Join Australia's most dynamic and respected property investment community

Give it to me!

Discussion in 'General Property Chat' started by pdp, 7th Jun, 2016.

  1. pdp

    pdp Member

    Joined:
    1st Jul, 2015
    Posts:
    18
    Location:
    Melbourne
    What would you guys do in my situation. I'm interested and open to hear all options and opinions.

    Current situation:
    - 26 living in Melb.
    - Currently sitting at 75% LVR over 5 mortgages across 5 investment properties @ I/O 4.30% for 5 years ranging from 25-30 year loans.
    - Roughly $1.38M debt/mortgages and currently bank valuation on combined value of properties is $1.85M.
    - $100k equity currently available.
    - Bank says I can borrow $400k-450k.

    Options I'm looking at for my next purchase for IP6:
    1. Wait and to nothing for another 6-12 months. Do minor renovations on existing portfolio to release more equity.
    2. Buy IP at $400k PP @ 75% LVR in Eastern/Northern suburbs Melb capital growth property between 10-25km out from Melb CBD. I know I will be most likely $100/week out of pocket if I'm chasing capital growth property.
    3. Buy IP at $200k-$250k PP @ 75% LVR in Ballart/Regional cashflow neutral/positive property (slower capital growth). I'll get neutral/good cashflow however capital growth will be slower than Option 2.

    What I think:
    I'm in accumulation stage so I want to purchase as many properties as possible in my early years of investing. IP6 will be important as it will either restrict me from IP7 etc. etc. due to serviceability.

    Bank says I shouldn't be pushing 80% LVR on a risk point of view. On should stick to roughly 75% LVR across the board. Which I totally understand given the tightening of loans etc.
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,781
    Location:
    Perth WA
    If this is your last IP before it's 'no more', make sure you're all good to extend IO periods etc.

    From your post it sounds like you're with one bank and dealing with them direct - I'd guess you're all x-coll as well. If you are, it's so important that you get all your lending reviewed before proceeding to identify any and all risks to your portfolio, not just now but over the next few years as IO terms expire.

    First and foremost, you need to be sure that you can hold the portfolio long term.
     
    Elives, HUGH72 and Bayview like this.
  3. Aaron Sice

    Aaron Sice Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    900
    Location:
    Ocean Reef, WA
    might be time to look at a CF+ property.....commercial?
     
    sanj likes this.
  4. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    745
    Location:
    Homeless
    Are all your loans with one bank? If they are giving you the signal they aren't keen to have more exposure to you then it might be a good idea to consider taking this loan with a different lender.
     
  5. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,521
    Location:
    Sydney
    I think most importantly is - How much money do/can you make a year outside of property?
    This makes a huge difference to strategy.
     
    sanj and Bayview like this.
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,033
    Location:
    Sydney
    PPOR?


    Where is the deposit coming from? Hope you are not crossing securities.


    I would go for 80% LVR if you can service. Ignore bank advice – it is for their benefit not yours.
     
  7. Bran

    Bran Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    3,224
    Location:
    At work
    You are doing better than me, so no advice here.
     
    Kolyat, Elives and TheGreenLeaf like this.
  8. TaylorChang

    TaylorChang Well-Known Member

    Joined:
    2nd Jul, 2015
    Posts:
    167
    Location:
    Sydney
    If I was you, I will buy in Melbourne or close to major city area rather than regional area.
    I can see for the next half year, you will be able to pick up more bargain in Melbourne than regional area. Especially, lending is tighter this year than last year. Oversea borrowers can't get into the market because less banks willing to lend. Plus you still can access money at low interest rate environment.
    Renovation will not increase property value at downward market.

    hence, I would take option 2).

    just my thought.
     
    MTR likes this.
  9. Jasmine

    Jasmine Well-Known Member

    Joined:
    12th May, 2016
    Posts:
    57
    Location:
    Melb
    If you are considering option #2, then south, and west are having some pretty good bargains at this time of year.
     
  10. Bayview

    Bayview Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    2,716
    Location:
    Mornington Peninsula
    Not the mindset, B.

    Even if you have only one IP, you can still bring something to the table!!

