Looking to go down the investment path. What's next?

Discussion in 'Investment Strategy' started by Sush, 22nd Aug, 2018.

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  1. Sush

    Sush Active Member

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    Hi all,
    I have been reading PC since last year and I find inspiration when I read from all the amazing experienced investors here and learn from their ups and downs and their journeys. PC is a true goldmine.

    I also keep myself abreast on the latest trends and news in the property market and aware of the whole Royal Commission and the slow tightening of lending $$ by financial institutions.

    My story so far:
    - Young couple in our mid-early thirties and about to start a family (baby due in Feb)! :)
    - Combined income above 160K (working professionals)
    - Bought our PPOR (using FHOG) in Dec last year - a cozy 3-bed townhouse located close to the trains and shops in the Northern suburbs of Brisbane for 380K.
    - Have bought PPOR keeping in mind a long term view of using it as a IP in the future (used the mantra - location,location,location)
    - Current outstanding debt = 338K (paid a significant deposit upfront by working hard & saving crazy for the last few years)
    - Other debt = 40K (CC and a car loan) - Aiming to get rid of it asap
    - So,between both of us we have a current debt of approx. 379K

    When we were buying our PPOR - a lot of people (including brokers and financiers) advised us that we had a much higher borrowing capacity based on our income and that we should buy a nice house+land package home upwards of 500K. But I didn't listen as we believe in starting small. :)

    Now, I am well aware that we will be reduced to one income household for atleast a year as the baby arrives, but I thought why not start planning ahead & get ideas and then put some goals for ourselves? :)

    So, with this background, I am now looking for ideas/advice on how do I start my property portfolio.

    A few things I am clear about is :
    - Looking for cash cows as I am not a big fan of CG. For me, getting a regular income from my investment properties matters which will become passive income eventually.
    - I want the property to pay for itself (if ever is such a thing).
    - Look for positively geared properties. Please advice what can be looked at. I am aware of dual occ types, only.
    - Looking to start paying both PO from get go as I don't want to get stuck later down the line when the IO term expires (the whole banks tightening lending thing).
    - Idea is to retire in 15-20 years with passive income on the property portfolio.

    So, my criteria is :
    - Start small
    - Look for cash cows and not worry about CG
    - Positive geared properties
    - Pay PO from start
    - Open to invest anywhere in any growing areas in Australia - even small prospective towns in VIC and NSW or even in QLD.

    Looking forward to all your inputs.
    Thank you! :)
     
    Gypsyblood likes this.
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Hiya Sush

    Welcome to PC
    What income will u need in 15 years to pull the plug on work ?

    ta
    rolf
     
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  3. nuzullandchicky

    nuzullandchicky Well-Known Member

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    Firstly, you may only have the choice of paying P & I as most lenders require this for new investment loans now days. I would not rule out CG as part of your strategy as you have time on your side and buying in a slightly better suburb this year is going to give you your 'cash cow' in later years, plus you may not have as many tenant issues if its in a better area or letting issues. I still believe 'everything in moderation' meaning diversity is key I believe (some CG some high yielding). I would not buy OTP or 'house and land packages' to start with but would take the advice of borrowing as much as possible while you have the dual income. best of luck and congrats on your bub![
     
  4. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Hi @Sush

    What level of 'regular' income from an investment property be OK to start with?
     
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  5. Propertunity

    Propertunity Well-Known Member

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    IMO that would be a serious mistake.
    Congrats on the soon-to-arrive bub.
     
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  6. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    Agreed.
    Neutral to positive cash flow is good, but at the same time, need something with an upside.
    A slightly positive cash flow property will become negative very quickly with repairs and maintenance.
     
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  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    most lenders that we work with will allow the borrower the option of PI and IO , since most of them are well well below their 30 % IO APRA quota.

    A little more dicky above 80 %, but still possible

    ta
    rolf
     
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  8. Trainee

    Trainee Well-Known Member

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    Have you actually built a spreadsheet that allows you to reach your goals with positive cashflow? What growth and yield does it need?

    Not sure why a deposit thats less than a year of your after tax income is big, esp with the cc and car debt.
     
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  9. Lacrim

    Lacrim Well-Known Member

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    Ditto.
     
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  10. Codie

    Codie Well-Known Member

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    Your not a fan of money? Can’t say I’ve heard anyone say that before.
     
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  11. Sush

    Sush Active Member

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    Thanks Rolf. In my mind, its above the 120K mark considering inflation and our lifestyle.
     
  12. Sush

    Sush Active Member

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    Thanks @nuzullandchicky for your tip regarding tenants. I agree with your "everything in moderation" advice 100%.

    Regarding OTP - why do you say no to them? Is it because of the high costs involved for the new properties? Interested to know any other specific reasons. Looks like people have opposing views on PC regarding house and land packages!:confused:
     
  13. Sush

    Sush Active Member

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    To start of with - if possible the income should wholly cover the P&I loan on the IP.
     
  14. Sush

    Sush Active Member

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    Thanks @Propertunity. :)
    What I meant was - if CG happens, then its great but I dont' want to solely rely on that.
     
  15. Sush

    Sush Active Member

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    Thanks @Property Twins for the perspective. Point noted. :)
     
  16. Sush

    Sush Active Member

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    That's good to know @Rolf Latham. Did you mean 20% deposit?
     
  17. Sush

    Sush Active Member

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    Thanks @Trainee. No, I haven't started that yet. I was hoping to get a template of that spreadsheet if anyone has prepared one before here on PC. Any thoughts?


    Didn't quite understand what you meant here (Sorry, I am new to all this. So apologies for my naivety.):(
    Can you please explain? Thanks
     
  18. Sush

    Sush Active Member

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    Cheers
     
  19. Sush

    Sush Active Member

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    Lol.
    Nah.. I meant.. if it happens its a win win! :)
     
  20. Trainee

    Trainee Well-Known Member

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    Your criteria is based on your own feelings and not reality. You would have bought mining towns at the peak.

    Put together a spreadsheet and see how realistic your plan is. (Its not. Unless you start with a significant amount. And you arent.)

    How do you walk to new zealand from brisbane? You dont. You catch a plane. Which you are afraid will crash. But thats probably the only way to get there.

     
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