630K Borrowing Power 100K Cash | What would you do?

Where do you draw the line? 20% deposit? 30? 50?

Parting thought. People here have done what you are trying to do. You have a strategy you havent proven actually works.

You are sure of this strategy, even though you just completely changed your strategy after people poked holes in it.

learning is the most valuable skill.

 

Enough deposit until it's CF+ And i'm sure i'll find something in that criteria.

Yes, people opened my eyes about brand new properties. However i still want CF+ weather they're new or old it doesn't matter.

I wanna hold them for 15 - 20 years. I can still achieve financial freedom and maintain a good lifestyle via my business. So i'm not really in a hurry, i'd rather have quality over quantity and something that i'm 100% sure will not loose money and will 100% reap fruits at the end of my journey.

May i ask what's your strategy? How's your portfolio looking currently?

 

https://www.realestate.com.au/property-house-vic-bayswater-133447994

Cash flow positive for me

 

That's precisely why metro Melbourne won't work...big land in metro areas is too expensive and the only way to get the yields up is via a granny flat, which isnt allowable in VIC. ...or via subdivision and building a 2nd dwelling - which requires mucho casho and cutting the land size in half. And even if you could add a granny flat , you'd lose a chunk of it to land tax because of the low VIC thresholds .

NSW regional Dual Occ is the ticket . You get big land, the land costs far less, vacancy rates are far lower, yields are much higher, you can hold several because of the much more generous land tax threshold , and Granny Flats are totally legal and do not require council approval up to 60M2

 

Nice, how's the capital growth in NSW?

What do you think about this property? It's CF+ for me

https://www.realestate.com.au/property-house-vic-bayswater-133447994

 

What? This is like the opposite of what you should be doing if you're trying to build a big portfolio quickly. And same for buying "new townhouses".

Trust me, as someone who was fortunate enough to accumulate a number of properties quickly on a low income, doing what you're considering so far wouldn't have got me past one or two.

You need a certain amount of yield yes, but you also need quick and reliable growth in order to not be bottle-necked by your rate of saving - which happens very quickly.

You basically need to be very, very selective and find those one in 10 thousand properties that give you growth AND yield. New townhouses are pretty much the opposite.

 

You're right, i'm searching now for something good. I have to close on an old property in couple of months which is CF+ or Neutral and has good land size.

Yep new houses/townhouses are out of my mind now, thanks to you guys.

Would u buy something like this for your first property? https://www.realestate.com.au/property-house-vic-bayswater-133447994

 

Neat and tidy. Nice sized land. When you say its CF+ for you, how do you reach that conclusion?

If you paid 650K for it, for example... stamp duty is 34K. 684K total.
Interest on 684K would be @ 18.4K if you used a competitive fixed rate of 2.69% IO
Outgoings will likely be @ 5-6K for building insurance, landlord insurance, council, property management etc
That will bring total outgoings to @ 23.4-24.4K

How much rent would you expect to receive for this?

Separately - comments above about growth need to be considered in context. Everyone likes growth. Makes ya feel good... but you have to consider whether it serves a purpose in getting you where you wish to go. If you have exhausted your borrowing capacity, growth cant be accessed through equity release/borrowing, so you have to sell to get at it. But equity achieved via debt reduction is a different beast. If you retire debt, that equity should, all other things being equal, become accessible as you have already demonstrated serviceability for the original loan amount .

You really need to start with some sort of end goal in mind. For example- do you want 100K income from your portfolio, or do you want $1Million lump sum profit? Whats the end goal for you? What REALLY matters. From there, get your borrowing capacity sorted out - and I mean thoroughly. Speak with a broker who can run scenarios for you - Start with your current situation. whats your borrowing capacity if you buy a property at X price point with X rental, today? If it went up 20% or 30% or 40% in value, would you have the borrowing capacity to access that equity and buy another property for X with X rental? That will tell you whether that strategy can work for you or not ...and for how long, before you hit a wall. What would the repayments look like at P&I ? Can you afford to run it P&I ? Is CF Neutral really going to cut it for you if P&I becomes necessary?
Then look at what would happen if you bought something much higher yielding. Whats your borrowing capacity if you buy a property at X price point with XX rental, today? If it went up in value would you have the borrowing capacity to access that equity and buy another property for X with XX rental? Just as importantly, if it did NOT go up in value, but you paid down 20,30% of the debt, would you have the borrowing capacity to access that equity and buy another property for X with XX rental? What would the repayments look like at P&I ? would the much higher yield make it far easier to run it P&I ?
Which of those approaches is going to get you to what REALLY matters.

