Greetings from Melbourne

Discussion in 'Introductions' started by hothed, 8th Jan, 2020.

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  1. hothed

    hothed Member

    Joined:
    8th Jan, 2020
    Posts:
    6
    Location:
    Melbourne
    Hey everyone!

    A quick intro;

    Looking to become a bit more sophisticated in investment strategies, in realestate, shares, and super annuation. Trying to build a portfolio of cash flow(CF) positive properties, generating around 50-60k for retirement. Have recently purchased IP 2 & 3.

    Not really sure how to proceed at this point. Rather than purchasing more property, is it more benificial to maximise the superannuation contribution to 25k/pa?

    About us:
    Married, both of us are 33, earning ~150k/pa
    Two fur babies (dogs)


    PPOR
    Value 825k
    LVR 80%
    P&I
    Location: Watsonia
    Needs reno or knock down rebuild. Love the location, close to train and shops, possibly this is our forever home. However new freeway is being constructed through the suburb over the next ~7 years.

    IP 1
    Value 750k
    LVR 80%
    P&I
    Location: Box Hill North
    2 bedroom unit (1 of 4 on block)
    Rented privately $21,600 PA
    CF -$3k/pa (after insurances, rates, etc)

    IP 2
    Value 200k
    LVR 80%
    P&I
    Location: Ararat
    3 bedroom house
    Rented through agent $15,080 PA
    CF -$4k/pa (after insurances, rates, agent fees, etc)


    IP 3
    Value 283
    LVR 80%
    P&I
    Location: Wendouree
    3/4 bedroom house
    Currently undertaking renovations (~$20-30k)
    Anticipated return $18,200 PA
    CF -$4k/pa (after insurances, rates, agent fees, etc)
     
  2. Trainee

    Trainee Well-Known Member

    Joined:
    24th May, 2017
    Posts:
    7,925
    Location:
    Australia
    Cash / offset, shares?
     
  3. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,412
    Location:
    Melbourne
    "Sophistication" does not necessarily equal "better" - can just mean more complicated.

    What's not working for you?

    The Y-man
     
  4. hothed

    hothed Member

    Joined:
    8th Jan, 2020
    Posts:
    6
    Location:
    Melbourne
    No shares, except super.
    No offset on any loans.

    Have 30k equity remaining on 636k loan on PPOR.
    We redraw off PPOR loan to fund the deposits for IPs.
     
  5. hothed

    hothed Member

    Joined:
    8th Jan, 2020
    Posts:
    6
    Location:
    Melbourne
    Not sure if we should keep buying IPs, as they are cashflow negative.
    Typically we have purchased a cheap property requiring renovations to increase value.
    I see negative cashflow properties as a risk if one of us stops work for a period of time (kids), or if I lose my job (contractor).

    We are both in the 37% tax bracket, with super contributions being taxed at 15%, you 'gain' a risk free 22% by maxing out the super contribution to 25k/pa. The only catch is not being able to touch it until 65.

    I was wondering how others incorporate this factor into their investment strategies.
     
  6. The Y-man

    The Y-man Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    11,412
    Location:
    Melbourne

    See post #14 of:
    Hi from The Y-man

    Hope it gives you some ideas.

    The Y-man
     
  7. hothed

    hothed Member

    Joined:
    8th Jan, 2020
    Posts:
    6
    Location:
    Melbourne
    Thought I'd come back to post a little update.

    What a crazy 18 month roller coaster it has been. I've managed to jump from contract to contract to keep the income flowing. We've started a family, and moved house!

    PPOR - Watsonia
    We were both working remotely and traveling up to Ballarat to renovate IP3, so we decided to just move in. We are loving living in Ballarat and think we'll stay up here providing we can keep working remotely for 2 or 3 days per week.
    This property is now tennanted privately to extended family.
    Agent keeps ringing me up to find out if we're going to sell. Current value ~ $900k (+50k)

    IP1 - Box Hill
    Engaged an agent as we previously had it rented privately to the neighbours who wanted to move in, upon our departure to our PPOR. Agent we dealt with was not the person doing the inspections. They stuffed up the condition report condition in multiple places and is very slow to respond to emails.

    The HWS just broke, we discussed in the morning that I would get a plumber to provide a quote, and the agent would get her plumber to quote. I get a text message from her that the plumber wanted $XXX and if i didnt take it up it would be a $90 fee. I proceeded with a different plumber and now have received an invoice for $180 for the plumber to come out.

    I've just engaged another agent to manage the property.
    Current Value 700k (-50k)

    IP2 - Ararat
    Tennant moved out. Left the house stinking of curry. Did not clean anything upon vacating, nor attend to the garden. Agent organised a steam clean and a cleaner but instructed them to only do a quick clean. to shoulder height. Upon entry you would visibly see the dirt on the walls above shoulder height and all the hanging light fittings were caked in dust.

    Agent argued that the tennants did not need to cut the hedges or garden maintenance, and kept saying they had to pay $700 to clean the property. As a landlord, i dont care if they have to pay 3k to clean up their mess. They should have cleaned it before they left, or rectified ASAP.

    I had to attend to the property to complete the clean and the garden.

    Changed agents.

    Current Value $220k (+20k)

    IP3 - Wendouree

    We moved out of our PPOR in Watsonia into IP3. IP3 required signifant renos. We've spent around $30-40k so far on;
    -new kitchen
    -new laundry
    -knocked out a few walls
    -new carpet
    -new floor boards
    -3x split system AC
    -new pergola

    I ran out of motivation before the little one arrived, so there are still quite a few things to finish. The laundry is still in the flat pack boxes from bunnings. The washing machine is sitting in an empty room hooked up to the tap and waste for the last 6 months, haha. My poor lovely wife. Dont know how she puts up with me.

    Current Value $450k (+150k)

    As I noted earlier in the thread I was looking to move away from property investment. We've pulled out the money that was paid down on the PPOR loan and have invested into shares.
    We're paying the minimum on all of the loans (however they are all P&I).

    The reason for this is that interest rates are so low, circa 2-3% and the return from the share market is typically ~7% over a long term average. Yes there is more risk, vs a guarenteed return on paying off your loan. This is a risk we're willing to take on because we are both still relatively young (35)

    I researched a lot of stocks and picked a few winners, however over the last 12 months they have started to stagnate and have been caught up by the ETF that invests in the top 300 australian companies.

    Our current share portfolio ($140k) consists of; BHP, CSL, NEA(nearmaps), WPC(westpact), VAS ETF, ASIA ETF.

    Going forward I wont be picking stocks and will just be continuing to invest into ETFs. Again, this takes away the emotion and mental overhead. We originally had invested under both of our names but...... out little family became a bit bigger.

    So now we're investing under my wifes name only, as she is on a lower tax bracket than I am, and will probably work part time whilst juggling family life and the little one.

    Our wealth creation strategy is to firstly, max out super contributions. This provides a risk free return in the form of lower taxes when it enters your superannuation account(15%), vs your bank account(37%, or what ever your tax bracket is). If we still have a mortgage remaining at 60, the funds from super can be used to pay off the remaining PPOR loan.

    I'm really proud of what we've achieved over the last 18 months.

    My work is trying to force me into a permanant role which will reduce my income from ~180k to ~130k. Something to think about, it will provide a bit more stability given there is now another mouth to feed.
     
    The Y-man likes this.