Max rental yield / cash flow ideas/ buying outright!

Would love some ideas / suggestions. We have $900k cash to invest.
Current situation, 1 IP - $340k loan, maybe $60k equity at best.
We are on a single moderate income at moment & will be for a few more years (3 very young children). So I doubt we would have much serviceability for further loans.

I am trying to work out the best way to invest, hopefully 2-3 properties out of it. Wondering if we should be buying a sub $500k property outright with high rental yield first to increase our cashflow. Then remaining could be spent on deposits for 1 or 2 longer term CG properties, (hopefully neutrally geared) once our income increases.

OR we could buy a PPOR with it and then would be able to save more of our income moving forward (without the cost of rent) for future IP’s. However we are not really sure where we want to settle yet so not in a rush for PPOR.

What would you do in our position and where would you buy sub $500k for high rental yield?

Any and all thoughts welcomed, I’m a newbie at this and just trying to read/learn lots at this stage.

 

Put half (at least) in equities and wait for the right ppor to buy. At least with half (at least) you will get some div income if you select blue chip defensive stocks or etf

 

Thanks. Can I ask why you suggest PPOR & not IP’s ?

 

experience.

A wife with 3 young kids, and $900k cash is a mix fit for telling hubby that we need to upgrade the family home! You will now be on the path of expenses ramping up for the next 20 years (at least)

Lets say you did manage to somehow acquire 2-3 properties. Would you have sizable equity/cash remaining for a deposit for PPOR in the future, or if you did gear up on these properties, would you also have enough capacity in the tank to take on some PPOR related debt?

Assuming you buy $500k property outright. theres circa $520k gone of your cash. Whats your return? call it 3% - $15k gross per annum less property expenses. Call it net of $10k per annum. Is it worth it to have $520k capital tied up in one property generating a nominal $10k per annum?

To me it just seems there is more downside than up. Hence why I suggested a PPOR, or put that $520k into equities. You can easily get 5% return, your capital is liquid too.

 

That's more than a little sexist. I'm female & the driving force of our investing.

 

Since you are currently in Melbourne, could you purchase something that suits your investment criteria, but use it as a PPOR for the time being? Reason being that you don't have CGT liability with a PPOR.

Paying cash for an IP isn't really the best use of funds, but understand if you can't get access to loans. First stop would be to see a Broker. Speak to a couple on the forum, as they have more experience with investors than the average broker. I'd suggest to get as much leverage as you can, then put the rest of your funds into an offset account, linked to the current PPOR. This gives you flexibility to treat the property as an IP at a later date, and keep the integrity of the loan intact. If you've got the funds to then purchase another IP, buy somewhere lowish risk, but with a traditionally higher yield. You can still get properties in outer suburbs of Brisbane, but a larger regional may be better suited. Can really only move forward when you know exactly how much finance is available to you.

 

Thanks for all your advice, really appreciate it. I hadn’t felt it was quite the right use of $ to buy out right. Good to hear others say it.

I had also been considering regional, as it seems (from my limited research) in some areas there is much better rental return. Will keep researching.

 

I know nothing about the stock market, I’m not against the idea. Do you know if there are any great forums like this that are for stocks? or go to sites so I can start to read & learn more?

 

Thankyou. Appreciate the help.