Paid advice regarding property strategy

Hi, Just wondering if anyone could point us in the right direction.

My wife and I were looking to buy a new PPOR in Sydney for the last 6 months. We've come close a few times but either didn't want to overpay or have been unlucky with low supply in the areas we've been looking. As a result we have oscillated a lot in our strategy, from considering buying a PPOR for 10-15 years to even considering buying 2 apartments. Often this change in strategy is due to beliefs about how the market will change in the next 5 years in relation to where we are in our life (both 30, looking at having kids next 1-3 years).

We'd like some paid professional advice about what the best strategy for our position is. I know there are buyer's agents and investment companies. We aren't looking for the whole package or someone to look at properties for us, we just want like 1-2 hours of paid advice about how to best position our property assets.

I emphasize paid as well. We aren't looking for a free consultation as I don't believe in those at all. We are willing to pay good money to get expert advice backed with hard data.

 

Good luck with that .

Most/all the experts got it wrong last year .

 

Most people who provide such advice are in the business of selling property, loans or fail the self interest test. I have never seen anyone in the property or loan industry give advice to not buy property or borrow money. Property advice is unregulated. Beware of sharks. That said, some are very good but I havent heard of someone being told not to buy.

 

Pure strategy is the one thing nobody sells because no one wants to pay for it.

 

Fair enough. Just thought

We're not necessarily predicting that the market will go up or down in of itself. It's more advice about what the best asset allocation for a property portfolio is to reduce risk in a down market and still capture upside. We're only 30 so willing to take additional risk but not stupid risk.

The question is whether to sell everything and buy a single PPOR (prime flat land, house can be bad) or to hold onto our apartment and buying a less ideal PPOR. Less ideal probably being a semi ( we are constrained by where we want to live ). Our living conditions (in terms of condition of PPOR) don't matter that much except for location. We are trying to hedge risk optimally and find some value.

Right now I think option B is probably better. Improves liquidity and options. Unfortunately the downside really is likely reduced capital gains in a market that rises further (depends on how bullish you are on asset inflation as a driver).

Cash flow is not going to be an issue due to our incomes; so our five year plan is to vacate the PPOR at that point, negatively gear it if possible and rebuild it within the 6 year CGT mark whilst buying another PPOR.

 

This sounded like you wanted/needed property strategy advice.

These sounds like you are seeking tax/accounting advice.

So I am a bit confused. No point seeing a doctor when one needs to see a dentist

 

Choose an area you want to reside in, hire the best valuer in that LGA and ask for recommendations/price guides supported with evidence. Considering this is PPOR there are no tax implications, circumstances will change if you are looking at 2 units.

I offer 'free' advice for friends/family. As this isn't a 'normal' request/transaction, costing would be open.

I think the first things first, decide on where you want to live, then identifying what you want (house v units v IP v PPOR).

No one person would be able to help with your situation, sounds like to the least, an accountant is required and an agent/valuer?

 

In my view, you don’t need paid advice. Just list your pros and cons, work out your goals and numbers, do your due diligence and you should be able to come to a decision.

 

Thanks for all the replies so far.

The question isn't really a taxation question or how to best structure to minimize or offset tax. It's more to see if there was an expert with better hard data to give more objective data on 1 strategy vs another.

What we wanted was an expert opinion about whether the potential upside vs downside is in situation A (single PPOR - 100% of portfolio) vs situation B (PPOR 75% + IP 25%). Anecdotally I have heard that more expensive PPOR suffer more % wise in a downmarket vs cheaper PPOR. Also that semi's do generally worse than free standing houses in an upmarket. However I don't have great data to neccesarily back this up. Having this data in numbers would be very useful in driving our approach and letting us come to the right conclusion.

What we are hoping is that some service can provide that data driven approach which can give us greater insight. However, it sounds like this service probably just doesn't exist.

We have already listed our pros and cons list (not main road, within 15 minutes walk to pub transport or shops, immediately liveable). Plus we have narrowed it down to not only suburbs but specific pockets in specific suburbs (all on the lower north shore). We've already done the numbers as well (both accounting wise as well as valuer general price/sqm data visualised using splines).

It's just settling on the single strategy now as above given the right data.

 

1 PPOR. A single 25% IP isn't going to give you 'diversification'. At your age, with a good income and family plans then you should go PPOR.

If you know your areas very well, look to buy the next large well located block that is 'good value' (regardless of the market there are always sales that you can look back on 6-12 months later and say that was a bargain or that was too much - you need to find one of the former).

Work out what you can live with house wise and compete to buy each and any that meet this threshold in your areas that are land heavy. The cheap in retrospect houses usually don't get the same buzz as their peers - Crappy kitchen or laundry/bathroom issues; overlooked garden; poorly presented. Anything that can be changed should be overlooked unless you would have to change it before you move in. And based on what you said about the house, I'm guessing that you are primarily considering its future value rather than creature comfort angle.

