New to property investment - seeking advice

Hi All,

I'm single, have no dependants (children), am dept free and will be renting a one bed apartment at approx $300.00 per week or lower if need be as my residence.

My annual salary is low at 55k and not likely to increase by much, other than with inflation.

I have a strong credit rating and have a nine year relationship with the same bank which I've had two previous mortgages with, no defaults on payments ever.

I will have approx 150-160k cash towards my initial investment/s.

My initial goal if feasible, would be to buy 5x IP over the next 5 year period, assess and move on from there.

I am not sure whether to purchase 2x IP's with the monies available, on two separate loans or buy 1x IP and have the remaining monies in an offset account until enough capital gains have been acquired to purchase the second IP in one to two years.

My target areas would be in 10-15 kilometre areas of the CBD (Melbourne).

I have spent alot of time reading/researching recently and have engaged a broker I have a good relationship with and also looked at the possibility of going through a property investment management company that would plan, source and manage my portfolio for a sum. I am looking to seek as much advise possible before jumping into this.

I haven't put in figures in this post in relation to potential IP's as I'm unsure of whether to invest in homes or units/apartments or in regional Victoria, such as Ballarat or new areas of Geelong etc.

All opinions and advice are welcome and I look forward to hearing your ideas.

 

Hiya

Stretch the cash over as many IPs as possible - 88% lends could be a good option.

With your rent at $300 p.w and lenders assigning living expenses of around $1500 -$2000 p.m for a single adult these days - I think your borrowing capacity is going to be quite tight so lender selection will be very important.

Cheers

Jamie

 

Has your broker worked out your borrowing capacity for 5 IPs.

Reason I ask is this;

55k - tax - rent - living expenses will leave cira 20k to service debt.

 

HI @GLFR20FNH is there any way you can increase your income? Second job or up skill?

 

Based on what you've shared, 5 x IPs over 5 years sounds possible, but will be a challenge so it'll be critical to achieve good rent returns and ideally, to add some value along the way so you're not having to save up 100% of your next deposit, or relying 100% on the market to grow.

 

Why 5x? Why not 1x? Why not 50x?

Define exactly what is is you want to achieve in the next 5 years and then work back from there. Saying you want to buy 5x Ip's for the sake of buying 5x Ip's isn't a goal. You only invest for the money so what is the cashflow or capital figure you want to achieve in 5 years time?

 

What rental yield are you working off Steve?

 

Hi Jamie,

Yes I would like to stretch the cash as far as possible and agree that finding the right lender is crucial.

Hi Colin,

Not as yet. He has told me he'll look into that today, although I'll be getting several opinions before making any final decisions, so at this stage I'm unsure of my current borrowing capacity based on my financial situation.

Unfortunately due to health conditions (not fatal thankfully) I'm unable to earn a second income. I can easily step up to a senior role, although am reluctant due to my health. So ideally I would like my money to as much of the work as possible.

Hi Steven,
Yes I agree on all points. Initially I was looking for high rental yield properties, although when researching the capital growth on units and apartments in these areas, over a 5-7 year period, most of these investments performed poorly over that period, so I then thought I may need to look at higher capital growth IPs (houses) in the 9-13 kilometre radius of the CBD for greater capital growth and medium to low rental yield. By doing this I think I may struggle to afford two IPs in the first purchase because the price point would be 500-600k for each of these properties.

I may have to look in the 15-25 kilometre radius to achieve this.

Thank you for all of the replies so far. I appreciate all of the points raised.

 

Completely understand @GLFR20FNH no point in working too hard at the detriment of your health. You need to enjoy the ride along the way!

 

The amount of IPs obviously does not have to be 5. In my research I did see that this was the path in the example I was reading i.e buying 1x IP every 12 months and growing your portfolio in this way for 10 years before shuffling the portfolio around and selling off IPs 1&2 to use as capital for further expansion. In this example the investment amount to start the portfolio was 80k and wage was around 65k.

I don't want to invest the cash in just 1x IP if i can stretch this out to purchase 2x in the initial jump. This is why I am posting the question here so as to get some feedback from experienced property investors that may have done things differently if they could do it all again.

I'm sure there will be examples and ideas mentioned that I may not have come across yet or thought about..

 

With your income the way it is I believe buy and hold won't get you far no matter what the yield.

You'll need to look at properties you can split and build on, or split and sell half to reduce debt if you're going to have a shot at getting to 5 (assuming they're not regional cheapies). Some outside the box thinking will be required.

 

7% +

 

The best I've found so far is 5%...

 

Without digging deeper Im thinking 1 or 2 IPs depending on purchase price and yeild.

 

7% is out there. Not sure if you will find it looking in your home state (assume you're in VIC?) though

 

If it's IP and you don't have to live in then why not consider properties in Queensland. The price of apartments of 1 bedroom is around 500k and 650k for 2 bedroom, which they are within 2 km of Brisbane CBD.

 

To the OP Please don't do this... apartment oversupply.

 

In melb it is hard to get decent return, and the closer in you get the lower it is.

You can do it, but, you are going to have to change the idea of 5 IPs within 15k of Melb CBD, I hope I am wrong though and you can show a way, cause they are prob all 500K at that distance ?

Also you have to work hard to find things that will return well, it means a lot of time consumed.

 

That's what I was thinking!

Today I've looked at IP potentials 13k of Melb CBD and in this area the rental yield is quoted at 5% but these are villa units in the high 3s early 4s. I do know that quoted rental yields may not be very accurate, so I will always drop the figure when considering all potential properties.

I have had a look at Ballarat central as a possibility and obviously your money goes further but 4% is the quoted yield on homes up there.

 

I am happy to purchase my IPs in areas further out and slowly move the portfolio closer into the 10-15k radius of the CBD. I will be open to shuffling things around as necessary and as situations change over the years.