Hi there
This is my first post. Very happy to join the forum.
Im 21 years of age currently working full time and Im looking at getting myself an investment property where I live in melbourne.Im currrently living with my parents.
I have narrowed myself down to two options.
Number One
A 1 bedroom apartment in Carlton for 190k will set up an interest only loan with the intention to sell in around 4 years.
The surrounding suburbs in carlton are much more expensive for apartments and being so close to the uni and shops I believe there will be strong growth in the next few years.Number two
A house in Melton a suburb a little way out of melbourne. Would be around 220k for a house. I also would set up an interest only loan with the intention to sell in 4 years.Either way I go I would like to try and get another property in the next 12 months aswell.
I wanted to hear some other peoples thoughts on which way to go. Im starting young but I have read the first property can make or break you. Looking into it and re searching as much as I can.
Your thoughts are greatly appreciated
Michael
anyone?
Hi Michael
Currently on my last day in the UK on holiday so will give you a long distance comment.
Not an expert on the area so wont comment here but on a financing perspective you have to bear in mind that a 1 bedroom unit will tend to be smaller in size and lenders will want to reduce their loan to valuation.
This also means if have sufficient deposit when you come to sell it you need to find a buyer with an equal amount or hope that lenders severely relax their lending criteria.
Structure is important when you set up a PPOR and most Mortgage Brokers have No idea. Flexibility is key.
Richard Taylor | Australia's leading private lender
Hi Michael,
Richard is right. The 1 brm unit should be over 50 sqm in size in order to obtain a 70% plus LVR. Anything from 40-50 sqm maybe 60-70% were you can get up to 95% on Melton property on a Full Doc loan. If the property is serviced or under a management agreement or high rise development also affect the 1 brm unit.
Ring a few lenders or involve a broker to assist further i suggest. But, my suggestion would be Melton.
Andy
Think you would get more than 70% on a 40 Sq m unit but agree it will be limited and less than Melton.
Richard Taylor | Australia's leading private lender
I'd go the house. Has it got much land attached? There is more potential with the house, councils change planning schemes, some areas increase in popularity for development. Whereas a 1 bedder will always be a one bedder. What's the rental return?
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeThanks guys. Either way i can loan 110% of the purchase price through the broker. Will be using my parents house as security. The carlton unit returns 1038 a month. Is around 30 square metres i think. Purchase price of 190k. The melton house would be a 3 bedroom returning 1070 a month. Purchase price of about 230k. I intend to rent it out for the next 4 years with an interest only loan making extra repayments as often as i can to build enough equity in the property to secure another one in 12months time. Once again your thoughts are greatly appreciated.
Just out of interest, why are you dead set on selling in 4 years time? The golden rule of property tends to be "never sell" because so much money is lost in paying estate agent fees during the sale, and re-paying for stamp duty on any subsequent property purchases.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Yeah the idea behind gaining equity is to not sell and use the equity as a deposit on the next one, meaning no cash upfront. Do you need to pay out other loans or something?
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeI will be trying to gain equity so I can buy another property in 12 months time. I am hoping to have 4 propertys in 4 years. After 4 to 6 years I intend to sell them all or the majority in order to use the capital gain for a large deposit on my own first home.
I spoke to a financial planner today to get his opinion.
He basically said it all comes down to demand and supply. With melton he said because theres so much land out there and new estates opening up all the time once they are full then people will just buy the next farm and keep going further out since theres so much land up there therefore having heaps of supply.
He said on the other hand with the carlton unit the surrounding suburbs are much more expensive its close to shops and the uni. Aswell its right in town with a better supply and demand prospect. Meaning I would more than likely have a better gain with the carlton unit.
Thats pretty much where Im at at the moment.
Hi,
Got Foxtel? Margaret Lomas LOVED Melton on this weeks Your Money Your call. Was that you "Michael"? So how many properties does you FP have? 5? 10? 20? 1? You do not need to sell to use capital gain if you structure correctly. You have a company, you lease your PPOR off your company. Market rent, deductions etc. (This is what I have understood is possible from others, it would be great if some of the pros could give more feedback on this system etc, please get your own advice on this one)
Ok there is plenty of supply….is there plenty where you are looking? Is the property you are looking at in the BEST location for Melton? Is it walking distance (or a really short car trip) to something? Shops, train, bus, schools, local parks etc? Who will rent your house? If the answer is anyone and everyone then why not Melton. I personally would not go with what sounds to be basically a bedsit purely because it is in Carlton. In 4 years time the land in Melton will have grown probably more than a 1 bed in Carlton. You need to look at who your market is and try to appeal to the broadest market possible (unless you love niche) You will never have an empty property if you have a broad market. 1 person may rent a whole house, whereas a family will never rent a 1 bed apt.
