I have 100K in savings - how should I play this?

Hey - newbie here. Have been lurking around a few posts and thought I'd ask for some advice.

I don't own any assets and I am currently renting in Melbourne.
I have 100K in my savings account (genuine savings plus some help from inheritance), and 600K borrowing power. I want to get my first foot in property investment, with the aim to build a small portfolio in the next 8-10 years.

Currently thinking my options to start off are:
a) Buy one IP ~$500K. Where would be the best city to look at that will have good potential for short term growth so I can use the equity in the next 2-3 years? Brisbane? Hobart?

b) Buy two IPs ~$250-300K. Where? Regional areas? Or suburbs outside of Brisbane and Hobart perhaps?

c) Buy a PPOR in Melbourne then use the equity in a couple of years to get an IP. Would Melbourne have good potential for growth in the next 2-3 years?

What would you do? Any other options you'd recommend?
Any advice is much appreciated!!

 

If you're happy renting I'd look to invest first as Melbourne is fairly unlikely to continue to grow the way it has been.

That said, if a PPOR is a priority in the next couple of years, I'd maybe buy the IP as high LVR as possible to make sure you have enough deposit for your home when the time comes, nad get your broker to plan ahead for you so you can be sure you can still borrow for it with an IP or two in place. Borrowing against an IP for the deposit on a home can be done, but it's not the best outcome from a tax perspective.

 

Tralexandria,

Thanks for reaching out to the forum.

You have done really well to save your deposit and real estate is a really solid way to deploy those funds. Real estate isn't just an investment, but it is also a place to call home.

If this is your first property, I would discourage you from "hot-spotting" around the country. Buy something in Melbourne in your price range and potentially in an area that you wouldn't mind living in. I agree that Melbourne is expensive right now, but with the help of a local buyer's agent I am sure you can get an edge in the negotiation particularly in this market.

A lot of people have come to me who have chased hot spots in other states & cities, and are left with a few inter state assets but no place to call home.

Hobart is probably going to be the best performing capital for 2018 (as it was in 2017). But if you plan to hold for more than a few years, is that really where you want to tie up your capital?

So I know it's a bit old school, but don't be too clever with your city selection. Buy in an inner or middle-ring suburb in Melbourne, with a long history of solid returns. Melbourne might not be at the bottom right now, but your job is to accumulate good quality assets to hold for the long term, not to pick tops and bottoms.

Again, it's old school advice, but has worked for me and my clients. I hope this helps you too.

 

I should round off my thesis: once you have a few properties under your belt, and you have your local "sticks" all sorted, then by all means be slightly more creative with your purchases.

But build a solid base first. And don't use up your lending serviceability buying properties inter state when you don't have a property in Melbourne.

Best,

 

I would say it might be good to get something to live in - as cheap as you can stand. From there debt recycle it down and invest into something you want to live in in the future. Negative gear that for a while then move into it when tax positive - at that point consider selling the first main residence for some tax free capital gains - or hang on another 5.5 years and sell tax free with some extra capital growth.

All the while doing this you would be still investing as well in other things.

 

Hey,

Did you end up investing the 100k? How's your portfolio going now