Guys,
I am just about to start my journey of property investing. I’ve read some books about how to start, but don’t feel quite confident as I’ve never experienced it by myself. I am planning to take FHOG as well, so I would say that for first six months I will occupy the place by myself, which is not bad, as I am paying $180 p/w rent.
My question that I would like your opinions is , a unit or studio in CBD or Inner City up to 180k or a unit in townhouse in a suburb, 10 kms from CBD up to 220k ?
What is the net growth of a unit/studio in Inner City, say it New Farm or Valley ? Does it exceed 8% p/a ? and as your first property – you will occupy, rent it out, and might sell if you have enough equity for other properties , is it a good investment ?
I would also note that repayment is not really an issue for me, and my individual income is enough, so I am looking for short term growth ( 1-3 years ) and decent rental income just to cover the cost of owning it.
Hi Ferdinand,
My preference would be to go for something a little further outside of the CBD, as the prices of inner city apartments tend to fluctuate quite wildly.
In addition, the bank's will generally lend a lower amount for inner city apartments, and this has two complications:
– You need to put more cash down which limits your ability to leverage into further IP's
– Borrowing off the additional equity for further IP's is less powerful for a lower LVR.The one part of your investment plan which is different to mine is that you are looking for short term growth – Why is this the case? Are you planning to sell and use the equity to leverage into a larger property deal? I'm not saying that this is right or wrong, but knowing the answer will help people here give you the best advice.
Cheers,
YI.The general rule is that property doubles in value every 10 years. This doesn't necessarily mean it increases by equal amounts each year. A property might remain at the same value for 3 years, then surge up 40%, or infact down a bit. It is dangerous to presume the property value will go up. If you create a situation where you are required to sell by a certain date, god help you if the value has gone down. You want to be able to hang on to the property until it is worth a suitable value.
Remember that if you sell investment property it is subject to capital gains tax.
I'd always go with an investment that is about land. It is land that goes up in value, not the dwelling on it. In that regard, I'd steer clear of the city studio option altogether. I'd go with something a tiny bit out of the city that is sitting on its own piece of land that is not shared with anyone else
Hi ferdinandch
Firstly welcome to the forum and I hope you enjoy your time with us.
I wont comments on the particular suburbs as i have property in both of them and think both are excellent as far as capital growth and rental stream.
In saying this i agree with the other comments. When it comes to studio units you will certainly find financing such a security difficult to obtain a decent lvr which means you need to put more of your capital into the deal when it could be utilised elsewhere on other investments.
If you intend to occupy the property initially and then rent it out make sure you structure the loan correctly so as to maximise your interest deductions when you come to rent it out.
Richard Taylor | Australia's leading private lender
YoungInvestor wrote:Hi Ferdinand,.The one part of your investment plan which is different to mine is that you are looking for short term growth – Why is this the case? Are you planning to sell and use the equity to leverage into a larger property deal? I'm not saying that this is right or wrong, but knowing the answer will help people here give you the best advice. >YI.
thanks for your response mate, that’s what exactly my plan is, I understand that studio in the city might not have good growth, but the rental income is quite decent, and I can live there as well initially before rent it out. While putting my saving on the equity ( from repayment ), I can try to find another property maybe after a year, and sell it or just redraw the equity that I have on that studio property. Do you reckon it’s a favourable strategy for first property ?
My brief situation is my income is not that high , under $50k, but I can afford repayment until $1500, and extra repayment until $2000 per month ( $3500 in total ). I have saving around $30k , and eligible for FHOG, and I am planning to start investing in the next 4-5 months. I believe bank will ask me for 20% deposit at least because I have never borrowed money before. So what I can afford is maximum $150k loan ( what banks will think ).
if you are on my shoes, what you will do for the first step and what are you looking for first property ?
cheers
Qlds007 wrote:Hi ferdinandchIf you intend to occupy the property initially and then rent it out make sure you structure the loan correctly so as to maximise your interest deductions when you come to rent it out.
Thanks mate, I don’t quite understand about this part, could you explain it briefly ? What the difference will be between before renting it out and after ? I know that we can get interest on loan deduction, but in term of loan structure , is there any difference ?
Cheers
Hi Fed
For a studio unit in post code 4005 or 4006 you probably wont get more than 60-70% lvr.
Also bear in mind interest on an redraw is not deductible unless the original loan was for investment. In this case it wont be if you redraw to use as deposit for a new ppor.
Richard Taylor | Australia's leading private lender
thanks Richard, I just know all of that. It’s not that simple to start ,
Based on your experience, I read some suggestions of yours on other topics , you always prefer using IO only repayment, how about redrawing equity increase because of valuation ?
No ferinandch i would not do a redraw but take a new loan based on the increased valuation.
There is a big difference.
Richard Taylor | Australia's leading private lender
thx Richard, I would like to know, what do u reckon investing properties in Morayfield area and Woodridge area , maybe u have some ideas.
Cheers
Certainly like the Northside there Morayfield, Narangba, Mango Hill etc.
Havent got anything there myself but financed a lot there recently.
Same with the southside but prefer Eagleby to Woodridge.
Shoot us an email if you have any particular property address you want searched and I can email you a Residex report on it.
Richard Taylor | Australia's leading private lender
Thx Richard,
I found some decent properties in Eagleby and Beinleigh. Based on your knowledge, if say it , my property has 700 sqm land, and the building is only 250 sqm, later on can I renovate the house and expand the size of the building become 400 sqm ? what’s the rule behind that ?
cheers
Regretfully not an expert on Albert Shire.
In saying this as long as it is on title i can see an issue in lodging a building application to increase the external size of the property. Normal Town planning conditions would apply.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Regretfully not an expert on Albert Shire.In saying this as long as it is on title i can see an issue in lodging a building application to increase the external size of the property. Normal Town planning conditions would apply.
Have you ever renovated a house that change the structure of the building before , Richard ? Can we request for some amount of loan from bank for that if we have enough equity ? Does it worth to renovate a house considering the cost of renovating if we want to focus on expanding our property portfolio ?
Mates, currently I’m in doubt whether I should make an investment on properties or not. I don’t know the calculation of people who have portfolio with 4-5 properties already, but if say it, I actually can invest my money ( $20,000 per unit investment and can generate income net after tax 600 p/month. )
Initial cash : 20,000
Net income per month after tax : 600
per annum : 7,200
cash on cash return : 36 percent
Investment unit will depreciate on value 8 percent per annum.
No mortgage required
Certainty : 80-90 %Can your property portfolio beat that number ? Easy, pretty much same, or difficult ?
I need someone’s opinion and suggestion.
Yes – Have you ever renovated a house that change the structure of the building before Every Qlder i have raised and built under.
Yes the Bank will fund the renovation although depending on the numbers may want to draw cheques in favour of the registered Builder doing the structural work.
Certainly renovate if it adds value and increases rent.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Yes – Have you ever renovated a house that change the structure of the building before Every Qlder i have raised and built under.Yes the Bank will fund the renovation although depending on the numbers may want to draw cheques in favour of the registered Builder doing the structural work.
Certainly renovate if it adds value and increases rent.
Richard, may I send you an email to discuss my current situation and maybe you can give suggestion on what the best I can do at this point ? I prefer email rather than phone call as I believe I can explain everything better on email, I’m not a phone-call type of person.
and maybe your talent can also help me with my mortgage
cheers
Happy to do so you have my email address.
Richard Taylor | Australia's leading private lender
Qlds007 wrote:Happy to do so you have my email address.I sent you an email, please reply at your convenience.
Cheers.
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