VIC I made a mistake. Looking for insights, advice and recommendations on moving forward.

Hi All, I'm new here but very thankful to find such a great forum.

I'm seeking advice, or rather, clarity and advice on the direction I should be looking to head in.
My wife and I would like to invest in some form of investment, just not sure what and where.

Our circumstances are as follows.

Before we got married, around 2010 I was un-researched and too eager to buy my first investment. I was sucked into buying a 1 bedroom apartment off the plan in Coburg VIC for $380K. I know now I was stupid enough to get absolutely ripped off and now have paid the price, with recent comparable sales in the vicinity of $320K. If I had put my money at the time into a house in the same area, I'd have doubled my money now. I want to cut my losses and get rid of it, but owing $280K on it means the rental nearly covers the repayments so I'm trying to hold on to the long term goal... Hoping that apartment construction slows down and supply starts to dry up. Maybe dreaming...

We bought our PPOR in Hillside Vic in 2013 at the bottom of the downturn in prices. Recent bank val has us at $720-760K, and we owe around $400K

We earn combined $300K at the moment, with my insurance broking business on the up and my wife's position continuing in a positive direction. We're pretty comfortable and spend too much on unnecessary luxuries so I wan't to make our money work for us.

Initially I thought about a Commercial property since I deal with them so much for work, but the lacking capital gains compared to residential has got me looking at houses. I'm currently thinking about inner West locations, 2+bedroom brick house on 350+sqm as a minimum, in a pocket surrounded by at least 1 freeway, a train line and shopping strip or centre, up to a maximum spend of $550K inclusive. There's one pocket in St Albans/Sunshine which ticks all the boxes, with schools, a university and a hospital also in the area.



If you wouldn't recommend this area, I'm open to education on why and what would be more suitable.

I've also flirted with the idea of buying land, teaming up with a builder and splitting the difference, but I don't know if this is too much of a risk at this point.

I F'd up once. I wan't to make sure I don't do it again and with no children yet but on the horizon, I need to make this work.

What and where do you fine people think we should be looking at? What would be the best option for capital gains and/or cheaper purchase price vs higher yield?

Thanks for your time and sorry for the long post.

Regards,
Elyas.

 

Thanks Rolf,

I just did a quick search to understand what that means. We had the IP on interest only for 7 years. We just came off recently, now both the mortgage and investment loan are both p&i.



As an addition to my opening post, I'm not totally closed off to the idea of purchasing interstate either, and for some reason, Tassie draws me.

 

"insurance broking business "
Do you have the right qualifications to stay in the business after 2022?
Can you survive if commissions are abolished?

 

I'm a company, authorised rep for the biggest brokerage in the world. I'm not as exposed as a fully independent business. Commissions won't be abolished, and if they do, our fee for service will increase and compensate.
"The right qualifications" I'm suspecting you're speaking of affect the Life product brokers, not the General/Commercial space...

 

What are you saving at the moment? Investments still need deposits.

 

About $50K pa.

We were scared off staying on IO due to the loan duration being 30 years or something, and interest payable not going away. I wouldn't be worried if this property was increasing in value but it's not, and so I don't have the comfort in knowing that when I sell it i'd have it all covered....

The only thing i have against the share market is my total ignorance of it to be honest.

 

I reckon your first step is to get your finances in order. You must take control of your spending or you will never get anywhere.

Stash every possible cent in an offset account attached to the mortgage on your PPOR. Learn to live on less, and understand the difference between “wants” and “needs”.

Not only is this good discipline, it gives you time to research different investment opportunities - you now know the pitfalls of rushing in before you truly understand what the investment is all about. Then, when you make your next investment, you will have a more solid financial base.
Marg

 

Fact is you made a mistake on a fairly small property. Your income level is enough to overcome the mistake easily, but only if you are willing to save. You make 20k a month. And you save 4k.

 

Some investment options that I have invested in other than resi.

Shares: simple index funds

Unlisted property trusts: Gives you access to high quality commercial assets not accessible as an individual investor.

