$70k to spend, buy 1 or 2 properties?

Hi Wombat

Welcome to the forum.

I've always been a fan of using as much of the banks money as possible and utilising LMI to grow the portfolio quickly. However, this doesn't work for everyone – it comes down to your own risk profile. If owning a couple of properties with high LVRs is going to stop you from sleeping at night, then I'd recommend you don't go down this path. If you believe you can afford to purchase both and aren't troubled with owning a couple of properties with higher LVRs, then I'd consider getting both.

Here's a blog entry on utlising LMI to grow the portfolio – http://www.passgo.com.au/blog/25-the-project/68-lenders-mortgage-insurance-lmi-a-good-or-bad-thing

Cheers

Jamie

Hopefully you have factored in capital gains tax liability on the sale of your investment property in your next tax return.

Gday W0mbat,

Seems like you havent got a clear concept of where you want to go with the properties. Whats the outcome of buying them? What do you want to achieve? If you want to develop them, then the property with the biggest land area and most useless house is the best buy to start with. The one purchase as opposed to 2 would also not put you under any pressure it seems.

Secondly when do you want to develop the property, if thats your intention? If its 5 years from now and you have a land banking type strategy then maybe buy the 2. If you want to develop sooner, you will need every bit of spare cash to do this, so buying 2 might not be the best idea moving forward.

Your focus appears to be on the loan risk & insurance cost, rather than the property itself and what you want to do with it. Try turning your focus around to the end result and the profit you want to achieve, then work backwards. To do this you need to know very clearly what you want to do with the property, then do your costs and calculations over the time frame you have decided on. Work out your best option, then focus on the loan and the cash you will need to reach your goal with this or these properties.

You are definitely on the right track with your purchases though. Good on you. Always go for property that you can add value to down the line, whether it be immediately or in a time of your choosing. Large blocks are best.

Hope that makes sense.

Ian
http://theblockblog.com
Free Property Investment Information, Tools & Resources for Investors with a Sense of Humour.

From a investors point of view- you first need to look at the basic numbers how each one affects you:

1. how much do you make?
2. How much tax do you pay and what will the affect on the tax be on buy 1 or 2 etc…
3. Are you and YOUR FAMILY willing to accept the possible change in lifestyle?
4. Your age? are you nearing retirement ?
5. Short and long term goal-do you need the money in the next 2-3 years? marriage etc….

A lot to think and plan.

planning is the key.

About the LMI; a lot of ppl think LMI is a curse …it’s not it’s like any insurance it provide you with a benefit– where is the benefit you ask?
Normally LMI cost around 1-3% of the loan amount depending on value and LVr…so let’s choose the highest 3%- yes you are down by 3% by paying this LMI …but remember LMi can be borrowed (capped)

1. the LMI is tax deductible
2. If the property went up by the average of 3-5% per year – then you make this “unrealised gain” back.

if we had a property boom or the property goes up in value; wouldn’t having 2 property be more beneficial then 1? of course…..yes easy said then to be done… always consider if you can afford it and how much strain it will place on your family and your life style….especially if you lose your job for 2-3 month.

Regards
Michael