I don't know how to settle on a strategy... First time buyer in Sydney

Discussion in 'Investment Strategy' started by stovebyo, 2nd May, 2020.

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  1. stovebyo

    stovebyo Member

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    Hi guys

    I suspect many of you will consider me basically a brat, because I'm in an incredibly fortunate situation.
    But I just don't know how to decide on a strategy and get started.
    My goal is to generate passive income through multiple investment properties, then live up the coast somewhere down the track.

    I'm 33, living at my parents, with my partner and paying minimal rent. We make good money (200k between us), have a good inheritance and savings (140k), have no debt (other than HECS), don't want kids, am in a very secure government role, am happy to buy or live almost anywhere in Sydney for the next couple years, and can work anywhere in NSW later on. I even have access to CoreLogic for crying out loud! I also have experience with renovations and repairs. I know I'm in a good starting position.

    However, there's a lot of strategies and I feel like every kind of "advice" service is just out to get my money short term.

    We've been to a financial advisor/planner, who has helped tremendously with insurances, super, and getting my partner debt free.
    Unfortunately I just can't agree with his advice on first home purchase. He suggests a new house/land package 50km from Sydney CBD in a new development area, with a big focus on depreciation in order to break even each year.
    I was on board at first, but of course did my research (mainly here, thanks!). Now it seems like a dumb move long term.
    I don't want an investment property when there's 50 others identical on the same street. I don't trust developers, and I suspect the immediate valuation after it's built will be crappy. I don't see how it will help me buy a second property if all I'm doing is breaking even each year with sluggish growth.

    So how on earth do I settle on a strategy? The last thing I want to do is pay another advisor/strategist/seminar to spruik something else at me that they may just benefit from.
     
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  2. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    House and land packages can be a mixed bag. Many of them don't perform well because there's an abundance of land constantly being developed and the developers control the demand & prices in the area for years to come.

    You may also want to see if the financial planner is getting some sort of incentive to promote these properties. The incentives can be quite significant. As a result they can often be over priced. As a mortgage broker there's only a handful of types of properties that have issues with valuations, but house and land packages is one of these categories.

    Also investing just for the tax benefits is a terrible strategy. It's the capital growth that makes the real money.
     
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  3. stovebyo

    stovebyo Member

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    Thanks. It's all of those reasons exactly why I don't want a house and land package.

    I asked him outright if he receives any incentive. He told me no he doesn't directly, but the accountant he works with (who recommended me the specific properties), does indeed benefit. This was the big red flag to me that made me decide I need a different strategy.
     
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  4. JoannaK

    JoannaK Well-Known Member

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    We're talking about your first home purchase, is that right?

    if that's the case, why are you paralysed?

    A first home purchase has many different considerations than an investment purchase.

    Purchase in an area you can afford, an area you like, an area you can see yourself settling down in for a good number of years.

    If it were an investment property, that's a different kettle of fish.

    Remember the old saying.....time in the market.....makes perfect sense when talking about your own home
     
  5. wylie

    wylie Moderator Staff Member

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    I'm 59 so in a very different situation, but my dad always said if he had five properties paid off, the rent from that would give a decent retirement. That is what they aimed for and what I also aimed for.

    That worked well for us, but we had three kids on an average salary, one car. So we did this at our own pace, and we chose that I'd stay home with the kids. We could have changed tack and I could have worked, but that was a conscious choice.

    So we got comfortable slowly. We've not even made it to five properties (though that will change in a few months when we finish building townhouses).

    The problem is that I'm not sure this would work these days, mostly due to land tax, stamp duty and capital gains tax.

    I'm not saying we shouldn't pay capital gains tax, but stamp duty to buy in and land tax each and every year have changed the landscape so much that I don't know if I'd head down this path if I was starting now.

    Perhaps buying one property in a different state would be one way to minimise land tax, but we've always been very hands on investors, renovated many houses, updated and refreshed between tenants. We've saved many thousands doing this and enjoyed it too.

    We've been paying land tax for several years, but the threshold doesn't seem to increase (in Qld anyway) so it is making this property game not as attractive.

    Example is we hold two inner ring properties in hubby's name. Land tax on them last year was just short of $14k. This year, with the blocks reconfigured into three, land tax will rise to $17k.

    That's a huge chunk of rent gone just to land tax, before we even look at interest, rates, utilities, insurance, maintenance.

    I don't know what I would do if I was starting out. Perhaps spread purchases over different states, but then it is very hands off, management and renovating done by strangers. Not our style really.

    And I'm not confident about choosing shares or funds. That's outside my comfort zone. Now we are able to get hold of it, super is much more attractive than it has ever been, so I'd build that up, but many people don't trust the government not to fiddle with it and when you are young, it seems such a long way away.
     
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  6. Jess Peletier

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

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    Your strategy has to be formed based on the goals you're trying to achieve...otherwise you literally have no way knowing where the property is going to take you or if you're on track or not.

