Our portfolio at 28, starting family- what next?

Hi all,

We want to share what we have and what we should be doing next?

Background:
- Both Pharmacists, both 28
- Live in Sydney renting at parents granny flat (too expensive to buy PPOR)

Goal:
- 75k passive income by 40, inflation taken into account
- start family in next year

Properties:
2013
- Purchase 1) Chester Hill NSW, 850k, 2 houses on 1 title, 1412m2, 15.24m frontage, 415pw front house, 470pw back house, potential to subdivide & add gf behind each house
2014
- lots of learning
2015
- Purchase 2) Birkdale QLD, 535k, land and house package, 540m2, 535pw
- Purchase 3) Chermside QLD, 405k, townhouse, 425pw, potential for cosmetic reno
- Got Married
- Purchase 4) Eagleby QLD, 260k, House, 631m2, 295pw, potential for cosmetic reno, potential to add gf
2016
- Purchase 5) Stapylton QLD, 145k, villa, 280pw, potential for cosmetic reno
- Purchase 6) Awaiting completion of OTP unit in South Brisbane, 460k, rent advertised for 465pw, loan is approved, waiting for settlement in December

Funds available 250k, borrowing capacity 350k

What next after OTP settles? Some of our thoughts:
1) Subdivide Chester Hill, then build 2 granny flats? (1 behind each house)
2) Purchase another IP? (Melbourne? Adelaide? Sydney? Perth?)
3) Build gf behind Eagleby?
4) Buy PPOR, live for 6-12months then move back to parents?

 

4 will be a popular option around here.

 

Wow Peter! Amazing portfolio already!!

Based on your numbers, it seems you are getting an awesome yield!

Would it be fair to say that majority of your properties are positively geared? What does your accountant(s) suggest now that you've had IP since 2013?

Given that you are living in Sydney, Im assuming the plan is to buy PPOR there too. Taking a stab that you are from the south-west area, even out west, you wont be able to buy anything for $600k?

What LVR are all your current properties sitting at the moment on market value of today?

Given that you'll be wanting to start a family next year, considered moving back with the parents for the additional support of a newborn? or remain in the GF?

Especially with the way lenders have tightened their lending criteria, and Im guessing the end goal is to obtain a PPOR, with conservative price in Sydney of $1m. I would personally do this;

- borrow funds or use cash to subdivide, and sell both lots. Consider if the return is there if you borrow additional, build GF per lot before selling. As mentioned, consider the holding costs and cost of the build to see if the profit from doing extra is worthwhile
- buy PPOR with cash, or take out small residual loan if required.
- Consider if during mat leave, or post mat leave, buy new IP leveraging PPOR/build GF in Eagleby
- excess cashflow from existing rentals to pay off PPOR loan or build up cash to keep on building portfolio.

 

Open a pharmacy

 

Thanks @r3ckless, great ideas here.

- LVR of portfolio sits on 85% (most properties purchased at 90% to take advantage of waivered LMI for our profession)

- Accountants have talked about buying a PPOR and holding for 12months, buying negative geared properties under my name and postive under wife's name. Atm, we are slightly negative (lots of maintainence costs this year)
- could we move into Chester Hill to call our PPOR (bought in 2013 as IP), sell and be exempt from CGT?

- yes, 1 million would conservative . Great idea on selling both and buying PPOR with cash + residue loan. Wife wants to buy PPOR and live far away from in-laws lol

- Would getting a DA approval (or CDC cert) to build granny flats add value to a property?

 

We're both using property to get out of the industry

 

Thanks @wylie

I think Ipswich and Logan city council allow gf to be rented to unrelated tenants

 

I know the feeling

 

I think Datto would swap your occupation for his portfolio any day of the week

 

You have never lived in the property before? Then no, unfortunately

 

All I want to say is seriously well done. My sister has a pharmacy degree and she's gone into research.
Not sure if the threat of Woollies et al getting into pharmacy is a concern at the moment.
I think it would be a major shame to give up Pharmacy after all that study - but you have do what's best for you. There's absolutely no point in doing something you don't like for your whole life....

 

Thanks @Gockie, appreciate it.

 

Hi Peter,

Congratulations on your portfolio to date. I think you are both doing very well.

I like the way you've set yourself a goal to achieve by a certain age.

As you are planning to start a family soon, I'd work out how the existing portfolio will stand up when you are both down to one income before adding anything else.

How does buying a PPOR impact your cashflow?

As you progress in your journey, investing in higher yielding asset classes such as shares and commercial property may help you reach your goal sooner. You could draw on equity in your resi portfolio to fund this, or use excess cash from your resi portfolio when it eventually becomes positively geared.

Regards Jason.

 

I think this is normal for Brisbanites

 

Thanks Jason,

Crunched some quick numbers on NAB loan repayment calculator:
On 900k loan 4.35% P+I = $1022 pw
Our current portfolio costs us $190pw (before tax)
Total cost $1212pw
To live comfortably, we can set aside max $600pw on property. On 1 income, I can set aside $300pw (not factoring in dependant costs yet).

Huge impact on CF, not possible.

 

Hi Peter,

May I ask which property manager your using in the Logan area for your properties?

And in regards to your post this is just my 2 cents but it seems like you have good rental return already with potential to add even more. Once you finish your accumulating phase build the gf in both the Chester Hill properties for higher yields and hold onto those properties as they will most likely be your strongest capital growth property compared to the Logan market and Brisbane apartment market.

Then either
A) rent where you want to live or live in GF with parents and if interest rates are this low for a while you can focus on debt reduction as I believe with the current rent you have now if you paid most of them off you'll easily get the 70k p.a (after tax) that you wanted by the age of 40. You'll need to do the calculations on these yourself to see if its worth wild.
B) Invest in PPOR in Sydney which is a strong performing market long term but may slow down your goal for 70k p.a but end goal you'll look much better I think?

Overall doing well, just have at least one more property in another capital city and I believe you'll do fine.

 

Interesting idea. What would be typical yield of commercial property?

 

Depends on the property - ranges from 6% - 9%.

Instead of buying a whole commercial property, you could invest in either listed or unlisted com properties.