Investment Strategy - Thoughts?

[LOCATED IN SYDNEY]

Hi all

I have been looking for my first investment property for the last few weeks, and I would appreciate some feedback on my proposed investment strategy in 2022. Some basic figures of my personal position:

Income: 150K / year (after tax)
Capital: 300K savings + 100K in redraw account on PPOR loan
PPOR: $2million valuation (1mil balance left on loan)
*assuming equity lending up to 80% LVR (1.6m), i would have 500-600K equity from PPOR

INVESTMENT PROPERTY 1

- Industrial Warehouse complex (I believe in the current landscape, CIP offer the best of both worlds in terms of CG/yield)
- 140m2 high clearance
- I believe it is community title (as its a secured gated complex but will need to confirm with agent)
- located in innerwest
- Not currently tenanted, but can get a tenant in very easily (personal arrangement)

- Sale Price: 1mil + GST
- Rent (annual): $41K excluding outgoings
- Purchased using equity from PPOR

INVESTMENT PROPERTY 2

- Residential apartment (Yield play driven, therefore i am thinking of interstate ie Newstead, Brisbane CBD)
- Minimum 2bedroom apartment

- Price: $550-600K
- Rent (annual): $30K (gross)
- Purchased using capital (20% deposit)

INVESTMENT PROPERTY 3 *assuming serviceability

- SAME AS ABOVE

The overall strategy is to secure buy&hold assets with (PPOR & CIP1) mainly aiming for CG, and IP2 & IP3 ideally neutral/positive geared (negative is still however acceptable) as a yield/cashflow focus play. IP4 and onwards would be focused more on CG rather than yield and would take the form of (anticipated) development sites or property class with strong CG prospects.

Based on your experiences, do you think these numbers stack up? What would you do if you were in my situation? Are there better options available? Or any other thoughts and comments is much appreciated.

 

Things to consider:
1. CIP will need a commercial loan and a lower LVR <80%
2. Owning lots of small strata title properties generally means lots of fees, duties and maintenance (and headaches).
3. With commercial property, investment quality (land component, tenant appeal, exisitng lease, development potential, etc) definitely improves as you move up the price range.
4. Have you checked your maximum serviceable loan for one good CIP or RIP? i.e. can you hold off for something better quality? Market cycle is changing so you could pickup something better opportunistically. I think of property investing less like a job (where effort = return) and more like fishing - some days you get a big fish and others no fish - but you still keep fishing.

TL;DR: 1 good investment is better than 2 or 3 mediocre ones

 

Thanks SmileSydney for your feedback

Due to my personal situation, there is a concern of job security and a large debt that i will need to pay back. As such i am erring towards a more cashflow secure objective with my approach to investment for the next couple years.

The attributes of CIP #1 suit the needs of my tenant that i would bring into that property perfectly. I know that there are greater benefits for CIPs at a higher price range, however i would then lose the security of said tenant. I don't believe i would have an issue with loan capacity/serviceability for something larger (PPOR500K + 300-400K savings), but i don't want to run the risk of essentially putting all my eggs into 1 basket, and then worst case scenario having a vacant lot for an extended period of time.

Thats why to mitigate this, i would bring a secure tenant into the CIP#1 (purchased purely with equity from PPOR so no cash upfront), and then use my savings to purchase a Resi IP #2 which will provide another form of diversification that would be relatively stable.