Confused about investment strategy

How's this. It's even scarier knowing with almost certainty that if you don't take control of your financial future, you'll be slaving your entire life for a boss and at the end when you got one foot in the hole, you can look forward to a scrumptious pension which leaves you pretty much on the poverty line. And if your renting as well? Double ouchy.

 

I agree too! So I have been making a finance health checkup plan for myself in preparation for my first acquisition. Things like checking in on my goals regularly to see how I am tracking, then maybe an annual checkup on my property values, and checking up on my loans (rates etc) as well as things like comparing other insurance companies to see if I can get a better deal etc.

 

Your BA must be as Zen as a Shaolin monk

 

That's a good way to counteract any of my fears! Because yes I am already seeing it with my family. Retired and having to rely on super and pension. And I'm afraid that with the rate of our population growth, I doubt there would even be a pension anymore when I get to retirement age!

 

You're young so time is on your side. Once you've done your due diligence and you're fairly confident, just go for it. In my buy and hold days, if I was a 7 or more out of 10 in terms of I'm getting a reasonably good deal, I'll just pull the trigger. You'll never be certain and sorry to tell you your fears will never go away as you buy more. You just learn to contextualise them better.

 

I had same goals, got 3rd IP by 30, am def not a pro and honestly don't want more property
My regret, is not getting a property that I can move into as the first property. By now its around 8 years, and though its an apartment, I would've been able to move into a fully paid off PPOR. But instead in my mid 30s, I'm stuck renting unless I sell and buy a PPOR at today's prices with a new large mortgage attached to pay off. I don't want to sell the IPs as the long term plan is to hold forever. I feel I wasted the time advantage.

guess what I'm saying, in mid 20s being gun-ho for investing and feeling there was all the time in the world, I didn't register the reality of buying only a few properties in life and time/life creeps up fast

 

Hey @WinnieM , i read through your posts and your goal, my suggestion is to follow a strategy with the fastest money turnover possible, i.e. invest the minimum money possible to get a return on money, which you can then use on the next property etc. Here's the quickest suggestion I can come up with:

1. Buy a FHB unit in your hometurf, Sydney, to save up to $20k stamp duty and potentially get a 5% deposit on, ideally target price <$500k so you don't stretch too much and also so you can get an earlier headstart on property #2. Ideally net cash positive if it was purely IO (but if you are paying off as P&I, i'm sure a net negative $300 or less per month will be fine). You might be forced into buying units because of the price target, so go for established units in a good area with upside.
2. Assuming you fork out 100k deposit and fees for a 480k property. Assuming your after tax is $4200 a month and your expenses are $800 a month because you live with parents, assuming you're disciplined and assuming you're paying net $200 per month after all expenses to hold the property on P&I, you're left with $3000 a month savings (and probably building up to $1000 a month in equity with repayments), and can be in a position to buy #2 within 2 years. It might need a re-finance of course.

By getting the stamp duty concessions, and potentially benefiting from a 5% deposit scheme, you have more cash to put towards property #2, which you can probably then look at Brisbane..

Let's give a real world example, of a property sold recently.. I'm sure tere's many more in other areas..

https://www.realestate.com.au/sold/property-unit-nsw-toongabbie-132430338

Sold for $410k, annual costs about $4k (info in listing), annual rent after 5% agent fees is about $20k, thats a net of $16k, thats a net of 3.9% p.a., assuming bank loan is about 3.3% of interest, the net benefit is 0.6% p.a. on the 80% loan (328k*0.006=$1968p.a.) and 3.9% on 20% deposit (82k*0.039=$3198), in addition to that, a hypothetical 60k sitting in an offset (this is your leftover 60k when you take 80k out of your 140k savings) adds an additional 3.3% (this is 60k*0.033=$1980), giving a total net benefit of approximately $7k per year, not including potential capital gains, 60k + 7k + 1 year of savings (36k) means you can have #2 after just 1 year...

in that real world example, with a p&i loan on 328k at 3.3%, after factoring in costs of holding the property and agent fees, you’re only out of pocket less than $100 a month of cashflow!

 

If you use the FHB, you'll have to have it as owner occupier purchase and live in it for 6 months..

 

Hi Winnie,
I was reading through your very interesting thread. Thank you. I am also trying to work out a strategy before moving forward and like you, have decided to use a broker through this site. The BA I'm still undecided. Did you manage to meet all your goals and find a suitable investment during Covid? Can I ask how long this process took and were you satisfied with your BA?
Thanks Jane

 

Hello Jane, I am glad that you found my post helpful, it was very helpful to me at the time as well (And now that I'm rereading the thread, omg so much gold in here) and fortunately I didn't suffer from analysis paralysis (I had a lot of close friends doubt me but I showed them hahahaha) and I have since bought my property just prior to covid hitting despite all the noise and cries to pull out from my mates (I knew I had enough cash buffer in place if things went to **** so I just pushed forward with it), it has been tenanted (rented back by the owner) since settlement, I've done some minor repairs on it and here I am rolling around in the rent money. LOL no I'm just kidding.

My BA had been very helpful throughout the entire process, it wasn't all smooth sailing, it was not the 'perfect' property, but it would not have happened if I didn't have my broker and my BA alongside me the whole time, it comes to show how it important it is to surround yourself with the right people.

But going through that entire process taught me so much about what due diligence I need to prepare for, who I need to respond to and when I need to respond to by. Literally, no reading or listening to podcasts beat the learning you get from going through the actual experience. I wasn't perfect, but whatever mistakes I have made, I have learnt from and will apply it to my next acquisition. (To then of course make more mistakes in my next acquisition which I would then apply to my 3rd )

The house I bought was very close to my budget as planned, and therefore I already have enough deposit to go again maybe within the next 12 months or so. My only limitation being my single and low income which I am working on improving now. Of course this is unique to my circumstances and everyone will be different.

I am knee deep in share market education at the moment and getting my strategy around that organised, I will of course then be revisiting my property strategy + get a review on my borrowing capacity and be ready to go again

Best of luck to you Jane! And thank you to every single person in here who gave me a little bit of their magic to help me along!

P.S. Also just read back some of my earlier posts saying that the next thing on the list is to look at 'renovating'. OH HELL NAW WTH what was I thinking?? With no connections, no knowledge it is way too much and way too risky! Definitely not something I would be looking into unless my borrowing capacity becomes absolutely maxed and I have no other options going forward in my investment journey. I'm #triggered I thought that

 

What a great success story! Congratulations!
I'm also looking at shares but I better focus on the investment first! Good luck.