Life financial guidance wanted

Discussion in 'Investment Strategy' started by virtual_mark, 20th Jul, 2021.

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  1. Trainee

    Trainee Well-Known Member

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    and then you experience sydney for the last dozen years, geared.
     
  2. virtual_mark

    virtual_mark Member

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    I should clarify this was amongst my ‘investment strategy’, not just for the sake of it haha. Although it seems this strategy I was thinking is perhaps not the best idea. I will play with the idea for a bit longer but feel investing in etfs or elsewhere is a stronger plan for the near to mid future

    thanks everyone
    Still open to any more advice
     
  3. Trainee

    Trainee Well-Known Member

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    Whats the long term plan? Ppor? Wealth for retirement? Do you understand the impact of missing out a few prime earning years?

    the more standard plan would be to go hard early, get some good geared assets and sit on them for a few decades. Might have to feed it with cashflow from the job. Then upgrade, refinance, etc.

    totally understand the appeal of travelling but theres a cost.
     
    Last edited: 20th Jul, 2021
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  4. John_BridgeToBricks

    John_BridgeToBricks Buyer's Agent Business Member

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    I still think average returns with leverage (real estate) beats above-average returns without leverage (equities).
     
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  5. virtual_mark

    virtual_mark Member

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    I completely understand (the most anyone can) the sacrifices we will be making to travel instead of work and build wealth. However, this is our choice and the lifestyle we wish to live.
    If you wish you can think of it as our ppor already purchased paid in full for $10,000 added value at a cost of $9000 by renovating in full and capital gains (due to covid and the added value) now valuing our ppor at $46k. Ongoing costs are fuel (about the same as rates) but we can live where we please.
    But Now from that lifestyle choice that we love, I want to make the best financial decisions I can and maximise my wealth for my situation, hence asking for advice and the beginning of my learning journey.
    I will have enough money for a deposit for a house and since I will not be needing a place of residence while travelling or even after as we live quiet a nomadic lifestyle and would struggle to purchase where we want to on the central coast. We would like to invest our money. Hence my original post to potentially buy an IP and hold onto it as an option.
     
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  6. virtual_mark

    virtual_mark Member

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    As long as there are some capital gains I would have tended to agree with you. Although some posters believe this isn’t an option for such a small budget.
     
  7. Kevbo

    Kevbo Well-Known Member

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    I think what you should do is to speak to a mortgage broker first to find out how much you can borrow, before considering the real estate route. @Terry_w and Phil of his team are outstanding (both mortgage + tax) and I highly recommend them.

    With $20k you can still buy a property with LMI, and there is nothing wrong with that. Note, however, that buying a property would involve some transaction costs (lawyers, stamp duty and B&P), and owning one will invariably have some costs (minor reno, insurance, pest control etc.) - they do add up.

    I concur with someone above that you should also chase CG (so don’t just buy for the sake of positive cashflow). Have you considered equities and ETFs to grow your savings for now? Also allocate 5-10% of your portfolio to cryptos - which will act as your “aggressive” investment.
     
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  8. virtual_mark

    virtual_mark Member

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    That's a great idea, and thanks for the recommendation as i wouldn't know where to start. My concern is that even if i could borrow say 500k+ it perhaps isn't smart to buy that high, hence my original figure of around 200k as i feel even in worst case scenario i would still be able to make repayments and manage unexpected costs.
    My thoughts behind this is because of all those added transaction costs, running costs/vacancy, possible increasing of interest rate and unexpected funding for the property that you mentioned, would be relatively larger for a more expensive property and i open myself to more financial exposure/risk.
    My question is do you think the 'overall' running costs for a $400k property would be relatively double that of a $200k property. Not really talking loan repayments but more specifically transaction costs and repairs over 10+years?
     
  9. Firefly99

    Firefly99 Well-Known Member

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    Nope. The repairs and maintenance costs are more aligned with the condition of the property when you brought it. Also the price of tradies etc in that area. A falling apart $200k house in the middle of nowhere will cost a bomb to maintain…
     
  10. Trainee

    Trainee Well-Known Member

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    Risk management is more important when you have no buffer. You really have to ask yourself, what happens if there is a serious repair (not crazy, but say a thousand to several thousand dollars). Can you pay for it? Even if you can claim insurance there is a lag (and excess).

    great to run numbers and say it is cashflow positive, but even the most optimistic investor needs a buffer.

    experience says no, expenses are not proportional to the price of the property. And new isnt necessarily repair free either.
     
  11. virtual_mark

    virtual_mark Member

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    Very true thanks. In terms of repairs and maintenance alone is there a blanket/general rule as to whether units or houses have a more costly upkeep or is it very much Strictly a property by property basis?
     
  12. virtual_mark

    virtual_mark Member

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    Understood thank you. If i were to move forward with real estate and had everything in order, how much would you suggest as a good buffer in your opinion on a predominantly positive cash flow property, with no 'expected' maintenance (a lot of assumptions i know, but more talking about that buffer as an emergency backup) around $5-10k? or more?