The Next Step

Discussion in 'Investment Strategy' started by indota, 13th Feb, 2017.

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  1. indota

    indota New Member

    Joined:
    3rd Aug, 2016
    Posts:
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    Location:
    Melbourne
    Hi All,

    As I am relatively inexperienced, I have been trying to soak up as much knowledge as I can from the valuable topics covered in this community. I now want to consult you all regarding my current circumstance and what my next step should be. Currently my wife and I have an investment property in Chadstone (Vic) that we bought in 2009, it's an old housing commission house on a 629m2 block. In 2014 we then purchased a PPOR in Mont Albert North; we see ourselves being here for the next 10 years. I must point out we have yet to use any of the equity from any of our properties. It's been slow but we are trying to add to our small portfolio, and we want to make a move this year. Based on my circumstances the following are my options (as I see it).

    1. I have enough cash to budget for 350-400k investment property without using equity.
    2. Use equity from the properties to buy another property/properties
    3. Knock down Chadstone and build 2 dwellings(which is out of my comfort zone as we are inexperienced, but willing to have a go)

    What are your opinions on our circumstance and how best to capitalise on it? Thanks for taking the time to read. I look forward to any feedback/ critique.
     
    Perthguy likes this.
  2. ashish1137

    ashish1137 Well-Known Member

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    12th Sep, 2015
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    Location:
    Sydney
    1. Split that cash to buy 3 properties with 20% deposit. You can buy 380k-400k properties in budding areas.
    2. Use equity to buy more properties 2-3. Try 5% or as close as possible yield.
    3. Keep one build at rear ( if possible) or dont touchbif dwelling is not that old.

    Regards
     
    indota likes this.
  3. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
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    Location:
    Baldivis, WA
    Hi Indota,

    Welcome to the forums. There are many more knowledgeable folks on here than me. And chances are instead of 3 options you probably have about 20.

    To help narrow down your options think about what you really want and how the current markets help get you there. For instance, if the cost of land is low then buy more. If building is cheap then build, if it makes sense to sell to move forward then do that or keep if you want long term. If you want cash or long term buy and hold strategy.

    Developing will most times achieve highest profits but you may want to hold off, buy a couple of places with development potential while you learn how it all works. But don't buy anything off the cuf, use a buyer's agent or ask for help here, you don't want to buy something you can't develop profitably later.

    Good luck with it all and keep asking questions.
     
    indota likes this.
  4. KateAshmor

    KateAshmor Victorian Conveyancing Lawyer Business Member

    Joined:
    25th Jun, 2015
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    Location:
    Melbourne
    A house or large unit in a growth area on a block with development potential could be an option. My investor clients in similar positions are tending to go for Frankston, Jacana, Boronia, Reservoir and Sunshine at the moment.
     
    indota likes this.
  5. indota

    indota New Member

    Joined:
    3rd Aug, 2016
    Posts:
    2
    Location:
    Melbourne
    Thank you all for the valuable feedback. To clarify at the moment, without touching equity we only have enough to purchase an IP worth 350 to 400k. Rough calculations do indicate that building two and holding one would be the most profitable at this stage. However as you all have indicated, using our current equity to purchase more properties with development potential or higher yield would be favorable at this stage. From my research here on the forums, my preference is for the west, however more extensive research is required. I guess now the next step is to find a good mortgage broker who could structure this correctly for us. I will continue to research and keep you guys posted. Thanks again, your help is much appreciated!
     
  6. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

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    31st May, 2016
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    Location:
    Australia
    You may be able to pay down the home loan and 'reborrow' to make it tax deductible
     
  7. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
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    6,673
    Location:
    Perth WA + Buderim Qld
    I would not be considering buying an investment property with cash while you have a PPOR mortgage. There are many other, more tax effective ways to go about it - that cash should be sitting in your offset account to lower your PPOR payments ideally, or as the twins suggested, use hte cash to pay down your home loan, split the loan and re-use the cash for your IP deposit.

    Using cash for investments is usually only a thing when you have no non-deductible debt.