A new Hello from the Goldie - what to do???

Discussion in 'Introductions' started by Tessy, 17th Mar, 2017.

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  1. Tessy

    Tessy New Member

    Joined:
    4th Mar, 2017
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    Location:
    Gold Coast
    Hi all

    How awesome is this forum! So glad I discovered it! What a wealth of knowledge!

    I am 32 year old mum of two who lives on the Gold Coast and am brand new to property investing and am trying to get my head around it all. I have read a few books (Steve McKnight one of them) and struggling to choose a strategy to go with initially?

    I have approx $150.000 equity to spend and $900.000 that I can borrow and servicability is very good.

    I am keen on the subdivision strategy idea with selling the vacant new block (with either selling the existing dwelling or holding it for positive cashflow as exit strategy) but everyone keeps telling me its too advanced for a my first IP....? Any thoughts on this? And if so do I spend all the money available on an expensive block or split it into two seperate buys?

    OR am I better off just buying 2-3 cheaper properties as buy/hold to look for Capital Growth?

    THanks
     
    Tessy, 17th Mar, 2017
    #1
  2. Propertunity

    Propertunity Well-Known Member

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    NSW
    You'll have to try a few things and see what works for you. I'd suggest you go to some of the free seminars to get some more ideas but do not sign up for the courses they offer. Also go attend some of the local investor meetups from on here.

    You and a whole lot of other people have the same idea. :)

    If you do what "everyone" else tells you to do, you'll get the same results "everyone" else has achieved (or not). Be careful who you tell your plans to and don't take advice from someone that is not where you want to be at.

    Never spend all the money on one thing unless its a sure bet and sub-divisions are never a sure thing. Always keep some cash in reserve as a buffer.
    I recall a conversation I once had at a seminar with an administrator / liquidator. He said there was only one reason a company went broke and one reason only - they run out of cash!

    That's another strategy that you need to decide is for you or not. It has worked for me.
     
    Propertunity, 17th Mar, 2017
    #2
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  3. Indifference

    Indifference Well-Known Member

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    Welcome Tessy.

    Firstly, just because you can borrow 900k doesn't mean you should.

    Secondly, your capital of 150k is worth preserving & not dumping into one project. Ie. It's also your cash reser8if this start going pear shaped or unforseen costs start creeping in & you need $ fast. Don't squander it or tie it all up at once if you can avoid it.

    Thirdly, what do you expect/ want to achieve longer term? How will this first step into property progress you towards that goal?

    Lastly, do you own your own home or have any non-deductible debt?
     
    Indifference, 17th Mar, 2017
    #3
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  4. Tessy

    Tessy New Member

    Joined:
    4th Mar, 2017
    Posts:
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    Location:
    Gold Coast
    Wow thank u for the response! I just love this forum!

    My long term goal is a passive income of $200000 as soon as I can... but realistically maybe 10/15 years. I wanna be able to retire early. And I am really unsure in what order I should be doing all the purchases.

    Do I draw all the equity available and put it in an offset just in case it needs to be accessed quickly?

    My PPOR I currently owe $620000 and I was thinking of borrow against that at 80% LVR (valued at $900.000). I also have one IP (used to be PPOR) valued $430000 and owe $285000. Borrow 90% on the IP?

    Thanks again
     
    Tessy, 17th Mar, 2017
    #4
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    a traditional financial planning approach for someone young that doesnt want to draw down capital, that one needs 20 to 25 x the end game

    in your scenario 4 to 5 million in unencumbered asset outside of the home, in todays dollars ( assuming the 200 000 goal is in todays dollars)

    just to confuse things a little, we would typically recommend more than one strategy to have a higher chance of achieving that goal.


    ta
    rolf
     
    Rolf Latham, 17th Mar, 2017
    #5
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  6. Indifference

    Indifference Well-Known Member

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    Ok.... so as @Rolf Latham has said, you'll need about 4M unencumbered to achieve 200k passive income assuming 5% yield.

    I assume your cash is in offset against PPOR.....

    As for the equity, you seem to have about 80-100k in the PPOR (staying below 80% LVR)...... but....... please consider carefully if you're completely comfortable using this to invest. Some prefer to keep their PPOR out of it whilst others prefer maximizing their equity leveraging... . Only you can assess your SANF.

    Your IP seems to have enough equity (at 80% LVR) to fund a deposit for another sub-500k property. (This is the obvious option if going the progressive accumulation route IMO....)

    Also, well done! You're in a position that gives you options.... you've started on a great journey.

    Now...... non-deductible debt. You have a reasonable amount. Kill this like vermin. At 4% that ~25k /yr just in interest.

    Lastly, your IP... as it was a PPOR, is the mortgage still P&I or IO? I mention this in the interests of cashflow. You seem to want to build a large portfolio & one thing that stalls the journey fast is serviceability, so cashflow is important from day 1.

    Enjoy the journey,

    Indi
     
    Indifference, 17th Mar, 2017
    #6
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