WA analysis paralysis!

Hey everyone,

My names Phil and have been living in Perth for about 9 years now but am originally from northern NSW.
My wife and I own 2 properties, 1 in Perth (our current residence) and 1 in Bunbury (150km south of Perth).

Growing up my mum always encouraged me to buy a house when I could save for a deposit. In the end I managed to buy my first place on the Gold Coast at 20, I sold it less than 2 years later to travel overseas....whoops!

Even though I've always liked the idea of owning property the bug didn't really take hold until about 6 months ago when I read my first property investing book, a book I grabbed randomly in the international airport to read on holidays. Anyway, since then it got me.
Since I find it hard to concentrate while reading I looked for other ways to get my fix, then I found the endless supply of podcasts.

So basically I've started to get a little bit of analysis paralysis with all the different view points, strategies, who to take your advice from etc. I thought this forum would be a good place to see what works, why and overall get some clarity.

If nothing else my friends and family will get a rest from me annoying them about property investing.

Look forward to the chat

 

Understand @PhilWA. I would ...keep it simple and stupid. Look up http://www.somersoft.com (previous forum) and this forum (Property Chat) for practical advice and take action.

Sana

 

I think there is so much good buying in WA at present that the best thing to do is act.

 

Speak to a broker first to check out how much you can borrow. This will dictate what and where you buy. Strategy depends on how active or passive you want to be.

Being in Perth there is little competition at the moment to buy in well connected surburbs where prices have fallen back meaning better yield to assist holding, and potential for the value to recover over time. Look for suburbs that have infrastructure improvements in the pipeline. You could go for something you could just buy and hold, but also with future development potential. Something in need of a reno to add value, if you like this strategy.

Either way I'd buy something rather than over thinking it.

 

Welcome to the forum Phil!

If you can, try and make it some one of the Perth meet ups- we're about due for one so keep your eye out. They're a great way to meet some likeminded people and learn from other investors.

As others have mentioned, getting your borrowing power checked and making sure your current properties are structured properly is a great first step - there's lots of good brokers on the forums who can help with this.

 

As @Jess Peletier says get to one of the Perth meetups. Treat it like CPR to jumpstart your investment mindset. You are blessed with numerous sage investors over there. Haven't met any of them but the contributions they provide on the forum are fabulous and I'm sure they will help get you on the right track.

 

One option that @sanj has raised a few times is buying a new build below replacement value. This is worth considering. Essentially you are buying equity. You would still want a good area and an IP that stacks up though.

 

Yeah that can work brilliantly depending on budget and wants.

Eg a property in Bedford sold last week for about $1m that im struggling to see how with stamps, holding costs, build costs and all other incidentals would have cost the owner less than $1.6m, construction was only completed in 2015.

Then again someone willing to wait it out is likely to make at very least $2m, possibly more, tax free, if they bought this, lived in it and sold it once rezoning comes through. Haven't done any research on it but with the nearest subdivision on the same street only a few hundred metres away unless there's some real specific reqson it cwbt/ won't be done it's inevitable.plus you aren't paying all that much more than a house of similar size and condition on 1000, Sqm in the area
35 Albion Avenue Munster WA 6166 - House for Sale #124208566 - realestate.com.au

 

Btw welcome to the forum! Hope you get what you're looking for and more.

 

Thanks for the heads up. We are actually speaking with a Financial planner. Realised we have done things a little back to front, fell into the first 2 and now trying to work out what to do next. After doing some reading and listening I think we need to go back to step 1, review our cash flow (budget) , create a longer term strategy, including finance. Once this is sorted we can have realistic time frame on the next purchase. Reverse - reverse engineer our way back!

 

Thanks for the heads up @ellejay

We are actually speaking with a Financial planner now that was recommended to us by a friend. He is the owner of the company a property investor and a broker. I've been speaking to a few different people on the subject so won't be putting all my eggs into one basket at this stage. I'll be making sure to ask lots of questions regarding their "property investment" background.

As with a lot of newly investors we have done things a little back to front, fell into the first 2 and now trying to work out what to do next. After doing some reading and listening I think we need to go back to step 1, review our cash flow (budget) , create a longer term strategy, including finance. Once this is sorted we can have realistic time frame on the next purchase. Reverse - reverse engineer our way back!

 

Thanks @Jess Peletier. Yeah would be great to meet up with other investors. Finding it hard to bounce ideas around with my immediate friends and fam.

As I was saying to @ellejay we are in the early stages of getting a cash flow strategy drawn up as I feel this is the best place to start moving forward. We will also touch on the borrowing side of things with them and look at current loan structure and possible future options. After having a chat with @Taku Ekanayake and his college (brokers) it would seem we need to get a deposit together before making the next move. This will have to come in the way of savings at this point as both our properties have no real equity to harvest.

 

Thanks Sana. Yes, keeping it simple is something I need to consciously do haha

 

Welcome Phil.

One of the hardest things you do when investing is saying no to the infinite choice out there. It is difficult.

Take care when talking to a person who is wearing a couple of hats at the same time. It is difficult to do and still give great advice.

I prefer people who have one focus.

 

Hi Phil, what was the book you bought which gave you the bug? I've got a friend who needs to read it! Also be wary of talking to financial planners who will steer you towards products which pay them commissions.

 

Is this the one you are referring to @sanj ?
163 Shaftesbury Avenue Bedford WA 6052 - House for Sale #124168738 - realestate.com.au

Block is a half block (460sqm ish), so would be worth about $450k. The house is nice, but I can't see it being a $1.1m house to build.

 

Hope you weren't a math major...

492sqm street front block in this part of Bedford - under 1k/m2 would be doing pretty bloody well

Stamp duty - 16k at your 450k price
24-30 month holding costs - less call it $50k
451sqm of building + landscaping including pool - if you can build it cheap enough that somehow total cost isn't 1.6M tben you're doing pretty damn well, this includes 3 bathroom.a tiled to ceiling with stone tiles, cedar cladding for aot of outdoor areas, a long narrow design which costs more to build than a square one etc.
Add consultant, planning, design fees etc, and it would've been possible to fly past that figure, certainly unlikely to have fallen short of 1.6m

 

It looks like an expensive build to me too @sanj. Those finishes are not cheap. From the photos on my phone I can't work out the flooring material in the hall. Is it just tiles or something more high end?

Out of interest the BMT construction estimator puts a minimum build price of $991,800.

 

Clever but VERY long term - this whole area is Urban Deferred at State level because of the obvious buffer adjacent.

Also half the site is recognised acid sulfate (red).

 

Welcome.
It's easy to get confused with all the buy, hold, flip, reno, cash flow positive, negative gear, nras, develop strategies out there.
It's ok to change your strategy over time too. You might start out with a reno to add value to increase equity to get deposits then get more into retain and builds etc
There is no one right answer but there is a lot of wrong answers.
You're on the right track with reading so you can determine what ideas might be suit you. You can look at things and assess them based on:
- what is your risk profile RIGHT now - are you happy to take a calculated risk for more reward or happy to play safe
- what do you think your risk profile in 5 years might look like
- what are you plans in the future - get married, have 10 kids, buy a boat,
- how much does it cost you to live now (tracking spending is eye opening!)
- can you reduce your cost of living to increase savings for a deposit
- is bad debt holding you back (credit cards, store cards, car loans etc)
- do you have any special skills that might sway your strategy - are you an electrician/carpenter/brickie and might excel at renovation work