Desperate to get started! Help!

First my situation. I live in Perth and currently earn about $90k per annum. I am 33 and purchased my first property, a duplex for 157k 3.5 years ago with a 21k deposit. I have managed to get my mortgage down to 90k and current property value is approx 270k.

Hi Houston,

Welcome aboard and I trust that you do pick up some useful information while here.

My question, I want to start building my property portfolio and to look at PCF properties but with booming property prices in Perth and surrounding areas this seems impossible! I currently have a 25K deposit saved towards my first investment property.

You have considerable funds in your existing property that could be used for deposits. Based on the figures provided (value $270K and debt $90K) you have $126K at and 80% loan value ratio or $153K if you extend yourself to 90% loan to value ration available in equity in your current property.

These funds can then form the basis of deposits and purchasing costs towards another property with the balance ofthe funds coming from security provided by the next property.

On an asset basis alone you have potential to borrow further funds well and truly above what you would imagine.

Keep the 25K in an offset account and use your equity to further your investment journey.

Option 2 is to purchase a larger property for myself and my partner (just finished studying and looking at joining the defence forces in the next couple of months) and our dog as our 2 bdrm duplex is starting to feel a little on the small side. A home of the calibre we want would be 350-400k. My partner should be earning about 40k a year in the armed forces for the first couple of years So I have a few options.

I wonder about the value in this – I assume that armed forces still move you around a bit. If this is the case you may be better off, from a long term perspective, living in DHA housing and using your funds to create an investment property portfolio.

1. Should I positive gear the duplex and purchase the larger home (though this doesn’t seem sensible without any tax benefits)

See my previous comment. A home loan is one of the more difficult loans to pay off so some delayed gratification may be in order.

2. Refinance the duplex so that it is negatively geared and use the equity to purchase the larger home?[headphone]

You can do this but the refinanced equity is not deductible – if that was your reasoning behind this line of thought.

3. Look at purchasing a property we can do cosmetic renovations to and sell it off within 6 months in this rapidly rising market to get some quick cash to be used towards future investments?

Do you have the skills and expertise to do this. Renovations can ‘blow out’ and you alos need to factor in your time costs.

4. Look further afield (as others have commented it seems to be the more rural towns like Geraldton, Bunbury and Kalgoorlie that have the most chance of getting something that is closer to being positively geared or could be with a bit of hard work for a couple of years) for PCF properties.

Bunbury is worse than Perth at the moment for CFP, I would suggest that Geraldton and Kalgoorlie, while not as bad in terms of CF will be difficult sites for CFP property.

I would certainly not go looking in anything smaller than the towns you have mentioned. Cashflow in Woop Woop is not a good investment.

I just don’t really know where to start and my head is spinning with all of the different ideas out there. I have been procastinating for 9 months now and the CG in Perth has gone through the roof in some of the still relatively “cheap” areas I have been looking at.

Is it better to purchase a newer property ie brick and tile or go for say an old character which are all the rage and can be fixed up with a bit of paint etc?

Go back to what your goals are, work out what you are trying to achieve and consider the exit strategy (how will you use your properties) – the answers to these questions will largely determine what direction suits you.

I want to take action but just don’t know how and everytime I see a property that looks worth investigating it has sold already! Most within a few days of being advertised.

If you do know what it is you are seeking in investments then this will help you to make a quick, but educated decisions.

Any advice would be greatly appreciated.