在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo
I am fairly new to this forum (although since I first joined I find it hard to get off of the forum) but have found it excellent for everyone involved. I am also fiarly new to investing having only purchased my first investment property in 2006. I bought my first PPOR in 2004 for $265 000. Bought my first IP in Nov 2006 in Brisbane (four bedroom house between Brisbane and Gold Coast) for $350 000. I sold my original PPOR in 2008 ($330 000) and moved to Sydney where is purchesed another PPOR ($700 000). Earlier this year I purchased my second IP in Sydney for $325 000. Thus my borrowings/equity are:
PPOR = purchased in 2008 $700 000 ($350 000 mortgage) valued in June 2010 at $800 000 - thus equity is $450 000.
IP1 = purchased in 2006 $350 000 ($350 000 Interest only mortgage) valued in June 2010 at $390 000 (thus equity is $40 000)
IP2 = purchased in 2010 $325 000 (292 000 interest only mortgage) equity is $33 000)
In total then my properties are worth $1 515 000 with mortgages of $992 000 (thus total equity of $523 000).
I am now sitting waiting for the next move. My income at the present moment is $106 000 PA from my main full time job. I am enjoying the process of buying IPs and am itching to move for the next one ASAP but am not sure when that could be or how quickly in the future (the pace of purchasing ) I can continue to keep purchasing. Eventually surely I am going to hit a barrier of borrowing capacity. What ways can I get around this (if any). I believe that what I am doing is ok, but after reading this forum I just wanted to check in and see what advice any of you may have for me being a beginning investor (but a very eager to learn adn motivated to buy investor!).
If anyone has any comments I would greatly appreciate them
Thanks and I look forward to participating more in these forum discussions in the future (once I have some advice I can give to someone!).
Hi & welcome Owen.
owen9 said: ↑
In total then my properties are worth $1 515 000 with mortgages of $992 000 (thus total equity of $523 000).Click to expand...This is a good position, by my first suggestion: STOP selling properties.
Yes, I understand that sometimes you need to sell one here and there. But you've wasted a fair bit of equity in transaction costs of buying in Qld and then selling, only to re-buy in NSW.
owen9 said: ↑
...but am not sure when that could be or how quickly in the future (the pace of purchasing ) I can continue to keep purchasing.Click to expand...Speed is up to you and how aggressive you want to be.
owen9 said: ↑
Eventually surely I am going to hit a barrier of borrowing capacity.Click to expand...You have not considered that rents increase over time and as properties go cash flow neutral or positive, your serviceability increases.
Some more aggressive investors use capitalising interest as a strategy, so essentially drawing down on equity to use debt to service new debt payments.
This can work well in a rising market but in a flat or falling market can lead to tears if you cannibalise all your equity and you have no more to draw on.
owen9 said: ↑
What ways can I get around this (if any).Click to expand...There are only 2 ways to increase serviceability. Reduce expenses and increase income.
1. Use IO loans not P&I
2. Get tax back each week rather than wait until the end of the year with a Variation form from the ATO
3. Consider renting rather than owning a PPOR, or getting a cheaper PPOR
1. Raise rents
2. Consider doing small cosmetic renos to IPs to allow you to raise rents
3. Make more money - get a promotion, get a second job, start a business, trade options or CFD's after you get a share market education, consider some small property development deals - perhaps a backyard sub-division?
Thanks for your reply. Sorry if it wasn't clear. I have only sold one property (that was my PPOR one which I then bourght another in Sydney as my main resident properties). I have not sold any of the IP ones. Thanks for the advice. Being single with no dependents and finding the repayments etc fairly easy at the present moment makes it a little frustrating when the banks will soon stop lending to you. Just want to get ahead while I can. I know time will make it all happen, but at the present moment while I have no children etc it just seems like I should be making the most of it.
Thanks again for your response. I appreciate it.
owen9 said: ↑
..... finding the repayments etc fairly easy at the present moment makes it a little frustrating when the banks will soon stop lending to you. Just want to get ahead while I can.Click to expand...Owen, if you want to be a bit more of an active investor rather than a passive one and letting time do it's work, then I posted something back here, that may interest you:
Good on you Owen, great to see someone getting in there and going hard.
You're in a great position, definitely ahead of my current position, although I am trying to get closer to where you are during 2011.
One lesson that I learnt during my 20s was that I focused too much on my salary and not enough on my investments. I had quite a high salary, peaking at around 200k and so my week to week cash flow was very strong. I always had some investments, but was also living a great lifestyle, traveling and expensive holidays etc and driving a nice car. No regrets, but think I could have definitely tightened my belt more and bought more IPs like you have done. It's a tough balance to get right, but like you say, while you don't have any kids, that is the key time to get in and go your hardest. So while getting a pay rise for yourself is a good thing, I am now of the thinking that you can be better off in the longer term if you keep the focus on your investments and basically "make do with" what you currently earn. Even if you get a 20k pay rise from a promotion, almost half of it is going to go straight to tax anyway. I think some easier money can potentially be made through adding value to your properties etc and that is value that you can keep over the longer term without needing to work again each year for it with your body..
You could also try different lenders or a broker if you are having problems getting further borrowings through your main bank. For your next purchase, as the market is flat if not cooling lately, why not pickup something that you can add value to by way of a renovation or subdivision?
Thanks gain Alan for sending the link (many of your comments that I have read on the other posts have been very beneficial for me ) and Recruit2 for the comments.
I am feeling like you Recruit2 in that for the past 6 years my focus has really been all on my career and income. Since purchasing my first IP I was amazed at how financially easy it was (for some reason - probably lack of knowledge - I assumed it would be far too costly for me and that I would never be able to afford the ongoing mortgage costs etc). Still, I went into it and gave it a go. Amazed at how easy it was to manage it the second IP wasn't as nearly stressful as the first one. Having friends on large 6 figure salaries and seeing them with nothing to show for it has amazed me. Since joining this forum and reading many of the threads and comments made here there were many books advised and one of them was "rich dad poor dad" which I purchased and have just begun reading (yesterday). I am now beginning to realise why they are on very high income and still have not much to show for it. Thus, I just want to do as much as I can now so that this can take to focus away from the career and income (so that I can actually enjoy the job for what it is!) and know that purchasing assets is better than liabilities! It sounds like you are putting yourself into a great position to get going with IPs with your career and income!
It amazes me the helpfulness of this site and hopefully one day I will be in a position to help others like people here are helping me. Just to communicate with people on the same page is great in itself!