I Lack Creativity. What would you do with ~120k in this situation?

Hi all. Great forum so thank you.

This is my first post. I'm looking for some inspiration on what to do as I fear I may make some less than effective investment decisions.

Scenario:

• I have ~120k deposit available.
• I want to build wealth with this deposit over the next 3 to 5 years. After 3 to 5 years, I will want to cash in the investment and purchase a home to use as my primary residence.
• I want to invest in something "safe". Not interested in anything risky.
• I am gainfully employed and have a good financial history however, I will soon resign from my job (within the next 2 months) and head off travelling for 1 year.
• I will not be able to service repayments on a negative cash flow property while I'm travelling.

Questions:

• Should I invest in a new build? Will rent cover mortgage repayments?
• Should I go for something low maintenance like an apartment?
• Could / should I purchase 2 properties with this deposit?

Thanks.

 

I'd put 70K of that into the deposit and costs for a dual occ, that will generate 8-10K extra CF+ money per annum.

No stamp duty to pay , as the stamp duty on the land would be less than 5K - which would be covered by the NSW new home grant of 5K.

So even if you got very limited growth - which is unlikely , you could sell after 5 years, which would get you all your money back plus the 40-50K of extra income you'd have generated. You really only need 4% growth to get your LMI (1.5%) and selling costs (2%) back. Not very difficult to achieve over 5 years.

530K dual occ. (land 160. Build 370) Borrow 90% ( 88.5% + LMI)

Your contribution would be 11.5% deposit (61K) + legals + interest during construction - @ 70K

Your return would be 8-10K CF+, depending on your marginal tax rate

You'd actually have enough money to purchase a 2nd one in 2 years - ie the 50K left over from the 120K, plus an additional 20K generated from cash flow over 2 years. Then you'd be generating 16-20K extra per annum.

When you sell, you'd get your deposits back out and you'd have built yourself a much larger deposit for your PPOR purchase

The planned sabatical wouldnt be affected either, as the properties run CF+ pre tax.

 

Hi Jonathan.... With these two statements, I think you should hold off buying anything till you get back...
Worth reading and learning in the meantime though

 

Some points to consider
1. If you plan to sell in 3-5yrs. Your entry and exits costs could be a considerable amount of any potential wealth you build up.
2. You need to consider you will pay capital gains tax on any wealth you build.
3. Over a 3-5 yr span you might get zero growth or even negative growth. Especially if you factor in the entry and exit costs.
4. If you plan on being overseas, you will need to make sure you have a decent buffet to cover any expenses that aren't planned for - hot water systems breaking, no tenants for months etc.

Based on what you have said and my initial thoughts - I think property is too risky for a short term result and u should park your money somewhere else while u travel care free.

 

Yikes, you will get smashed with Stamp Duty, Buying, Selling and holding costs over that time frame.

How about instead:
Investment Products
or
Intelligent Investor Equity Income - Diversified Portfolios - InvestSMART
or
https://www.ssga.com/apac/au/retail...roducts/state-street-builder-fund-retail.html

 

Why not buy the main residence straight away?

 

see above. zero stamp duty costs. zero holding costs .....

 

Even if he buys the main residence now, he's not going to live in it for the next 12 months (unless I've read too much into his comment)..... Which will mess up the tax status...

 

Agree - buy the main residence now, live in it until you leave and rent it out for a year. Saves the buying and selling costs.

 

More details on these please?

 

I would be going shares in this timeframe. Some great threads on LICs and ETFs in this forum.

 

For a 1 year investment. .. that could be a solid idea. The yield is there with AREITS and it's for 1 year only...

 

I second this. Would like to learn more about this opportunity if possible!

 

You guys... read any of @euro73's posts for the last 3 months

 

Hello everyone. Thank you very much for all of the responses. The diversity of opinion makes this such a great forum.

 

Or it can confuse you.....
Anyway, hope we gave you idea/s to move forward with.

 

I would go onto social media and ask an informed community about what to do.

 

Winx on the nose might be a good bet.