What would you do if you have 4M for property investment?

Hi, we are a young couple in Melbourne, we don't have a property yet, but we are planning to purchase our first home in the following 5 years. We will have around 4M for the property, so we hope to get some advice from people, what should we do? Shall we buy a place in Toorak? Or shall we buy two properties from different locations? Like I said we are new players and don't have a plan yet. Thank in advanced.

 

That is a fairly broad question. What do you want to do? What are your objectives?

 

I’d buy a cul de sac in Mt Druitt and gate the road off to make it an exclusive estate.

 

4m cash or 4m with loans?

 

We need a house to live in the future, but we are not sure we should either spend all money on one property or shall we purchase two or more?

 

Cash

 

Will you be able to buy the house you want in the future if you purchase another property now?

 

Why not do both ? Spend all the money on PPoR ( get tax free CG) and take a loan against it to buy one or ten others. or/ and REITs ( get tax deduction). Whats your end plan (exit strategy) you need to know that before you start.

 

Do you have other assets?

$4M on a house plus nothing else in assets isn't really a good idea imo.

 

Yes, that's why I want to know more how people think and will allocate the money.

 

It depends on the price.

 

I'd buy a nice house in the burbs for about $1.5M for myself.

I'd then buy two IPs worth about $700k each with strong rental returns in reasonable growth areas.

Of the remainder I'd leave about $200k in cash for liquidity and the rest I'd put into a diversified share portfolio, focusing on quality shares with decent dividends.

This gives you a roof over your head, a solid asset base to build upon (the two IPs), please quality income streams to support future endeavours.

 

1) Educate yourself about leverage
2) Build appropriate buffers (given coming rates rises)
3) Using a combination of LVR/your current income, borrow as much as possible (personally I would aim for a portfolio of around $10m which should be comfortably self sustaining)

If another 5 years, you will be worth $8m (assuming 8% year on year portfolio growth). Use that increase in equity to buy yourself a house ($3m after CGT) and your other $4m will keep giving.