Analysis Paralysis - First IP

Yeah I feel it is a head vs heart decision at the moment and because its my first investment property its amplified due to my lack of experience. I think Brisbane area does have more CG potential when you look at the history of previous cycles and how it follows Sydney. How did you make the first leap, did you purchase your first IP in your local market?

 

Something I've learnt here is the importance of a good broker. Yes they can help you with finance and budgets etc. but they can also help with property reports like residex. These can help give you an idea of the bank value of a property, which could help you buy below value which may help you get into the next prop faster.

 

Great Tip - I will certainly be asking my broker this. In your experience do most brokers have a subscription to Residex and can get as many reports as they like or is it something they charge for or will only do a one off.

 

We first purchased in the outer west of Sydney near where we grew up (we we're both 19 at the time, not together at that point though). We had to sell my place (2 bed unit) later due to financial hardship.

Our first purchase together was in 2010 in outer western Sydney again, with a view to living in the house later. We sold both remaining properties in 2014 to buy acreage locally. At that stage we had no plan with property, I was more career focused and completing a Masters degree with a view to earning a higher salary.

We ended up ditching the acreage idea and purchased a renovator up the coast opposite the beach (this will become our PPOR further down the track and that was our intention at the time of purchase). We only became serious about IP's after enjoying the reno and the results and wanting to do more of it in the future.

I did quite a lot of research before deciding to purchase in Brisbane due to yield and growth prospects (we need yield as we are at max serviceability).

It took us about a year to pull the equity out of the coast IP and get preapproval - had to go with Liberty because they are a non-APRA lender.

We played it fairly safe in Brisbane. Purchased a 4 year old 3 & 2 bed duplex 20kms from Brisbane with existing tenants. It pushed us outside our comfort zone and family/friends etc said don't do it, buy in Sydney.

The trick for us was to take every disaster style scenario and mitigate it e.g. extended vacancy = $X into offset for a rainy day, tenant damage = LL insurance + building insurance and I can drive up and do most repairs myself.

 

Talk to your broker and see what they have.
I know mine is very generous with stuff like that... Hehe at least he hasn't told me where to go yet I do pester him more than I should.

 

I understand the preference of buying something close to home/

Personally I have not seen any 2br units in the 2528 region that I would be remotely interested in buying and for the next little while cannot see this changing.

Go and have a look a little further south around 2541or even further south where you can still pick a house on some land and have the opportunity to add value whether now or down the track. Vacancies levels are low and whilst prices and purchaser demand has increased, if you move quickly you can still pick something that would suit.

In 2541 stay away from anything strata as the agency fees are a killer.

 

Great story thanks for sharing @Tim & Chrissy As soon as I mentioned Brisbane my Girlfriend just looked at me as if I was stupid lol.

 

I really appreciate your opinion @Chilliblue I have seen in other threads that you have quiet a few investments around the Illawarra and Shoalhaven area. This might be a good opportunity to have something still close to home but get my foot in the door with an actual house and Land. Thankfully my Mum has worked in 2541 for the last few years in Social work so I will be quizzing her as where to watch out for public housing etc.

Have you had any trouble with bad tenants around this area?

 

@Nemo30 In this example I'm guessing you would buy the property do the cosmetic reno then rent it out and try get a bank value done after the reno is complete? How soon will a bank do a valuation after you purchase the property?

 

No problems whatsoever with tenants and many are now on two and three year leases.

However I was careful as to where and what I purchased. If you need any help just pm me.

 

Yep. To give an example, here is a link to a thread on a property I bought about 10 months ago. Morphett Vale SA renovation

Not saying that these numbers can be replicated - I got a great deal. But the principle is the same. Find something that you can make money on and extract it for the next one. Just be careful on overcapitalising.

I'm not a broker, so can't tell you about how soon you can refinance. Ask your broker, or if you don't have one @Corey Batt might be able to answer.

 

Hi @Timwest - sounds like a fun set of options. Sorry been off grid camping with the kids missed some of the party! Definitely valid to consider you other markets like Brissy so don't let me turn you off that.

With your budget as stated you will be in 2bed unit territory in 2528 and surrounds. Fine for longer term and smsf purchases but you said you wanted cg in 1-2 yrs. Can't say that you are likely to make enough to refinance for another deposit unless reno is involved.

@Chilliblue gave some good advice, heading further south to 2541 and getting a house for a reno gives you more potential for enough gains to generate a deposit for IP2 in less than 24 months. Same strategy in Brissy for what its worth I would look for high 200's or 300k house to renovate there too in various affordable southern corridor options, or even outer north. Let your goal determine the strategy not the other way around.

 

@Nemo30 @Timwest

Generally if its a 'significant' renovation - kitchen, bathroom, painting, flooring etc a valuer may consider a market value as soon as complete. Anything less you're going to want to wait 3-6 months, preferably the latter to ensure you gain the highest revaluation possible, else the valuer will refer to the previous sale price and may only accept a nominal increase in value.

As as example - I had a client purchase a property for 150k, which was significantly below the true value but the seller needed it sold immediately. One month post settlement the property valued at 160k, with the valuer noting the previous sale price.

6 months later the property value at 200k with no works completed on the property and no real movement in the market.

The way valuers compare properties is looking at the last three months in sales, and if insufficient can be found the previous 6 months. By waiting out until the 6 month, the previous sale is no longer valid to be compared against and the property can truly be valued at the market representative value.

 

@Nemo30 great read and well done with the property How did you fund the renovations? Cash or did you add it to the mortgage?

 

I had about $60k to play with - I'd withdrawn equity from another property.

Was enough for 20% deposit, buying costs and Reno.

There are others who have done similar recently who could provide feedback too.

@joel recently did a small ($3k?) Reno on a house in Adelaide.

@S1mon has a thread about a similar Reno in Western Sydney

You don't have to spend that much. I was just trying to show you that you don't have to wait for the ip to grow organically to make money.