Yes there may be plenty of supply now.. but what about in 4 years or ten years? Think a little longer term and see what grabs you.
Good luck let us all know how you go with it!
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeWow – let me get this straight. You are 21, and intend to acquire 4 properties in 4 years. I am presuming each property will require you to put your hand in your pocket to some degree… I am intrigued. I am wondering what kind of well-paid role you are already doing at 21 to provide you with such a slushy fund
Impressive matie! I think I must be missing something – most properties I look at would require me to put my hand in my pocket and pitch cash in each year for quite a few years. Is this not the case for you? If not, do share the secret!Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
DWOLFE
I didnt ask the financial planner if he owned investment property himself.
In regards to the supply. In 4 years time I believe there will be even more houses there as there is alot of land out there and the council has already stated another 3000 plus hectares will be used for residential purposes.
"You have a company, you lease your PPOR off your company. Market rent, deductions etc. (This is what I have understood is possible from others, it would be great if some of the pros could give more feedback on this system etc, please get your own advice on this one) " I will try and look into that to see how it works.
JacM
Im only on an average salary. With the 2 properties above I would only be out of pocket at maximum $50 a month for whichever one I choose . The loans would be structured as interest only where I would make extra repayments as much as I can to build up equity to secure another property every 12 months and continue that for 4 to 5 years.
cheers guys
Hi again
Those seem like great numbers to me. I have been taking a look at a model of :
IP property price = $250k
Deposit = 10% ($25k)
Interest only mortgage
Nomatter how I look at this, it seems to me that I would need to contribute $300 towards the mortgage per month.
The exception to this rule is should I be negative gearing against my day job income, in which case I'd expect to get about $4k a year back from the taxman for a few years. I guess that would cover the $300/month, assuming the negative gearing tax laws do not change.Is that pretty much the model you are looking at, or am I missing some golden nugget of information that makes the contributions less in the absence of negative gearing? (The reason I ask is that I really do not feel like having to earn a mega-salary for the next 30 years just to get $4k a year back
) Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hey Micheal,
Sounds like you have a good game plan, I am on a similar path having just purchased, and intend to buy at least 1 every year for the next 20 years!
My question to you, why are you planning to sell in 4 years?? You may think you are making a "profit", but you are essentially losing all the future capital growth within that property. DONT SELL!
I'd go with the carlton 1 beddie. Close to shops and UNI, kind of inner city, popular lifestyle streets around, and popular area. Melton – outskirts that will attract more of a niche market. The carlton 1 beddie would be alot more appealing for the renters. With Melton being a development area, there is a lot more availability, which means you may find it difficult renting out or selling as there are many around…
Natalie
My first ( and last ) thought is why sell?? You can still use the capital made without selling – keep them they could be CF neutral in 4 years!
JacM
My purchase price would be 190k with an interest only loan. The rental return is $1038 a month. I am out of pocket around $50.
DWOLFE
I also now think its best for me to not sell my 4 properties but to use the equity in them to secure my PPOR instead of selling them and using the profit as a deposit. I figure its better to keep the properties and get them all cash flow positive.
Natalie
Your right on the money. All those reasons you listed I fully agree with.
Im going to go for the carlton unit.
Great job Mike! The great thing is that you have thought it through and have made a decision to buy, which is more than most people do ever! I hope you keep us posted in your progress to hardcore property investor.
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email Mehi ppl, just joined this site today and was wondering about any seminars that steve mc knight is doing etc or any other type of seminar to help me get started in this property game would b much appreciated …….thanks mitch!
Oh well. Your decision.
Not a fan as i would rather get a higher lend on Melton and even purchase another security with the funds i have left over. Good luck.
Impressive matie! I think I must be missing something – most properties I look at would require me to put my hand in my pocket and pitch cash in each year for quite a few years. Is this not the case for you? If not, do share the secret!
) 
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