help with 1st time investing strategy.

Hi Gus,

IMO – you need to look at the whole picture.

You have some accessible equity in your existing portfolio. Going to 90% LVR will release around $54K (less costs). While $54K is reasonable it is not a huge sum of money in property investing land.

You haven't indicated what sort of income you are on.

These two aspects of your situation are important as lenders will consider both before lending you money.

From my perspective I would suggest meeting with a good broker and working out what your current lending position is and then determining if serviceability or security is the hurdle you will face first.

If the answer is security then you should look at a property with capacity to value add – if it is serviceability then look at an income producing investment.

To answer all the points in your post directly and link it back to my previous post .. i will answer them one at a time.

Firstly my long term goal is to own income producing assets which will one day replace my regular job and I hope to do this through residential property.

Admirable. Thats where we all start. Wanting to achieve a little more.

I have set up a discretionary trust, my PPOR is worth $260,000 with $180,000 owing and I am 27yo.

Nothing wrong with either setting up a discretionary trust, or having a PPOR that you are paying off gradually. In my view you have set up the discretionary trust a little early, as half of the benefits you can get as a tax deduction happen at a personal or owner level. Invoking the discretionary trust should be when you have over a specific level of assets .. or you have no need for the personal taxation discounts offered at a personal level.

Your PPOR despite being of a minimal invest and having now reasonable equity in the property .. is a longer term hindrance to getting the maximum possible for investing. The amounts of any contribution are immediately deducted against what you can possibly borrow .. limiting the size of your maximum potential borrowing. When its fully paid off .. its a wonderful asset to lend against .. and use as a contributor for further wealth strategy. Until then its a debt that holds you back.

I have recently become very interested in inner city units, particularly those with car spaces as they seem to have much more reasonable yields than standard house and land anywhere near the city.

This is where your reason for investing should come into play. Yes, in the inner city .. units with car spaces will be more desirable than units without carspaces. But there is really a market in each category.

Studio Apartments, Studio Apartments with carspace, Studio units with carspace, storage unit and shared facilities.

Do you see how at each level you will attract a different client .. and have different expectations? I am deliberately using Studio as they are the most difficult market in the inner city area .. and yet the most profitable.

You should always investigate whether the market you approach is catered for .. or nearing saturation. At saturation point or above .. there are more units than possible tenants and you start lowering rentals to attract ANY tenancies.

I realise that the generally accepted view is that land outperforms units in capital gains in the long term.

This all depends on picking your market .. and market timing. Land will generally be more sought after than units .. but again we are depending on an understanding of your market conditions. Understand your market conditions to better appreciate what expectations you can have for your properties. Both land and units eventually reach a peak point .. at which point the buyer is not prepared to pay any more for the type of property provided. This is where your market knowledge will come into play. Buying at market or above market is a great way to wait a long time for a result. Buying below market .. or assessed market value is a great way to make money in the shorter term.

If you are frustrated by your broker at this early stage I would contend this broker is not for you. There are a few brokers who are regulars on this forum and who often give good advice to forumites. They would be a good place to look next – and don't be fearful of their possible distance from you. Modern technology and good customer service overcome the tyranny of distance each and every time.

Your incomes, while not low, do limit, to a certain extent, any negative gearing benefits you may have.

determining if serviceability or security is the hurdle

This is a great point and I guess thats where I need to look now. When you say security do you mean that banks prefer certain types of security or are you simply referring to the LVR and potential growth? My outlook thus far has been to get something that is minimally negatively geared with the aim of positive returns in the medium term. How would my situation RE financing impact this? I guess my question is how do I determine which is my hurdle?

Bit of both in my response – looking at the type of property but more importantly looking at your existing LVR and accessible equity levels.

If you grab another 'cookie cutter' property you'll consume a reasonable amount of your available security at which point in time you'll need to sit on your hands waiting for the market to move. By comparison some value adding strategy may alleviate this matter to some degree.

Have a good chat with a broker and they should be able to provide you with some possible scenarios if you bought something with lower/higher rent returns and/or at market value or above. 

A lot of people focus on property selection and overlook the needs of their finances. Borrowing money is fundamental to property investment and if you keep this in mind as you move along the continuum then you will improve your chances of success.

Hope this helps

Investment in Real Estate is some time the task included with Risk. The Real Estate is one of the best fields to earn more amount in less period of time. The necessary measures has to be taken before investing in the field. We should verify some of the details like where to invest and how to invest, the location, amount investment is worthable or not, Is that place have demand to invest the amount on it or not and many more tasks has to be taken into consideration. The proper consultancy of  an experienced person would better serves the purpose of investing.

I agree with the above however crime rate is a bit debatable. Places like Mount Druitt, Doonside and Harris Park in Sydney are examples. All 3 have very strong and good performing rental and sales markets based on yield and how quickly they rent the places out.