Just purchased first IP, where to next?

Discussion in 'Investment Strategy' started by Damarcus11, 14th Jan, 2020.

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  1. Damarcus11

    Damarcus11 Well-Known Member

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    So i've just signed the contract for my first investment property in Arana Hills, Brissy. Purchased for $550 000 ($300 000 loan, $250 000 cash).

    I know most would recommend using a smaller deposit, but this was necessary for me since the loan limit was $300 000 and I thought a more expensive purchase would be more investment grade.

    This property should be slightly positive cashflow, maybe $60-$80 a week. As soon as possible I would like to purchase another investment property.

    With the $250 000 equity already in it, what would be my options for a future home loan?

    I'm hoping to purchase the second property for between $400 000- $500 000. Hoping to keep my portfolio pretty much cash flow neutral, what kind of property (and where) would you buy?

    My long term strategy is to buy and hold for CG, and trying to keep a fairly neutral cashflow.
     
  2. Trainee

    Trainee Well-Known Member

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    You made it cf positive by putting in a 45% deposit. How many 250k deposits do you have?

    whats your income?

    youve also factored stamp duty etc?
     
  3. kierank

    kierank Well-Known Member

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    Why was the limit $300K?
     
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  4. PandS

    PandS Well-Known Member

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    You can’t call that neutral when you foot nearly 50%, the opportunity cost on 250k at 3%-4% is close to $9000 a year, so your properties need to go up at least 9k a year for you to break even

    if you put in 5% and get it neutral gear then it is a better number.

    don’t be too quick thinking leverage up buy and buy and properties could just goes up and made a lot of money.

    hold it for a year or two and see and have a feel of it, remember leverage magnifies your gains as well as loss so have prudent risk management.
     
    Last edited: 14th Jan, 2020
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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Any tax advice taken?
     
  6. Damarcus11

    Damarcus11 Well-Known Member

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    I bought the property with my brother, our large deposit was from an inheritance. He is earning about 60k/year, but works as a subcontractor which doesn't help the application. Meanwhile, I have just returned from living overseas and didn't have any declarable income statements.
     
  7. Marg4000

    Marg4000 Well-Known Member

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    Slow down!

    You have taken the first step, now give it time to settle down. You still have to finalise the sale, and find a PM and a tenant (unless already tenanted), in which case you have to check our the existing PM before automatically re-signing with them.

    Don’t rush in to another IP purchase before ascertaining whether being a landlord suits you or not. It is not for everyone - just wait to see how you handle your first crisis!
     
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  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You should seek advice next time. There are many different ways this could have been structured to say you tax.
     
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  9. Damarcus11

    Damarcus11 Well-Known Member

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    Okay thanks. Some good tips here. I'll definitely slow down my aspirations and focus on this first property first.
     
  10. Trainee

    Trainee Well-Known Member

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    ugh. This gets worse with every new fact.
     
  11. thatbum

    thatbum Well-Known Member

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    Any particular reason you purchased together with your brother? What are your long term plans together?

    Its generally recommended that you don't purchase together with friends or family unless there's a clear short term exit strategy. Long term jointly owned assets can cause a lot of issues.
     
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  12. Damarcus11

    Damarcus11 Well-Known Member

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    We wanted to work together on the project, eventually building a portfolio together. Our ideal scenario would be to buy and hold for the long term unless a property is obviously under performing.
     
  13. MWI

    MWI Well-Known Member

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    And what if brother gets married or de-facto relationship and then new partner does want to pull out his share, for many reasons, they may wish to relocate, start a family, buy a place of their own, etc....?
    I would make sure this is communicated and plan B, possible out scenarios are discussed too, just in case.....
     
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  14. Trainee

    Trainee Well-Known Member

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    Wait till you want ppors.

    is the loan in both names?
     
    Last edited: 14th Jan, 2020
  15. Damarcus11

    Damarcus11 Well-Known Member

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    No the loan is in just my brother's name. The plan was to put the next IP's loan under my name.
    Right now my long term plan is to rent my PPOR and have investment properties on the side.
     
  16. Trainee

    Trainee Well-Known Member

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    Whose name is on the title? If just your brother, you must have contributed cash. Is there a loan agreement?

    If both names are on title, is it joint tenants? Or tenants in common, in what percentages?

    Who makes the repayments on the mortgage? How would you get your equity out? Is it really your equity?

    impact on future stamp duty exemptions? First home owner grants?
     
    Last edited: 14th Jan, 2020
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    what is the security for the loan?
    Who is on title to the one you just purchased?

    All owners of the security property generally need to go on the loan
     
  18. Damarcus11

    Damarcus11 Well-Known Member

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    The property is jointly owned 50/50 between us-we both put in equal shares of the deposit. The loan is under his name, but the rent will more than cover the loan repayments so he won't be out of pocket. If we have a vacant property then we will cover the repayments 50/50.
     
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    whats the security for the loan?
     
  20. Damarcus11

    Damarcus11 Well-Known Member

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    A security wasn't mentioned by the bank. I presume the property itself? If for some reason we couldn't find a tenant and couldn't make the repayments then we would sell the house.