Newbie to Propery Investing with a ‘what would you do?’ question.

I just re-read your posts.  The most important questions are:

WHEN are you going to move interstate?  Why are you moving, and is there a possibility it might not occur?  To where will you move?

Will you want to own the place you live in, or are you happy to carry on renting indefinitely?

Sounds like your husband earns a tidy sum.  Does he work for himself?  What I'm getting at is, does he work through his own company?  If so, there are ways to buy property through the company and thus reduce company taxes due to the ownership of the property.

Is there a family backup plan if hubby became ill/unable to work?  In other words, are you able to re-enter the workforce and support the family, or is it under consideration to get income protection insurance on hubby?  Don't answer this one – just ponder it.  Even the stash of cash you are currently sitting on would only last a couple of years supporting a family. Less if it was also supporting mortgages.

I'll wait till I see the answer to these questions before I rattle on with a bunch of irrelevant options.

You sound like you've done plenty of reading

You guys are in a great position, and don't necessarily have to go down the path of purchasing property 30mins or so out of the city.  Sounds like you can afford blue chip which ought to produce great capital growth.  I think if I were in your position, I'd sink around $500k or $550k into a small house – or if push comes to shove, a townhouse (not an apartment) in the likes of St Kilda, or areas of similar proximity to the city such as Kensington.  Your leftover cash each month will enable you to hold the asset while it grows beautifully. 

Alternatively if you prefer slightly higher rental returns with potentially less capital growth, you could look at splitting it in two – eg a $300k property in the suburbs, and then a unit worth $250k as close to the city as possible, or a house in the likes of Geelong or Ballarat (both have super strong rental demand).  This strategy of having two IPs rather than one introduces a bit of liquidity into your portfolio.  You could offload one if need be, while still holding on to the other.

Both the above ideas would still leave you some emergency money. 

Remember this is just what I might do in your position.  Other people might do differently.  The most important thing is to do SOMETHING, but not to bury yourself so far in debt beyond your comfort level, such that you lose sleep and cause household tension over it. 

Doesn't matter which suburbs you choose, there'll surely be someone on here that has researched the suburb to death.  I myself have paid a lot of attention to Geelong lately.  Feel free to yell out for help if you decide to include that area in your search.

ps yes, interest only loans with offset account.  Pay all excess money into the offset, not onto the loan!

We can tell you what we would do or specifically what we did in the same situation with roughly the same money.

– Buy a 1 Bedroom Unit, that is approx 10-15KM from a major city that is at least 50squares. = Buy this outright or as close to it as possible for $185K. The Unit you purchase should return a rental income of at least $180-220 per week.
– Once Settled, and you have a 1 bedroom unencombered unit. Use the unit as security to purchase new townhouses. Approx $550K. You should be able to squeeze 2 of these secured against an unecumbered property of that profile.

Reasons for this structure.
– The unit is small enough and cheap enough to always be rentable.
– The value of the unit is the security for new properties. If we work on 20% LVR. You could squeeze 2 Townhouses or several smaller units in there.
– The Rent from the unit should cover most of the shortfall of renting out new properties

This strategy is obviously not without risks, however we did this a year ago and it has worked out very well.
– Purchase 1 Bedroom Unit in West Footscray outright for $150K
– Used it to purchase 2 off the plan townhouses @ $500K ish each.

End result –
– Spend of approx $150K spawned a portfolio of 1.2 Mill ish. In the space of about 3-4 months (to find property, 9+ months to fully settle)
– Minimal capital outlay beyond initial $150K (Approx 20-30K altogether for new contract deposits and processing costs)
– Minimal Stamp Duty Costs because we went for off the plan purchases.
– Maximum tax deductibility across all 3 properties.
– Consequently all 3 properties have gone up in value. 1 Year later, we are almost at the stage where we can get the townhouses re-valued, discharge the 1 bed unit as security, and start the cycle all over again.

Anyways if he question is what would we do, then this answer is what we did and why we did it.

Hope it helps.

Hi Jodi

Four approaches are better than three, so here's another one

I would buy a "standard" family home, in a solid working class area, i.e. well away from housing commission areas and with a low percentage of rental properties.  Preferably brick & tile and 3+ bedrooms.  I'd then on-sell this property with vendor finance so it generates income at three points, i.e. around $15K as a deposit when the new vendor finance buyers move in, around $500 per month positive cash flow (after all expenses on the property) and the "back end profit", e.g. you buy the property for $300K and on sell it for $335K.  All income from this property is declared as "investment property income".

The above property then has the potential to support your next, probably negatively geared, long term buy and hold.

We have found that starting off with a positive cash flow property first, followed by a negatively geared buy & hold, has been a great way to build our portfolio, without having to wait for market driven capital gain, i.e. we fix our own capital gain and cash flow.

Cheers,  Paul

Hi Jac

Nothing too definite, they just seem easier to sell, i.e. they seem more attractive to our buyers.

Cheers,  Paul