First Time Investor - Existing IP, What next? [Any Advice Welcome]

Discussion in 'Investment Strategy' started by Gregg, 9th Jan, 2020.

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  1. Gregg

    Gregg Member

    Joined:
    9th Jan, 2020
    Posts:
    15
    Location:
    Perth
    Hi All,

    First time poster, been following the forum for several months now and have enjoyed and learnt a lot from the content and love the awesome community here.

    I’d like some advice for my situation. I’m currently 25 yrs old, with a full-time stable job. I bought my first investment property back in November 2018.

    The property was an 811m^2, old house with R30 zoning in WA. I bought this property for 550k, since then, I have paid my loan down to 390k and have an estimated 50k in equity. The property is currently being used for AirBnB where I’m receiving roughly $400-$430 per/week on average

    I have decent savings built up and looking to exercise one of the following options:

    1) Subdivide existing house, sell empty land, and buy another property

    2) Subdivide existing, build and rent/hold long term

    3) Keep existing house and do nothing to it, use equity plus savings to purchase a small property under 300k in another suburb

    4) Do nothing, keep saving and wait for house to appreciate (more options may present itself with more savings in the future)


    A few additional notes, I’m living with parents so living costs are quite low, however I’m about to move out with my fiancé and currently looking to find a place to rent closer to where we’d like to live (near our work)

    I’m still new to all of this and have made plenty of mistakes so far (probably still making them), would appreciate any feedback/advice. Happy to provide more information if required!

    Thanks in advance!


    Greg
     
  2. thatbum

    thatbum Well-Known Member

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    4,903
    Location:
    Perth, WA
    Welcome and congratz on the first IP purchase. I imagine you've learned a lot already getting to this point, and from a few months reading these forums.

    I have to caution a little before going into subdivision project though - that's another thing entirely almost. I would take your time to look into all the different aspects that go into the feasibility of a project - tax, costs, finance, and most importantly, end profitability.

    Just a quick query - the airbnb income seems a little low? I guess its an old house, but still - what was the theory behind the short term thing?
     
  3. Gregg

    Gregg Member

    Joined:
    9th Jan, 2020
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    Location:
    Perth
    Thanks for the reply!

    I agree, I'm a bit reluctant with the subdivision for now. Mainly because I have zero experience and would prefer to venture out into other IPs before going down the subdividing route.

    The property is very old, built in 1972 and when I initially bought it, I was just interested in it's potential to subdivide without properly thinking how well it would rent (was evaluated around 350-400 p/week when I was buying it).

    However, after purchasing the property, the state of the house was much worse than I realized (should've known this earlier), and because of this I found it hard to find tenants so I stopped trying. Instead, I cleaned up the house and did a few modifications to make it livable, to experiment I started hosting with AirBnB and overtime built a profile with consistent occupants and stuck with it since.

    I can certainly look to raise the prices. But for now, I'm thinking what to do with the equity built up + savings for my next project.
     
  4. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    25th May, 2018
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    Location:
    Sydney
    I would do nothing for now. Build up your property portfolio and then come back to this property a bit later down the track and re-develop it then if you choose. Accumulate now, develop later.
     
    Last edited: 9th Jan, 2020
  5. Jess Peletier

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

    Joined:
    18th Jun, 2015
    Posts:
    6,372
    Location:
    Perth WA
    Hey Gregg, and welcome to the forums.

    Have you spoken to a broker?

    Your options may well be determined by your borrowing capacity so if you haven't done that yet, it's a good first step.

    From there, you can develop a strategy to move forward.
     
  6. Gregg

    Gregg Member

    Joined:
    9th Jan, 2020
    Posts:
    15
    Location:
    Perth
    Thanks for the responses so far!

    @Jess, yes I've spoken to my broker, I have a borrowing capacity of 370k. However, with some assessment of my position, I'm only comfortable to borrow up to 240k. This would give the potential opportunity to purchase another IP under 300k.

    I'm leaning towards just waiting for now until I build up a larger deposit to borrow more. I just don't want to miss an opportunity if there's one now to buy another IP!

    Cheers for the replies everyone!
     
  7. craigc

    craigc Well-Known Member

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    25th Jun, 2016
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    1,227
    Location:
    Melbourne
    Suggest also read tax tips about using offsets v paying down IP loans.
    Especially if you have a partner and moving in together you may want to buy a PPOR in the future.
    Welcome & good luck!