$110k what should i do , thoughts below

Discussion in 'Investment Strategy' started by showtime94, 31st May, 2018.

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  1. showtime94

    showtime94 Well-Known Member

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    Hi , ive got just 1 property in logan area , ive managed to save 110k in the offset , my initial goals were to offset it fully but now im thinking of :
    A)getting a granny flat in the back.
    B) putting 55k on a house and 55k for the granny flat ( if i have to save up abit more for the house i can.
    C) putting the 110k on other house
    D) just fully off setting the place i have now then saving up the deposit for the granny flat or other ip

    Things to consider/ i hate my job and hate working in general ( only time id like working is when im doing what i want to do and working for my self im working on it but thats not my reality now) So in saying that i dont want to put my self in a position where im chained to a job i hate just because of my properties, like right now the position im in i can quit no issues my property is positively geared and has enough in the offset for me not to worry about anything ( thats why im thinking of putting the 110k on a granny flat to improve my cashflow and improve the position im in that i like. But i thought it might be wiser to put half of that as another deposit for a house and the other half on a granny flat that way i can increse my wealth in the future and cashflow wont be as good as if i just put in all on the granny flat but it will be alright .
    If i was to do that which is put half the 110k on a house and other on a granny flat i would save more money just to decrease the interest abit and ill be in a better position.

    What do use think ?
    The above reason is why im not conventional investing like useing equity and buying as many as possible etc ( i might do that when i have my bussiness but not now)
    Or maybe use have a better idea for me to do ?
    Also if im looking at fully off setting the property i have now im looking at less then 2 years so not that long
    Thanks guys
     
  2. Simon L

    Simon L Well-Known Member

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    Hi there,

    Having 1 property in Logan, even mostly offset is not enough for you to risk not working as you will experience vacancies, maintenance, rental arrears on that one property like anyone else.

    I've mentioned this before in other threads but I would not suggest getting a granny flat yet in Logan, especially if you still plan to build your portfolio as you will very likely be over capitalising on the build. Your tenant pool will be smaller as you are now looking for specific tenants that will rent both properties at the same time or 2 separate tenants looking to live so close to each other. Also there is no rental stress in Logan so people have a wide range of affordable properties to choose from meaning the demand and rent for your granny flat will not be high. If you did nothing else and parked the $110k in your offset account you will generate approx. $5000 savings in interest alone. Having no cash and a granny flat that also devalues the front house and overall "appeal" of the property will only generate roughly double that - not worth it.

    To buy another house, you do not need to spend all of the $110k. On a 20% deposit loan, your total outlay would be approximately $75,000 for a $300k house including deposit, stamp duty, legal costs and a few thousand buffer to fix up "teething issues"

    Ultimately it comes down to your goals in life. I was in a similar position as you when I first started investing which was hating my day job. Chanelling that passionate hate into a driver for property investing can be more powerful and motivational than you realise. You will feel like you are no longer working just to pay the bills but have a strong purpose to reach your next short term goal to achieve the long term goal of quitting comfortably ASAP.

    My suggestion, depending on more of your personal factors and goals, is to buy another property with good cashflow already and have the $30 - 40k cash buffer sitting in your offset account for your first property. Feel free to PM me to discuss in more detail.
     
  3. hobartchic

    hobartchic Well-Known Member

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    Sounds like you are being smart. You need a plan for a job loss too.
     
  4. New Town

    New Town Well-Known Member

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    Speaking from experience one of the real skills is to develop and maintain motivation towards your current employee job. Look into each task as a challenge to excel and do your best. Delve deeper into the role to extract anything that is interesting. :)
     
  5. New Town

    New Town Well-Known Member

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    I would want to use it to buy another property but its true that a passive investment will chain you to the job at least in the near term. To escape the job, you would need to take renovation/development approach (which is higher risk).
     
  6. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Hi Showtime94,

    Simon's advice above is really good. Correct, don't invest the $110k for more income with a granny flat. Use the money as a deposit to purchase a new property, and try to be as "growth" oriented as you can be, as this is what will get you out of the time-for-money world of salaries.

    Stick to the major capitals, and buy as much as you can.

    Kind regards,
     
  7. MTR

    MTR Well-Known Member

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    Yes, become an active investor

    Can you imagine buying resi property at the moment with current yields perhaps 4%.
    Passive investing works well when you are buying for growth, cycles where markets are rising.....

