Investment strategies for the Sunshine Coast

Hi all,

For a bit of background history, I admit I am in a very fortunate postion where (from a combination of selling my first house /savings and family assistance) hubby and I now own the property we live in outright (having paid off the mortgage), in Buderim QLD.

We are now looking for an investment property on the Sunshine Coast, where we will be using savings and inheritance to purchase.

I do however have a car loan of 35k and a personal loan of 10k that were acquired prior to receiving inheritance.
I have always been funny about spending my savings which is why I have these loans still- which I do know is a silly mistake as the interest is dead money.

Anyway.
We are very lucky and have the means to purchase a investment property without necessarily obtaining a mortgage. However, knowing that this will mean it is hugely postively geared, I am wondering whether I should take out a minimal mortgage (for example 100k) on the Investment property?

I would then use cash to pay off my car loan and personal loan, and use 45k of the mortgage towards the purchase of the IP.
I figure an investment mortgage would still be a much lower interest rate than those loans (which I think are around 10-11% but not sure exactly as it is variable). Plus the interest is tax deductible.

I would leave the remaining mortgage funds that I dont require, sitting in the mortgage so that I dont have to pay P or I on it.

Ideally I would like to buy a tired 3-4 bedroom property in Buderim or Maroochdore, with potential to renovate to some extent. The funds left in the mortgage on the IP could fund this later on.

Any advice would be much appreciated.. thanks in advance!

 

Pay off the car and personal loans, so long as there is no penalty for early repayment.
Marg

 

suggest you learn how money and risk works. But if you just want one ppor and one ip, just pay it off asap.

 

Hi K8F
Buderim is lovely. Must have the most coffee shops per capita in Australia I reckon! Are you are your spouse both working fulltime, and is the house you are living in your forever home ? Does it have ‘upgrade’ potential or is a finished product ?

Depends a lot on your circumstances and objectives but If I was in a debt free position in that great part of the world one of the strategies I would seriously consider is doing clever bang for buck upgrades to a home whilst you are living in it (as opposed to sprucing up a separate IP or flipper). Then you could either sell the finished product tax-free, or if you keep to rent one spouse could sell a half-share to the other to legitimately get some gearing into the equation. Also get clued up on the 6 year rule that some of the beancounters on here bang on about. Not advice.

 

Diversify out of Sunshine Coast. You already own property there.

 

If you could elaborate rather than just be short with me that would be much appreciated.
Despite the fact Im in a fortunate situation now, it doesnt mean I have always been in that position..

 

I understand what you are saying.. It is just that we are hoping to get an old property on a big block in Maroochydore and renovate it. But yeah, if I bought any more in the future I know it isn’t a good idea to have “all my eggs in one basket”.

But definitely open to suggestions to good investment locations !

 

Thanks I really appreciate the advice! We do want to continue doing up our house we live in, however we don’t have kids yet so it is hard to justify the extension we would need to really maximise the gains. It definitely has potential to upgrade without over capitalizing due to the area, comparisons on the street and the fact we back on to a park.
I work fulltime and spouse is part time

It is already a 4 bedroom house but to upgrade the kitchen we would need to move it, and encroach on 4th bedroom- hence extension to maintain 4 bedrooms. Either up or out.

Maybe not our forever home, but too good to sell in near future as it is in the best public school zone. I would want to keep it as an option for when we have kids.
I would consider renting it though whilst we lived in the next property. Also would be open to living in the new IP in the final 6th year before selling..

The property is just in my name, but can you explain what you mean by one spouse selling a half share? Thanks!

 

Well for example if the house you own now is worth say $600k and you rent it out for a few years you get no benefit from gearing as its owned outright. But if husband borrows $300k to buy half share from you, he gets gearing on his share once you rent it out. Now if he’s not working full-time this may or may not suit – it’s something you need to crunch the numbers on. But if that house is a ‘keeper’ with long-term value-add prospects, and you want to move out of it few a few years while getting involved in other projects, the numbers may be favourable depending on a host of variables including your income levels etc.

 

Why, though? Is it because you think you can make a great return doing this, better than what you can expect buying somewhere else? Or your just comfortable with the area you live in?

You seem to not like debt, feel grateful for what you have now, and want to buy near where you live. Thats all fine, but if you want to build some real wealth, think differently. Understand and use debt wisely. Always be hungry and look for better returns. That means looking for the best market to buy in, not just near you.

On the other hand, not everyone wants the stress and risk of a big portfolio. If you control your spending and just end up with a couple of houses near you, thats not a bad outcome.