    Problem is most people who are willing to help with this are trying to sell you a property at the end!

    Is this going to be a home for you? Or is the priority that it's a good investment?

    PS - we do offer property strategy coaching - it's fee for service, so not free but we don't sell property or refer to any property sales people or buyers agents.
     
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  7. stovebyo

    stovebyo Member

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    Thanks guys

    The priority is a good investment. I'm happy to live in it somewhat short term (6 months - 2 years) in order to satisfy FHB stamp duty exemption, but I don't want to live in an inner-west Sydney apartment or outer-Sydney house forever (as this would be my budget, around 700k max I believe)
     
  8. Jess Peletier

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

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    If the priority is a good investment, do you think Sydney is the right place to be buying right now? Have you considered what can be achieved by buying interstate?
     
  9. stovebyo

    stovebyo Member

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    I'm open to all options, but I don't really know how to "consider" interstate as I have no experience doing any of this research. I'm trying to learn, but keep coming up against paywalls. There's an overwhelming amount of variables and conflicting information.

    I am leaning toward Sydney because of the stamp duty exemption, and I would be happy living here for another couple years, and can do much of my own renovation. I really wouldn't know how to research properties and pull the trigger in another state, without of course hitting that paywall and having someone do it for me
     
  10. Jess Peletier

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

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    At this risk of pushing our stuff, if you want to learn those skills we can help with the research side of things - check the link in my signature and see if you think it might help.

    Also - what do you mean by paywalls? Having to pay for information?

    There's loads of free info online but the issue is forming it into something useful with zero feedback.
     
    Last edited: 2nd May, 2020
  11. stovebyo

    stovebyo Member

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    thanks. While your product seems good, and I really don’t mean to be rude, I’m certain it doesn’t just cost $37.
    I’m interested, but I hate having to give up payment information and my contact info (resulting in mile long upsell emails) before finding out the true cost of something.

    as you can probably tell, I’m very skeptical. I’ve been burnt before, and I only have this first chance to do it right once.
    I don’t think buying interstate is for me at this point, but certainly something I’d be open to for IPs in the future.
     
  12. Angel

    Angel Well-Known Member Premium Member

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    Would you consider renting in your preferred location in Sydney, and buying an IP that is "near enough" within driving distance, like Illawarra region or Newcastle. The significantly lower buy-in price would compensate for loss of FHB grant or stamp duty concession.
     
  13. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Whats the 700 based on ?

    ta
    rolf
     
  14. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Just a general comment.

    In life, we get what we go out looking for .............. and have acquired programs in various segments of our lives, that worked well then, but are toxic to us now.

    Oddly enough, the folks that usually get into trouble are the cynics, sceptics, over-optimisers, IP thieves and " fiddlers" once they let go of the rubber band of built up procrastination, and often end up with a rubbish outcome.

    Likley not a popular comment, I dont make the rules, I just observe em

    ta

    rolf
     
    Last edited: 2nd May, 2020
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  15. ttn

    ttn Well-Known Member

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    Other FHBs would not mind to be in your financial position right now to get that first home and convert into an IP after. A lot depend on your discipline of minimise spending and maximise savings along the way

    Suggest to get an IO HL to start your journey maybe a MB can help you out but since you are skeptical so not sure if that would work out :rolleyes:

    I think I do have many good strategies but not qualified to provide advice so ... good luck :D
     
  16. Jess Peletier

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

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    It's literally $37. There is one up-sell to one of our full courses for $97 which you can take or leave - but that's it. :)

    Interesting that you are willing to spend literally $100's of thousands on your investment, but you're worried about a $37 purchase that has a money back guarantee! :D
     
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  17. stovebyo

    stovebyo Member

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    Guess I’m just trying to find the balance between blindly rushing into something (such as the new house and land package) with due diligence. Definitely not procrastination or over optimisation

    Thanks. I’ll look into it. I did assume there was a bigger upsell or ongoing subscription component, forgive me but there’s no way to tell. I’ll consider your product.


    thanks! Nice to read an actual suggestion. I would consider investing within a couple hours of Sydney. I can even potentially get a work transfer to those areas, particularly Newcastle.
     
  18. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Bump

    Thanks guys

    The priority is a good investment. I'm happy to live in it somewhat short term (6 months - 2 years) in order to satisfy FHB stamp duty exemption, but I don't want to live in an inner-west Sydney apartment or outer-Sydney house forever (as this would be my budget, around 700k max I believe)


    Whats the 700 based on ?

    Ta

    rolf
     
  19. stovebyo

    stovebyo Member

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    just an amount suggested to me by my mortgage broker. Preapproved for 750 although he seemed to think that was done quite easily.
    Why, what do you suggest?
     
  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    People don't work for free. What you might want to consider is doing as much research you can on the forum and then bounce a few ideas around and the pay to get proper advice, but make sure the fee is reasonable cost.
     
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