Can/Should I start investing

Hi everyone,

Wanted to outline my situation here and see if anyone was able to provide some advice on next steps for me. I'd previously used the SS forums to purchase my first place and found them very helpful.

We currently live in a 1BDR in Sydney's inner west. Owing around $440k on the property conservatively valued at $650k. Repaying minimum $2,237 per fortnight on a 3.77% variable P&I loan. Combined income pre tax around $165k. No other debts.

We'd like to move to a 2BDR place in the same area - but know we can't afford to purchase. We're happy to rent to live, and rent out our current place. We are probably looking at paying $700 per week in rent. We expect we could rent our existing 1BDR for $600 to $650 per week.

The question is whether now is the time to do something more. In addition to the above, there is a spare $30k sitting in an offset account. I'd be interested in hearing peoples thoughts, especially about whether we should engage a planner or company to assist (I've previously come across OpenCorp but a bit unsure based on some of their reviews). I have a moderate amount of time to do some of our own research, but if we were to go down the path of an IP i'd gladly be guided by an expert.

Cheers.

 

Welcome! I'm in the inner west too.

I don't see the need for engaging a planner or company to walk you through what is a relatively simple problem - what exactly are you hoping they would do?

Have you considered having your current PPOR revalued and refinancing your current loan? 650k x 80% = 520k so you should be able to redraw 80k to use towards a potential property purchase, say a 300k IP ideally in a rising market.

What's your age and life circumstance? Do you need to plan for a family etc?

 

IMHO no one can tell you if you should start investing or not, its a very personal decision. I can tell you (from my perspective and from what I have seen with many others) that the people who often do well with real estate investing are the ones who show some focus and commitment, have a realistic timeframe in mind not expecting to make a killing in 3 years, spend at least some time to read and learn the basics and then network with other successful investors while they put their own plan together and then take action. If you decide you want to invest, first person to see is a MB to get your finance in order and know how much you can borrow. A good MB can also help you get some kind of plan in order and give you some direction.

With regards to OpenCorp, I know nothing about them and just looked at their website for 3 minutes. My gut (and experience) tells me its a high risk proposition to get involved with them. In this investing game, try to reduce your risk as much as possible. If you want help with buying and decide that's the path for you after careful consideration, then seek a reputable Buyers Agent and not a company where transparency is impossible and bias is inevitable imo.

 

Thanks Tess. I guess the main reason was that I'm just not sure where to start - I'm more than happy to self educate, so if there are any good introductions I'd be happily pointed in the right direction.

31 and 30 - married and in stable employment. Likely kids in the next 18 months.

 

Have you had a chat to a broker yet? That would be my first port of call so you can see first of all how much you could potentially borrow, and work out what your cash-flow will look like and so on.

That way you'd have a professional to bounce ideas off, get property reports and so on, but also keep control of the purchase yourself.

I'd rather see you using a BA with your own broker and lawyer, than a group like Opencorp - one stop shops can often not work in your best interest. It's always good to have a few independant eyes on the deal.

 

OK, the fact that you want to have a family soon-ish needs to be taken into consideration then.

Main consideration is cashflow given future loss of one income due to baby. How much are you saving into your offset each month? Have a look at the end of month offset balances for the past 6 months to see how much you're saving each month.

I would estimate your post-tax income to be about $120k or $10k per month, your mortgage is about $4.8k per month (assuming 26 fortnights in year and dividing by 12), how are you spending your remaining $5.2k per month?

Your situation resonates with me, when we were living in our first PPOR we had a mortgage of similar size ($480k) and I was pregnant. We bought 2 cheap IP's (one sub $200k, one sub $300k), at the time our incomes were much lower than yours.

I would not necesarily book into see any financial planner unless you have nailed down your aims, worked out what's happening with your current expenditure, and identified your risk tolerance and goals. I truly believe the wealth of information here on the forum surpasses what a financial advisor could do for you, but you need to take charge of your own financial destiny, IMHO things like these are best done yourself and not outsourced.

Hope that gives you some food for thought.

 

Leo, Tess, Jess,

Thanks for your replies. You've already convinced me that with a bit of common sense and some research I can do this without needing the services of a single advisor etc.

Also I realised a mistake above - the figure of $2,237 is the repayments per month (not fortnight), so that would leave us with more spending. Cheers all.

 

Take on board the advice of a good mortgage broker and other successful investors as you find your way. Imo you don't need one of those 'all in one' investment companies. Best of luck mate.