Seeking advice

Hey all
Relatively new to the forum, so far have found it very worthwhile.

Little background on current situation

Current PPOR in melb bayside suburbs. Have approx 1 million in equity and annual income of 400k p/a.

Have no IP currently.


Very eager to invest but just trying to determine what is exactly best for my current situation.

Current thoughts are that Melbourne is top of the list, as it is the worlds most livable city, with large population growth predicted. And also happens to be the only market that I am familiar with.

Also thinking that Brisbane might be an option for something more affordable with better rental yield.

Goal is medium to long term capital growth, with the option to build duplexes/townhouses in the future.

Just not sure whether I should be buying several cheaper properties, or spending more on better properties.

Apologies if I come across as a novice, but this will be my first foray into the investment game, and want to make the right decisions at the start.

Thanks

Tim

 

Welcome.
Keep reading, researching. I would also suggest meeting with a buyers advocate or two. Define your end goals and get a plan together.

 

Also not necessarily after advice as to which exact suburb to invest, particularly in Melbourne.

More after general advice as to what plan I should be taking, as there are many options with the equity and income I currently have

Thanks again

 

My advice would be not to rush into anything. Take some time to find out more about different areas and different options.

This is good thinking. I am onto this strategy too now.

No need to apologise. I have been investing for more than 10 years and I'm still trying to figure it out!

 

Don't exclude commercial or inter-state or overseas properties in your search!

 

With that equity and income the world is your oyster. Take it slow as many 'investment advisors' will be rather excited to meet you and very keen to help you part with your funds.

What outcome are you hoping for? Goals, timeline? Figure out exactly what you want as a first step, and the strategy will come afterward.

 

Something that might help you figure things out is to set a goal, for example, your goal might be $100,000 income after expenses. Your expenses will include insurance, land tax, council rates, water rates, maintenance, rental management fees and strata fees for a strata property. You could assume these costs could take 30% of your revenue.

Straight away you can see that you will need more than $140,000 coming in just to get your $100,000 income after expenses. Next step is to break down the number of properties based on expected rent. For cheaper properties, you could expect maybe $300 per week rent. At that level you would need 9 properties to generate the level of income you want. If you go for more expensive properties, you might expect $500 pw rent. In that case you would only need 6 properties.

I would also definitely consider commercial properties as part of your portfolio. For example, you could see a property like this:-

Purchase price:- $749,000
Rental return:- $48,205

Because with commercial the tenant pays most of the outgoings, you would only need 2 of these to reach the $100,000 goal. This is a much higher return than a typical residential property. However, you miss out on the potential to build equity as easily. With residential you might knock down and old house and replace it with two new houses. This is not as easy to do with commercial.

It's good that commercial has a lot higher return but there are pros and cons of both residential and commercial property and its important to understand these when building a portfolio.

Pros & cons: Investing in commercial property - realestate.com.au

 

Sounds good to me
Melb may be close to peak, nonetheless I am a huge fan and think it has good long term prospective

With your income, equity developing property is a good way to create income streams and grow wealth

@Be Developer sources sites in Melb, Sydney
, also read threads on developments, I have posted my Croydon and Thomastown deve you may be interested in viewing the numbers

All the best

MTR

 

I've seen more difficult starting point than yours...

 

Sounds like you can do a mix of both..........Though I'd personally look at the 600k-750k mark blocks with established homes within 10-12km of Brissy CBD...Or Melbourne given how easy the development codes are there. Depends on how hands you can be / want to be.

And as others point out, what do you want property to do for you?

 

@timbo_001... if you don't mind me asking... what do you do to have an income of 400k p/a?
A company CEO? Self employed?

 

Thanks for all the replies

@Gockie
I am self employed, in a trade based business. I am very fortunate with the current high income as I have a few contracts currently that are very profitable.


As my current income is high, I am predominantly chasing capital growth, with rental yield not as important.

Goal is to begin accumulating as many properties as possible over the next few years whilst the income is high, with the plan to then lower lvr's and be less reliant on regular income in 10 years.

Thanks again for the replies

 

Hi @timbo_001 , this is not an advise, but I am just sharing my thought as we are all still learning.
I am also self-employed with situation slightly ahead of you.

Start with doing self assessment on you and your current business.

Whether you are on your accumulation stage, or nearing the retirement time and therefore looking for passive income.
Assessment like how risky your business is and therefore the stability of your income will have so much impact on your investment plan.

If you are still young, your business is less risky and that is your stable income, I would be less inclined to get cheaper properties as it's only giving you yield and compromising on the growth. In your case it should be the other way around as you already have the cash flow from the business. Well located commercial with development potential might be a good consideration as it can provide you with the growth and yield.

Property development can be very tempting, but perhaps might not be a good option at this stage as you will lose focus on your current profitable business trying to juggle your time doing both. In the mean time learn property development from a lot of the experts here, and do your development nearing your retirement, converting your growth properties to good yielding properties. You will have a decent amount of passive income during retirement.

Again, not an advise, just my thought.
I am actually looking forward to hear what @Beano , @MTR and others have to say.

 

Try to get as few properties/tenants as possible as they will give you less hassles
Try for passive investments .
Keep your focus on your business
Maintain and improve your profitability
Sell the business when you are ready and price is right
Retire while looking after your investments ...then build up a diverse portfolio