    Can someone tell me where you can achieve growth in Australia today?? Serious question
     
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  8. PresentNow

    PresentNow Member

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    There are 3 main things, amongst many, banks consider before they lend you money.
    1) Deposit
    2) Serviceability - income to pay back the loan
    3) Credit History

    So in order to set yourself up, you have to consider that every property you buy should put you in a better position to buy another property. As, if your strategy is to just buy and hold, then there will become a time that you will exhaust your borrowing capacity and it will become a long journey.

    Consider becoming an Active Investor and look at ways you can add value to your property, such as sub-divide, buy double blocks that you can sell of a land, renovation with buy and flip.

    Look at Commercial Properties that give you better yield.

    Look at buying land at a discounted rate and get your own builder to build at a cheaper price, and see if there is any potential to sell it amongst all those house and land packages that charge more.

    Its better to hunt for great deals buy low and sell at median house price to make some small profits putting towards your home. Rinse and repeat.
     
  9. Eric Wu

    Eric Wu Well-Known Member Business Member

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    Well said @Simon L.

    Dream big , @showtime94, plan ahead, look at a bigger / wider picture.
     
  10. Sackie

    Sackie Well-Known Member

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    Brisbane.
     
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  11. showtime94

    showtime94 Well-Known Member

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    Good reply , thanks mate i didnt even consider some things that you mentioned
     
  12. Singhalyash

    Singhalyash Well-Known Member

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    How is your property in Logan performing? Which area as I am looking at Investing. Any other area expert suggest for under 450k?
     
  13. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Hi Leo,

    What sort of property in Brisbane? I wrote an article this week charting the Sydney:Brisbane price ratio, and it is right on (or slightly above) the long term trend line (the data is up to 30 June 2018). Which means that Brisbane is neither expensive nor cheap compared to Sydney.

    Syd vs Bris.PNG
     
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  14. Sackie

    Sackie Well-Known Member

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    HI John,

    I guess everyone has a different way to identify 'deals' and what is value to them. For me, I've never put much stock in most of the economic stuff. House to income ratio, trendlines etc etc etc. I've never used them and personally I think its all a bit of nonsense and hocus pocus which can actually be a hinderance to finding good deals and quite misleading. I much prefer to focus on qualitative/emotional, on the ground feedback from various players.

    You've asked me what sort of property?

    Well broadly speaking:

    1. Established homes with greater land content
    2. Good OO areas or
    3. Ripple areas (a biggie)
    4. Add value potential in some way (extra biggie)
    5. Negotiate a good deal or at least fair market value
    6. Middle ring suburbs of Brisbane as close to the CBD as your budget/financial situation will allow.


    That's my broad framework. Where specifically? Up to individuals to do their own thorough DD.


    That's just how I do it mate.
     
  15. bob shovel

    bob shovel Well-Known Member

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    1. forget the granny flat idea
    2. buy next IP

    The property couch did a podcast recently on grannys and do not recommend.
     
  16. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    Fair enough, and good strategy.

    I just find the "Brisbane is inexpensive" narrative interesting. Historically, it is at the ratio is always trades at.
     
  17. Sackie

    Sackie Well-Known Member

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    I have no idea if Brisbane is 'expensive' or not, that's really subjective imo. But I do know there is good value in Brisbane for certain stock types and areas.

    Pre Sydney and Melb recent boom most thought property prices were 'expensive', then the boom happened.

    Reason I don't put much stock into all the economic hocus pocus/commentators is none of them/the data predicted any booms and most of them were negative on real estate until prices had already started to take off and every boy and his grandma knew real-estate is spiking. They always lag what is really happening on the ground and generalise massive markets/demographics/stock types into 1 or 2 markets. They also can't take into account add value potential which can completely change the dynamics of a deal.
     
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  18. Codie

    Codie Well-Known Member

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    From what im seeing on the ground middle ring north Brisbane, the whole "inexpensive to Sydney" narrative doesn't hold much if any weight in regards to Brisbane growing, Its very local driven. I don't believe all the growth comes from interstaters selling up and pushing prices up here as some have suggested. As Leo pointed out, the value add makes a huge difference, all it takes is a higher owner occ suburb to all start renovating (this is happening, trades are hard to get in parts) and all of a sudden you have great growth in a suburb. Mix this in with on the ground emotion and there's some great deals out there In ripple suburbs