Buying next year with $300k - Empty land outright or a house with mortgage?

I bought my first property last year (October) in Sydney for just over $1M to live in with my family. It is a 50 year old house on a 700 sqm land. I have about $890k mortgage left on this. Location - Wentworthville NSW.

I am starting to look at investment properties to buy next year. I have started looking at QLD mainly because I can't afford to buy anything remotely close to Sydney or Melbourne by next year. SA and WA are out because they are far from me.

I started looking at established houses in the $800k range so I could get around $500k loan (I checked my loan serviceability and it looks like I can loan upto $800k with my current salary).

After going through some threads here, I am now thinking if I should buy land plots that are newly released for $300k so I don't need a loan.

My needs are mainly to retire in the next 8-10 years with a rental income of around $10k per month from investment properties.

Should I buy a large size land that I can sell (or build houses and rent?) in 8-10 years or buy a house that is currently leased now?

 

Not really sure I understand the process here. You want to buy the $300k land upfront then take out a loan in the coming years to build on it? Or you just want the land now because you see the prices rising?

 

If I'm buying the land, I won't take any loans. I will leave the land empty for the next 10 years. After 10 years, maybe sell it or build houses/units there to lease it out.

If I'm buying a house, I'll need a loan but will start getting rental income straightaway.

 

What returns are you expecting on a 300k block of land in 10 years?

 

If you want to retire with a rental income of around $10k per month from investment properties, then you need to buy/develop high yield properties. Buying land and leaving it will not get you any income. Some of the options you can try are - buy a townhouse in a high yield area, buy old house and build granny flat.

 

I'm expecting a moderate returns of 8% to 9%.

 

I agree. My thinking with the land is that I could buy a bigger land (2000 sqm to 3000 sqm) and be able to build multiple townhouses to lease them out.

This idea ofcourse assumes that there will be a rental demand for these townhouses in 10 years.

 

Where are you thinking for 2000-3000sqm land that would be worth building multiple townhouses on, for 300k?

 

If you buy land you can't claim any outgoings on your tax return but you can if you buy a tenanted house and receive income from it. You want 120k per annum in rental income, how much are you receiving now? What will bring you closer to your goal of receiving $120k pa

 

Also you have about 300k cash now, excluding ppor, and your goal is 120k income in 8-10 years from property rent?

 

I am still researching. Ipswich is one on my list: https://www.realestate.com.au/buy/p...0000-in-ipswich+-+greater+region,+qld;/list-1

 

I don't have any rental income at all currently. My house is on a 700 sqm block. Most of the other houses on my street have already been converted to duplex.

I have plans to build a duplex on my land in the next few years. I will live in one and lease out the other. Current rental market for duplex in my suburb is $450 (could be more for newer building). So I'll have approx $23k pa from this plan. Another $97k pa would help me reach my goal.

 

I have close to $150k now. I'll be getting about $150k by mid next year from vested stocks and money from my overseas business.

Yes, this is excluding anything from my PPOR. I won't use any equity from my house unless necessary. I may use this equity in a few years for renovation or build a duplex here.

Yes, that's my goal. I could be unrealistic with my goal.

 

Do you have a plan on how to get to your goal?

 

My plan is mostly buying larger land plots in growing suburbs and build properties for leases in 8-10 years.

 

You need to trade off the higher tax on profit making (ie no CGT discount), GST etc with the non-deductible holding costs etc.