Hi to all. Ive been lurking here for some time and now Ive decided to make myself known ! This is a great site and the information and sharing of ideas is second to none !!
I come from a family who has invested and developed over the years and have done quite well. I realise there are family assets there that can be utilised to leverage and build my portfolio, but Id prefer to keep things seperate. So Im am quite motivated to get cracking and really ramp things up.
To my situation. I currently have one IP in Melbourne, Bank val is 345K and the RE Agents val is around 380K. Rental income is $17,500 K p.a and the loan is currently around the $135K mark with a fixed interest. I also have around 30K saved to supplement the equity I have in my IP.
Id like to begin expanding the portfolio but am finding it very difficult to find cash flow +ve properties. However, there is one opportunity that I have come across. The property is well located in a regional centre. Purchase price of approx $145K, currently returning about $160 pw in rent. The block is sufficient for a subdivision and a 12 sq unit on the rear. Ive already checked with the council and they are perusing the docs as I write this, so this is all subject to their approval.
After VERY concervative calculations, total borrowings(inc all costs to build on the rear, my deposit and all expenses) would amount to around 250K-260K and total rents would be $17K., giving a return of approx 7.1%, which I KNOW is next to impossible in Melbourne. After deductions, the holding cost would be VERY low and should be +ve after a short while with a small rental increase on the front unit.
This would allow me to focus on eliminating the commitment on my original IP ($135K) and let the other two new ones fund themselves.
Barring this particular opportunity, what would you more experienced guys do to maximise your situation to the full?
Id really appreciate your input here !!
Thanx in advance !![biggrin]
25 people have read but no one has any tips?
Hmmmm…..
I think I would refinance the Melbourne IP to a line of credit loan to its maximum debt ratio. Then I would purchase the 2nd IP for cash, if I had to contribute my 30k to complete the purchase then thats ok.Next I would get a construction loan to build the 12sq unit.This loan would be drip fed as the construction progresses.Once it is completed I would maximise the rental return on the 2 units and obtain a 1st mortgage on the completed project. With these funds I would repay my line of credit on the Melbourne property and start the process all over again.The chain reaction is now in place and you can start looking for the next deal with lots of twists.
Good luck.Ratso,
I know you’ve said you wish to keep your IP’s separate from your family – but have you sat down with your successful “investing and developing” family members and had a chat with them regarding the specifics.
You’d be surprised how much knowledge gathers over the years within family members – once all the ‘personality issues’ have been stripped away.
Once you have their input, I’d suggest sitting down and mapping out your goals and aspirations. You didn’t indicate whether you were chasing CG or high yields or both ??
This decision will dictate what you buy and where.
Cheers,
Dazzling
“Go hard or go home”
Hi thanx for the replies.
I have gleaned much info from the family and from my own research but trust me when i say i need to do this on my own.
Im more interested in cahsing higher yields for the nextr few years as I believe Cg will be fairly stable for a while to come, certainly none of the gains that we have seen in the recent past.
Id welocme others input here too….Profit man thank you for the funding tips.
Something to consider:
Set up a trust before you buy the property (in the name of the trust), and consider selling one of the properties on stratum title. I’d recommend the older house because of the maintenance issue plus you’ll probably get better rent for the new unit. How do the numbers look now? I expect your cash on cash return just might improve!Ann
I think you should check your sums….if you are borrowing $250K at 7% then that is $17,000 per annum – your gross rent! Given that you will have rates, maintenance, property management etc – you will be out of pocket…
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