4 properties (6 incomes) in 6 years, welcome any comments!

Discussion in 'Investor Stories & Showcase' started by Sydney Villain, 27th Aug, 2018.

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  1. Sydney Villain

    Sydney Villain Member

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    In each case we vall'ed the properties after the build. From what I can recall, the vals came back over dollar per dollar. Granny flats cannot be subdivided unfortunately under the planning regulations. I wouldn't consider selling as they are yielding a good cashflow.

    In terms of potential buyers, these type of sites would probably only appeal to investors (perhaps owner occupiers with large families, or living with in-laws). In this current environment, just a personal opinion, but I feel like it would be difficult to sell to an investor. So I plan to hold on long term.
     
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  2. Sydney Villain

    Sydney Villain Member

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    One site is a cul de sac, and the other is a standard block.

    The main house on the CDS has a garage and large driveway but the tenant has FIVE cars, also a very narrow frontage for the granny flat, so the tenants park on the street. However, they have a large front and back yard - as big as a normal house, which kind of offsets the parking issue.

    I widened the driveway on the standard block so they each have their own spaces. So worked out well.

    Parking has been a constant issue with these tenants but has settled down now. Other than metering/water charges, it is probably the most important thing to consider as it will turn off long term tenants.
     
  3. Sydney Villain

    Sydney Villain Member

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    Sell off one of the dual incomes and consolidate I guess.

    I saw the recent reports as well. Some small increases in the interest rate by the banks makes sense given their increased risk exposure in a falling market. The majority of my loans are fixed for 3 years with the exception of Fairfield (May 2019) so I can ride this for a bit and build up cash flow against it. Refinance just came through to get out of another NAB loan, reduce it to 80% LVR and fix for another 3 years at 3.99% with Suncorp.

    My in-laws retired at 50 years off the back of a successful development project and acquiring several properties in metro and regional areas which my wife helps to manage. Dad travels out monthly to do all the repair work himself and it keeps him really busy.
    While they have inspired us to a degree I don't think we will go into it full time like they did (unless we see a good opportunity), the portfolio is just there to supplement our jobs and give flexibility (to work part time, spend time with the family or whatever.

    Long term I want to hold all the properties debt free. We are both 30 years old so we don't plan on retiring for another 30 years - maybe just wind down the career a bit. Over the next five years my aim is to set up a self managed super and get at least one investment property each for my wife and I.
     
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  4. jefn89

    jefn89 Well-Known Member

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    Sounds good, for me the idea of "retiring" is not something I'll likely ever do :) !
    Long term goal, in the next 10 years or so, am nearly 29 is to not have to ever work for anyone else though i.e. your financial freedom. Everyone has different goals although for me having seen some friends and close relatives be beholden to an employer is not something I'd be keen to sign up to longer than I needed.

    Congrats to your in-laws though and keep up your excellent work!
     
  5. euro73

    euro73 Well-Known Member Business Member

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    Great job. You have built a P&I proof portfolio. 125K income against $1,485,050 debt is an 8% yield before tax, so between the surplus cash flow the portfolio generates and the salary savings you are generating, you should be able to pay down all the debt in 15 years or less. Even if you were to get no additional growth over the next 20-30 years, all you need is for rents to double in that time and you'll be sitting on unencumbered property generating 250K Gross.

    The growth you've achieved on your Sydney purchases is nice, but its the yield from the dual occupancy properties thats the real magic ingredient in this portfolio .

    Along the way you may hit servicing ceilings ( which only matter if you have ambitions to keep growing the portfolio) but it will be temporary rather than permanent, as you will always be paying down debt in an accelerated fashion.

    This is the way to invest. Dividend Reinvestment using Cash Cows + Debt Reduction.

    einstein .jpg
     
  6. Sydney Villain

    Sydney Villain Member

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    I think rents are stagnating though?

    On the flip side, if I sold one of the dual incomes I could buy a duplex site:

    Purchase $1.3 -1.4M
    900k in build/other costs (current site I am building is $800-840k)
    100k in interest costs pa
    = 2.3M

    Each unit = 1.5M value

    Hold and rent both @ 1200 / wk (2400/wk) = $124,800pa

    The Challenge is holding with interest so if I JV with family, reduce interest to say $70k pa

    So that $700k equity generated in the land and $54,800pa return in rent.

    Compare that to holding a dual income property which is giving me $18k rental after interest.

    Simplified this a bit too much but looks like a decent play. I couldn't afford the deposit and interest charges without selling the dual income site.
     
  7. Sydney Villain

    Sydney Villain Member

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    Scenario: Sell dual Occ, buy duplex site

    1,485,000 + 2,020,000 - $500,000 (sale proceeds) = say $3,000,000 debt

    125,000-47,350 (dual occ rent) + 125,000 (duplex rent) = $202,650 rent pa

    = 6% yield

    Debt calculation assumes no JV and no offset.

    I see your point re debt ceiling. This would be more of a long term play.
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Looks like you are doing well Villan.

    How are these properties owned?

    What’s the land tax bill like?

    I might of missed it but where do you live – i.e. a paid off main residence or renting?
     
  9. euro73

    euro73 Well-Known Member Business Member

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    Rents doubling in 20 years isnt an ambitious estimate.
     

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