Ultimately you can't know what the market will do in 2-5 years. If you'd asked 1000 property experts five years ago where the market would be today I'd expect almost none would have picked what's happened. What you can predict is that, longer term, a well located land heavy PPOR will *outperform* a less well located property on a smaller landholding and *significantly outperform* all but the rarest of rare strata title. Certainly in the very long term this sort of PPOR will make money.

 

Thanks. This is the kind of answer I wanted. Validates what one of our main strategies has been up to date.

Unfortunately we've seen the 'good value' houses dry up in the last 4 months in the areas we've been looking at. Low stock has not helped this as it has driven feeding frenzies at auctions. We've seen real FOMO kick in and lead to crazy prices on subpar properties.

Will be patient but this advice is reassuring

 

The good thing about situation B is that you will get some rental income out of it, which improves your cashflow during the course of ownership. It will however be useful to understand the budget amount for that 25% - if all you can buy is a small unit in a remote suburb the capital growth could be very slow, in which case you may be better off spending all your dollar on one PPOR.

 

I agree with that sentiment in part. However what swayed us towards A was that the cashflow relative to our income was pretty small.

The numbers were more like 60-70% PPOR and the rest IP. The proposed IP is a 1.2 mil apartment in inner sydney (not CBD) which we currently own outright. Total portfolio size would be max 4 mil but if single PPOR might be as low as 3mil.

 

If you've got close to 1.2 deposit and can comfortably pay back balance in 10 years and (most importantly) this would get you a good block in an area you like where you could like happily until KDR/rent out then I'd say go for it!
You can always assess whether/when to KDR later and if you postpone KDR could start leveraging into IPs big time after 5+ years. Who knows you get the right place and you may be happy with minor alterations instead of KDR, pay down/off mortgage quickly and then comfortably be purchasing 1-2m current dollar equivalent of land heavy IPs every year for the following decade. Then by time you're late 40s you can pivot to getting your investments positively geared so you can retire when/if it suits. I've seen lots of high earning professionals get this wrong where they have a reasonable amount of property but it is all still neg geared and they need to keep working to meet cash flow. Asset rich but cash poor - more like asset rich but cash bankrupt (if you know what I mean).

All IMHO and others I'm sure have different ideas and (perhaps better) plans.
We just bought a nice sharply priced PPOR instead of a compromise plus 2 investment homes and happy with the outcome. Intend to payoff quickly then buy IPs in 5-10. We are unusual as I don't work at present and we have 3 small kids and very lumpy (share driven) income which makes negative gearing less effective.

Good luck!

 

It sounds like you are in a common dilemma between your head and your heart. My wife & I often have conflicting views about property/investment/life and end up in a similar situation. Big decisions get complicated if you are trying to balance financial security with happiness and well-being. For me, it helps to focus on what is the one most important thing I'm trying to achieve and doing whatever I can (within reason) to make that happen.

Buying a $3m home is a big commitment for anyone but if you can find a place you expect to be happy living in for 10-15 years, I expect that would be your priority and I don't see why you would end up regretting it. You are young enough (& presumably earning enough) to be able to make the repayments and focus on your investment strategy as a separate future decision.

 

A few years ago, I changed banks and their private banker asked me if I needed any advice. I said I honestly can’t think of anything an advisor could tell me that would help me in buying or selling property or shares.
As is the requirement I then laid out my investment portfolio, loans etc and what I needed in terms of lines of credit. She went away and set up what I needed.
A few weeks later she rang to ask the unusual favour if her, her fiancé and the personal wealth advisor could come and spend a few hours with me as they found it remarkable that without a significant income for the first half of my life I was able to produce such a successful yet unbalanced high wealth that had nothing in shares or any other assets. We have since spent a few sessions together discussing properties and projects.
The truth is these guys know so little about investing that they are well dressed well spoken salesmen. They know that you can’t easily learn the feel of a great deal, a great investment or great value without watching others do it and it’s certainly not something they can teach you.
The best advice is do things that make you happy, read extensively on investing, values, property and forums. Look at people that are successful and ignore those that advertise. See where there is success and what made the success, you’re young enough to be able to duplicate the success of others. The big secrets are passion, effort, saving and the will to succeed.

 

Many years ago, one of our banks wanted us to have a review meeting with one of their “financial planners”.

We got together and the first item on the agenda was for me to go through our structures, our assets, our liabilities, our income (from all sources), ...

When I finished my presentation, the planner stood up and said “You’re too complicated for me” and then left .

Meeting over.

 

Admire her cojones to ask the client for advice, I hope you charged her!

 

No she’s quite a lovely person