Forums / Property Investing / Help Needed! / The best way to create a passive income from my situation.

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  • Profile photo of SeaveeSeavee
    Member
    @seavee
    Join Date: 2013
    Post Count: 3

    Hi Everyone

    My name is Chris and I'm faced with a dilemma.  I'm not sure where I should

    be focusing my active property investment strategy.

    What I have… I have the family home with no debt – it worth about $1.2m.  I

    also have about $1m cash.  However, at this stage I have no income to speak

    of.

    My goal is to achieve a passive income of 150k over the next 2-3 years.

    However, I don't know where to start.  What are your thoughts? and most importantly, who should I learn from the achieve this

    goal?  I'm more than happy to pay for the education I need. I just want to know who I need to learn from.

    Thanking you in advance.

    Chris

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    sell the family home

    buy another house for 500k

    go buy a commercial property for 1.5 mil yielding at least 10 percent

    ensure you get insurance

    150k pa

    Profile photo of SeaveeSeavee
    Member
    @seavee
    Join Date: 2013
    Post Count: 3

    Hi Wilko, thanks for the advice!  1 question.  How do I find 10% yielding commercial properties?

    Profile photo of Daniel_95Daniel_95
    Participant
    @daniel_95
    Join Date: 2013
    Post Count: 25
    wilko1 wrote:
    sell the family home

    buy another house for 500k

    go buy a commercial property for 1.5 mil yielding at least 10 percent

    ensure you get insurance

    150k pa

    I'm not exactly a genus but wouldn't it be highly risky to put all your cash into one asset? Especially it being a commercial property?

    I would have thought it would be better to diversify your risk and invest in a handful of cheaper properties (be it residential or commercial), possibility to value add and go from there.

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    How about a commercial property that has 6 retail shop fronts with 6 individual tenancies.

    your insurance protects damage to the building from fire etc 

    also protects from a loss of rent and damage by tenants. 

    Commerical properties have longer leases then residential. Outgoings are paid for by tenants rather then the owner in the case of residential. 

    A bunch of low value properties that you can value add to might not be what the original poster required. Takes a lot more work to do that the to purchase a commercial property. If he wanted to he could value add to the commercial property and add extra walls producing more shop fronts, taking on more tenants increasing his yield.

    he only needs one manager rather then using a variety for the option of low cost residential properties.

    Risk is directly related to knowledge. The more knowledge you have in a area the greater your chance for success and minimizing and perceived risks 

    Profile photo of Josh AthertonJosh Atherton
    Member
    @josh-atherton
    Join Date: 2011
    Post Count: 269

    Hi Chris, 

    it would be worth conducting a risk analysis for yourself first. This will allow you to identify what you perceive as high risk and allow you to stay away from those strategies to start with. Secondly, identifying an investing strategy to assist in buying structures to allow for asset protection and also future tax minimisation. 

    You have great cash assets which allows you to do a lot, maybe look at buying assets that will also create some equity in the very short term which can increase your yield dramatically and help you achieve your goal. Also, your goal is easily achievable. You could no doubt do a lot better than that. 

    Josh

    Profile photo of SeaveeSeavee
    Member
    @seavee
    Join Date: 2013
    Post Count: 3

    Thanks Josh.  I appreciate the responce.  

    I've done a risk analysis of myself,  It suggests I'm in the upper end of the risk profile.

    Structures are not an issue.  I have a good structure to work from and have a good accounting firm to help here are put what every we need in place fast.

    "You have great cash assets which allows you to do a lot…."  – I'm especially looking for someone to work with me on this one!  Do you know of anyone that can help someone like is happy to take a bit of risk (I would also do a lot of analysis to reduce these risks and insure the assets as you have suggested) find the correct properties that fit a strong yeild strategy?

    Cheers Chris.

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479

    I would suggest using the million to create a couple of little assets rather than one big one.

    You see .. in any investment portfolio .. the worst situation is to be subject to a SPOF – Singular Point of Failiure.

    Thats a property that promises high returns and doesnt deliver. Which in turn carries down the rest of your portfolio.

    Better to have a reasonable mix of smaller assets to start with (albeit reliable ones and bank friendly ones) than the weight of your whole portfolio being lost on one or two major holdings.

    You'll have multiple assets to lend on, and you can borrow against ANY OR ALL of them for further incremental progress in your portfolio.

    Consider the house a last point backup, not a cash realisation. Thats the Ace in the Hole you have should any part of your investing turn bad.

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