What Would you do in this situation

Discussion in 'Investment Strategy' started by celsioraus, 14th Dec, 2020.

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  1. celsioraus

    celsioraus Active Member

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    1. 40 Years old
    2. Mortgage Free
    3. PPOR valued at 2m
    4. Rental Income + Salary generating 14k per month
    5. ~4k per month Expenses
    6. Net Savings PM ~10K
    7. Bank has offered 800k for investment property

    Options
    • 5 years of ETF Buying to generate 50k PA dividends (approx 600k in)
    • Investment Unit (Sydney) ~650k Generating 500pw rent
    • Save up 200-300k and wait for a market or house dip
    Fairly conservative with money hence the lack of secondary investment before PPOR was paid off. Looking back 2019 would have snagged a good deal on property. Things look too hot now on both ETFS and Property
     
  2. MB18

    MB18 Well-Known Member

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    PPOR and investment property providing rental income already... I'd go the ETF route.

    Neither property nor shares seem to be overly cheap right now, but at least with the ETF you are not having to leverage into them, and regardless of what happens you will still receive some sort of income.
    Besides, transacting an ETF is so cheap and easy you could easily switch to another IP if an unbeatable deal or remorse came along. Its trickier going the other way.

    You could make use of some of that $2m equity in your PPoR, but conservatism is understandable.
     
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  3. celsioraus

    celsioraus Active Member

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    Sorry to clarify i only have 1 PPOR with no IP (Im living in the Studio) and whole house is rented. But i get it the situation is the same. Its just very hard to jump into VAS when it has doubled in 6 months. I will have to do the numbers its a much safer way to generate similar income down the road.

    I think the good point is the Equity is always there even if i did 2 years worth of ETFs. Harder to buy into ETFs once i have a 700k~ loan to pay off
     
  4. MB18

    MB18 Well-Known Member

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    VAS still has a bit of work to do to even get back where it was earlier in the year, and that's before it potentially goes onto new highs.
    On the plus side the yield is ok for the times we are in, and if you are buying in over 5 years the timing risk is reasonably well mitigated.
     
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  5. Trainee

    Trainee Well-Known Member

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    How much do you want to retire?
     
  6. celsioraus

    celsioraus Active Member

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    I’d say 10-15k clear a month. Especially if / when a child comes. I will probably revert back in another 10 years with the same issue having a million in ETFs and the same single property.
     
  7. Trainee

    Trainee Well-Known Member

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    Thing is if you need 10-15k income, and most likely a more expensive ppor (or you live in the one you own and lose the rental income), you are actually not doing that well.

    Will buying ungeared shares get you there? You need at least 2m, 3 to be safe. Sure there is equity but you need to access it and there are borrowing limits.

    Worth thinking about why you havent used gearing much over the last 20 years?
     
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  8. celsioraus

    celsioraus Active Member

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    Correct, moving into the actual house would cut my income in half (there is a top bottom split). Conservative investor, slow and steady. A lot of paying off a mortgage is emotional and a lifetime goal. I have enough time to have something decent built up by mid 50s.

    3 percent on ETF dividends assuming I won’t be selling doesn’t seem fantastic does it. Granny flat property really is the best but I’m trying to keep my properties in the same area to lower stress and travel. Trade offs have to be made for mental peace
     
  9. MB18

    MB18 Well-Known Member

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    Nothing wrong with being conservative!

    Dont worry about the 3% on divvies... it's reasonable to assume they will grow inline with the underlying etf, and even then it is very easy and and acceptable to viably draw down the capital.

    Gearing can potentially increase your returns, but it also works in reverse. Remeber that the bank decided that the risk/reward payoff was better suited to lending you the money to invest with, otherwise they would have done it themselves right?
     
  10. Shogun

    Shogun Well-Known Member

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    Last edited: 14th Dec, 2020
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  11. craigc

    craigc Well-Known Member

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    Given your conservative / low risk preference, have you considered say SEQ for it’s relatively higher yields and lower buy-in prices?
    Has the advantage of exposing you to property to diversify risk (outside of just your PPOR), but the higher yield mean the tenant is going to be likely close to or paying off your loan given your mindset goal towards paying down loans etc.
    You can then match yield/purchase price to your comfort level.
    Of course there will be debate on forecast future growth but that is always a forecast / best estimate.

    Feeling the need to visit or travel to an IP can be satisfied by a good PM sending you lots of photos from the regular inspections. Outside of this time you shouldn’t be entering the property when tenanted anyway (unless authorised). Otherwise use google street view if you really feel the need to ‘drive past’.
    Good luck!
     
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  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    what would I do?
    Start enjoying life, travel, not investing further unless you can't spend all that income.
     
  13. The.Night.King

    The.Night.King Well-Known Member

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  14. celsioraus

    celsioraus Active Member

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    Its not a bad idea.. My friend has a townhouse up there and wouldnt mind to get away up there in the future if ever untenanted. Any suggestions on areas i can zone in on?
     
  15. Shogun

    Shogun Well-Known Member

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  16. Momentum

    Momentum Well-Known Member

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    You've got it made already. Don't be greedy. Enjoy being financially independent on 120k a year with no debt and paid off PPOR
     
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  17. snoopy

    snoopy Well-Known Member

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    I would borrow $300k to $500k against the property and buy ETFs and steadily add to it. With a PPOR paid off and a good income you can still enjoy life while you invest
     
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  18. unicorntears

    unicorntears Well-Known Member

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    Are you happy living in the studio or would you prefer to live in the main house? Or a different house? Is the $10-15k you need per month on top of living in the main house? Why do you need that much if you're only spending $4k per month currently?
     
  19. Gockie

    Gockie Life is good ☺️ Premium Member

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    I’d be happy with what you have :)
     
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  20. Blueshoes99

    Blueshoes99 Well-Known Member

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    Good job!

    You r only 40 so prepare for your future by getting at least one more property. It will grow and with your earning capacity you will be ok in the future. Having the extra property will mean it will be fully paid off by the time you retire. You can sell and then do whatever you want.

    You can invest in shares/ efts etc but you won’t get the capital gain as you would will with property unless you make a killing on capital gains on shares.

    If you get married, have kids and wife stops working then the you have to also think about how you will finance an additional two humans and their living costs.

    It’s so weird you are only able to borrow 800k- go to a broker, you will be able to borrow more.