Hi Everyone,
My partner and I are really keen to set ourselves for the future by using property investment to create wealth. We have both just turned 30, have no kids but would like a family in a couple of years. Our financial situation is below, as you can see we are not big income earners and probably never will be however have very secure jobs and have a fair bit of equity to play with. We are in W.A and would like an additional 2 properties within 2 years, at least one with development potential and something that we can keep our eye on so preferably in Perth. I guess I’m just posting this to see what people think, if you were in our shoes what would you do. Where would you consider investing, where would you stay away from, negative gear/positive gear, should I utilise the services of somewhere like momentum wealth and does our goal sound realistic/achievable?
Income 1: $74,000
Income 2: $78,000PPOR: $620,000 (bank evaluation last month)
Loan: $285,000 (plan is to pay it off in 13 years)Investment: $500k (Perth, no subdivision potential yet)
Loan: $450,000
Rent: $440pwCash in Bank: $80,000 (sits on mortgage to reduce interest, 30k of it will be for renos to PPOR)
No car loans or personal loans.
Thanks
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This topic was modified 10 years, 4 months ago by
Hot Stuff.
Looks like you’re in a good position there Hot Stuff and you goals seem very achievable. When you say ‘cash in bank’ is that in an offset account or available as redraw? Depending on which would have different tax implications.
One thing to consider is holding costs when you drop down to one income when you start a family so this should factor into the positive vs negative gearing. You’ll need a decent buffer in place and make sure everything is manageable on the one income – even with a vacancy or 2. Especially if you plan to develop one of the blocks.
If it were me I would draw on equity on my PPOR and set up a line of credit to fund deposit/s and purchase costs on IP/s – ensure you don’t mix deductible and with non-detectible debt too.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
Hi Hot Stuff
If I was in your situation, I would focus on a neutral/positive geared property.
Your current IP is negatively geared and is costing you to hold.
Personally I always focus on neutral/positive geared properties. I don’t want the property to cost me to own it.
Negative geared properties are appropriate sometimes though.All the best
AndrewsuperAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auHi Hot Stuff
Are you able to value add (eg renovate) the IP to increase your rental rate?? Are you charging market rates for the rent? As SuperAndrew says, it is costing you to hold the IP (so only a help to reduce tax) and unless you are able to improve the IP to increase the rental yield, it will take an awfully long time relying on market forces to get over the hump.
ChrisA1
Persistence is 'to keep on keeping on, no matter how hard the going may be'
“Cash in bank” meaning redraw facility which is on the PPOR mortgage.
The current investment I don’t believe will go up in a very long long time, some improvements are being made but I can’t imagine getting more than $450pw for it when comparing it to others online.
Just checking out positively geared properties in Perth, with historically low interest rates they do exist eg Armadale, Orelia, units in balga and the city etc. I’d prefer something with a substantial amount of land (700m2 +) as this potentially will give us a better chance at getting decent capital growth in the future.
Hi hot stuff
You’re in a great position.
Your borrowing capacity is good and you’ve got a fair bit of equity up your sleeve that can be accessed.
With some careful structuring and lender selection – a couple of IPs in the short/medium term should be pretty easy.
Keep in mind when kids come along your borrowing capacity falls and you may find it more difficult meeting your liabilities if one of you reduces your working hours (just something to consider when planning for the future).
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]
Hi Hot Stuff
Welcome, and I hope you enjoy your time with us.
Excluding the $30k you plan to use for the renovation, that leaves $50k in your offset. If you take that $50k out to fund a deposit on a subsequent property, you will increase the interest payable on your existing property.
A more comfortable way of achieving your goal may be to collect additional cash for the deposit on a subsequent IP. You might consider looking at putting your offset moneys to better use earning a higher interest rate elsewhere. We are able to get our investors up to 2% per month (ie up to 24% per annum) which would be more than sufficient to cover your monthly PPOR mortgage interest obligations with plenty left to spare.
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Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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This topic was modified 10 years, 4 months ago by
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