Property investing strategy - professional planning and advise

I am looking for an experienced property investment planner to help create strategy across residential and commercial property investment. Someone who has done it is for himself/herself. Not just an advisor.

Output I am looking for is a plan to buy - X number of properties over next 5-8 year to create cashflow income of $200-300 per year after X number of years and potential equity of $X million

any recommendations from this group ? I am in Sydney region but open to invest interstate.

cheers
Mob

 

You cant outsource strategy.

 

From start to finish, what timeframe do you want to make the 300k CF?

 

What sort of deposit/equity do you have ?

 

Invest with the future in mind - 68 Gracefield Road, Gracefield | Capital Commercial 2013 Limited
Based on 100% borrowing (using equity), what the agent believe it will sell for (7.6% net yield) and funding off equity (2.5%-2.7% funding) you will be halfway to your $300k pa profit .
This could be achieved in a few weeks.

 

This is quite a simple plan to implement - but only with
1. a certain level of borrowing capacity and
2. a certain level of cash reserves or a certain level of equity .

And you should be realistic about time frame.... 5-8 years isn't impossible but it is optimistic, and can really only probably be achieved if you don't have any other debt ( PPOR, car loans, personal loans HELP debt, etc) and have a significant ( and I mean significant ) amount of surplus cash flow with which you can make additional repayments

Let me give you an example using Dual Occ's. Lets assume a hypothetical purchase price of @ 700K ( 240K land. 460K build ) where stamp duty will be @ 6.8K . Allow 2K for legals. Allow 2K for building+ pest and Depreciation . Call it 710K total. If you are seeking to fund 20% + costs for each deal, you need 150K of accessible equity or 150K of cash . You also need to be able to borrow 560K for construction.

Assuming you borrow the 150K and the 560K, you will generate @ 16K NET , running the property IO. Of course, if the goal is to pay them down to reach a passive income, you will generate @ 2K NET, as the P&I repayments will eat up approx 14K more than IO repayments .
That 2K could be used to make extra repayments towards the mortgage on the Dual Occ.

If you make no additional extra repayments aside from that 2K per annum , the loan will amortise to NIL over 27.5 years .
If you are able to make additional extra repayments of 1K per month ( 12K per annum ) from your own surplus cash flow, you would be paying an extra 14K per annum onto the property (2K + 12K ) , which could conceivably pay down the 710K in @18.5 years - ie 11.5 years sooner . Assuming you see rental increases over time, its probably reasonable to expect you will be able to improve on that result over time - potentially shortening the repayment term to a period of @ 15 years , but equally, you may also see rate rises which cancel that out, so its difficult to calculate/ predict whether or not that 18.5 years will become 15 years or not. Probability would suggest yes, but the only way to ensure it is to be able to make more than 14K per annum in extra repayments ...

Assuming you use cash for the 150K and borrowed only 560K, you will generate closer to 19-20K NET, running IO.... or @ 5K NET running P&I.
If you make no additional extra repayments aside from that 5K per annum , the loan will amortise to NIL over 23.5 years . ( 4 years faster than if you borrow the lot )
If you are able to make additional extra repayments of 1K per month ( 12K per annum ) from your own surplus cash flow, you would be paying an extra 17K per annum onto the property (5K + 12K ) , which could conceivably pay down the 710K in @15.5 years - ie 14.5 years sooner . ( thats 3 years faster than if you borrow the lot )
Again, assuming you see rental increases over time, its probably reasonable to expect you will be able to improve on that result over time - potentially shortening the repayment term to a period of @ 11 or 12 years , but equally, you may also see rate rises which cancel that out, so its difficult to calculate/ predict whether or not that 15.5 years will become 11 or 12 years or not. Probability would suggest yes, but the only way to ensure it is to be able to make more than 17K per annum in extra repayments




On the income side, the Dual Occs generate 41K + of rental income today, so if you assumed that could grow by 50% during the time you were paying them off ( lats say 15 years ) , the rent would exceed 60K by the time the property was unencumbered.

So in very simple terms, if you can buy 5 of them and pay them off in somewhere between 12-15 years, which would require you to contribute 60K extra per annum from your own pocket ) you could reasonably expect to generate 300K Gross rental income . But you'd need 750K equity and 3.55 Million borrowing capacity to do that OR 750K cash and 2.8 Million Borrowing Capacity

You'd also need to factor in running costs. Property Management, Council, water, insurances etc..... They run at @ 6.5K now, but If they doubled across the 12-15 years, you'd need to assume 13K per Dual Occ. So if you owned 5, that would equate to 65K of running costs. That would mean your 300K is now 235K Gross. That 235K is taxable, although you'd still have @ 10K depreciation on each dual occ , which should reduce the taxable amount by 50K to @ 185K ( seek some advice on that ) . Assuming you had no other deductions, tax on 185K is @ 56K, although the changes to brackets will mean that probably ends up closer to @ 52K by the time the 12-15 years pass...

So 235K Gross would NET you 183K and it could be done in 12 - 15 years , give or take....

There are a number of assumptions here which are reasonable , but not bullet proof.... for example, this hypothetical assumes that rents only grow by 50% but costs double . if rents did better than that or costs did not inflate that much, the results would be better.... and of course, as the debt comes down and the rents go up, the debt reduction will mean you can borrow and purchase more ( if you wanted to ) .....obviously as time and compound do their thing , you get accelerating benefits over time.... so you would in all probability outperform what I have mapped out above ( if you wanted to ) . I was just outlining how simple it is to map out a strategy that will get you an almost assured income , with or without any growth. It is essentially a dividend reinvestment plan using resi property. You buy assets that produce a dividend, then reinvest that dividend in debt reduction. Year in. Year out. It isn't fast or sexy. But it is effective. Eventually the debt is gone and the large income machine remains.... providing a massive platform from which you can expand ( if you want to ) all done within 12 - 15 years

As you can see, the real issue is deposits and borrowing capacity - the rest is actually quite easy .

PS - you could also do this strategy at 90%LVR rather than 80%LVR if you had the borrowing capacity but didnt quite have enough equity to fund 20+ stamps each x 5 . It would cost a little more as the LMI would add @ 2% to each purchase, but that's immaterial in the end game


OR you could go the commercial route, if your appetite extends to that ..... the yields are always going to be superior to resi... as are the risks. And you'll find that borrowing money to 80 or 90% isnt practical either

 

$1 mil

 

10-15 years

 

Not planning to outsource but seek guidance from expert - who has been there and done that. I am good in stocks but not property.

 

Let's go in the middle,

Say 250k net CF in 12 years.

What's your starting equity/cash and serviceability?

Without starting with significant amounts of both, achieving 250k net CF not including your ppor in 12 or so years will be (at least in my mind) very, very difficult to achieve.

 

In total ?
With $1m we purchase a property about $3m
Rental at 7.5% cap rate
Net rent $225k less interest of $50k net profit $175k

We could get you on $175k profit in a month.
Would that be too long to wait ?

 

Based on your situation I think you can achieve $300k in 1 to 1.5yrs

 

175k a month?

 

Um..

Am I missing something? How is this possible?

 

Haha no $175k pa starting in a months time
To get $175kpm takes a bit longer than a month (but it is achievable I have done it ! )

 

$175pa in a months time ...by settling in a months time

 

Lol ok I misread !

What would the risk level be for those numbers?

 

It's hard to say but look at the IM on the link I posted.
Being in NZ there is no land tax and stamp duty .
But there is income tax
If it is structured through a company then the net taxable profit is taxed at 28%.

 

Perhaps have a chat to the real estate agent .