Hi guys, first time posting here. I'm not sure what to do now. Last year in June I bought a property with my GF, a 1 bdr apt in Inner West Sydney and rent it out. We paid our 20% deposit and we have now a P&I mortgage. We cleared all our savings to pay the deposit, but since June last year we managed to put 70K in the offset account. The property now is positively geared and I'm happy with that. Last month I've changed job and I got a considerable pay rise (basically I've doubled my net salary), so we are expecting to considerably increase our saving rate (we might be able to save well above 100k per year). I consider myself in a very fortunate position. My partner and I are in our mid 30's. We don't have any other investment other than Super. I want to max both our concessional Super moving forward. We don't own our home (but the apartment we bought is in the same building we live, we like the area but it's much more cost effective to have an IP, I think). But, given the amount of saving we have, I was thinking about how to better employ our money. The more conservative approach would be to keep saving and filing our offset. I love to see the amount of interest we pay each month going down while the rent we get stays the same. We could service another loan very easily, but I'm not sure if doubling down in RE is the right move. Our journey on investing and RE started basically 12 months ago so we don't have much experience. I understand my question is very general and broad, but wouldn;t mind to get some insight/idea from you guys. Cheers, Piage
I'd identify your short, medium and long term goals. Then look at all the strategies/investment vehicles available to you to get you to achieve your goals. Where does more property fit into that? Real estate is a fantastic vehicle for growing money over time. All comes back to what our goals are.
Hi the Y-man, how do I calculate that? I've used a calculator online and it says we can borrow 3M. Our current loan is 500k now.
Welcome to the forum! A broker can easily run the borrowing capacity / serviceability numbers based on an assessment of your situation. Sounds like you guys are in a great position and as per @Sackie 's post may be a matter of trying to articulate your longer term objective and building a plan to get there?
Hi Sackie, Morgs Thanks for your replies. I guess setting goals is the number one step. At this stage, the only thing we want is set up ourselves for retirement. Would love to be financially independent, so that we could potentially retire/partially retire and move to Europe in few years. But short and mid term we have no idea. We don't live frugally, we go on nice holidays every year and usually those holidays are are short term goal, we like to travel... In terms of our current property, I had many friends talking about negative gearing it but, a part from the fact that the market is not growing much now, I don't get why losing money on an investment is a good strategy. With the money in the offset, our property is positively geared. Would it make sense to think about a PPOR or is it better to stick with IPs? Also, I was thinking of starting putting money in some ETFs, but at this stage I think there will be a correction so I prefer to keep accumulating cash that is returning me a 3.69% tax free. So many options, so many things we could do!
What does that look like for you and your GF? Do you need 100K per year? 150K per year? 200K per year? Again.....What does that look like? Do you need 100K per year? 150K per year? 200K per year? You have also mentioned buying a PPOR potentially... do you want to live here or in Europe? Once you know what you are shooting for, you can start identifying what you need to do to get there . if the goal is a $1 Million PPOR and to be debt free with 100K income outside super in 20 years, and another 100K income from inside super when you both reach pension phase ( 30+ years from now ) .... that's what you build a strategy around. If the goal is to travel/live in Europe /move around.... why buy a PPOR? It' going to use up borrowing capacity and divert money that could otherwise be used to invest in Super or other assets .... which defeats your end goal.... to retire with a handy income so you can travel.... A PPOR can be very worthwhile if you intend to stay... as PPOR's generate CGT free money upon sale, are exempt from land tax thresholds etc.... but as I said, they also eat up a lot of money for deposits and stamp duty, and they chew up vast amounts of borrowing capacity ... which seemsto me to be the opposite of what needs to be done if you want to leave for Europe in a few years . So start by asking yourselves "what does what we want , look like"? Go from there
My 2 cents. I guess this is relative - but I think most here would say aim for a happy balance - don't go spending like no tomorrow, but spend enough to enjoy the journey and smell the roses along the way (unless you are allergic to roses). Your view of the "market" may be very limited - I am still seeing areas of potential growth in some areas of Melb for instance. I understand the sentiment, and agree that a negative cash flow combined with low CG property will be a killer. However, I suggest you keep your mind open to the possibilities. At the risk of sounding like one of those off the plan property spruikers, a negative cash flow IP with CG that exceeds the holding costs can provide a incredibly tax effective wealth building instrument. As per @euro73 post above - it's a personal choice. Ok. Interested to know at what point will you determine there has been a crash, and therefore the time to put you money in? Many people fail at this point (whether in shares, ETFs, gold, property whatever) - as they don't have a strict plan on when to enter, and subsequently tell stories of how they "missed out". The Y-man
That is the beauty of investment - so many choices Some of us use an active / value add strategy, others have a more passive approach. I think the key to any success is action (not inaction) and it sounds like you've started to get a taste of that! I think if you put some tangible numbers around what that end point looks like, you'll then be able to reverse engineer what you'll need to accumulate to get there.
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