Mortgage funds: I invest in mortgage funds with Australian unity. They lend money to developers building anything from mid size apartment buildings to a simple duplex. Max 65% lvr loans for 12-18 months. Average 8% p.a return.

A few years back I was a resi property investor and never considered anything else. Now I only hold 1 resi investment and have no interest in accumulating any more resi investments after finding these other options.

 

Big Al,

Are you leveraged into these sorts of things at all? Or cash only?

Obviously that’s the biggest + in resi but for those of us that don’t have large amounts of Equity and can only put savings towards shares and funds, do you still recommend?

 

So using your Resi equity as the loan? Or a margin loan?

 

I personally don’t leverage for investments at the moment. But I would consider leveraging if a great opportunity arises. I say that because I have the ability to draw surplus funds against my home loan at 3.88%.

I guess I haven’t given much thought recently to the benefit of resi & the ability to leverage. That’s because I am fortunate enough to be in a position to be able to build wealth without leverage. Then again my mindset is more focused on the income return then possible future growth.

In the near term I’m not sure how much growth there is in resi to make up for the lower yield and extra effort compared to property trusts , mortgage trusts and even dividends from shares.

The OP though seems to be earning good money. That should give them the ability to invest reasonable amounts on a regular basis without leverage and still build wealth at a reasonable pace.

 

What @The Y-man was referring to is the manager of the property trust normally borrow say 50% of the asset value then raise the other 50% from investors.

For example I earn a yield of approx 7.5% yield from the unlisted trusts I am in. Now if I personally used leverage to invest then that could increase my return further.

 

@Big Al what's the best way to research these investments further?

 

So just over 3 years ago I had never even heard of property trusts. Now I consider myself well versed in the world of property trusts. I jumped on google and typed unlisted property trusts and read pretty much everything on the net relating to property trusts.
Core property research is a good site that reviews property trusts.
I also started jumping onto the websites of all the property fund managers. Charter hall, sentinel, centuria, Heathley, fortius. These are ones that focus on unlisted funds.
Next I started calling and meeting with the different fund managers. Of the ones named above I have met all them in person before investing with them except for centuria. While I no longer meet with the managers in person much anymore, I still contact the reps regularly regarding new funds or to see how current funds are going.

What I am finding though is that compared to 3 years ago opportunities to invest in attractive funds are harder to find now. Commercial property has had a big run the last few years. Office funds have done really well and while there are funds open for investment with great quality assets, the prices are on the high side meaning yields are lower.

Example. The latest opportunity that has landed in front of me is the fortius cammeray trust. Fortius being the fund manger is looking at buying the Stockland mall in cammeray. They will borrow approximately 50% of the purchase price and raise 50% from investors. The initial yield for investors is 7.25%. There will be a component of that income which is tax deferred. So an added benefit there. It’s a small retail centre with a few offices and a childcare centre on top level. The wale is 4.6 years by income. That’s the key info but there’s a lot more to it then just that.

Now they emailed me and other potential investors with this upcoming investment on Thursday 6th June. They asked for reply email expressing interest. By Monday 10th June they received more expressions of interest from investors then the $23.9 mill they want to raise.

Now I put my hand up for this one and was surprised at how much interest they had. Even though I expressed interest I was a little hesitant on this one. If anyone is interested I can go into further detail on my thoughts on this particular asset / investment.

Sorry for the long rant. I like to go into deep detail with my posts.

 

Thank you for the information and giving detail on it, I’m now spending hours on google haha.

If I can ask a couple basic questions for both yourself and the Y Man, what is the appeal to going Unlisted Vs Listed, from what I can see the entry into Unlisted is a lot higher and owned direct compared to owning shares/units on the ASX?

Are yields similar? I see a lot of funds achieve mid 7s... which is highly appealing - Esp using a PPOR Loc and debt recycling.. some quick modelling would pay down that non deductible much much faster.. I’m slightly excited now but need to do more research..