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

On main road too industrial, far from shops and station. Close to petrol stations. Perhaps closer to ferntree gully n boronia stations better. Seems to be a few in that price range. Some big blocks near ferntree.

Dont completely rule out 3 bed townies if you can get them cheap enough/below replacement value - cashflows will be much better. I mean whats the point of picking up a block for subdivision and plonking two townies on it if its way cheaper for you to just buy two townies outright.

 

Spot on.
How many IPS or even the amount invested is irrelevant without knowing things like LVR, investing strategy, what's the end game, basically why investing into RE.
I have mentioned this stories before I think but may mention two real cases again...
1. At property seminar the presenter asked everyone in the audience to put their hand up how many IPs each person has. An elderly lady next to a couple put her hand up for one, and the hands kept going up of other attendees until I think one person had around 40 or so, and all people clapped.
At a break a couple sitting next to the lady asked so you have one IP, where is it located and so on. She answered, well my husband passed away and left me one commercial property worth around $15M and no debts so I am here to learn.
2. While refinancing some of my loans at my broker's place he mentioned of a young lady who purchased 7 IPs in short period of time who was financed by his company. The broker told me how she ended up being in a local paper as she was now about to teach others how to successfully invest. What he told me though shocked me as he said her deposit was generously given by her parents and she was 98% LVR. This was few year back when properties in SYD where booming, I am wondering were she is at now?
I think most don't succeed past one or two as OZ statistics show 90% of investors own 1 or 2 because:
1. Not knowing what to achieve from investing. What's the end goal, what amount of rental they wish to achieve then work backwards what asset base is required.
2. Not having a clear property investing strategy. Many ways to invest into IP and in many places.
It comes down to experience and walking the talk and learning.
So I would suggest start with one IP and the strategy see if this produced the outcome required. If so duplicate when finances and markets permit if not need to tweak and adjust.
Many factors come to play, negotiating, sales, management, strategy, adding value, cash flow, teams, etc... such as in business hence why many just find it too hard.
Always simple to understand yet it doesn't mean it's easy, but then what in life is easy that provides great results?

 

"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."

Love that analogy! People head over to www.dmaonline.com.au and buy a pool table! Get practicing!

 

the emphasis is mine. To do that you need strong cashflow. The best properties are therefore ones that need work and then you can improve value and rents. Might be hard to find a house with your budget and you might need to start with a unit.

definitely don’t use up all of the 630k!! Significantly less is better as your first one will be the learning one.

I reckon start with a cheap 450k unit. Not to make money immediately, but rather to immediately begin the process of learning and have a 180k head start for the next one...

Second one would 100% need to be a major renovation or development opportunity if you want to reach your goal..

you make money learning how to find the deals, you learn how to find the deals by trying to find things that fit your goals..

just literally work out the cost of ownership, cost of any additional improvements, and the projected net rent after fees/annual costs.

eg. Stock standard 450k unit renting for 400 per week with 1000 quarterly costs has these numbers:

- Rent = 400 x 52 weeks x 98% occupancy rate x 95% post agent fees = 19364
- annual costs = 4000
- Gross Benefit p.a. = $15364

costs of ownership:
- 20% x 450k = 90k deposit
- 5% x 450k approximate transaction costs = 22500
- Total risked capital = 102500

- Interest @2.6% x 360k = 9360

net benefit, after deducting interest, before taxes = 6004, when measured against only your borrowings (in return for making 102k illiquid and reducing borrowing capacity)

net benefit when measured against value of money = 15364 - 2.6% x 1.05(450k) = 3079p.a. (this is simply assuming it was 105% loaned, which is the fairest way to compare investment options, as all money is a cost or opportunity cost)

As you can see it will take a few years to simply recover the stamp duty.. so the process is accelerated by finding places that need work, where you can add value