Should I diversify this early?

[TTT]

I am in the unique position of owning an investment property (just a 1 bedroom in melb w/sub) that I have been able to pay off almost half the value of the purchase price, and also have a rental return which covers the repayments.

I am 22, finished university this semester and have no uni debt and feel I can confidently cover the other costs associated with the property.

so, I have around 5K in savings and a steady cash flow,

should I look to diversify?

 

[springhill]

Firstly, congrats for what you have achieved so far.

Simple question for you.
Are you confident your diversified earnings can better your mortgage interest rate?
If you are, go for it. If not, hammer that mortgage.

 

[TTT]

Firstly, congrats for what you have achieved so far.

Simple question for you.
Are you confident your diversified earnings can better your mortgage interest rate?
If you are, go for it. If not, hammer that mortgage.

simple but pretty wise answer. i guess continuing extra payments off the capital is probably the wisest way to go....

 

[tech/a]

simple but pretty wise answer. i guess continuing extra payments off the capital is probably the wisest way to go....

I'd also question the longterm holding o the IP
Covering costs really has you as the banks no 1 employee
You take all the risk while they take the earnings of you property
In interest. If you have a passive income from your IP or there
Is capital gain accumulating going forward---- then keep it.

If not question the use of the positive capital locked away in it.

 

[TTT]

I'd also question the longterm holding o the IP
Covering costs really has you as the banks no 1 employee
You take all the risk while they take the earnings of you property
In interest. If you have a passive income from your IP or there
Is capital gain accumulating going forward---- then keep it.

If not question the use of the positive capital locked away in it.

I guess im banking on there being a capital gain on the value of the property...obviously no income as of yet

 

[tech/a]

I guess im banking on there being a capital gain on the value of the property...obviously no income as of yet

Exactly the point Im making.
If your not positively geared then your wasting your money and opportunity
if capital appreciation doesnt eventuate. I think in housing capital appreciation of
any decent amount is un likely in the next 5 yrs (over 20%).

Many years ago I had a commercial property
I had a contract on it for $165K which fell through.
I had $1000 a month th service it.
I kept it another 10 yrs.
Sold it for $165,000. Man---the bank loved me!

Now older and arguably wiser I am selling property which
will release funds to freehold others---then I couldnt care less
if prices rise or fall. The properties I have and am freeholding are Industrial
complexes.
The ones Im selling are Housing properties.

Anyway food for thought and maybe something to take away.

 

[TTT]

Exactly the point Im making.
If your not positively geared then your wasting your money and opportunity
if capital appreciation doesnt eventuate. I think in housing capital appreciation of
any decent amount is un likely in the next 5 yrs (over 20%).

Many years ago I had a commercial property
I had a contract on it for $165K which fell through.
I had $1000 a month th service it.
I kept it another 10 yrs.
Sold it for $165,000. Man---the bank loved me!

Now older and arguably wiser I am selling property which
will release funds to freehold others---then I couldnt care less
if prices rise or fall. The properties I have and am freeholding are Industrial
complexes.
The ones Im selling are Housing properties.

Anyway food for thought and maybe something to take away.

wow, I had never heard of freeholding until now, seems a bit confusing...

I guess while I have your attention, you're obviously very knowledgable. I have a pretty generic question, but, from your experience, do you think I should continue to pay as much off my mortgage as possible atm (im living at home rent-free) or should I let the rental cover the mortgage repayments and only spend what I need on the other costs; rates etc.

I know its hard to answer the question without all the facts, but just interested in how you'd go about it.

I should also add, that I am keen to buy a 2x bedroom to live in and rent out the other room in the next 2-3 years

 

[Julia]

wow, I had never heard of freeholding until now, seems a bit confusing...

I'm a bit astonished at this. Is it your intention to always have debt attached to your properties?

Congratulations on what you've achieved at your age. Really well done.

 

[tech/a]

I have a pretty generic question, but, from your experience, do you think I should continue to pay as much off my mortgage as possible atm (im living at home rent-free) or should I let the rental cover the mortgage repayments and only spend what I need on the other costs; rates etc.

This is a critical time in your thinking and anyone else who is in a similar position.
The clear point here is that you have an investment property as against your PPOR (Principal Place of Residence)

The whole idea of an IP is to either generate a passive income OR enjoy a capital gain---if your real lucky then BOTH.

The only way youll get a passive income is to have more coming in than out so the sooner its paid off the better.
BUT
If its going to take years and $1000s in interest etc to get to the point of a passive income then you have to question what point the IP has as an investment.----- no point--then get rid of it.
If you were in a position like myself where you realise capital gain and freehold (Own) properties the problem solved and the Ip's are doing what they were bought for!

Run all you figures through a good accountant. If your negatively geared with no or little capital again then I would be selling!

Property is a wonderful investment but timing is critical in property and ANY investment.
Get it right and your a rich genius.
Get it wrong and your struggling.

