Strategy Game: How would you start your property portfolio if you had $1.5 Million?

I know the answer is everyone has their own risk apatite and circumstances and what suits them. Though my question is how would YOU start your portfolio? And why? If you had the following hypothetical scenario:

- You inherited $500K Cash and another $1Million worth of overseas property in an EU member state country part of the Easter European Block.
- You don't own a home, so you've been renting in Australia.
- You have a low income of 50K (before tax) and need to support your family of 2 kids and your wife (who is not working). Your income will not change for the next 2-3 years.
- You have some additional income from the European properties which are rented out, let's say 25-30K (after EU tax).

 

Would you buy a PPOR or all into REITs

 

why property only ? if ur endgame is to growth wealth.. i strongly suggest other "assets" ETF or shares, but if there is property at the moment i would start buy buying a PPOR as the property investment market especially for resi is not viable imho.

 

I'd sell the OS property, and borrow as much as possible to buy a main residence, then pay this off and redraw and onlend to the trustee of a discretionary trust to invest in LICs and EFTs.

 

so you would use 1.5 Million + whatever you can borrow on a 50K income (which would be very little, let us say 200K maybe) so 1.7 Million to buy one PPOR property. Isn't that putting all your eggs in one basket? Yes, I understand that you will borrow more against it later. Just trying to understand your thinking why would you spend so much on PPOR and not try to diversify to 2-3 properties.

 

Assuming I have the knowledge I have now, I'd be buying development sites or JVs with other parties, funding projects debt free or with minimal debt and build chunks of equity this way to expand as fast as I can. In my mind the best way to build meaningful massive passive income for myself is to first focus on building up the equity machine first. You can even reinvest some profits and use the rest to live on so you don't have to wait too long to live the great life. Of course there are finer details but this would be my rough framework. Its pretty much what I do now.

 

Except if you are in ACT, TAS or VIC where its recovering (according to Ripehouse property clock) and perhaps WA where it has probably hit the bottom. What are your thoughts?

 

and assuming you are only starting off and you don't have the knowledge that you have now? Try to imagine you are back when you were starting.

 

I wouldn't want to pay too much for the main residence as it would slow you down. But the main residence is the only CGT free asset you can acquire (that increases in value) so think carefully about how to get one.

I would probably buy a second property and rent it out with the aim of moving into it later in life and selling the first main residence CGT free.

 

Simple. I would be leveraging as much as my serviceability would allow to buy cosmetic reno deals in good OO areas, with BMV purchases. That's what I did then .

 

so let's say 500K for PPOR and 1 Million rental and move into later. But in this case you would pay CGT on the 1 Million property right?

 

nice strategy. What are OO areas, please? Owner Occupied?

 

so flipping properties?

 

Owner Occupier areas. High proportion of people wanting to live there long term and not just renters/investment stock.

 

Partially if it was ever sold or none if it was the main residence at death. It could be passed to your heirs tax free.
Also any expenses incurred while living in the property will be used to reduce the CGT on sale. 3rd element cost base expenses.

 

What % of OO would you consider High OO area? What strategy would you use to secure BMV deals? (Buyers agents, make friends with hot shot realestate agents in the area, or?)

 

ok so this way you don't pay CGT on either of the properties? even if you sell the first (500K) one?

 

Thats right - if you plan it right.