All Topics / Help Needed! / 300 000 in the bank.. what to do?

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  • Profile photo of smoule1smoule1
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    @smoule1
    Join Date: 2010
    Post Count: 3

    Hi All,

     I just have a few questions I was hoping to get a little feedback on. I'm a 26 year old female living in Brisbane city. I recently came into some financial freedom, having a little over 300k in the bank and not sure which way I should invest it. I'm planning a 6 month overseas trip in a few months time and hope to have a place before then. If you were in my situation what would you do? Would you loan money from the bank and get a house and have tentants pay it off or just spend all of your own and buy a unit? I live in Brisbane city  I would greatly appreciate feedback.

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    Not knowing where you will be travelling, 6 months is still a decent block of time – and I assume you don't have a job to come back to.  So I'd set $30k or so aside for travelling expenses and getting set back up in Oz when you return.

    One option is to buy two properties on Interest Only loans, throwing $125k at each (some of which will be eaten by stamp duty).  The tenant's rent should pay the mortgage easily.  Any spare cash should sit in an offset account holding the interest down, yet readily accessible if the need arises.

    Then again – maybe you are eligible for the First Home Owner grant.  So perhaps the other option is to buy something for yourself, with the solid intention of living in it for 6 months, then moving out and putting tenants in it.  In this regard, you could secure a house before you go on holidays, but aim for a long settlement (ie avoid settling while you are overseas).  Still put down a small deposit, but again – put all the rest of the cash in the offset account.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Simon PlummerSimon Plummer
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    @plummer
    Join Date: 2010
    Post Count: 44

    Buy 5x $300,000 units at 80% LVR. Or less at a lower LVR so you can prepare for interest rate rises. Have them sit there for 10 years and BAM! Before you know it your $300,000 has turned into $1,800,000 in equity.

    You've come into some cash early in life so if you invest it wisely you won't have to work a day after your 35th birthday.

    Profile photo of ducksterduckster
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    @duckster
    Join Date: 2004
    Post Count: 1,674

    Welcome to the forum.

    smoule1 wrote:
    Hi All,

     I just have a few questions I was hoping to get a little feedback on. I'm a 26 year old female living in Brisbane city. I recently came into some financial freedom, having a little over 300k in the bank and not sure which way I should invest it. I'm planning a 6 month overseas trip in a few months time

    How do you plan to fund your holiday ?
    Are you having a working type holiday or are you relying on your savings or the $300,000 as this will have a bearing on what sort of investment plan you may need?
    If you are away for 6 months on holiday a bank won't be too keen to lend you money while you do not have employment.
    If you borrow money you have to be able to make the repayments, so how confident are you at gaining employment once you get back from your holiday. Because you could fund say 12 months of repayments out of the cash you have.
    What is your long term plan?
    Are you thinking of ever living it the property later or continue renting it out.?
    With investment property you can buy it in areas you do not live now!
    So If it was me I would look at quantity of land under the building.
    Here are some examples
    http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=106196932&f=60&p=10&t=res&ty=&fmt=&header=&cc=&c=21109608&s=qld&snf=rbs&tm=1265161067
    http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=106157826&f=50&p=10&t=res&ty=&fmt=&header=&cc=&c=21109608&s=qld&snf=rbs&tm=1265161067
    http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=106117420&f=50&p=10&t=res&ty=&fmt=&header=&cc=&c=21109608&s=qld&snf=rbs&tm=1265161067
    http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=105870703&f=40&p=10&t=res&ty=&fmt=&header=&cc=&c=21109608&s=qld&snf=rbs&tm=1265161067
    http://www.realestate.com.au/cgi-bin/rsearch?a=o&id=104980069&f=30&p=10&t=res&ty=&fmt=&header=&cc=&c=21109608&s=qld&snf=rbs&tm=1265161067
    Now I have no idea where these suburbs are in relation to Brisbane
    but you most likely do.

    Say it costs you 330,000 for one of these properties
    say at a guess you need $10,000 stamp duty
    say a 40% deposit say 130,000
    Loan of about $205,000
    Rental income of about at a guess  $11,000 a year
    Repayments on P & I of $500 a week based on 10% interest rate
    $26,000 a year
    with the left over $100,000 you should be able to cover 3 years if you have no tenant.
    With a Tenant you would be $16,000 you have to find a year. $300 a week.

    now another scenario
    Say it costs you 330,000 for one of these properties
    say at a guess you need $10,000 stamp duty
    say a 61% deposit say 200,000
    Loan of about $125,000
    Rental income of about at a guess  $11,000 a year $218
    Repayments on P & I of $278 a week based on 10% interest rate (bad interest rate for safety margin)
    $14456 a year
    with the left over $90,000 you should be able to cover 3 years if you have no tenant.
    With a Tenant you would be $100 a week short or $5200 a year  (I added 2000 for expenses).
    you should be able to cover 17 years of holding this property without rent increases.

    smoule1 wrote:
    and hope to have a place before then. If you were in my situation what would you do? Would you loan money from the bank and get a house and have tentants pay it off or just spend all of your own and buy a unit? I live in Brisbane city  I would greatly appreciate feedback.