    Lift that self-esteem, my good man. ;)
     
  11. Bayview

    Bayview Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    2,716
    Location:
    Mornington Peninsula
    Having been around for plenty of years, my (fatherly) advice is to hope for the best but prepare for the worst.

    Income is not definite or even a guarantee of increasing in life, so use this as a factor for your future cashflow calculations versus risk..
     
    teg499 likes this.
  12. pdp

    pdp Member

    Joined:
    1st Jul, 2015
    Posts:
    18
    Location:
    Melbourne
    - Commercial/retail properties I'm not really looking into at this stage at now due to the high entry costs and GST involved if I was to find a high foot traffic space in a sought after area.
    - Yes, I do see some good buys coming up in inner city Melbourne. However, I'm not discounting out other cities. Looking at Brisbane potentially for higher rental yield and lower entry PP costs.
    - Not too worried about what the bank is going to say but I do understand where they are coming from. I'm comfortable in going 80%+ LVR across my whole portfolio given my current circumstance (living at home, minimal expenses). However, I'm also planning ahead for 5+ years and what lifestyle changes will occur.
    - I've got $150k sitting in offset at the moment which I could potentially use for a bigger deposit etc to lower the LVR OR I could just take out a bigger loan so I can park it in offset for other things.
     
    Last edited: 7th Jun, 2016
  13. Player

    Player Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    348
    Location:
    Paradiso
    I'm going to go out on a limb and present a glass half empty perspective...........


    I would suggest the 150 K offset be left alone and used as a buffer to improve sleep at night factor.

    Without knowing what your portfolio is worth and what you owe and your income this is very generic opinion here that I'm offering however interest rates will rise one day.

    ***EDIT*** Okay just reread your initial opening post and saw your borrowings and gross values. Your income (and its security) is key here.

    I don't wish to put a wet blanket on your ambition and congratulations for what you've achieved so far at such a young age, however unless you were far more active in your dealings/trading of property such as subdivisions or reno, sell and subdivide the rear type of strategies, just banking on the BHP (Buy Hope Pray) mantra that has worked well to date may not see much joy as a passive approach when nearing the top of a market cycle. Having > 80 % LVR's when at such a low point in the cash rate cycle makes me nervous.

    If you must buy..........look at Brisbane.

    Merely my 0.02...........................
     
    Last edited: 7th Jun, 2016
  14. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,117
    Location:
    Melbourne
    Could you eleborate more on where your current 5 IP's are and there respective values?

    That should allow more scope to give advice particularly around diversification. Your portfolio could look good now but we don't know if it's all based on a one trick pony town waiting for disaster to strike.
     
  15. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,478
    Location:
    Perth, Melbourne, USA
    TC
    I am loving the Melb market, even though the market has been very strong I think moving forward Melb will be the safest market in Australia, fundamentals good, number 1 for immigration.
     
    ellejay and TaylorChang like this.
  16. pdp

    pdp Member

    Joined:
    1st Jul, 2015
    Posts:
    18
    Location:
    Melbourne
    Thanks for the comments and advice so far. All has been helpful and making me think deeper about what issues could arise.

    I earn net $80K / p.a. and have security around my jobs.

    I'm not tossing out to buy then subdivide etc as I have done it before on another IP i purchased which I bought, got plans and permits and sold off for profit to do other things.
     
  17. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,478
    Location:
    Perth, Melbourne, USA
    good strategy
    have a read if interested on my 4 townhouse development in Melbourne, lower end, this sort of strategy may also suit

    mtr
     
  18. Ted Varrick

    Ted Varrick Well-Known Member

    Joined:
    21st Jun, 2015
    Posts:
    572
    Location:
    No Mans Land
    I'm going to second Player's post, and politely ask if you should be considering a change from Accumulation Stage to Circle The Wagons For A While Stage.

    Just saying....
     
  19. sanj

    sanj Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,148
    Location:
    Perth
    ah so youre comfortable with value add strategies and have done it profitably and successfully in the past?

    id be more inclined to continue down that path, even if it meant waiting a while to build up more funds. ultimately if you have an aptitude for developing then buy and hold resis are generally a waste of time/capital/potential, especially when you are not already financially independent.