Help Young Investor with Next Steps

Discussion in 'Where to Buy' started by Tealey1, 18th Oct, 2020.

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  1. Tealey1

    Tealey1 Active Member

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    Hello everyone! My mind is all over the place and hoping for some guidance on what I should do next in my property investing journey. My GF and I are 25, have $110K in cash, household income of ($200K ish) have 3 properties *details below, and hoping to focus on some capital growth long term whilst keeping strong borrowing capacity for our next purchase.

    Option 1: Use Binvested and cross our fingers ($13K fee!)
    Option 2: Buy a unit around $400K in Burleigh Waters
    Option 3: Buy unit $220k in Moreton bay which will leave enough savings + more equity for somewhere else.
    Option 4: Buy unit $320k, Everton Park area, QLD
    Option 5: Buy house $260k in Logan area, QLD
    Option 6: Buy house $400k, Bracken Ridge, QLD
    Option 7: Buy house $450k, Newcastle, NSW
    Option 8: Buy house $300k, Bendigo area, VIC​

    Current Property:
    Property 1. 2B 1Bath Unit, Southport (bought at $275K)
    Property 2. 3B 1Bath House, Hobart (bought at $211)
    Property 3. 3B 1 Bath House, Kippa Ring / Redcliffe (bought $375k)
    Might not get any replies and I've probably worded this all wrong, just hoping for someone to help push our thoughts in the right direction. For all we know, we could be missing something entirely!!!
     
  2. db9

    db9 Well-Known Member

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    Hi, nice post! I would clarify and zoom out on your goals first. Where are you at and what do you need from your next purchase to get you one step closer to your goals? Another option depending on borrowing power and goals could be buy one more expensive property now rather than a less expensive one that you hope to leverage into another (less expensive?) property. Do you have a PPOR or view for one at some point?
     
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  3. Tealey1

    Tealey1 Active Member

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    Thanks for your reply! The ultimate goal is to debt-free and self-sufficient from rental income! Not really sure what that number is, maybe $100K PA (after expenses)? I see us being early on in our journey and buying as much as we can, as soon as we can is important so that we can take advantage of compound growth (we are still relatively young). Then again, goals can always change!!

    We are hoping to buy a PPOR in around 4-5yrs (house in Burleigh Waters), which would set us back at least $750K.

    Hope this helps!
     
  4. Angel

    Angel Well-Known Member

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    Scrap Option 1.
     
  5. willair

    willair Well-Known Member Premium Member

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    On the option list from 1-8 i would cross out 0ne and Five for starters..
    Then i would factor in where do you want to be in five years..
    Married?
    Children?
    The 2 above items can change everything depending on how this is set-up from the start and who's names are on the title..imho..
     
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  6. skater

    skater Well-Known Member

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    I would run as far from Option 1 as I can.
     
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  7. Angel

    Angel Well-Known Member

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    I dont imagine any growth from a $220k unit in Moreton Bay. Try a $350k house.
     
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  8. Trainee

    Trainee Well-Known Member

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    Ppor should be a consideration. You run the risk of maxing out your borrowing capacity just when you want / need a ppor say when you have kids.

    generally your purchases seems on the cheap side. Is it because of deposit limitations? Or you didnt want to borrow that much? Or focus on cashflow (which you dont really need)? If you want cg it might be worth going more expensive in larger capitals.
     
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  9. Tealey1

    Tealey1 Active Member

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    Exactly my concern, I wouldn't want to buy properties that mean I max out borrowing capacity in 5yrs! My GF (future fiance) will kill me! haha

    Another reason they are on the cheap side is simply that we had low incomes up until now (this is starting to change with experience) so, saving up $60K was a big feat! I hear 20% deposits are also more favorable for banks to release equity in the future.

    If we buy $400K house, that is basically all of our savings, we go back to square 1, rather than snagging 2 cheap ones now. Not that this is the best strategy, just something to consider.