    Are you interested in getting money for nothing (the first home owners grant you may be eligible for it) ?
    http://www.osr.qld.gov.au/client-group/first-home-buyer/index.shtml
    But for FHOG you need to live in it for at least 6 months before renting it out?
    Do you like paying capital gains tax (if you live in it for six months see below links) ?
    http://www.ato.gov.au/individuals/content.asp?doc=/content/36887.htm
    https://www.propertyinvesting.com/forums/property-investing/help-needed/4330593?#comment-202397.

    With borrowing (not lending) the money from the bank you get a leverage effect property grows at about 7% p/a over a long term average. So if you borrow money that is not yours you make capital growth on the borrowed money. Also you have some cash in case things go wrong like the house is trashed (have landlords insurance) and it takes 3 months and say $30,000 to get the house rent-able again. Where as if you use all your cash if something goes wrong you may be able to borrow money from the bank but you will have no spare cash to cover the loan repayments.

    I am sorry that I have not given you a clear direction or advice but I am not allowed to unless I am a licensed advisor so you need to work out what risk you are comfortable with with your investing
    One big risk you are taking right now is having 300k in one bank account. During the financial crisis some banks froze their deposits for 12 months ! Every heard of Pyramid building Society ! http://en.wikipedia.org/wiki/Pyramid_Building_Society
    Maybe you could read books on this to broaden your understanding and books do not cost a lot compared to seminars.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Hi Smoule

    Firstly welcome to the forum and I hope you enjoy your time with us.

    Whilst i wont comment directly on what you should do with your funds I personally would be looking at buying somewhere in Brissie for investment and then gear to an 80% lend placing the balance of the money in a 100% offset account.

    I certainly wouldnt be using more than 20% deposit as when you return from traveling you may decide you want to purchase a PPOR and want access to these funds. An offset account will protect both the deductability status of the interest as well as giving you immediate access to the oncall funds.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of smoule1smoule1
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    @smoule1
    Join Date: 2010
    Post Count: 3

    Thank you all so much for your responses,

    I plan on going overseas between 3-6 months for a vacation. I been recovering from a car accident resulting in me having a broken neck and other injuries. Now that compensation has come through and helped me pay alot of debt and freed me up I am unsure of the exact path I will take.
    I am not working at this point but will get back in a few weeks time, so I don't think I will be able to get a loan right now. I plan on renting the property out for some time. I do have a lot to learn about investing and I am glad I came across this site.
    Does anyone know of a good financial advisor in the brisbane city region?
    Thanks Again

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
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    Post Count: 12,018

    Possibly ……. to discuss what.

    Dont mean that sinically but as a FP myself find that many clients dont really want FP advice but something else.

    All boils down to whether we have to charge for the advice or whether it can be done with a coffee and chat. 

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of smoule1smoule1
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    @smoule1
    Join Date: 2010
    Post Count: 3

    Being a first time buyer and having the $$, I am struggling with what options would best suit me. General advise or otherwise

    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Drop me a line or give me call be happy to meet up with you.

    General advice over a coffee means i dont have to charge you for it lol

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of SingerSinger
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    @singer
    Join Date: 2009
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    smoule1 wrote:

    Does anyone know of a good financial advisor in the brisbane city region?

    Talk to Richard.
     
    Since you've come on a property forum you must be interested in property, but most financial advisors will see you as a sitting duck.     Most will convince you put your money to work in managed funds.   Of course, they will want to manage the funds and collect the commissions.  

    Profile photo of christianbchristianb
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    @christianb
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    smoule1 wrote:
    Hi All,

     I just have a few questions I was hoping to get a little feedback on. I'm a 26 year old female living in Brisbane city. I recently came into some financial freedom, having a little over 300k in the bank and not sure which way I should invest it. I'm planning a 6 month overseas trip in a few months time and hope to have a place before then. If you were in my situation what would you do? Would you loan money from the bank and get a house and have tentants pay it off or just spend all of your own and buy a unit? I live in Brisbane city  I would greatly appreciate feedback.

    Firstly, all the best in getting back on your feet (no pun intended!).
    As others have pointed out, you have what is perhaps a "once in a lifetime opportunity" to set yourself up financially, so be aware of the risks as well as the rewards. In your position I would probably consider investing $200,000 at 50% LVR into an investment property and enjoy a holiday. Once you've had a break and got your head around being a property owner and landlord (and the property is showing regular income) you can have a look at investing in a second IP using the equity, or perhaps consider purchasing a PPOR. In any case take it easy, get good advice, and put your money where it can work for you.

