Skin in the Game

Hi All - Thought I'd throw up a quick rundown of our current situation.

I've just converted our PPOR into our first IP. We built a new home back in 2014 located in Toronto (Newcastle) NSW. At the time my gf (now wife) and I were FHB and looking just like anyone to get a foot on the ladder. At the time the "new build" FHOG swayed us into going down the build path. It was a learning experience and a half! Sloping block, Bushfire rated, etc. In the end we probably overcapitalised slightly but basically stuck to our end budget for house and land. Picking up the land cheap helped. Over time the Lake Mac/Newcastle area has seen good growth and time heals all wounds. We also performed a good chunk of works after handover. Driveway, flooring, window furnishings, landscaping etc. In the end we had a bank Val in 2014 of $475k. House is now appraised around $630-$650k (bank val possibly a bit low.

2014 - $475k (bank val)
2018 - $630k (appraisal)
Current LVR 69% approx.
Rented $520/week

During this time we have also tackled some significant (and costly) milestones. Wedding and two kids ie. back to single income! We are now setting out on our new adventure moving to Mackay Qld for work. I've gained employment in an engineering/technical role in a Sugar Mill.
I've also over the past 12 months significantly educated myself in the world of property investment. Books, Forums, Podcasts and the like. The wealth of knowledge gained here is invaluable. Obviously whilst we were on one primary income we've been hamstrung as to our next move due to serviceability so I took this time to provide myself with a good base knowledge in order so set in place solid foundations for future investment moves. As wife starts to return to the workforce and we gain some useable equity I'm looking forward our next purchase hopefully some time in 2019.

I've set some modest goals of $100k passive income. Likely through $2m of unencumbered assets outside a family home yielding at 5%. I feel I could achieve this numerous ways and a lot will depend on timeframes set etc. Currently we are 28 so still young but many people our age are still looking at starting a family, house, etc. So feel this is a good baseline to start as we can progress forward from here. I'd like to have some options come by late 30s. Whether that's a career change, travel, educate myself etc. My current role I am not extremely 'passionate' about but it pays fairly well and there is good career progression. I see it as a means to achieve my property goals. So certainly don't see me working in this when I am 60. But am pretty sure I can knock out another 10 or so years.

Any comments/suggestions/criticisms are welcome. I feel this is a good way of keeping me honest on this path. Any questions I am happy to answer to further clarify our situation. Thanks in advance to all the community on here.

 

@wilso8948 sounds like you're off to a great start!

Something that I'd suggest to consider is not buying in Mackay, unless there is good fundamentals or you plan on living there for a longish period of time. This would keep your original property Captial Gains exempt for another 6 years.

*i don't know either market well but it's something that I've done and has turned out quite well.

 

Thanks Brendon. Certainly just renting at the moment. The difference in renting costs to what we will achieve from our place is a nice financial win. I did entertain the idea of doing some small cosmetic renos to keep us busy whilst we are there but for now it is just too much of a volatile market. Maybe if that changes when I have 'on the ground' knowledge. I'll likely make my next purchase elsewhere. Likely Brisbane or Adelaide with a long term CG/Yield strategy.

 

hi breno

@pinkboy is a local in those parts. get yourself a pushie and chase him down for info

with the kidlets arriving and time off work find out borrowing capacity and work with broker to the best way forward: CF+ likely

 

Hey Bob Shovel

Firstly - Whos Brenno?
Secondly - Kidlets have well and truly 'arrived'

But thanks for the mention.

 

I'd like to hear from anyone who's been able to achieve their financial goals whilst being young with kids. I feel the only success stories I come across are

Middle aged with kids - doing well
Older with kids moved on - doing well
Middle aged no kids - doing very well
20 somethings with no kids - doing well until they have them and its a rude shock..

 

="wilso8948, post: 616566, member: 13601"]Hey Bob Shovel

Firstly - Whos Brenno? that's now your new name . Welcome!
Secondly - Kidlets have well and truly 'arrived' hahahaha life as you knew is over. welcome to struggle street

 

Money is a number game, when you have so much out going and cost then you don't expect to have much left over to invest, if you have a young family most of the money going into the mortgage and the kids education and childcare, not much left over to invest.

Only way you can have young family and doing well, you have plenty of asset before that happen or you got highly paid job where your income covered all your out going and have plenty left over to invest or you have rich parents.

For the rest of us with average job and average pay then you
follow life path, you are poor when you young and richer when you are older.

 

Depends how you define 'doing well'.
All comes down to expectations.
If you're the sort of person that can smash out that goal in your 20's, your expectations are going to be a lot higher than that, you will (likely) also be hanging out with people in similar positions, so your perspective gets skewed.

Also,
$100k passive is not $2M unencumbered at 5%.
More like $3-4M is required.
Maintenance, council rates, insurances, etc will eat up a lot of that $100k 'passive'.

 

[QUOTE="Also,
$100k passive is not $2M unencumbered at 5%.
More like $3-4M is required.
Maintenance, council rates, insurances, etc will eat up a lot of that $100k 'passive".[/QUOTE]

Not if it's in shares.

 

Young kids don't have to be that expensive to run really, we added the bulk of our properties while the two kids were under 6 (we had a good equity base from earlier purchases though), they were CF+ properties (and some I wouldn't buy if I had my time again).

The killer will be finance, especially in this environment. It was easier to get when we did it but, still difficult in our situation. To get back to a double income my wife went back to work full time in the day and I pulled myself out of our business in the day to look after the kids, and then worked nights and weekends.

Long story short, ditch child care (best thing we/I ever did) and work in second income somehow. Or just enjoy the kids while they are young and hook in after!

 

Yep! We never did child care but just ditched the 1 x full time roll.we now share the load doing 3-5 days per week... somehow we got it working so we are ahead each week income wise.... plus heaps more time togethet with the kids!
Gotta jump and seek out opportunities

 

Great reply. I don't feel they are 'that' expensive. More dipping down to one income for an extended period whilst being so used to two. I think many people having children in the future will struggle with that. Its a real eye opener. Good to see you achieving something whilst the kids were young. Kind of the story I was chasing as I don't expect to achieve it all I'd just rather not put the brakes on fully. Certainly financing in this environment is harder. Even having our second killed our serviceability and being on the one income there for a while was a big downfall. But Kids certainly aren't a "financial investment' as most of us know.

 

I thought this thread was going to be about the legions of people putting down places or spruiking who have no skin in the game.....

Carry on