Starting a property portfolio 28 yrs old

Hi all,

Happy to be here to gain some valuable insight into the property industry.

I'm looking at trying to build a portfolio of properties over the next 5 years.

I know we have seen a property boom in a large portion of East Coast Aus over recent years so picking the right locations are more vital than ever.

So a bit about me,
-28 with long term gf.
-Savings of about 220k mostly sitting in shares (that's been my financial passion since 18yrs old).
- I own 50% of a 1 bedroom in unit New Farm, Brisbane valued at 430k that's neg geared at about 6k per person after depreciation.
-90k plus super salary
-I live in inner Sydney paying 490 in rent per week
- 450k borrowing capacity for investment properties and same for PPOR
- can't really afford property in Syndey, plus it's peaked and see below for further complication regarding moving to France one-day
- gf is french, possibility of moving to France in the future (5 years time) which could complicate things tax wise as I'd live and earn my salary outside of Aus, thus not be a resident for tax purposes.

My goal is to build a portfolio that will in 30 years slowly pay itself off or generate a passive income stream. I'm interested in buying high rental return properties, building equity in them through light renovation then using that to help buybthen next property. Capital growth is naturally high on the list of what I desire however understand the long term side of real estate investing.

I have considered buying land and building a duplex, existing homes with high yield, units in inner city suburbs 10kms from CBD etc. Also like the idea of commercial real estate however I suspect I need larger deposits for this. As for locations, I need to look into it much more however in the past I was looking at houses in outskirts of Brisbane (Wynnuum, Morton Bay) Launceston, Lismore/ goonellabah.

Am keen to continue learning and interested to see what others might recommend for my strategy.

Thank you for your thoughts!

Stuart

 

Hi @Stuart89, not advice but some suggestions.

Firstly congratulations in getting into investing early at a young age and building a sizeable share portfolio, so well done.

1) My first question to you would then be "why property?", it seems that you have gained experience in developing a healthy start to a good share portfolio, one that could be further invested to generate an ongoing stream of dividends. Have you read the other threads on "Other Asset Classes" / "Peter Thornhill" / "LICs" and other threads on "retiring early" / "living off dividends"? Have you read Peter Thornhill's book, Motivated Money? Not saying property is better than shares / shares is better than property, but Peter's book does put a perspective on this, and since you've already got a good start, it is not improbable to build up a $1m plus share portfolio over a reasonable period of time depending on your investing strategy, commitment and horizon - as your aim seems to be building up a passive income stream.

2) For property to develop a passive income stream, you either need to have a large deposit, gradually pay off the debt and/or consider other pro-active strategies - renovation/development/dual-occ/NRAS/Airbnb/regional/USA? etc. Not impossible but also a big challenge, reasonably capital intensive, and also a high degree of active risk management. Maybe just have one good IP and getting it paid off over the years combined with your developing share portfolio might not be a bad strategy compared to building up multiple investment properties. (In fact, there seems to be an assumption that the capital growth of property is superior to shares).

3) It seems that to further develop your property investment portfolio, you may need to sell down your shares for the deposit, which could somewhat end up defeating the purpose of what your long term aim is - to develop a passive income stream.

4) You already have a part ownership in an IP in New Farm in QLD. New Farm is a good area. Perhaps consider to "get in" (own this 100% buying out the other party), or "get out" (sell out to the other party). In other words, need to consider the longer term viability of this ownership with another party as what would be in your best interest. There is a certainly a risk factor to consider. Perhaps getting out and getting your own property 100% might make sense.

5) You may have plans to travel and live outside of Australia one day for a period of time, you don't know where that may take you and what will happen, so need to question being hamstrung with say lots of property debt, rather than the opportunity / freedom to continue to save and invest.

So in summary;
- If your aim is to build up passive income, do some further reading / understanding of what you can achieve with growing your share portfolio and obtaining a growing dividend stream, for your situation and intended near future scenario.
- selling down your shares to buy property could be detrimental in the longer term.
- consider the viability and relationship with your investment in the New Farm property longer term.
- consider perhaps 1 or 2 IPs which have growth potential, where the debt is manageable and can be paid down over the longer term may be an appropriate / viable strategy combined with developing your share portfolio.
- continue to save and see where your life's journey takes you in the next few years!

 

Hi @ORCA,

Thank you for the detailed reply. Greatly appreciated!

In response to a few of your questions.

1) Why property - I want to diversify my savings, having 90% of my savings in shares can be risky so am wanting to spead the risk. I've not read the books however have read a few other investing ones, I'll have a look though at the ones you mentioned.

2. There is definitely some merit to having 1 or 2 good IP whilst building my shares portfolio. I would certainly maintain the shares portfolio however maybe trim it and stop adding new capital like I always do.
The Brisbane property is air bnb and we have superhot status so it's going well and continuing to gain traction as only started in December 17.

3. True. When I say passive income, I guess really I mean to want a way to build wealth as I know my salary alone will never be in 200,000 p.a. so need another means to built future wealth to retire comfortably, travel as desired etc. The passive part would just make life easier if I end up in France and not aus, thus not sending money back to keep on top of everything.

4.the IP is with my father, so not stress on that one. He's a director in real estate and we have a 20 odd year holding time on it. Separate loans etc

Thanks again ORCA, will consider the 1-2 IP with the shares folio option. Just need to do some proper resesres into locations!

Cheers, Stuart

 

OK, thanks for the feedback, definitely suggest you buy a copy of Motivated Money Welcome - Motivated Money before you do anything. Peter paints a picture of an approach that may resonate with you, especially the views on the conventional wisdom that shares are risky. If this is one of your concerns and driving factors, then you really should read the book to consider an alternate point of view. In fact, suggest you go buy a number of books, or re-read the ones you got, as well as discovering further posts / threads on this website before you do anything.
(Sidenote - here's a link to who is ORAC Orac, whereas I think ORCA is a whale!)