Hi everyone
This is my first time on here so I'll introduce myself first.
I'm 23 years old and work as an accountant averaging $45k a year.
About a year and a half ago my parents helped me with a deposit on my first property, a 3 bedroom townhouse.
In march, when the stock market crashed I had enough money saved up and borrowed some from relatives to trade shares with.
Long story short, I made enough to pay off a good chunk of the home, I currently still have $140,000.00 owing, we had purchased it for $370,000.00 so there is some equity there.
I'm really keen as to buy my next property but am not sure if I'm rushing into things or over extending myself… I would really appreciate what the experienced people on this forum have to say.
I've found a property costing $475,000.00 (that's including stamp duting etc), it is a house with 3 bedrooms + a granny flat at the back with another 3 bedrooms in a bit of a poor condition, so it is only being rented out for $510 at the moment. I quite like this oppurtunity! It is 900 square meters so in the future it has potential to be subdivided.
Now shares is more in my comfort zone and currently trade with $65,000.00 borrowed from the bank via a line of credit.
A family member wants to go into this property with me 50/50, after doing stringent budgets I only have little less than $100 from my paycheck left over per week to spend on miscellaneous.
I am not including any of my share income, all this income is used to offset the mortgage and is not consistent enough to put into a budget.
I've also started renting a room out at my place.
Ultimately – I want to make this new property positive cashflow,
I guess my question is, am I going about this the wrong way? i.e. relying on my share trading to pay off the mortgage.
Should I be trying to pay off more of my current home and make it easier for myself before extending myself to get another property?Should I be looking for a cash positive property smack bang from the start?
I live in South Australia by the way.
Because of my current salary cashflow is a problem, ultimately (say 5-6 years from now) I want a higher cashflow.
Sorry for the essay and I hope that made sense, hopefully you guys could help shed some light.
Kind regards
Binscab
Extra things I forgot to mention:
I don't have a offset account (I have no idea why!)
Currently paying interest only
I have $0 savings, all profits go to offsetting the mortgage hence buying the new place would mean I am using equity on my home.
I am currently renting my place out under the 6 year main res exemption rule so I can claim the interest and utilities deductibility.Once again thanks so much everyone any help is much appreciated.
Binscab
Ok so if you grab cash out of your offset $$ the real question is will it make you better off or worse off??
As the funds are for investment purposes out of your LOC, it is then deductible for the interest on that money.
You are pulling out deposit plus costs so estimate about 25% of the value of any new property you buy.
510income /475 cost means its about 5.2% return. This in itself would deter me from doing it as you are about $160/wk in your pocket to start with. After this there are holding costs of rental managers, rates and maintenance, so be cautious buying smething at this price level. The property sounds like it needs work so where is that funding coming from? Family members are emotional partners not business partners and if their personal circumstances change they will want out, or not to do essential repairs down the line. It's only a suggestion but don't do business with family.
There is so much more I could suggest, but lets see if you get any other opinions and then make up you own mind on what sits better with you. Either way goodluck.
DD
Thanks DD
I will analyse my options, the main factor of why I need to go in with a partner is pretty much because the banks won't give me much more money.
I guess what I ultimately want is a positive cashflow property.
Would you be able to elaborate on
"510income /475 cost means its about 5.2% return. This in itself would deter me from doing it as you are about $160/wk in your pocket to start with"
I didn't quite understand that. When you look for a property what kind of return do you look at normally?
I was under the impressino that $510.00 income a week was pretty good for a $475,000.00 property?
Thankyou so much once again
Binscab
Am I missing something?
Nah Mate'
This guy got one here last night and posted a bunch of posts along these lines…
Stick around, there are plenty of people on this forum who are genuinely interested in answering your questions and learning from the various opinions put forward.
Hey Matt
Thanks for the heads up!
Am looking forward to learning as much as I can from these forums!
Cheers
Binscab
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