    Profile photo of dr housedr house
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    @dr-house
    Join Date: 2001
    Post Count: 281

    buy your own home with cash and use  it later as a line of credit to buy other assets such as another property or shares.
    The loan then becomes tax deductible.

    Profile photo of zimbyzimby
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    @zimby
    Join Date: 2009
    Post Count: 40

    I second Talking to Richard.
    He’s Helped put me on the right track :)
    Just be careful with that much money you’ll be getting lots of free advice and new friends

    Profile photo of Kipper57Kipper57
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    @kipper57
    Join Date: 2006
    Post Count: 252

    I am not licensed to give advice, thus this is not advice however putting it in an account with reasonable interest would be what I would do for the time being.  I see the property market as over cooked,  you will find this worth a read.  I would say by the end of this year you may see a clearer picture

    http://globaleconomicanalysis.blogspot.com/2010/02/pool-of-greater-housing-fools-in.html

    However remember it is worthy to do your homework not just take for granted what is said in these forums

    Profile photo of JpcashflowJpcashflow
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    @jpcashflow
    Join Date: 2007
    Post Count: 575

    I agree with Wanelad,
    I bought a property of a person who was looking for a quick sale due to them loosing there jobs "etc" in a good area and a very good price.
    I work in real estate one advice that i can give the property market is going to do some funny things in the next couple of months.
    There are alot of homes on the market whch are not selling and from what clients have told me finance is becomming alot harder to get know days.
    So i reckon kick back play it smart get a part time job and see what happens with the property market.

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
    Email Me | Phone Me

    Your first port of call in finance :)

    Profile photo of keikokeiko
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    @keiko
    Join Date: 2008
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    Seen as your new to this and if you have not been looking for very long then I would possibly keep the money in the bank until you get back from your holiday and then focus on what you want to buy.
    But if you have been studying a while and your keen to buy something before you go on holiday then have a good look around and see what you can buy with your money and buy 1 property at a time not 5 in one hit (go like a turtle before a rabbit)
    Don't bother going to a bank as they will loan you $5 instead of $10, go to a mortgage broker actualy go and see a couple of mortgage brokers and see what they say.
    The link above for global economy I did not bother to read but I am sure I have a fare idea on what it says, but don't let this put you off, that was probably writtin by 1 person sitting behind his desk and that will be his thoughts for the week next month he/she will probably have different thoughts along with everyone else.

    Or if you really get stuck and can't make your mind up on what to do, Ile borrow the money of you at a rate of 10% return p/a, I know just the property that is waiting for me. lol

    Profile photo of Jacqui MiddletonJacqui Middleton
    Participant
    @jacm
    Join Date: 2009
    Post Count: 2,539

    A bank account would not have a chance at producing the result that many suburbs are producing…

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of MPSMPS
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    @mps
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    I think everyone has given you really sound advice and lots of information for you to consider..

    I would support some of the earlier comments and add a few extra..

    Before you do anything sit down and work out your ultimate goal.. (ie retire in 5 years with X income, have a holiday for 3 months of every year etc)…
    You also need to consider your comfort levels (ie doing renovations – given your injuries does this inhibit you?  If so then you need to make sure your strategy is sound for you and your abilities – as well as your comfort levels ie risk).

    The points about having a loan approved after returning from your holiday maybe an issue if you dont have a job to come back to and if I read your information correctly you either have been injured either at work or outside of work – but given how awful that sounds it seems like it might have stopped you from working and therefore once again will effect how attractive you are to the bank… The bank is not a property investor so they don't look at the potential of a property – they look at how quickly can they offload or resell the property if something goes wrong with your loan..

    Given your recent injury it sounds like a holiday is just the ticket and i hope you have a wonderful break! (given I lived overseas for 3 and half years I can understand the calling you have!!)

    I would support what others have said – be careful about who you disclose your bank balance to, as there are many people in this world who would find your situation very attractive and may not have your best interests at heart..

    The other thing I would say would be to ensure that you are absolutely educated before you start making any decisions on property – starting from the beginning of what you want and what you are prepared to do..

    I do wish you all the best, it sounds like you have had a tough time and are deserving of some good luck and a good break!

    Take care and travel safe…

    Wishing you the best future in your property investing journey!…

    Jodie
    Property Coach and Finance Specialist

     http://www.multiplepropertyservices.com.au.
    I help people realise their lifestyle goals using property as the vehicle.. As me how today – no cost and obligation free!

    Profile photo of minichickminichick
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    @minichick
    Join Date: 2009
    Post Count: 54

    did I read that correctly one poster saying 10% interest rate seems a tad high me thinks

    Profile photo of Benjamin CsikosBenjamin Csikos
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    @benjamin-csikos
    Join Date: 2010
    Post Count: 114

    Wow. Look at em all come out of the woodwork the moment you say you have money to spend.

    I live in carindale. Work in west end. I'm 26.

    I could give you a hand if you wanted, but it looks like you'll have more help than you need.

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