Hi guys, I’ve been on here on and off for ages and strongly believe it to be the best pi investment forum on the web.
What I’m looking for at the moment is a STRATEGY.
I was married before, I lost a house, a couple of jobs, health and more.
However I’m back on my feet now…
I got a decent income, I’m remarried and have a beautiful little boy.
I have savings of 200k cash and it’s about bloody time i get it out if the bank and make it at good use..(currently earning 6%though).
I would like to own about 10-12 properties within 10years and have a passive income of around 60k.
I’m 35yo and have no debts. My wife and I gross around 140k. She has FT job and I work on ABN.
As of next month we will be living rent free for about a year at her mother’s place and I think it’s time to start.
We live in Melbourne SE suburbs.
When it comes to purchasing we are totally open minded.
We do not own any ppor, just to let you know.
We are even considering purchasing overseas. We are not experienced at Renos but definitely able to give a freshen up to an old dwelling (painting, floorboarding,a touch of rendering…that’s pretty much what we can do..).
I really look forward to your ideas/strategies. They would be much appreciated.
Thanks!P.s. Bankwest is going to approve 600k loan next month (when my wife goes back working after maternity leave).
For once I'm not going to write a big script for recommendations. I'm going to make a simple one instead.
Get as much VALUE property as you can for your buck. Borrow as much as you are allowed to .. on a fixed term interest rate.
Ok .. sounds easy? It may take you several years to learn what VALUE in property really represents.
I prefer getting several little properties over a single big one. Sure .. the rises, costs and falls are greater, but thats half the fun. You also distribute the risk across several tenancies rather than being dependant on a single one.
But thats me. You'll have your own winning solution.
madeinitaly wrote:We are not experienced at Renos but definitely able to give a freshen up to an old dwelling (painting, floorboarding,a touch of rendering…that’s pretty much what we can do..).No need for experience. If you decide to carry out cosmetic renos on your own it’s generally just time that you need to give up (and of course a bit of money). If time’s an issue, you can always look to outsource. Basic renos can be carried out by a local handyman (call local property managers for some recommendations).
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
With $200k cash, there is no reason why you cant buy 10-12 x $150-$200k in the next few months. If each property is giving you positive cashflow of $500pm, thats already a positive cashflow of over $5000pm…from day one! Over time, with 10% anual rental increases, that would equate to a a positive casflow of over $10 000 per month is under 10 years…plus you would have some decent capital growth.
Put aside $20k for each property, which can be used for small deposits and fees etc and borrow as much as you can.
I'm not a financial advisor, but thats what i would do if i had a pot of cash to invest with
Or, buy one property undervalue for cash. Then 'do it up' a bit and then mortgage it. Hopefully you will get close to 100% of the purchase price – assuming it has gone up 20%. Release the $200k cash an repeat the process.
(make sure you get a broker first as it may be difficult to release $200,000 cash)
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi guys, thanks a lot for the time you took in answering my question.
Xdrew: I’m not sure I’m understanding your idea of Value in your case.
Jamie: im sure we could somehow manage to get some time off for Reno, although the less proficient at it you are the longer you will need and the more expensive it is going to be… I like the idea of local trades outsourced by RE agents. They seem to be the cheapest.
RobbieP: great and encouraging scenario there although I’m a bit confused… Are you talking about getting 500$ positive cash-flow per month on properties between 150-200k? Where? How? How do you achieve this from the get go? Not even in the States I believe you could get that at the moment. I’d lOve to be able to do that but I really doubt there are such properties unless of course I buy them cash….elaborate if you can….cheers.
TerryW: to be honest with you I never thought about this method, sounds clever and creative although I might feel more comfortable undertaking this venture if I were more experienced in the process of purchasing P.I.
Definitely something to think about.Thanks guys, keep the creative juices flow…
Madeinitaly, very simple scenario:
Lets say you looking for investment property in the $150 000 region. You manage to get a $150 000 property for 20% below market value and you pay $120 000 for this property.
You are willing to put down a $15 000 deposit, and you ask the bank for the remaining $105 000. I might be slighly off here, but your monthly mortgage repayment with a 5% IR over 25 years is about $600 per month.
You rental income of a property like this could be $250pw or about $1100 per month, maybe more.
So the cash flow on the deal would be Income (rental $1100) LESS expenses (mortgage $600pm), leaving you with a positive cash flow of about $500 per month.
Yes, there will be small other costs associated with running the property i.e. council rates etc, but this is just to give you a very simple example of how decent cash flow is possible.
All the best.
Hi RobbieP,
Would you be able to refer me to the lender that is lending at 5% interest rate for 25 years?
I will probably start looking for a PPR next year
Cheers!
Kong
Kong,
My apologies, i have just arrived in the country and wasnt sure of the IR.
With regards to the mortgage term of 25 years? I didnt know it wasnt possible in Australia. In South Africa, it quite normal to have a mortgage term of 30 years. Whats the norm is Austrlia?
Is it safe to base my simple example with a IR of 7% and a mortage term of 20 years?
If so, mortgage repayments would be about $740pm, rental income $1100pm (maybe more), leaving a cash flow of about $250pm (before a few minor deductions).
That look a bit better to you?
Hi Kong
5% rates are out of the question at present. Around 7% is what’s currently on offer.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi robbieP,
As much as interesting your strategy is I’m
Not sure how many under 150k property that rent over 1100 per month.
If any of you guys know any area that offer that please share.
I believe you can either find that price and not have many tennants available or viceversaNo worries Robbie, and thanks for the confirmation Jamie
7% still sounds quite good, and I'd love to lock in these interest rate for 25years or more. However from a brief search online most only fix rates for 5 years, and the maximum I could find was 15years.
Anyways, this might be a bit off topic, but I read somewhere that hedge funds are able to borrow from one country such as Japan at very low interest rates, to invest into investment vehicle around the world, which provide much higher yields than the cost of borrowing.
Does anyone know anything about this? Is this something the average investor is able to do as well?
Hi Kong,
Whats the longest term mortgage you could get for a variable IR?
Regards,
Robbiekong71286 wrote:No worries Robbie, and thanks for the confirmation Jamie7% still sounds quite good, and I'd love to lock in these interest rate for 25years or more. However from a brief search online most only fix rates for 5 years, and the maximum I could find was 15years.
Anyways, this might be a bit off topic, but I read somewhere that hedge funds are able to borrow from one country such as Japan at very low interest rates, to invest into investment vehicle around the world, which provide much higher yields than the cost of borrowing.
Does anyone know anything about this? Is this something the average investor is able to do as well?
Hi Kong
Think very carefully before fixing rates for an extended period of time. Your circumstances may change in the future and the break costs associated with a fixed rate mortgage can be quite hefty.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
RobbieP wrote:Hi Kong,Whats the longest term mortgage you could get for a variable IR?
Regards,
RobbieHi Robbie
Investors generally opt for interest only loans for tax deductibility purposes. IO periods are generally 5 years, some lenders allow 10 years. After this period, the loan reverts back to principle and interest. At this point, most investors refi to another IO period.
The normal loan term in Oz is 30 years.
Cheers
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
RobbieP wrote:Hi Kong,Whats the longest term mortgage you could get for a variable IR?
Regards,
Robbie30 years generally. There used to be some 40 year PI loans too
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
5% on IR for long term is very ambitious
The average long term is ~ 7% and RBA thinks that 7% is about right in the current climate (mentioned @ SMH last week)
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