Hello,
I'm 26 yrs old and my partner and I have just started to get into property investing and we are unsure as to what to do next. Our PPOR is worth around $580 with $390 owing and our IP is $560 with $390 owing. From these sums i would assume we have about $120 in useable equity. Question is do we use all of the deposit on one purchase or try and buy multiple cheaper properties?
Well done ion starting your investment journey young.
Difficult to say with so few facts. Yes looks like you have about $120K at 80% lend.
What is your cash flow like? I'd assume negative.
Can you afford another negatively geared property?
Cheaper properties may give you a better yield to improve your cashflow.What are your long term goals?
Have you got your loans structured correctly? Is the equity due to CG? or are you paying Principal & Interest (P&I)?
If you are paying P&I on the IP stop now and go interest only and put the extra into your PPOR (via an offset account).
free_dom wrote:Hello,I'm 26 yrs old and my partner and I have just started to get into property investing and we are unsure as to what to do next. Our PPOR is worth around $580 with $390 owing and our IP is $560 with $390 owing. From these sums i would assume we have about $120 in useable equity. Question is do we use all of the deposit on one purchase or try and buy multiple cheaper properties?
Hi Free_Dom
Welcome to the Forum,
You actually have $132k in equity/deposit to utilise. You have $74k to use against your PPOR and you have $58k to use against you IP.
You need to really look at 2 things – the rental yield (not just cash-flow but also taking into consideration the holding costs such as strata) and also Capital Growth and this will help accelerate future IP purchases.
My preference is to purchase a house – it has far greater potential for increase in rental yield as well as capital growth. You can extend, renovate more extensively (I’m not talking about over capitalising but rather more flexibility) and develop (or perhaps sell with a DA without carrying out the development work).
Also it is best to present the numbers of both scenarios including incoming income, outgoings, deposit amount, etc and have someone model the scenario to show you which option is better. Which areas are you looking at?
Shahin Afarin – Elite Property Finance
http://elitepropertyfinance.wordpress.com/TheFinanceShop | Elite Property Finance
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We both work in stable public sector jobs with a collective gross income of about $130000 and no dependents or personal loans. We are starting to build wealth for our later years but not to retire till we are in our late 40's or 50's plus the property game is rather interesting. Our PPOR is P&I and our IP is IO. Not sure what you mean, "is the equity due to CG?" I think its just from the area that we have bought in.
We could afford another neg gear property but we're not sure if we should try and balance with something neutral or positive. We read all the magazines and website but there are just so many directions and strategies out there to take. Very confusing.
free_dom wrote:We both work in stable public sector jobs with a collective gross income of about $130000 and no dependents or personal loans. We are starting to build wealth for our later years but not to retire till we are in our late 40's or 50's plus the property game is rather interesting. Our PPOR is P&I and our IP is IO. Not sure what you mean, "is the equity due to CG?" I think its just from the area that we have bought in.We could afford another neg gear property but we're not sure if we should try and balance with something neutral or positive. We read all the magazines and website but there are just so many directions and strategies out there to take. Very confusing.
In that case you should jump onto an Interest Only loan and have an offset linked to the loan. This will help you fund (together with any capital growth) for the purchases of further properties. The only problem/risk with this strategy is that the funds parked in your offset are liquid and if you cannot control your finances then you may be tempted to tap into these funds.
TheFinanceShop | Elite Property Finance
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Hi Finance Shop,
We reside in Sydney and would like to continue to invest here. Both our properties are apartments in the inner west of Sydney. We were looking at buying an IP house in western Sydney with DA plans for a duplex . I don't think we would able to muster enough money to build at the moment but could be forth while down the road. It seems that lots of people are buying in the Gladstone area which gives CG and cash flow.
Hi Free Dom (nice name)
Welcome aboard.
In terms of equity, you're in a decent position to kick off your portfolio.
If you've decided that property is the way to go, I'd encourage you to tap into the equity now and leave it sitting dormant until you actually need to use it. That way, when an opportunity does present itself, you're in a position to act. I've got a few clients at the moment where I'm doing an equity release and purchase application at the same time and it can be a pain (I vented about it in a recent API article).
In terms of what sort of properties to purchase – I'll leave that one to you to decide. Personally, I have a preference for houses as well – particularly those that can do with simple, affordable, cosmetic renovations that add value quickly and also enable you to increase the rent.
26 is a great time to start – property investing, for most people, is about long-term wealth creation so the starting young certainly has its benefits. Besides, with two already under your belt and with a fair bit of useable equity, you're already off and running.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
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free_dom wrote:Hi Finance Shop,We reside in Sydney and would like to continue to invest here. Both our properties are apartments in the inner west of Sydney. We were looking at buying an IP house in western Sydney with DA plans for a duplex . I don't think we would able to muster enough money to build at the moment but could be forth while down the road. It seems that lots of people are buying in the Gladstone area which gives CG and cash flow.
Fantastic. The house with the DA approval for a duplex sounds good. I have a lot of investors who have made a lot of money in the Pendle Hill/ Wentworthville areas building duplex. The rental demand is extremely and ridiculously strong. The capital growth has also been fantastic. So a lot of these investors are building a duplex, selling one to reduce their loan and keeping the other brand new property and claiming good depreciation and negative gearing against the property. With the DA as you have stated – you do not need to build now. You can build later but DA’s have a time period before they lapse. Having said that it is relatively easy to get a lapsed DA approved again.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
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