Next Steps: What would you do in our situation?

Hi,
Been following Property Chat for quite some time now and I was hoping we can get some advice as to what others would do in our situation. We've just turned 40 and our financial position is as follows:
PPOR - Value approx. $1.9m - $2m, owe $200k (corner block, can be subdivided in the future).
Investment Property - Value $650k, owing $350k (can build another one at the back)
Family Trust: $80k
Savings: $100k
Ideally we would like to buy another property (in Melb.). Preferred Budget is up to $600k. We're looking at St Albans, Dandenong or Frankston and surrounding suburbs. Would you buy one property in these areas with the long term view of subdividing and putting one in the back (however no plans to do this in the next 5-10 years) or would you buy two in Melton as this would result in a better cash flow over the next 10 years so overall meaning we could contribute less out of our own pockets even though we would borrow more upfront ($800k). Any guidance would be much appreciated.

 

Arrr...I'd retire on those numbers.

 

Sell up everything and move to QLD,we need new money into the system..

 

I'd probably develop and sell tbh, if you are looking at 2mil and can be split, what would a similar build cost, 450k? Subdivision costs 50k EST, plus 200k owing you would be looking at 3.5mil with 700k owing.

Split the IP and have cost 300-350k to subdivide and build? Add the 350k and you're looking at 1.2mil value with 650-700k owing.

4 properties with 4.7mil Val and 1.4mil owing, a surplus of 3.3mil is a tidy position. You could sell one your PPOR and be debt free with 3mil in property and a nice cash kickback.

Sounds brilliant in theory, hopefully the numbers stack up in real life.

 

I'd be subdividing and paying out your existing debt with the proceeds. And then finding other sites just for kicks as retirement could get a bit dull in your early 40s.

 

probably quarter past one, but if quick enough, could cram in a few more before they turn into pumpkins

 

Hmmm, hard to say. I think it will slow down however doubt it will go backwards.

 

I wish. Still have two little ones so I'm working for the next 20 years. Hopefully I can help them out in the future.

 

I see a lot of folks say this, Spending every day for the rest of my life on the beach or in the pool or in the theatre room or playing video games or coding on my personal projects would not get dull .

I think retirement would be what you make of it and I would never be bored .

Moot point though as I am a long way off from retirement lol.

 

Honestly? I would find a 1-2 day per week PT job in regional Victoria, sell the super pricey PPOR and use all the sweet sweet CGT free moolah to:
- Buy a gorgeous Victorian/Edwardian/Californian Bungalow in the regional city Centre of your choice for PPOR
- Buy a fair few regional *cash flow positive* properties to provide you with solid, consistent rental income.

You've done incredibly well - congrats! I really hope I'm in your situation in 15 years

 

Any chance you could elaborate on this? Like where? - Is Regional safe to buy for rental reasons?

Why not invest in other asset classes? Any reason to stay with property for income?


-Frank

 

Because some folks still wake up screaming in the middle of the night from flashbacks of the GFC where the share market dropped 50% and it has taken a decade to finally get back to the original levels. Oh how fun it would be to go in now and see if it happens again so we can finally just go and just kill ourselves.

Not saying it would be a bad decision - just explaining why some will not be considering it.

 

Congratulations on your position at 40! That's incredible. Your equity is through the roof! My next move in that position, considering my own opinion of the Melbourne market being flat for a while, (I could be wrong on that for starters) - I'd build another property at the back of the investment property, this will further increase your equity and cashflow while gauging the market. That's just what I would do. Not one of the options you were considering so sorry if this is no help at all. Just felt compelled to share.

 

Rents would stay about the same if you had places around the 200-280 mark, so recession proof income & you have something to do on days off looking after things if you want to be a bit hands on.

 

Thank you. Sounds too good. Not keen to build at this stage as I work full time as well as juggling a young family. However definitely part of the master plan once the kids grow up.

 

Thank you. That's something I hadn't even thought of. Nice to hear ideas that hadn't even crossed my mind.

 

For me personally I'm more comfortable with property as I understand property and like property. I'm sure there are better options however it's out of my comfort zone.

 

Thanks Tim. Yes that is another option and we have thought about it before however we just thought given that we've got at least 15-20 years of working ahead of us we could stretch ourselves as the build option is always there to fall back on.

 

Do Not develop your land or you will be up for some nasty CG Tax in which you are currently exempt from.

If I were you I would slightly up my budget and buy a future splitter block in St.Albans. Long term hold I am a strong believer St.Albans is going to outperform a significant amount of VIC suburbs.

Your obviously great with debt reduction so go P&I on all your remaining loans and just smash them all down. In 15 years time you will be likely sitting on over 5mil in unencumbered debt.

Sell them all when your ready to retire, buy the kids a place each and tell them to earn enough money to come visit you in Noosa once every few months.