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We stopped buying in Sydney in 2012 when we saw the market begin to move, since then our Sydney clients have enjoyed 17%, 16% & 18% p.a capital growth year on year. For example a client investing in a $500k property in 2012 has made over $250k capital growth as well as being positively geared after tax from day one.
Feel free to check out my website at yes.com.au-
This reply was modified 8 years, 10 months ago by
Modernity Investing. -
This reply was modified 8 years, 10 months ago by Modernity Investing.
Modernity Investing
Email MeI think this concept is designed for only one winner and it’s not the guy buying in.
If there is clearly a “Greed Button” being pushed by the seller then buyer beware!
Assumptions that sound all-good on paper usually come back to bite the buyer, long after the seller is gone.
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This reply was modified 9 years, 1 month ago by Modernity Investing.
Modernity Investing
Email MeHi all,
I’m looking at investing around the areas within St Marys, Penrith, Werrington.The current vacancy rate for St Marys is apparently 3.09% (http://www.realestateinvestar.com.au/Property/st+marys), higher than both Penrith and Werrington which sits at 2.41% and 2.22%.
Looking at these % rates, should I be worried of not being able to find a tenant quickly (especially in St Marys)?
Thanks in advance!
The time to be buying into western Sydney was 2 years ago, if you buying in now you are getting in at the top of the price cycle.
You need to careful if this is what you actually want to do. Often values soften in the years after the market tops and if you need to trade you could get caught with negative equity. This has happen to a lot of people buying into Sydney post 1992 and post 2003. In some cases post the market reaching it’s top in 2003 values did increase above purchase levels until 2011-2012. That can be a long time to wait if you need to get out.PM me for an article I wrote for Your Investment Property magazine on how to select future growth areas to invest into.
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This reply was modified 9 years, 1 month ago by Modernity Investing. Reason: typo
Modernity Investing
Email MeWOW, thats a great prize. Bugger about the $30,000 debt, thats the elephant in the room. While you are wasting $1000 per month on interest and only saving $1500 per month your not getting ahead.
If I was you I would sell the new car ASAP and don’t buy another car until you have bought a house or an investment property. If you do buy another car, pay cash for it.
As far as your question should I Purchase a Principal Place of Residence or Invest First?
The age old question: “Should I buy a principal place of residence first and invest later or should I invest in property first, rent and buy later?”
In order to make some sense of this question we will conduct a comparison on the following basis:
1. Analysis conducted over a 10 year period.
2. Capital Growth for both Investing and the Principal Place of Residence is calculated at 5% p.a.
3. The income of the purchaser is $80,000 per annum
4. The purchser has $130,000 in cash savings for the transactions
5. The base cost of the Principal place of residence and the investment properties is $420,000 in year 1, then increasing by 5% p.a. (compounding) each year after that).
6. Rental Income is 5.2% of the portfolio value (gross)
7. The maximum loan to value Ratio across the portfolio is 80%
8. Interest Rate of 5% p.a. on all loans taken out for PPOR and Investment loans
9. Purchaser has a goal of achieving $1,500 per week income from their portfolio in 10 years (after all expenses and tax are taken into account)
10. Cashflows in each scenario include expenses for either rent or mortgage interest repayments and household expenses (rates and maintenance)Example:
Scenario 1 – Buying PPOR and then Investing
Purchase Years
Purchase Year – Purchase Price – Number of Props Purchased – Type Of Purchase
1 – $420,000 – 1 – PPOR
5 – $510,513 – 1 – Investment
6 – $536,038 – 1 – Investment
8 – $590,582 – 1 – Investment
9 – $620,531 – 1 – Investment
10 – $651,558 – 1 – InvestmentAfter 10 years in running this scenario, the outcomes are as follows:
Portfolio Value – $4,661,503
Cumulative Debt – $3,668,078
Cumulative Expenses – $219,758
Net Equity (After Expenses) – $606,541
Loan to Value – 79.39%
Net Cash-flow After Tax – -$17,129Example:
Scenario 2 – Investing and Renting First
Purchase Year – Purchase Price – Number of Props Purchased – Type Of Purchase
1 – $420,000 – 1 – Investment
2 – $441,000 – 1 – Investment
4 – $486,203 – 1 – Investment
5 – $510,213 – 1 – Investment
6 – $536,038 – 1 – Investment
7 – $562,840 – 1 – Investment
8 – $590,582 – 2 – InvestmentAfter 10 years in running this scenario, the outcomes are as follows:
Portfolio Value – $6,515,579
Cumulative Debt – $4,961,299
Cumuative Expenses – $130,000
Net Equity (After Expenses) – $1,424,280
Loan to Value Ratio of Portfolio – 76.15%
Net Cash-flow After Tax – $3,435In summary, by investing in property first based on the variables mentioned above being identical in both scenario’s, you would in fact be $817,739 better off from an equity perspective (Total assets less total debt) and $20,564 per year at year 10 better off from a net cashflow perspective as well as $89,758 better off from an expense/cost of living perspective over the 10 year period. This of course would put the example purchaser here well on their way to achieving their financial goal of $1,500 per week income after all expenses and tax have been taken into account and then give them a greater choice as to where they would buy their principal place of residence if that’s what they wanted to do.
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This reply was modified 9 years, 6 months ago by Modernity Investing.
Modernity Investing
Email MeEquity, It’s really is the magic ingredient that makes growing a portfolio possible, without growth in a property’s value there is no wealth being created.
Without growth in equity our only hope to buy the next property is to save every cent for next property purchase deposit or worse, having to sell one to buy another.Luckily, equity is a very simple concept to grasp. At its most basic it simply means the amount a property is worth minus the amount owed on it.
However, not all the equity can be used because generally banks will only loan 80% of a property’s value, just in case it loses value. So the ‘useable equity’ is the amount the property is worth minus 20% and then minus the amount still owing.Case Study
The sample property is valued at $450,000, the owner has a mortgage balance of $220,000 owing.
Owner’s equity: The property’s value $450,000 minus mortgage ($220,000) = $230,000
Useable equity: The property’s value $450,000 minus bank’s 20% ($90,000) = $360,000
Borrowing capacity: $450,000 (property’s value) minus $90,000 (bank’s 20%) = $360,000 (useable equity) minus $220,000 (mortgage balance) = $140,000
Leaves us with an accessible equity of $140,000 (the amount you can borrow)
Leaves us with an actual owner’s equity of $230,000 (the amount you will receive from the proceeds of a sale*)
Why is it so important?This accessible equity can be used as a deposit on an investment property. The equity can be used to put down a deposit on your next investment property, to cover legal costs and stamp duty.
Accessing your equity
The most straightforward way to setup your debt is to us a loan called a Line-Of-Credit. This keeps the debt secured to just one property, but you can take the cash from the Line-Of-Credit to put down as your deposit on your next purchase.
At settlement the new mortgage is drawn down to cover the remaining cost of the property purchase.
And the process just keeps working. The faster a property increases in value the sooner the equity can be accessed to purchase another property. This rise in value is the golden egg that all property investors are looking for.Equity can be generated by both an increase in the market value of the property and through a decrease in the amount owed on the mortgage.
* less selling costs, etc.
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This reply was modified 9 years, 7 months ago by Modernity Investing.
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This reply was modified 9 years, 7 months ago by Modernity Investing.
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This reply was modified 9 years, 7 months ago by Modernity Investing.
Modernity Investing
Email Me-
This reply was modified 8 years, 10 months ago by
