All Topics / Help Needed! / Help – I am a new investor and my mind is boggled!

Viewing 20 posts - 1 through 20 (of 48 total)
  • Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Hi, 

    I am hoping someone can offer me some advice. I have been looking to buy a 2 bedroom apartment, investment property, in the inner west, mainly around Marrickville, Dulwich Hill and Petersham. I have been approved to buy a property up to the value of $550k which is a loan of $380k as I have a $100k deposit. NB: I have however been looking at properties in the mid 4's as the rental return isn't very high around there, so I haven't wanted to stretch myself. If I went ahead with this scenario I would need to chip in between $188-$268 per month.

    However, I have been mulling over some other strategies/areas to buy in and am now completely and utterly confused as to what is the right path to take. Ideally (and I am not sure how realistic I am) I would like to buy somehting now, then save a bit more money for a another deposit and buy something else in the near future. I am not sure if lenders would do that as my salary is quite small, around 60k. NB: At present I have $130k. to work with.  

    The options I have been thinking about are below. 

    1. Buy a 2 bedroom apartment in the inner west, around the mid 4's, chip in a littel bit of extra money each month. Long run I would hope the property will increase in value and I would make some money. 

    2. I buy a 1 bedroom aparrtment in the inner west, around the late 3's, early 4's, and hopefully I woudln't need to chip in extra money and it would look after its self. The only thing with this option is I don't think 1 bedrooms appreciate much in value do they? 

    3. I buy a 1 bedroom apartment around Darlinghurst/Potts Point. The rental return is much higher around there, then it will tick on in the background, but again I don't think it will appreciate much in value. 

    4. I buy a 2 bedroom apartment around the Manly area, around the mid 5's, and the rent should if not all, nearly cover the repayments I think. Again, I am not sure if there is much room for the property to grow that much in value around there as I think they peaked a long time ago. 

    FYI – I live in Manly, but I have a lot of friends in the inner west, so I am familiar with both areas. The reason I was interested in the inner west is due to the current and potential growth. 

    I hope this is really clear to someone as I am so confused as to how to proceed. Any advice would be hugely appreciated, thank you.

    Also, I hope I didn't go over board with the information, I just wanted to ensure you had all the facts :) 

    Thank you in advance. 

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

    Hi cbarry,

    Welcome to the forum.

    It's a bit of a tricky one to do a buy and hold in Sydney if you are looking to purchase something else in the near future. Doing so would somewhat stifle your ability to borrow again as your serviceability level would deteriorate with the negative gearing. It'd also be harder for you to save for your next deposit due to less net income.

    I've invested in units in the Redfern/Alexandria area and whilst some good capital gain have come, it has been a slow road to building a portfolio due to poor loan serviceability. A lot was to do with a limited employment income.

    As an alternate strategy, you may want to look at picking up a positively geared property first, perhaps in a regional area. Something that nets you say $4k per year. You may need to put $20-30k down or less if you want to be creative. After this purchase, then use your remaining $100k as a deposit for something in the Sydney metro area. This will leave you with a potentially neutral cashflow but still with good exposure to any capital gains that comes from the Sydney market.

    Also, don't necessarily rule out 1 bedders. Generally they have a better yield and in my experience grow at a similar pace. Choose carefully and keep away from the small ones though.

    Best of luck.

    Plummer

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    There is no one right strategy. You need to think which will make you the most money – factoring in potential capital gains

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Hi Plummer,

    You are amazing, thank you so much for taking the time out to reply to me. You have really made things clear in mind, so a huge thanks. 

    Have a great night :) 

    cheers! 

    Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Thanks Terryw, great advice :)

    Profile photo of Jimmy86Jimmy86
    Participant
    @jimmy86
    Join Date: 2013
    Post Count: 46

    Don't know the Sydney market too well. but i would definitely only invest in areas you know well.

    If it's looking like your salary will not increase in the near future then it may be worth your while to look at purchasing 2 (one unit one house for diversity) higher yielding properties between 300 – 400 and dropping 60k on each. This will put you in a relatively neutral position, but position yourself for any potential capital gains.

    If your strategy is to increase from the capital gains (sit and hold) then it is important that you do not eat into your income from a negatively geared property (or 2) as this will tie you up with loan serviceability until you achieve the capital gains. 

    I don't know too much more about your situation other than what you've provided above, and just throwing this in the mix for you to consider, but possibly could be good to look at a unit (inner city) and a new house and land investment for the tax benefits (if your income will be growing).

    Good Luck!

    Jimmy86 | Future Assist SMSF Specialists - Bris | Melb | Syd
    http://www.futureassist.com.au/setupansmsf
    Phone Me

    Self-managed super specialist administrators and advisers

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

    Hi cbarry

    It might help to alter your method of setting the target.

    For instance, rather than naming a few suburbs and hoping the numbers on acquiring property in such suburbs will work for you, perhaps instead define what financial position the property you purchase needs to present to you, and then buy in locations that match this criteria.  It will do your head in trying to make a square peg fit a round hole.

    The job of an investment property is to earn income and/or wealth (not to be located in a particular suburb).

    Hope this helps.  Take a step back and be a bit more clinical about it, and go after numbers rather than particular suburbs.

    Hope this helps!

    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 FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,680

    +10 Jac's… I despair when I see newbies with these negatively geared hold and hope strategies. Even worse when their horizons only extend out past a few suburbs because that is the limit of their comfort zone.

    Cannon fodder for the market.

    Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Hi Jimmy86,

    Thank you, that is wonderful advice, and I like your idea of potentially buying a house and unit, this makes sense.

    Also, and excuse me for my ignorance, but I just want to ensure I fully understand capital gains. I understand this is the difference between what it cost me to buy the property and what I make when I sell it, and I understand I get taxed on that profit, but how much is that tax? My strategy is to increase capital gains as I would like to make money from this. Forgive me, but I am unsure what else an investor would want?! Would it be to just have the property paid off? Also, when you say position yourself for any capital gains, just to clarify, do you mean ensure my property is positively geared?

    Sorry for all the questions but I just want to make sure I have my head around it.

    Thanks again :)

    Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Hi Jacui,

    Thank you so much for your post. This is such super helpful advice and makes complete sense. I think being a female it's been really hard to be clinical about it, and not get emotionally involved, but hearing what you said rings true and I feel like I am definitely getting closer to it.  As of now, I am detaching myself from specific suburbs – Thank you! 

    :)

    Cheers,

    Charlotte

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,680

    Two things you absolutely need to do before you jump.

    You need to develop an investors mind set. Your not buying fast red cars, fashion label clothing or cuddly puppies. Your buying little boxes on blocks of dirt that people want to pay you to live in.

    You also need to have, at the very least, a basic understanding of the game and its rules.

    At this point you have neither. While you develop those two things, mindset and knowledge you should be putting together your 'team'. You need an accountant, mortgage broker and solicitor. They are your go-to guys. You don't finalise decisions before consulting with them.

    Get those things right and you've set the foundations for a potentially successful venture into property investing.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Charlotte, The capital gain less adjustments is added to you Taxable income and is paid at your marginal tax rate.

    If the asset is held for more than 365 days then a concessionary rate is charged 

    Cheers

    Yours in Finance

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

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Yes, you're right Freckle, I don't have a complete understanding of either, hence why I am doing my research reading, talking to various people and interacting on this forum. I am definitely ensuring I get an understanding of "The game" , to extent that my broker told me to stop over analysing everything and just simply buy something. I also have accountant, mortgage broker and solicitor that I am using, and they have all been a wealth of information. Thanks for the advice!

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,680
    cbarry wrote:
    my broker told me to stop over analysing everything and just simply buy something.

    Get another broker. That one isn't worth 2 bob.

    A good broker does more than just get you the finance. They help you understand and analyse the deal. They should also help you refine your investing strategy that enables you to be properly structured for future growth/investing opportunities. You reconfirm that advice/info with your accountant and at a deeper level.

    Just simply buy something doesn't cut it.

    Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Thanks Richard, I really appreciate it.

    Cheers,

    Charlotte

    Profile photo of cbarrycbarry
    Participant
    @cbarry
    Join Date: 2013
    Post Count: 17

    Hi Freckle,

    I was under the impression a mortgage broker only looks after getting finance for you. My broker said she isn't there to offer me financial advice! I thought they were separate?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    cbarry wrote:
    Hi Freckle,

    I was under the impression a mortgage broker only looks after getting finance for you. My broker said she isn't there to offer me financial advice! I thought they were separate?

    Yes, they are separate. However some brokers are also licensed financial planners, and/or solicitors, and tax advisors as well.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    Freckle wrote:
    cbarry wrote:
    my broker told me to stop over analysing everything and just simply buy something.

    Get another broker. That one isn't worth 2 bob.

    A good broker does more than just get you the finance. They help you understand and analyse the deal. They should also help you refine your investing strategy that enables you to be properly structured for future growth/investing opportunities. You reconfirm that advice/info with your accountant and at a deeper level.

    Just simply buy something doesn't cut it.

    Or maybe that is something that a sales person says – to talk you into something that will make them a commission.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of moxi10moxi10
    Participant
    @moxi10
    Join Date: 2010
    Post Count: 194

    Hi cbarry              You're in luck, you've struck the jackpot here with the respondents to your request for help. Ignore your previous broker's advice not to over analyze.  Although it is said that one of the things which hinders success in any form of investment is failure to act, action without due deliberation often leads to failure. As Freckle has pointed out,  your questions reveal the fact that you need to learn a bit more before diving into the deep end. The people who have offered advice to you here are well qualified to do so! I also know for a fact that several of them are receptive to private messages and would be happy to assist you in a private capacity.                                                                                            Best Of Luck

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,680
    cbarry wrote:
    Hi Freckle,

    I was under the impression a mortgage broker only looks after getting finance for you. My broker said she isn't there to offer me financial advice! I thought they were separate?

    She's the 2 bob variety.

    If a broker doesn't understand property investing how can they advise on the product and the way to set it up to buy an investment property?

    Like all teams there's Grand Final winners and Wooden Spooners. Your team need to be experts in property investing and preferably investors themselves. It's the golden rule when picking your team. An accountant who specialises in estate management won't cut it. A solicitor that specialises in family law won't cut it.

    There's players and then there's 'players'. Your guys need to know property with their eyes shut.

    Professional skills often overlap and then there's just knowledge and experience from being in the game. When you talk to your broker they can often see problems that while not necessarily their pervue they can alert you to potential problems, give you an overview and give you an agenda to discuss with your appropriate expert team member.

    If you talk to investors here with multiple properties they will tell you that an expert team is the essential foundation component to achieving success. It's not a guarantee but it substantially reduces the risk.

Viewing 20 posts - 1 through 20 (of 48 total)

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