Newcomer - My story and lots of questions!

Hi everyone,

I've just discovered this forum. Thanks for letting me join.

We are renting out a property we formerly lived in, at a rate of 900 per week (two dwellings on the one allotment).

Our rental yield is a smidgen over 10% which I think is a good rate. It's in Sydney. It's bringing in 14K per year after all mortgage (I&P), expenses and tax payable.

We plan on keeping this house for the long term and once it's payed out, it will serve as an income stream. It has about 22 years on it left till fully paid out.

We are moving to a regional city for a change in lifestyle and hoping to build a home (total cost $350k). The excess from the IP will cover 65% of the loan for our live-in home. Combining that excess and what I can scrounge monthly from our strict budget, I want to pay down the live-in home in 6 years or less. This will free up $ which we would like to use to pay down the original loan (Question 1: Is this a mistake?). If it goes to plan (ha), that loan will be released some 6 years after the live-in home is paid off.

The goal is to have a nice income stream so that I don't work my hubby to death. 50k per year would be really nice. He could quit his job (I'm happy to continue working.)

Is my plan half decent or could I be doing something way better when it comes to investing in property? I'm generally not a risk taker as can be seen from my slow and very safe approach to growing wealth.

We would like to invest our super into property - Looking at industrial warehouses. Again, bad idea? I'm very new to all of this. We would also consider not paying down IP once live-in home is paid, but instead diverting that money to a 2nd IP if it's better in the long term.

I see posts here about owning 5, 6, and even 7 properties and my jaw drops. How in world did you all do it? Am I wrong path here? I know I play on the very safe side of things. What is your main goal in attaining all of those properties?

Thanks in advance.

 

No right or wrong. The plan to live in a 350k regional house and 50k income would be different to the plan to live in a 5m PPOR with 200k investment income and leave a house each to your kids, for example.

 

It depends on your end goal. If it is to move to the country, build a house and retire in the next 10 years with a 50K passive income you are probably on the right track with another IP. I To be fair, I wouldn't know much about warehouses or your personal circumstances so I am not able to offer any advice there, but I will tell you this: don't try to figure it out alone. This is my one and only regret in my journey. I wasted a lot of years trying to do all by myself because I didn't want to spend the money. In reality when the penny dropped, I realised not only that the money I was spending on my buyers advocate I made back immediately but also that I made a lot more over the years that followed because their took the guessing out of the decision making.

 

It's through a SMSF. I'm not familiar with REIT/syndicate, but will look it up. Is there anything about it that stands out to you?

Lol! The problem is no one elaborates beyond the brag.

Financial freedom, for both us and eventually our kids.

To be honest, the initial goal is financial freedom so that my husband can cut back on work to 2 days a week by then. However, we would love to leave a house to each of our kids as well. So perhaps I am on the wrong track. I can only dream about a 200k investment income and leaving a house to each child!

The problem is that I don't trust anyone who stands to make money off the advice they offer me. How do I know what they are stating is in my best interest? It's unfortunate.

 

That's interesting. I'll talk to hubby about it and see where it takes us. Are you personally familiar with REITs? Thank you for your advice btw.

Well done to you both! All the best in your future endeavors.

 

Congratulations sounds like you are well on your way to where you want to go. Many people will recommend more leverage early on but I think there is a lot to be said for the way you are doing it, nice and simple get yourself sorted and happy then you can take on more property later if you like. Something to think about would be to change the Sydney house to interest only when you move into your country house this should create extra surplus to help pay down your country house, you can then switch back to P&I once you have fully paid off your own house.

 

Once a very wise investor told me, "You only listen to people who have achieved what you want to achieve".

This might require changing your beliefs and what you have been hwwring till now from friends, family and acquaintances. But this works well.

 

Then you need to know enough to understand the advice.

 

I know what you mean but there are ethical people around that will work for you, not off you! You just have to ask and find them.

For me... I've been an investor and in the industry for 20 years and I just wouldn't go out tomorrow looking for my next investment on my own, without someone to sort out my finances at the cheapest rate, someone to advice on the best structure to purchase in, and having no idea where in Australia and what type of investment is the best thing for me right now! Let alone negotiating if I found one and knowing that I was buying at the right price.

 

True to a point. We must relinquish control of decisions and leave it to someone who is an expert in their field. I find a good dentist and doctor and stay with them. I have to go through many to find a good one though. The thing is, a bad dentist or doctor won't cost me 100, 200 or even 300k in mistakes. But a biased financial advisor might.

I understand your point, but if I knew enough, then technically I would have no need to ask for advice. Why would I pay someone money for something I could figure out myself with some research and common sense?

I sold in the downturn of 2009 for a profit, even though RE said in his 30 years of work he did not think we would sell above X amount. He, the expert, scoffed at me when I said that we could. I had been following the market for a while and knew that our house had certain advantages others in the same suburb did not. We sold 25k above X amount. Did our own conveyancing, as the CL when purchasing was paid 2k for nothing but errors we picked out and unnecessary delays. I purchased in 2011 a house for 100k cheaper than what it sold for in 2005. Did our own conveyancing again. I generally know how to buy/sell at good rates and can read and comprehend. I have gone through a period in which our single income suffered 2 redundancies in 4 years, and I still managed to knock off 195k in debt (home) through budgeting and coming up with a financial plan myself. Just because I don't trust other people to give me unbiased advice, doesn't mean I don't know 'enough' in general. An insurance salesman will always sell you the policies in which he will make a better commission from - Same with a broker. There is nothing inherently wrong with this - they need money to survive as well, but it just makes it all the more difficult to accept their advice as the golden rule if that makes sense. There is too much conflict of interest in finance.

I asked for advice here because I wanted to get a feel for opinions, from people who had nothing to gain by steering me in a particular direction. I wanted to know if anything stood out to anyone as a particularly bad choice, or if there was something I had not considered.

 

How did you figure out which financial advisor you can trust?

 

I'm interested in learning more about this 4 lane highway.