Hi all, thought i'd post a question and see how the more experienced investor do it
What benchmarks, targets are you setting before considering your next purchase? I am just trying to get an idea of what people are doing? I am not sure if i overly extending myself or if i am being to cautious (probably the later).
I am sitting on 3 slightly positivly geared IP's , with my house paid off. Loans at about 25% (500K) of the total value of the lot (2M). I am thinking another property is the way to go , maybe even 2..
Thanks
Joei'd be thrilled to be in your situation!!
I have one IP, no PPoR. currently owing $190k, VERY positive geared, probably valued now around $450k. As soon as I have reached my 6 month probation with new employer, end of sept, I'll be jumping straight into a loan for IP #2. I plan to get #3 as soon as possible after that. I obviously have a lot less equity to access than you, but figure with IP#1 I have enough equity to cover 80% LVR on 3 properties without using any of my own cash. The aim is to have all 3 resulting in a net neutrally geared position within the first 12 months, and hopefully from the second year onwards they'll be +CP.
With interest rates low, and the property market in Perth in a good place, I'm wanting to jump in straight away and the only thing holding me back from future purchases will be the banks.
Don't forget with your house fully paid off, you can get a LoC loan against the equity of that which can be a fully tax deductible loan as far as I'm aware, as well as raising the LVR up to 80% of your current IPs. so you have loads of equity money to play with! use the leverage. I know if I had that sort of position I'd be going into small developing projects. But that's just my opinion.
I am wondering though why your properties are only slightly +CP when the loans are so low? Have you looked to see if you can add rental value there to raise your rental returns?
Hi Guys
Yeah, I would lean towards the idea of you being a little too conservative. However, we know nothing about your life stage, goals, income or risk tolerance.
As you get older, your risk tolerance should definitely decrease, however I think I would have to be about 100 before I dropped below 50% LVR. The other issue is obviously your ability to service the debt, but unless you need the positive cashflow to eat, I'd certainly be neutrally geared at the very least.
Then there's your own risk tolerance. While in your situation, I'd probably be around the 60-80% LVR (assuming I could service the debt), if that's going to keep you up at night then don't do it.
In any case, whatever you've been doing so far seems to have worked out well for you. But since you asked, I'd definitely be buying probably two more 500K places if I was in your shoes.
Have fun!
Andrew
Thanks Wisepearl, when i said slightly +CP I mean returning about $15K a year which is pretty good i suppose.
I think a small development project would be nice and i am pretty good with my hands
but i wouldnt have a clue where to start, better keep trawling this forum I suppose.Joe
$15k after all deductions and expenses? that's a very healthy return indeed!
with development projects, its my understanding you can get a good project manager on board who can effectively guide you through the whole thing. if you don't know what to do, just hire the appropriate experts. it will cut into your profits, but with the right information, guidance, plans and approvals you should be set for good profits anyway. once you've done it once with experts guiding you the whole way, perhaps the second time you'll know more about what you can do yourself to save on costs and what is better left to the experts.
i'd love to go into development, but i think i need just a bit more $$ behind me, or a JV. I want to learn a little bit more too, buy another IP for rental and do some renos before going after the development side of things.
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