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350k ready to go

Discussion in 'General Property Chat' started by Schmick_, 15th Sep, 2015.

  1. Schmick_

    Schmick_ New Member

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    Hi guys,

    Some of you may remember my one post back on Somersoft a few months back. Due to studying a double degree, working internships for an amount that was close to free (damn exploitation I tell you) and a general inability to take action, I am back where I have started.

    I would really appreciate some general advice as to how you seasoned investors would approach my current position.

    A bit of background to myself,
    -I am in the final year of my degree, working as a casual 3x days a week (approx income of $550p/w)
    -I am graduating in July of 2016. I also need to undertake another 5 week internship sometime next year (most likely unpaid)
    -I have been awarded a sum of 350k (long story).

    I am a bit confused as to which path I choose at this point in my life. These are the 3 options that I believe I have;

    1. Use roughly 20% of 350k as a deposit for an apartment, borrow as much as I can and keep the rest in an offset. I would need to buy in areas such as Liverpool e.c.t

    2. Use most of the 350k + borrow to buy a better investment closer to the CBD (Im thinking areas such as Croydon Park, Penshurst to be within my price range)

    3. Wait until I graduate and secure FT employment (roughly around August 2016) and see how the market is acting then.

    Would appreciate some thoughts
     
  2. Leo2413

    Leo2413 Well-Known Member Premium Member

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    All depends on your goals and how aggressive you want to be. If i was in your situation (I'm pretty aggressive) i would:

    1. Increase my income to double what you have now (yes i know it will be hard with study but its very doable)
    2. Once i have done that and servicibility is all good, break up my 350k into as many deposits as my servicibility will allow and buy a couple of ips. Forget high rise units, off the plan, etc. Buy middle ring, median price assets, possibly with room to add some value. That would be a great start to building a portfolio imo. And also, learn as much as you can re books, forum etc. Your decisions will generally only be as informed as the knowledge you have. (that's a biggie, trust me).
     
  3. FireDragon

    FireDragon Well-Known Member

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    I will suggest 3 because:

    1. If you don't have a job, I don't know if you are able to get a mortgage.

    2. I don't think you can buy anything in Penshurst area for 350K. Last year Sep I bought a one bedroom unit for 350K in Penshurst and currently similar unit is asking for 460K.

    Alternatively are you interested to buy in other states such as Brisbane?

    Edit: please ignore my comment regarding Penshurst's price. I misread the second option, I thought the OP is not going to borrow.
     
    Last edited: 15th Sep, 2015
  4. bob shovel

    bob shovel Well-Known Member

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    Your current income is low for serviceability and once you get full time employment it would be considerably more one would like to think. Do you know what the salary wouldroughly be one once you complete your studies? Would be important to find out.

    I think given your income speak with a broker explain situation and what you expect to earn next year.
    Find out what you can borrow and as long as you don't have to eat into the cash to much buy somewhere to get the ball rolling, looking for short term cg and decent yield to help servicing. even though you go full time next year it still doesn't mean your on mega bucks cause you have a uni stamped piece of paper!

    In short don't touch to much, borrow as much as possible on your income
     
  5. York

    York Finance Broker Business Member

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    I think he meant use the 350k plus borrow more to buy in Penshurst etc.
    But I agree that without full time employment not sure if you'll get a loan.
    @Leo2413 said depends on your goals and objectives and I'll have to agree. You need to know where you want to go before you decide how you're going to get there. Once you do that, it will be much easier to make the decision.
     
  6. JDP1

    JDP1 Well-Known Member

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    option 3. Too many unknowns and variables at play. Get a bit more settled first. e.g. what happens if you don't get a FT job after graduation?...you might need a bit of that money.
     
  7. Leo2413

    Leo2413 Well-Known Member Premium Member

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    That's really true though. I mean we know nothing about this bloke. He might be a hardcore, kick ass dude who wants to rip it up asap. How do we know. His path forward will really depend on this goals and risk tolerance. I mean he could do what most other investors in Australia do which is throw a dart and aim for the best plan. But this is PC, he should be able to get a slightly higher level notch of advice here i should think, considering the company he is in on this forum..
     