When you play a game of snooker, the aim is to clear the table, not the first and easiest shot on the table. Not the second shot...not the third shot. The game is won by clearing the table. Building a portfolio and then holding the portfolio and then growing the portfolio requires that you consider several purchases ahead, and anticipate future holding costs as well. You have to know what you are trying to achieve. Taking easy or obvious or lazy or least challenging shots can leave you snookered .

 

Thanks mate, i'm only gonna target properties like this. I'll be sure to inspect them and get a proper professional building inspection done before buying any property.

I'd get minimum 400 rent for this and i'd only offer 600K for this property.

Also i could get FHOG and then put it on rent after 12 months, would that be a good idea? Maybe not, the property has to be 5 years or less older for me to be eligible for FHOG right?

Estimated repayments
$1,419
per month

Your savings$100,000
Stamp duty
- $31,070
Transfer fee
- $1,494
Government fees
- $111

Available deposit $67,325
Your price
$600,000
Deposit (11%)
- $67,325
LMI estimate
+ $11,157

Loan amount $543,832

These calculations are based on a 3.13 interest only
loan with an interest rate of and a loan term of years.

 

At least you are on the right path to get some land and older house as opposed to a new townhouse. But, you still have to read through a bit more to understand the CF, yield, stamp duty, etc calculations.
I like this one instead https://www.realestate.com.au/property-house-vic-thomastown-133575746
Lot closer to the city, good train connectivity and better chance of CG as well as development opportunities.
The other option is look at Sydney properties where there is a granny flat and you can rent the granny flat separately.

 

Nope. My first property was a duplex pair on one title for land value. Around 440k. Spent around $60k fixing them up since they were basically a write off inside. Rented each side for $280/week so $560/week all up.

Still wasn't cashflow positive in any real sense after all real life expenses were factored in, probably close to neutral.

But I was able to use the equity gain to borrow more, once based on the renovations, and then a second time subsequently due to subdividing them into two lots.

Your calculations seem way off if you think buying something for 600k and then renting out for $400/week is cashflow positive.

 

Thanks mate,

Thanks for the valuable information mate. Hats off to you and all the other members who have contributed valuable information to this thread!

I am going to write an exact strategy on paper, get a good broker and run the number i need to be targeting to reach my goals.

 

Thanks for the advice man. I'm only going to do homes though.

I actually wanna hold my portfolio for 30 years now. I wanna go hard in accumulating wealth via business in the next 10 years and invest all the money in buying as much property. I'll definitely purchase my first IP in a few months. I'm sticking to quality over quantity. I'd still be able to manage a good lifestyle because all my properties would be paying themselves off while gaining capital growth and i make money doing what i love doing on my terms anyway. Looking for that generational wealth effect

 

You said "cashflow positive for me" a few times but by that logic any property can be positive with X amount of money put down as a deposit. That's not how it works though @thatbum is correct your calculations are way off

 

Yeah i know i was way off, that calculator didn't include a lot of things. I found a good calculator now which does including total expenses as well. I'm going to speak to a good broker so i have my numbers planned crystal and clear

Currently i can afford a 500K Loan With 100K Deposit on an IO loan it's CF+ on P&I it's $100 a week CF- Both calculations includes all expenses like Council rates, Insurance, Repairs and maintenance, Water rates, Property management fees Property mgmt. fees, Inflation etc.

I will make a new thread later on because this one is a mess, later down the track i'd want young investors to gain knowledge from it so they don't have to go through every comment on e

 

Hi Euro73 - what's the capital growth like for properties in regional NSW? Any specific suburbs/regions?
Thanks

 

we are Building in Orange and Goulburn , and both have been great for growth ... But they are also affordable and have low vacancy rates - so the yields are excellent on our Dual Occs . Renters gobble up our product ...
Granny flats go like hotcakes in hungry Goulburn rental market

 

I like that

Here is another prospective

For Cashflow consider treechange, bigger lots, addon
For CG consider Seachange, relatively smaller lot and most importantly follow the money means buy where rich people want to live

 

Go regional Vic if you want caahflow and some decent growth (Geelong, Ballarat, Bendigo)