Newbie - Novice Investor

Hi Guys,

I've been lurking and reading for a while, figured it was time to post!

I am currently living/renting in Sydney's Eastern Suburbs

Own an IP in The Gap, Brisbane. I grew up in the area and have owned the property for 18 months.

I am at the stage now where I have the cash to invest again and really have no idea what to do! So many people profess to have the magic formula or the best way to build a portfolio so no wonder it gets confusing for a newbie.

A little about my situation, happy to hear opinions and advice

IP 1. Value of $650K - LVR of approx 75%

Cash on hand of approx $140K

Struggling to work out the next step, i am thinking of picking up another 1 or possible 2 IP in Brisbane around the $500-$600K mark. Looking in areas such as Chermside and surrounding surburbs, or Annerly/Greenslopes on the Southside.

Looking at getting a house with the potential to do a light touch up and rent out and hold for capital growth.

This is probably the easiest and simplest option for me although i know that i could buy potential development sites, splittable blocks etc - so many options and so little idea!

Thanks

 

This is what I would do:

1. Order a few upfront valuations and see what is the max you can pull out up to 80% on the existing property and use that equity release towards the deposit of the next purchase

2. Consider doing the purchases at a max LVR 90%, 95% or 97% (depending on what lender you will be eligible to use). During the accumulation phase you want to use as little of your personal cash as possible. You need to consider debt reduction strategies when your portfolio has matured.

3. At a 90% plus LMI capped/borrowed scenario you will need a minimum deposit (including stamp duty) of $68,000 where as at a 97% LVR scenario with LMI capped/borrowed scenario you will need a minimum deposit of $51,000.

4. Think about the strategy as CG is very important. Im a little bias in saying developing is a great strategy but you are essentially a walking ATM and I think its a little risky with the amount of funds you will have after the closing costs are taken into consideration.

Ps. If you are a medico, lawyer, accountant, poli, athlete, celeb you may be eligible for 90% no LMI.

 

Shahin makes some good suggestions.

Make sure you have a clear path on how to get from property 2 to property 10+ (or however many you need to hit your goal). What you buy now needs to align with what your end goal is and allow you to get you, rather thank blocking you (e.g. if income is limited, rent return will be important).

 

Thanks guys, some great suggestions. I think my next step will be to arrange a catch up with someone to run through the possible scenarios.

The potential pitfalls in getting from 2 - 10 + properties is something I would love to understand, how I structure these purchases is also something I want to know more about.

The Brisbane market (houses) seems to have pockets close to the CBD (5-10ks) where some real value can be had, I really want to capitalise on this (as I am sure the rest of us do as well) Can anyone recommend any great reports or sources of data they use to identify great spots to purchase?