    Last edited: 15th Sep, 2015
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  8. JDP1

    JDP1 Well-Known Member

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    save the flattery for the ladies on this forum...lol
     
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  9. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I don't know how to flatter.... i just tell the truth :oops::D:p
     
    Last edited: 15th Sep, 2015
  10. Schmick_

    Schmick_ New Member

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    I can roughly get a loan of around 250-300k based on my income (I have been a causal in my current job for over two years). I did get pre approval around January of this year, which has now expired as I did not purchase then (FML).

    Once i graduate next year, ill be looking to earn roughly 60k p/a.

    I currently live at home so expenses are quite low.

    After factoring in costs of an IP, from my figures it seems income generated from the IP will be fairly neutral, possibly slightly negative.

    I guess it is just a matter of determining whether I am willing to take a risk right now.
     
  11. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Try to weigh up the risk of 'doing' Vs 'not doing'. Both are risky. There is no riskless position. ;)
     
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  12. D.T.

    D.T. Adelaide Property Manager Business Member

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    The lending rules changed a lot in July 2015. Its possible you'd get a different number now.

    I wouldn't risk it personally. You have no way of knowing whether you have a job or not.

    When you do have a job, if you don't mind staying with parents for the first year, you could use your 350 as 20% deposit and costs on about 4 properties in cheaper capitals like Bris and Adel. This will set you up for life. Move out, work hard on getting promotions for a couple of years and you'll find yourself in an envious position.
     
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  13. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Should you find yourself with a reasonable income, that $350k opens up the possibility of accumulating $1.5 to $2mil of property.

    But before getting too far ahead of yourself, consider your goal. If, for example, you're gunning for a $100k passive income in 5 years, you will need to approach things differently than if you're aiming for $50k passive in 20 years.

    One thing to give due consideration to is whether you're keen to multiply your (considerable) starting capital.

    It's not much of a stretch to turn that $350k into significantly more through a value-add strategy; whether cosmetic or structural renovation, subdivision, small development etc. There's plenty to keep a big buffer aside during the process of multiplication too.

    You're in an excellent starting position. Just get clear on your goals and work backwards from there :)
     
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  14. bob shovel

    bob shovel Well-Known Member

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    With regards to employment will you stay where you are? or is it an internship and they're just taking advantage of fresh meat?

    Sounds like it's best to talk to a broker first to get the borrowing sorted.

    What are you studying? What field will you work in?

    And don't let the plan and strategy talk put you off. It will all come into place as you learn more, dont let it deter you with your first purchase! You sound like you have enough of an idea to get going, don't confuse your self or hold off because you don't have a "plan". It will evolve as you evolve!
     
  15. Schmick_

    Schmick_ New Member

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    I am looking to get into a consulting role with one of the big firms, where I have the ball rolling for post-grad employment. Im currently undertaking a management / law degree. Trying to get a legal graduate role in this saturated market is not a plan for me.

    As much as I would like to jump in and get started early, I understand the importance of using this money wisely as it has the potential to give me a great head start. Even if that requires me to wait another year or so!
     
  16. JDP1

    JDP1 Well-Known Member

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    Wise decision. as I said above, hold fire..get more.settled first. You are in a good position - just don't rush into anything.
     
  17. bob shovel

    bob shovel Well-Known Member

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    It's all good to wait but you have the cash and payslips to go now. Albeit you may want to refine a plan further. but to play the devils advocate and say "hurry up and buy!". So you wait till mid next year to get a job, that comes along, once you start a new job you'll need to wait 3-6 months for payslips to come through, so your out to end of next year. End of year Christmas everyone's busy, so your out to Feb 2017, plus any other surprises that apra may throw in. You might find a new job along the way or decide to take the cash to the casino! but in that 9 months if bought well you could scored something that increases 10-20%in that time. So you'd be up 70k on a 350k property.

    @Steven Ryan Correct me if im wrong but given @Schmick_ can get a loan and having the cash would offset the repayments you'd be cf+.

    Do you have any interest or intent to go and develop straight up? Or value add plans. If you simply want to start I say go for it! Things change, you don't want to come back in 5 years and say, "**** that ******** was right!"
     
    Last edited: 16th Sep, 2015
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