My situation:
I am 27 years old and after fluffing around overseas for a couple of years have now been back in Australia and worked a couple of years to build up some cash. I now feel like I have been standing still and see the need to invest for my long term future. I am not after any get rich quick or the like, rather to over time generate an income from property investment. I am looking long term and have been doing extensive research from a variety of sources (including this and other sites) on both my strategy and the appropriate property to buy. This website is a wealth of information and I want to thank everyone who posts on here and over at somersoft.
My financial situation is as follows: No debts at all with $20,000 cash in the bank available for investment. I also have about $40,000 in a first home saver account which can only be used for the purchase of a first home. Earn $80,000 per annum as a PAYG employee. I have access to a $100,000 non-recourse (i.e the repayment terms are flexible, but it will be paid back at current interest rates) loan from my parents which I can use as a deposit. I took out a personal pre approval through the CBA in February for $320,000 of this year which was for a period of 6 months, this has now expired. I would be approaching a broker rather than going back to CBA for my next pre approval.
In the meantime I have set up a family trust structure with Company as the trustee which I would be looking to purchase any IPs in. My basis for setting this up was for long term asset protection and with the aim of operating a cash flow positive portfolio and the long term ability to allocate distributions of income. This was done with assistance from James at houseofwealth and Terry with some legal advice.
Based on the amount I have to spend (I would be looking at a maximum purchase price of 370k + costs.) and with the aim to create a cash flow positive asset I have been mainly focussing on regional areas. Even so, I believe from my research that to create a cash flow positive asset there needs to be something within the property that can be improved either in the short term (through renovation, subdivision, etc.) or long term through development.
I did put in an offer on a place in Wendouree which was a 3 bed brick veneer on approximately 800m2 with planning approval for 2 units but the vendor was wasting people’s time just trying to get an indication on value of the existing 3 bedder once he had built the 2 units and is continuing with the development himself.
I suppose I am at a bit of analysis paralysis and have decided it is really time to get myself in to the market as I feel at the moment I am letting opportunity slip by. The strategies I have looked at are below and I suppose I am looking for any comment from the experience on this forum with regard to my financial situation and what I am looking to achieve. I need to have clear idea of these things an criteria so I know exactly what I am looking for in a property as at the moment I have looked at a lot of properties but without being clear in my head of what I want it isn’t actually getting me anywhere.
Everyone’s opinions are very much appreciated and apologies for the long first post.
Strategy 1
Regional cash flow positive with potential for CG at cpi (i.e 2-3%, nothing spectacular)
Ballarat (Wendouree area east of Gilles St North) or Geelong
250k for a 3 bedroom brick house on a large block (>700m2)
This also leaves some available cash to either invest in another property down the track once I improve my serviceability or to do renos, etc.
Strategy 2
As close to the city as possible with potential for CG. Likely to be negatively geared for the next 5+ years.
350k for 2 bedroom unit (not apartment) in Footscray West, Seddon, Braybook etc.
There are some nice streets and areas about this part of town and I think in future there will be decent enough capital growth.
Strategy 3
Buy a block of units (maximum 4) in a regional town with an increasing population demographic. This would potentially be cash flow positive from day 1. Areas that have seemed of interest are Mildura, Albury, Mt Gambier, Morwell. Would be looking for all on one title, zero to little capital growth potential.
Strategy 4
Buy the biggest block of land as close to the city with future development potential. Albion, Sunshine West would seem the closest available with block sizes large enough. This is a riskier proposition I feel as they are currently not the greatest suburbs going around.
I have also thought about investing interstate (South Australia and/or Queensland predominantly for some land tax benefits when held in a trust) but don’t really want to, nor have the time, to travel that far at this stage.
Thanks again everyone for your tips,
Cheers,
Sam
Sam,
old post I know, how did you get on?
First, you need to decide how you want to invest (i.e. short or long-term).
Personally, as a RE professional, I advise people to aim for 10-year investments
in stable and developed country. It’s true that yields on property are lower
(2.5–6%) but actually your property’s value grows faster and compensates these
lower yields.
The markets in Austria, the UK, Germany, the USA, France and Switzerlandpresent the lowest risks (e.g., hyperinflation, national currency devaluation and
GDP declines).
It’s also important consider what currency your personal expenses will be in
within five to ten years. For instance, if you own residential property in the UK
and your children are studying there too, it is worth investing in property that
earns rental yields in British pounds rather than, say, US dollars.
In terms of location, it is better to opt for either popular areas of major city
centres and their well-situated suburban areas, or the medium-sized towns with
growing numbers of inhabitants, well-developed labour markets and potential
for economic growth.
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