Buying PPOR in then turn it into IP, maybe Cairns?

Discussion in 'Where to Buy' started by Christopher Kocksch, 4th Feb, 2020.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Christopher Kocksch

    Christopher Kocksch Member

    Joined:
    18th Sep, 2019
    Posts:
    15
    Location:
    Melbourne
    Hi every one, I've been reading around here and trying to educate myself as much as I can and was thinking of a bit of a plan that I'd like people's opinion on.

    My and my partner (both 33yo) currently live in Melbourne but we'd like to move somewhere more "tropical".
    We have a property in Darwin that we turned into an IP 4 years ago. (It's fully paid off, worth about 250k at the moment).

    We would like to buy another one this year but then also build out our Van an travel around Australia.

    Here is my idea:
    Buy a PPOR that has needs some renovations (nothing major) to add a bit of equity.
    Something that has enough outdoor space for me to build up our van.
    The bank has approved a 425k loan if we use equity from the Darwin property.

    Take between 1 to 2 years for that and then turn it into an IP while we go travel around the country for about 1 year and decide where we want to settle.

    Cairns sounds nice as we already have a few friends living there, and i'm quite a bit into diving but I'm afraid we will never much CG.
    Maybe somewhere around Brisbane...
    My partner is a pharmacist and it seems she could easily find work, I'd have to do a bit of whatever I can find for the time being.

    I'd like the property to be close to a neutral (or even positive) cashflow once hit the road.

    Keen to hear any thought, critics, suggestions or tips you guys might have. :)
     
    Last edited: 4th Feb, 2020
  2. wilso8948

    wilso8948 Well-Known Member

    Joined:
    23rd Jan, 2018
    Posts:
    420
    Location:
    NSW/QLD
    Take a look at Townsville close to the Strand. Magnetic Island for diving and close to the reef. Enough to support it long term now IMO.
     
  3. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    4,880
    Location:
    Qld
    Agree Townsville has better prospects than Cairns.
    Just check flood levels and make sure you buy high and dry.
     
  4. Darwin55

    Darwin55 Well-Known Member

    Joined:
    15th Mar, 2017
    Posts:
    179
    Location:
    Darwin
    Cairns yields are very good. Has seen very little growth for a long time. The locals on here might be able to comment on the likelihood of any future growth.

    Insurance is expensive.
     
    Christopher Kocksch likes this.
  5. Christopher Kocksch

    Christopher Kocksch Member

    Joined:
    18th Sep, 2019
    Posts:
    15
    Location:
    Melbourne
    Thanks for the comments, I'll try to talk to some locals to get their feedback.
    I will also do some more research to see if there are substantial benefits on buying for PPOR instead of IP and turn into IP later.
     
  6. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,224
    Location:
    Perth WA
    Have you done any research on Cairns as an investment location?

    You’ve already made expensive mistakes with structuring your loans, (fully paid off INV) and I can see the potential for more expensive mistakes if you build your portfolio ad-hoc. :)

    Unless you’ve done significant research on Cairns and it ticks all the boxes - has great growth drivers, the cash-flow you need, population growth etc - I’d suggest renting somewhere tropical for a couple of years, and buying your next investment property elsewhere.

    Constantly changing the role of your property from OO to INV can result in a really poor performing portfolio that ends up draining your resources and costing you long term.

    You’re better off thinking strategically about your investments and building your portfolio for a specific outcome, rather than going through life collecting properties like souvenirs. :)

    PS - Cairns is beautiful - definitely move there!
     
    FatElephant, My House QLD and Ardi like this.
  7. Christopher Kocksch

    Christopher Kocksch Member

    Joined:
    18th Sep, 2019
    Posts:
    15
    Location:
    Melbourne
    Thanks Jess, very helpful for my thinking process!
    The first property was already paid of and then inherited, so it' really just been an extra income at this stage and it's in my partners name.

    I'm also considering other areas, renting and buying somewhere else as IP could also work.
    I need to research what advantages there would be in buying a ppor as a first time home owner to see if that can help rather that buy an IP.

    I also need to get better at the research part :eek:.
     
  8. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,224
    Location:
    Perth WA
    Oh that's great re the first property - not as bad as first thought then! :)

    I would ALWAYS rather go straight for a good investment, than save a few thousand on stamps and get stuck with a crappy INV.

    If you can use your FHB for a great investment, that's perfect :)

    The research side of things is a bit of a learning curve - there's some great books to help (Margeret Lomas has some good ones, if you like reading) and we have a course to help shortcut the process too.
     
    Christopher Kocksch likes this.
  9. Christopher Kocksch

    Christopher Kocksch Member

    Joined:
    18th Sep, 2019
    Posts:
    15
    Location:
    Melbourne
    That's what I want to focus on, getting a good IP but hopefully get benefits from FHB and potentially do some reno to add equity from the start.
    I my ideal scenario I'd like to find that IP somewhere we would be happy to live for a year or 2. But I understand not to let emotions drive the choice just because we will live in it for a while.
    Got my first book from her. :)
     
  10. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,133
    Location:
    Adelaide, SA
    Freehold INV owned in 1 party name, looking to purchase OO
    Worthwhile getting some professional advise, they might recommend selling the property to the other spouse
    Thus creating tax deductible debt, freeing up some funds.
     
