Investment Strategy - What would you do?

Hi all, been a long time lurker reading some of the fabulous insights and experiences from property investors. I'm keen to seek some advice on my current situation:

I'm 37 and a sole breadwinner ($165k PA) and currently own a property in South East Melbourne which was bought around the high $4XXk in 2014. The price has gone up significantly to around the $600k mark so there is some upside in the existing PPOR. My estimated cash in hand at the end of 2016 will be around the $100k mark, which will sit in an offset account linked to the mortgage. I have another overseas property and retirement fund which if liquidated, will mean I have access to about an additional $300k cash if I wanted to. The overseas property is currently positively geared with about a rental yield of 6.6%.

What are your view on the pros/cons of the options below?

1) Put all the savings in the offset account and work hard towards reducing overall mortgage for the next 3 years,
Pros : Pay off PPOR mortgage, then use equity to fund the first investment property.
Cons: Might not be the most efficient use of cash

2) Enter the market now with an IP
Pros: Get into the game early.
Cons: Uncertainty about entering property market in current climate as everything is so expensive now. Not much Capital Gains as its close to peak prices in Melb.

3) Any other suggestions form an investment perspective?


Thanks all for your comments and advice!

 

Why not do 1 and 2 at the same time?

 

I am looking at buying very soon and it most likely will not be in Melbourne, for now anyway

 

Thanks for the reply Terry. I am skeptical about entering the market now at current prices. Just in the last 18 months I have seen 4 properties along my street change hands for quite significant amounts, which means if I wanted to do so it would also mean that I would be buying near peak.

Whats holding me back is that I am still contemplating whether to "kill the golden goose" since the overseas property is giving a decent rental yield, versus entering to invest now with potentially not as much upside.

 

Hi Darren, thanks for the reply. Agreed that it certainly looks unattractive to enter the Melbourne market now. However, I am pretty risk averse and would prefer the assurance to be able to view the IP over a drive rather than having to fly interstate to see the condition.

 

Only if you are buying in your street perhaps.

 

That is true. I am still relatively green to investing in property, as my previous purchases have always been based on luck and gut feel, which so far hasnt let me down.

However I think it is far better to more prudent to educate myself on the fundamentals before entering the IP scene, which is why my approach has perhaps been overly cautious and maybe it has caused me to analyse to paralyse.

 

OK long story short. Financially your strong but I would take the time to increase the knowledge/direction department, in order to maximise the best use of your strong financial position/resources . You've done well so far which is great, but moving forward I would take a step back, put some goals together of where you want to be in 3 years. 5 years 10 years. Then spend a few months to learn via books, forum, meet ups. Doing that can make a massive difference to where you end up over the next decade. That would be my approach which I think would most likely yield the best results.

Just my 2 cents

 

Thanks Leo, the 2 cents are very much valued and appreciated.

Coming from a country where housing speculation was very controlled by the Govt and moving to here, it opens up a whole new world of opportunities and also risks.

The 3 , 5 year and 10 year goals need to be expressively formulated. Personally it would be nice to move to an area close to the city, but I would think it would still be several years and IPs later before I could afford living in a place that I want so now it's just about living comfortable and sowing the seeds for the future steps to get there.

Just out of curiousity what books and media would you recommend? The Richest Man in Babylon is on my list, and obviously this forum is a great networking media.

 

I value that attitude very much. Unfortunately, a large chunk of the population seem to think they are entitled to live anywhere they like.

There are so many good books recommended on the forum relating to property investment that will give you loads of knowledge and also (importantly) help you avoid so many of the easy mistakes as well. Just do a forum search. If I could only recommend 1 book (not directly related to property) that can have a huge impact on achieving great success then it would be :

http://4motivi.com/books/jim/seasons.pdf

You should be able to read it from the pdf version above. Regarding property investment, just do a quick forum search,

Cheers