Hi there folks – we are looking to buy our first IP and need some investors advice, so here it is all out on the table:
We have had 2 primary residences/houses previously, bought in upcoming areas (in Melbourne), renovated (largely by ourselves) and then sold to our live in our 'forever' house which will need a little costmetic work but can be done over time.
We have 40k cash deposit and no mtge on our primary house. We are both in our late 40's with young school age children so have time for capital growth but in a few years time might not have too much spare cash depending on unanswered high school decisions/dilema. Also we would like to have another IP in 5years.
For our IP we can't decide between a house in Sth Frankston or a 2 bed unit within 15km of MElb , or a smaller unit and less expenseive. We are looking between 350-400K, but could possible go higher (if we chose not to buy for education), or less (250K) for the smaller unit furhter out of the city.
Our thought process:
Sth franskston – you can get land and it should have good capital growth in 5 years. We don't mind if we have to do a bit of work to it in the long run –
Unit – good rental return, the city will hold value and should increase in value over time (in proportion to the cost of other properties in the area. Little work required – a never sell investment
Ballarat- growth corridor area cheaper housesOr is this a chicken and egg question ? Should we go to a property adviser? We aren't wet behind the ears with property, but purchasing a house to raise your family is different to an IP.
SO House or Unit and is another property in 5 years too ambitious ?
Any advice would be great as more research helps before we jump in and am a bit nervous.
OK have just read another thread on CF+ thats sticky and might need to rethink long term straregy before we jump in, but would really appreciate any advice
Any reason why these are the only two choices of location?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi JacM
Sth Frankston is an area that we feel we can afford for the size blocks. From a few posts on other sites it seems that it is on the move. We have few friends who live in the area so we know we can do easier research, so I guess we sort of comfortable with it, in that it's not a totally unknown. The city unit (hawthorn/caulfield/clayton etc) our thoughts were around the uni student and young professsionals we thought that as the city grows these suburbs will be 'closer in' and the price will rise. We have a little knowledge of the West, and don't really know the nth at all so more research would be a bit more involved.
But since reading the thread on CF+ maybe we should look further field and not neccessarily in the town we live.
Honestly I have been looking at the IP from a housing point of view, not IP. So after last nights reading a stragey is needed more urgently than 'just buy a house before the market moves over spring….
Hi vj4mj2,
Your aims are definitely not overly ambitious and congratulations for making the first step!
As it seems you are looking for capital growth, South Frankston might be a bit of a stretch for great capital growth in the next 5 years. The area has been "the next big thing" for far too long for my liking and also sits in part of the mortgage belt that could see problems should interest rates increase markedly in the next few months and even to 2013.
I definitely prefer the inner 15km ring (and avoid CBD apartments) for capital growth and units can offer this for you as well.You also have the distinct benefit of removing equity from your PPOR to contribute to the funds to complete the purchase of your IP (or even two IP's!) so you don't need to use any cash if necessary.
We run free property investing education seminars in Melbourne that cover a lot of these competing ideas might be of use to you, the information is on our website.
Thanks LH for your advice. Our Mtge broker also suggests we purchase two properties, but one for now is enough worry. Maybe when we are more comforatable we will go from one to three.
Thanks for the thoughts on Sth Frankston, that was also a 'con' on our list but have heard some good and some bad on the growth of the suburb.
I will check out your website and see what dates your free seminars are on.
Cheers
Just make sure your lender / mortgage broker doesnt suggest to you that you offer your PPOR as security and cross collateralise the 2 securities.
Be suprised how many Brokers / Bankers have no idea about loan structuring and are keen to take every bit of security they can get their hands on.
Richard Taylor | Australia's leading private lender
To avoid using your own cash, have you considered accessing some of the equity in your current PPOR to fund the purchase? LH touched on it above.
If you're thinking about building a portfolio, it helps to have some cashflow – $40k placed in an offset account is a good start.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks Qlds007 and Jamie M
yes the mortgage broker suggested we take out two loans at the time we were selling on both properties, for the below reasons. We did not go ahead with this as I didn't want to have a large mortgage on a house the we owned and thought that we shuold be able to get a mortgage with enough cash deposit without using our home as security (we are conservtive which might be costing us??
The theory was – take out two loans.One on the existing PPOR and one on the new PPOR ( we broke the cardinal rule of buying before selling and had a contract on this house before we sold the other (this house was less because it's further down the road) and we were ok with this) This gave us a 550k loan on old PPOR and 400 loan on new PPOR. The theory was that the larger loan would be paid out when we went to settlement and we would have a 400k loan on this place which would give us the freedom to purchase an IP when we were ready. Since we would not draw down on the loan it would not cost us apart from the intial set up.
As I said above we didn't go ahead with this since it was too much at the time with moving to a new suburb and kids into new schools, selling house via auction, etc to think about being ready for an IP (I wasn't sure I wanted to move at all!)
What do you mean by cross collaterliaze ?
Have been reading heaps more on the forums and we are coming up to speed but don't know what the above means.
Thanks for your posts, it has been helpful and keeps giving us more questions to answer what will be riqht for us.
Cheers V
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