking for a fourth.
Is that net income figure combined net income or just one person ?
In answer to Stuart, I have a question from your comment. Where in gods name do I find a res property showing a 10% yield???????
If you can show me I will follow you to the moon and back.
Look forward to your reply.
Drewboy[
]Hwd007,
First of all yes the net income per month is a combined income. My wife is working part time as we have a new bub.
I am curious to know how the CG will take care of the cash flow. Could you show me?
And how could I move the last two properties to neutral or even positive?
You really have me thinking about this idea. Is this a strategy that has worked for you or someone you know with similar circumstances.
Thanks again.
Drewboy.[
]Drewboy, get on realestate.com.au, You’ll find heaps!
Hint Look in LARGE regional centres, and talk to agents, these properties are not nessesarily the ones that they advertise!
If you want a hand I’ll point you in the right direction. Email me it’s in a number of places on this forum(You’ve got to do some ground work![])Cheers
Scott SP.S. Yeah right Stu, valuers hate them too“Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
-anonScott please let me in on the secrets as well
The invitation is open to anyone (I might regret this!!! [
]) I know I’m being kryptic, But if you email me, with your details and ask for advice I’ll help anyone who’s willing to help themselves. I’m not offering a free ride or some magic formula though! I’m just a beginner too!!! But I will steer you in the right direction. Who knows you might learn from my mistakes.[]Cheers,
Scott S[]“Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
-anon
In answer to Stuart, I have a question from your comment. Where in gods name do I find a res property showing a 10% yield???????If you can show me I will follow you to the moon and back.
Look forward to your reply.
Drewboy[
]Drewboy,
In response to your question about where to find IP’s that return 10%, they are out there you just have to go looking for them on the net.
To prove that they are out there I got 4 last week.
Shane.
Drewboy, my comments were more hypothetical. Circumstance is a major factor. Harder than it looks. If you realistically have $1000 per month left over after expenses with 2 kids, your doing well and I would suggest are well positioned to invest.
You have $200K equity it seems. And with $1000 a month savings you could afford to invest. OK well it depends on what rent you can get from your home. In my mind that would be my starting point. i.e. move out and rent and rent out your new property to get max depreciation benefits. The start your research for another new property close to Brisbane. NOT High Rise ! But 2 bedder with ensuite. That should do you for 12 months. depending on your gearing and cash flow sit on them and wait for a rent increase before going for another. Or if very confident, go earlier say in 6 months time. But remember you have a family to support, so you need to keep your risks manageable.
Where you go from there depends allot on your priorities and cash flow requirements. I mentioned capital growth and rent are linked. as property values increase, so does rent for the area, all be it a delayed effect. So if you buy in a hot growth spot, a brand new property could become cash positive within a few years if you buy the right kind and rent increases steadily. Your repair bill would be relatively minor compared to old property.
This is based on my own cash flow analysis of a property I bought brand new for under $250K in Brisbane. Try to stay under $250K for each property within 8 KM CBD Get rental appraisals before you buy anything, from more than one source. $250K aim for $280 / week rent min !
Positive cash flow straight up usually means old property with little depreciation benefits on cheap land far out woop woop. Being a city lad, I guess its just not my thing. Also you could have less predictable capital growth fluctuations and a delayed repairs bill to eat your cash savings accrued from the investment. Just be careful is what I say, as it ain’t always as good as it seems.
The numbers must work, with fat left over for contingencies. It’s a numbers game.
Finally, get professional advice, as I’m just a rank amateur.
Scott
Point me in the right direction too please…
Gav.
I have got a client that owns 19 properties and her average yield is 11%. [
]
I would like to have her portfolio. []I just takes a lot of pounding the pavement (for which I have little time at the moment [
]).Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHello Scott, Ive just started looking for advice and found this site and then your email. I jointly purchased a Commercial building in Hobart last year. We have it on interest only payments and have no problems paying these installments. The property has 11 ground floor shops and they are all rented out. I am looking to develop the 2 upper floors into appartments for rent. We dont have any more capital and will obviously need some money to achieve this. Im not sure how you go about getting investors or what sort of loan to get. Not sure full stop. Any ideas would be great.
Also I own a residential property in Alice Springs. This seems to be raising in valuue quite well. I plan to buy another property in Alice Springs to ove into. The one Im in now will become the investment property…….be good to get some ideas on how to maximise and allow me to buy other property.
Thanks Will
The invitation is open to anyone (I might regret this!!! [
]) I know I’m being kryptic, But if you email me, with your details and ask for advice I’ll help anyone who’s willing to help themselves. I’m not offering a free ride or some magic formula though! I’m just a beginner too!!! But I will steer you in the right direction. Who knows you might learn from my mistakes.[]Cheers,
Scott S[]“Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
-anonHello Stu, just had a look at your website looks good. Already got some good info from it
Thanks Will
I have got a client that owns 19 properties and her average yield is 11%. []
I would like to have her portfolio. []I just takes a lot of pounding the pavement (for which I have little time at the moment [
]).Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi Drewboy,
If it were me and I had the cash or equity available, I would choose a commercial property. In your example you are netting $12,000 PA from the commercial property. If you were to spend hours looking on the net and talking to agents in regional centres trying to find 10% yielding residential properties, you would need to find multiple properties to get the same returns.
I would much rather spend time putting together one good deal on a commercial property, than punishing myself looking for hours for multiple residential.
But that’s just me, look at what your own goals are and how you want to utilise your own time.
Cheers,
Matt.
Instead of spend too much time figures it out which one is better. May be just go out there and do it.
Just do it!
Just do it!
Just do it!
Just do it!
Just do it!
Just do it!
Just do it!$ $ $ $$ $ $ $
$ One problem solved! $
$ Next problem arrive! $
$ $ $ $$ $ $ $
]
])
](please don’t anyone take this seriously
]) I know I’m being kryptic, But if you email me, with your details and ask for advice I’ll help anyone who’s willing to help themselves. I’m not offering a free ride or some magic formula though! I’m just a beginner too!!! But I will steer you in the right direction. Who knows you might learn from my mistakes.[
]
]).
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