    Christopher Kocksch likes this.
  11. The Grinch

    The Grinch Well-Known Member

    Joined:
    22nd Sep, 2019
    Posts:
    229
    Location:
    Cairns
    Cairns local here.I believe growth will be coming into cairns over the next few years. Lot's going on up here. Work isn't to hard to find. If you want a job you will find one.

    We have seen some suburbs outperform others. Definetly do your own research before any purchase.

    Lot's of beautiful houses in the 400k range. I'd look into areas like parramatta park, brinsmead. Whitfield. Edgehill. Freshwater, redlynch, trinity beach and palm cove. Depending on what your lifestyle needs are these are some of the better performing suburbs with their own drivers for growth.

    Stay away from the south places like edmonton, white rock, mount sheridan etc. Lot's of land supply and higher crime rates ( break ins).

    Would also steer clear of woree, manunda and manoora.

    Insurance can be high however if you shop around and check your flood zones then you should do ok.

    Kuranda is also really nice however is not suited for everyone.
     
    Darwin55 likes this.
  12. The Grinch

    The Grinch Well-Known Member

    Joined:
    22nd Sep, 2019
    Posts:
    229
    Location:
    Cairns
    34 Old Smithfield Road, Freshwater, Qld 4870

    Large land block in a very safe suburb with some of the best schools in cairns. Would be able to add value quite easily and have the space to develop on in the future if you needed to. Last I saw they wanted 450k for this however I'm prettt sure a sneaky lowball may be accepted.

    That said. Tons more good purchases in cairns for your price point. Just need to do your DD.
     
    Christopher Kocksch likes this.
  13. Christopher Kocksch

    Christopher Kocksch Member

    Joined:
    18th Sep, 2019
    Posts:
    15
    Location:
    Melbourne
    Thanks for the tips! :)
    We would not move before July but I want to do as much research as I can before hand.
     
  14. hammer

    hammer Well-Known Member

    Joined:
    26th Jul, 2010
    Posts:
    2,417
    Location:
    Darwin
    Awesome! Life in a tropical city is pretty good. Everything is close by, it's easy to get around, there's all the infrastructure, housing is not expensive and there's a big airport if you ever need a change of pace or a reminder why you don't live in Sydney. ;)

    But you really, really need to take the environment into consideration. Make sure tropical housing is part of your research. Can make a huge difference interms of livability, electricity costs etc...

    Also, especially in Cairns you will need to double, triple and quadruple check storm surge maps. Cyclones are one thing...but they also suck up the ocean like a suction cup and that 5 metre tide turns into an 8 metre tide and wipes out a lot of houses. Most of Cairns is in a storm surge zone. You'll need to keep this in mind before you buy.

    I agree with a lot of the people youon here and reckon should rent for six months first.
     
  15. significance

    significance Well-Known Member

    Joined:
    6th Sep, 2019
    Posts:
    164
    Location:
    Queensland
    On the Townsville option, getting neutral or positive cash flow is certainly achievable here. Real estate values plummeted in Townsville several years ago after a mine closed so there are good bargains to be had, and there are some signs that they might finally be about to start rising again. It's not a bad place for scuba diving (though Cairns is closer to the main action in that regard) and there are some great lifestyle properties in North Ward, Belgium Gardens, Castle Hill, Pallarendra and Townsville City.
     
    wilso8948 and hammer like this.
  16. Troysonbassaniproperty

    Troysonbassaniproperty Well-Known Member

    Joined:
    6th Jul, 2020
    Posts:
    64
    Location:
    Rockhampton
    Christopher,

    Sounds like exciting times ahead for you guys. In terms of CG in Cairns on an aggregate level it may not appear to be doing to great however there are certain suburbs within Cairns that are producing wealth creating returns and outpacing the averages not only locally but across the state.

     
    Last edited by a moderator: 6th Jul, 2020
  17. fumid

    fumid Well-Known Member

    Joined:
    15th Feb, 2016
    Posts:
    263
    Location:
    Sydney
    wilso, what do you think an investment in Magnetic Island?
     
  18. wilso8948

    wilso8948 Well-Known Member

    Joined:
    23rd Jan, 2018
    Posts:
    420
    Location:
    NSW/QLD
    Townsville yes. Magnetic Island itself? No. Its a great tourist draw card for the Ville though.
     
  19. fumid

    fumid Well-Known Member

    Joined:
    15th Feb, 2016
    Posts:
    263
    Location:
    Sydney
    Wilso, which part of QLD you usually based on? You go to TSV to inspect property now?
    For Magnetic Island, looks pretty good for long term renting as well?
     
  20. wilso8948

    wilso8948 Well-Known Member

    Joined:
    23rd Jan, 2018
    Posts:
    420
    Location:
    NSW/QLD
    I'm based in Mackay. TVille is 4 hours away. I often visit a few times per year. What's the attraction to buying on an island? rather inconvenient, car ferry etc to visit. Much better to buy on the mainland.
     
    jared7825 likes this.