{My best mate bought 2 penthouse apartments on the Esplanade in Glenelg here in Adelaide set him back 2.2 mill
in 2008 He also has a business property worh $1 mill and a Freehold house on 5 acres worth 1 mill.
At the time of purchase he owed 3 million to banks on 4.2 million of Property.
Business serviced loans didnt bother renting out penthouses.
Today Business cant service loans House sold for $850k and Business similar $890K
Leaving approx 2 mill debt. Penthouses worth $900K and $700K each.

A whole lifes work stuffed!.}

 

[TTT]

Run all you figures through a good accountant. If your negatively geared with no or little capital again then I would be selling!

I've only had the place for 2years and if anything I say the value hasnt grown or reduced by anything significant.... is this a reason to sell?

I guess i am asking more of a real estate question

 

[tech/a]

I've only had the place for 2years and if anything I say the value hasnt grown or reduced by anything significant.... is this a reason to sell?

I guess i am asking more of a real estate question

Capital value may be stagnant.
What about all other costs and
returns how do they stack up?

Then ask should I hold
Look 1 yr in advance and ask the same.

If all your doing is servicing debt who do you think benifits?
Its not you! Your the shmuck holding all the risk and supplying a lovely
place for someone to rent and a person to fix things when they stop working or fall apart!.

If its going up 20% a year or even 10% a year then be a shmuck!
If its flat or costing 5-10% a year you are a shmuck as are
all the other smucks.
Personally Im reducing my shmuckness.

 

[frugal.rock]

Personally Im reducing my shmuckness.

There's a word for the Macquarie Dictionary...
How's the reduction going?
Would've thunk 8 yrs ago was in the middle of the property boom, depending on the location?

 

[tech/a]

I hold a number of Domestic and commercial properties
After selling off those that were highest geared.
Adelaide was relatively stagnant in that time.

just bought another in Sellicks Hill last year.
Property boom started for me in 1996.

 

[frugal.rock]

Would like to get into the property game.
On a low schmuckness level though...
Can I ask for some general advice @tech/a ?
Synopsis. My sitch.
Mid 40's, married, 2 dependants (11&13), 60k mortgage on house, value around 400k +,
20k on credit card...(yeah, I know...
Combined income around 100k.
About 80k superannuation, not SMSF.
Stock portfolio around 43k.

Have been planning to build a granny flat, live in that whilst Reno the house, which is in a state of disrepair. (Tin roof, asbestos fibro)
Have the loan forms filled in, just have to chase up some documents and submit, aiming at about 200k, so would have 120k left after refinance.

Would probably rent out the g flat after all done.

Was planning on using some (half?) of the funds to trade with in the planning stages.

What direction would YOU go if you were me/ us ?

The above is the current plan, however, things can change?

Thanks in anticipation.
F.Rock

 

[tech/a]

Would like to get into the property game.
On a low schmuckness level though...
Can I ask for some general advice @tech/a ?
Synopsis. My sitch.
Mid 40's, married, 2 dependants (11&13), 60k mortgage on house, value around 400k +,
20k on credit card...(yeah, I know...
Combined income around 100k.
About 80k superannuation, not SMSF.
Stock portfolio around 43k.

Have been planning to build a granny flat, live in that whilst Reno the house, which is in a state of disrepair. (Tin roof, asbestos fibro)
Have the loan forms filled in, just have to chase up some documents and submit, aiming at about 200k, so would have 120k left after refinance.

Would probably rent out the g flat after all done.

Was planning on using some (half?) of the funds to trade with in the planning stages.

What direction would YOU go if you were me/ us ?

The above is the current plan, however, things can change?

Thanks in anticipation.
F.Rock

I’ll answer when I have more time

so you have a $200k budget for a granny flat and Reno costs?
If not what are your numbers.
What would the Reno house and Granny flat be worth once finished.

 

[willoneau]

With only small mortgage and large amount of equity why do you still have 20k credit card?
unless interest payments are less than mortgage interest?

 

[frugal.rock]

I’ll answer when I have more time

so you have a $200k budget for a granny flat and Reno costs?
If not what are your numbers.
What would the Reno house and Granny flat be worth once finished.

Thanks tech. No rush. My world is topsy turvy atm. Long story.

Budget for g flat and Reno, $120k.
The refinance loan would be 200k.
The existing 60k mortgage and 20k cc would be paid out. @willoneau
was short on work for a while...a family budget is exactly that, not to many areas that can be tightened up. EG, the missus..
Credit card could be covered by selling unnecessary vehicles...

Property with Reno house and g flat circa 650k ( with a decent reno/ update) or rent 400 house , 300 flat. PW.
Your question leads me to think any money put in would return around 50% extra if sold. Haven't crunched rental % return. Brain dead atm.

The Reno would be with whatever is leftover from the flat build.
Am hoping to do much of it myself though.
Obviously easier said than done. But I tend to be frugal...
F.Rock

 

[frugal.rock]

Should say, not keen to sell though.
Happy enough to rent both out though. But where to live then?