Help with investment strategy with current portfolio

Hi Everyone,

Looking to get some advice/strategy to maximise investment growth with my current portfolio and use profit to re-invest.

Here's where i am at -
PPOR in Truganina (Vic) $ bedroom.
Investment property purchased last year - 4 bed house in Hoppers Crossing (Vic)
Invested in 400sqm (12.5X32) in Ellarook Estate in Truganina (Title approx Dec 2018). Purchased last year.

My (10 year) long term goal is to have a portfolio of 6 investment properties.
'Good to have goal' is to move out of my ppor and get bigger one.

Questions I have (Advice I need on) -

1) Land prices are going up really fast in Truganina. To get the maximum benefit, should I build a 4+2+2 (single storey) house in Ellarook and sell after one year? or should I build a double storey 4+2+2 and sell after one year?

2) Or should I build one the house and hold long term (rent it out). If you recommend this, should i go with a single or a double storey house?

3) Should I invest in another parcel of land? If yes, what suburbs would you recommend?

4) I have boy who starts PREP next year. He is on waiting list for most of the Christian schools around but I doubt he will get into Heathdale (Werribee) or Baccus Marsh Grammar (main campus or the upcoming campus in Rockbank).

5) Will it be a wise decision to move out of the current PPOR and rent it out and move into another rental property where there are good schools?


Any tips from your side is appreciated.

Thanks,
yd.

 

Hi @afterbuddha, have you worked out the numbers with each option? costs, profits, tax? family needs?

difficult to say which option is better with limited info.

 

As @Eric Wu pointed out, start with the cost of a single vs double storey and then check what similar single/double storeys are selling for, in order to determine profit. If there is no profit then no point in selling.

To maximize rentability you should also avoid having the same type of configuration as other properties in the estate. For example, if all houses are 4 bedders, then why not consider building a 5 bedder so your product will be different to others?

Buying another parcel of land can work, but again you need to do your due diligence - what is the total cost required for land + build? And what are the finished products selling for? This info will be able to guide you on whether you should invest in another land + build project.

This is a question that only you and your family can decide. What do you want for your kids?

From investment perspective, if you rent out your PPOR then you may increase some serviceability so potentially it can help expand your investment portfolio. But you will also need to find a balance between gungho investing and what the family is happy with

 

Hi David, The land title is in Dec 2018. I was planning to start looking for a builder soon and lock build price. How do i predict prices that will be mid-2019? I am expecting the house to be ready by then.

 

Make sure you have your broker run numbers before you go down this route.

Recently I checked the same for a client. They don't owe a lot on their PPOR - earning rental income on this would have been shaded by the banks, and also taxed. At the same time, they would be paying rent from after tax cashflow - the rent they would have paid in a better locality would have far exceeded the rental income, worsening their borrowing capacity.

 

I don't think anyone can predict what the price it will be by mid-2019.

What you can do however, is to make an due diligence check now based on current price and follow sold prices every couple of months. For example:
- Truganina land purchase price: $250K (this you know)
- Truganina Build Cost for 4/2/2 Single Story house: $250K (this you can find out by getting quotes from builder)
- Include a 10 - 15% contingency for anything else: $37500
So your total cost will be, say, $500 - 537K.

By using sites such as house.ksou.cn, you can find out comparable sold prices for 4/2/2 single storey houses in Truganina at this point in time.

Let's assume they are selling around $600K now, and assuming prices don't change too much, then you could make some gain by the time house is completed by mid 2019. However if they are only selling now around $500K, then you may not have much profit by the time your property is being built.