QLD Some advice for a newbie

Age: 26
Current net worth:
$270K worth of shares in Vanguard ETFs
$38K in a term deposit
Income:
$60K a year + potential to earn an extra $60K through additional contract work. However, the latter is quite unstable and not guaranteed.
Goal: Be able to quit my job, earn about at least $55K/year passive income and do the things I want.

I have no experience in property investing and invest in ETFs because I'm afraid to dip in individual stocks.

I'm just wondering if it's worth it to buy an investment property at this point, how I should go about it and what areas I should be looking for in QLD.

I'm also afraid of taking on a significant mortgage as I'm unsure how long I'll stay in my job for (thinking of resigning)..

Do you think a bank will allow me to take out a mortgage solely on the basis of projected rental income? How much should I be aiming for?

So far I'm thinking of $400K - $600K if possible...

Also, do you think it's worth it to build a granny flat and have dual sources of income?

Thanks

Any advice appreicated on how to best achieve my golas

 

I have no experience in property investing and invest in ETFs because I'm afraid to dip in individual stocks.
If you want to achieve your goal bad enough , you can learn.

I'm just wondering if it's worth it to buy an investment property at this point, how I should go about it and what areas I should be looking for in QLD.
My opinion is yes. Do some research. See if your budget can buy a middle ring home. Read lots of threads on it. Narrow down a few areas. I believe Brisbane has more growth to come and as a long term BnH, it presents good upside for negligible risk.

I'm also afraid of taking on a significant mortgage as I'm unsure how long I'll stay in my job for (thinking of resigning)..Well then that conflicts with you building wealth from RE and some other assets.

Do you think a bank will allow me to take out a mortgage solely on the basis of projected rental income? Haha, we all wish that were the case. Nope they wont. Its based on all incomes, debts/liabilities and your deposit available.



Also, do you think it's worth it to build a granny flat and have dual sources of income? Yes it can be worth it in select cases but not when you're in the stage of needing to build your asset base first, imo.

 

Contact any good broker to find out your borrowing power. $ 300k (ETF & cash) you may be able to start the property investing.

$ 55K/y passive income will take a long time. You need to increase your asset base. House with GF may not earn $55k/y passive income. Cost with property investing is big (repayments, repair, agent fee, council rates, water, land tax etc)

Granny flat cost $ 130K, so it will take 5-6 years before you see any passive income from the GF.

 

If your afraid of debt and good debt then you can never do real estate especially if your just starting off.

One of the main benefits of real estate is leverage. You can use 90% of the banks money to make you more money. Don't ever forget that. That is one of the fundamentals of RE investing.

 

While you should invest as early as you can but you are still young and have already good investment in ETF. If I were you, I would learn first before jumping into property investing. Do that as much as you can through books, podcasts, blogs, YouTube, etc and you will have a much better knowledge base in a few months and in much better position to make your own decision, which is valuable for your investing journey that is still a long path ahead for you.

 

whats your PPOR situation? 300k at 26 is super good. maybe think about short term 3-5 years and having ppor in mind.

 

To earn 55k in income consistently you need:

1. 3% return on real estate assets ...you will need $1.84m in full paid off real estate

2. 4% return on ETFs like VAS you will need $1.375m in ETs

It is not hard to achieve this. If you jump into Perth agressively..and sell in another 3-4 years you should be able to get there pretty quickly. May reinvest back into ETF once the market corrects.

Cheers
Sash

 

I dont have a PPOR. Live with parents, paying nominal amount for board. I would like to get a PPOR but I feel it would generate no passive income for me.. Also i am just generally scared of taking out a mortgage with that much debt hanging over my shoulders.

 

Debt increases your returns (and losses). Property tends to beat shares when you leverage and keep increasing that leverage over time.

You have to decide whether the returns are worth overcoming your fears. That partly depends on your goals.

Goals that are fine for a single 26 yo may not be fine for someone older with a family. Which you might become. Resigning, for example, isn't always an option if you have family responsibilities.

Are you really planning for the future? Or just the present? Will your current plans cover your expected future?

 

Any hot tips for 400k?

 

Pretty hard for quality stuff at that price point...unless you build.

 

I do not intend to have a partner any time soon. Family is not an issue for me. I'm close with my mum and that's about it. Marriage is completely out of the question for the next 10-20 years or any serious relationship for that matter.

In terms of investing it's hard for me not to just invest it all on Vanguard ETFs which return 7-8% on average over time. My investment horizon is long-term so I could not care less if there was a market crash for the next 2-3 years.

Property is so hard to get into. I mean I could just sell all of my shares and end up with a deposit + extra for offset account. But then I am just too scared of taking out any form of significant debt...
Not sure what to do as I've always wanted to own property. I guess taking huge out a massive mortgage is the only way huh...

 

How good are you at predicting the future? What would your returns have been leveraging into property that grew 20% last year?

Very few 26 yos think they will have a family. But a few years down the track….

your whole approach, as good as the results have been, seems defensive. It feels like your attitude to money is more about fear instead of the possibilities it beings.You might have to work through what it is you fear about debt first.

otoh, save like crazy and just keep investing in index etfs and you’ll probably do pretty well by 60. Maybe you dont need property. Though experience says you are probably better off with at least some leverage. And with a negative, fearful attitude to money you may have trouble enjoying it.

 

IMHO, $55K/year is a pretty crappy target for passive income. I would suggest you double it, as a single.

 

O leave him alone @kierank. This young man is still a baby compared to us and is still learning about overcoming some fears. Don't stress him out any further.

 

@kierank is correct. Aim for as high as you can possibly imagine.

 

Unless its some sort of FIRE thing and op plans on getting there at 35, 55k is aiming really low.

 

You know that, I know that, but he is young and still learning. Living with his parents, $55k would be fine, (and a big achievement) as his current income is only $60k.

I would suggest thinking for the future. At some point, most people wish/need to buy a PPOR. If your parents are supportive, why not buy yourself a home, live in it for 6mths, then move back with your parents. The rent you get for this home will cover a large part of the mortgage, maybe even all costs associated with it, depending on where you live. You can leave your PPOR for up to 6 years, and it will be CGT free.

 

This is nonsense, you dont need debt or offset to buy a property. You could sell all your shares or just some of them to buy a unit or house. Keep your money in your term deposit, which is what you should be worried about. Have 1k a month, or every 2or 3 months if you take out a loan against the house to buy 200k of solid companies with strong balance sheet and revenue.

 

Better to stress them out now and they get it right THAN let them stress out later in retirement when they got it all wrong.

Don’t want them to become another FURI - F..ked Up Retirement Income

Totally agree.

A lot of people make the mistake of setting a retirement income similar to their after-tax employment income.

When working one has 2 days/week to enjoy themselves; in retirement, one has 7 days a week plus one tends to go up a shelf or two with their living costs.

TBH, my target for the OP would be a minimum of $55K for living expenses and a minimum of $55K for entertainment/recreation/travel.

Othersise, here comes another FURI .