    Any specific recommendations?

    Again, thank you so much for the help!
     
  10. Tealey1

    Tealey1 Active Member

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    Nice shout! We've got one of those in Kippa Ring / Redcliffe area!
     
  11. Tealey1

    Tealey1 Active Member

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    Would like to live in a $750Kish house in Burleigh Waters (big surfer), 2 kids, probably my single income for a while (probs around $180K at that time). Both names on the title.

    The way I see it is that we have 5yrs of smashing out investments before kids. I would then imagine life is flipped upside down! What we do in the next 5yrs will dictate a lot, so these next purchases are the most critical.

    Again, thank you a million for your time :)
     
  12. Angel

    Angel Well-Known Member

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    Consider diversifying across states to spread potential land tax.
     
  13. skater

    skater Well-Known Member

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    Yeah, you need to keep tabs on Land Tax. It can be a killer.
     
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  14. Trainee

    Trainee Well-Known Member

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    If you have a plan to buy 750k PPOR in 5 years, you need to have a borrowing strategy that allows you to do this. And 185k cash. This is something that should be worked out years in advance with a good mortgage broker.

    Also remember, once you reach, and probably past, the borrowing limits, if you sell you can't buy back. i.e. you might reach a point where selling one doesn't help your borrowing capacity.

    So you really have to buy stuff you want to hold long term. Cheaper properties probably have higher yields, but not to the point where they add to your borrowing capacity. If you then have to sell some to free up borrowing capacity for the PPOR, that's just wasting stamp duty payments.

    Taking the extreme position: are you better off holding a Sydney / Melbourne 700, 800k IP for the long term, compared to the smaller Qld stuff?

    Or, if you were starting from nothing now with just a block of cash. What would you buy that you are happy to hold for 50 years? Would it look the same as your current portfolio?
     
    Last edited: 19th Oct, 2020
  15. Tealey1

    Tealey1 Active Member

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    If that is the case, we could buy the PPOR now as an investment and occupy 5yrs down the track. The downside is things can always change I imagine. What are your thoughts around growth for houses in Burleigh Waters?

    I'm happy with our portfolio as is. Hobart grew $60K over 2yrs and we pulled the equity, that's already over 100% ROI on our initial cash downpayment of $50K. And that is in a very low socioeconomic area (Herdsman Cove).

    Having 1 in Syd/Mel is dependent on 1 market, bad for cash flow as it's negatively geared and we'd be screwed if anything tanked. I personally like the idea of diversifying with property and holding long term.
     
  16. Trainee

    Trainee Well-Known Member

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    Are you actually in Sydney? Will you have to relocate to Burleigh Waters and what is the impact on your work situation?

    Dont agree with the concentration in Syd/Mel, because prefer the fundamentals of the big capitals, though thats just an opinion.
     
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  17. Tealey1

    Tealey1 Active Member

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    Yeah living and working in Syd. Work is happy for me to relocate to GC and work remotely / out of the Brissy office a few days a week if I need. Would love to have IP's in capital cities, but we are basically priced out at this point, hence the attraction on more affordable locations. What would you do if your budget was up to $450K?
     
  18. skater

    skater Well-Known Member

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    Ummm, you won't get much in Burleigh Waters for $450k.
     
  19. Tealey1

    Tealey1 Active Member

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    I know right! I should have clarified...

    Maybe we should up our budget to $700Kish and buy our future PPOR now in Burleigh rather than a $450K IP elsewhere. Thoughts?

    To be specific again, if you were me and had an IP budget of $450K, where would you be buying?
     
  20. Robbo80

    Robbo80 Well-Known Member

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    If you are set on Burleigh for the next 20 years then go for the house. Coastal properties aint gonna get any cheaper, and most investment advisors will push you towards regional coastal/outer ring suburban locations which will largely perform in line with gold coast in any event.

    Its not about the number of properties rather the quality of the portfolio.