Update on my first IP & When Should I Consider my Next IP?

Market sentiment may well be low, Sketch, but don't assume that prices are going nowhere for 12 mths- esp the FHO price bracket, in which you're looking. My prediction is for increasing prices until June 2009 (when new grant boost supposedly ends) which may well serve to artificially boost the market, like it did when the grant was first introduced. Who knows what might happen after this, but don't be surprised if the govt extends the grant. Anything could happen really.
Along with falling interest rate rises, also expect investors to re enter the lower priced Sydney bracket. I'm already hearing anecdotal evidence of this happening and can only see interest being further fuelled in the bottom end market as holding costs decrease.
Ideally, you should buy when you can afford it, and dare I say it but I believe that the dip may well and truly be over for the FHB market. It's all up from here, at least in the areas I know and monitor in Sydney.
Best of luck in whatever you decide to do

 

Heh.. Thanks Jacque, you always seem to mention so much valid stuff..

What would your opinion be on when I could 'afford' to buy my next place..?

I mean at the moment as it stands, I plan to move out and back home, and rent out my apartment not long after Jan 11 next year. From then on, provided the interest rates don't get much higher than they are now, rent should cover all my expenses. And I have about $51k equity on the apartment, so yeah, technically I can probably 'afford' a second place the moment I move back home..?

 

I tend to agree that in the short term, next 6 months, things may pick up significantly for property.

Though unlike Jacque I tend to be a little more nervous about the second half of 2009 onwards, but my nerves are not as much associated with Australian housing as they are reflective of the world economy (particularly the US & UK) and the influence it could have on Australia, and inturn Australian housing.

 

Mmm.. All good points..

I guess after taking everything in I'll still probably wait a while before my next purchase, approx 12 months. Just so I can build up a little more equity, and have a little bit of time to enjoy my money a little while I'm still young.

Once I move back home and rent out my first property, I'll probably just keep an eye on the property market in Parramatta, and if I end up coming across another great investment opportunity like I did with my first property, chances are I'll consider buying sooner.

I guess I'm not really in any rush, I'm still young and already in a great position, and even if all I were to do was continue paying off my first property, I'd still find myelf in a great position, so I may as well be patient and take my time and make wise decisions.

I have another query by the way;

I remember reading over the forums a while back and seeing people mention that if you have mutliple IP's, you should try your best to have them all on seperate mortgage wit seperate lenders, unfortunately I forget the reason why.

When I finally do buy my second property, should I get the mortgage with another lender? Should I just pull out a second mortgage with my current lender? Or should I just increase my mortgage with my current lender?

 

Hi Sketch

You're in an ideal position really with moving back home, saving cash etc- especially if you have time to look and maintain an eye actively on the market. So many buyers think simply looking at the net occasionally means they're "active" when the truth is so much more involved than that. It involves physically inspecting, talking and maintaining contact with agents, tracking sales data, following auction results etc, as you may well know.

Parra is a great place to start given your budget as well, but you already know that! Also look at Blacktown and surrounds for cheapies.

Re: mortgages. What you would have read about would have been cross-collateralisation. This is where the bank/lender basically has security over more than one property for one loan, essentially tying you to them and your loans and assets together. The downsides to this include:

* Reduced sales proceeds. If, for example, you decide to sell one property the other could be revalued at a reduced rate.

*It may reduce the value of refinancing. If one property increases in value, and the other decreases the overall value may be the same and no more equity is available. Not good for further borrowings.

*In the event of you defaulting on one loan, if the properties are cross collateralised the bank will freeze both assets in order to satisfy the debts of one.

Banks like to take control of your entire portfolio, so it's preferable if you can spread this around so that more flexibility is introducted amongst your loans, and therefore options. Lots of mortgage brokers don't like cross xing (and I'm sure they'll tell you other reasons why) and prefer stand alone mortgages instead as well. This is the way we've done all our property loans, and it's worked well for us, especially when it comes to refinancing.

There's been other posts on this too- check out this one from a while back.

http://www.invested.com.au/3/crossing-loans-1300/
Happy reading! It's all part of the journey and learning

 

Thats the one... Cross X or something I think may mate called it..

I'll definitely have a read over it and if I have any queries, post em up.

Thx heaps..

And by the way, as far as blacktown is concerned, I know you can generally get a house over there, or even an apartment for quite cheap, but I don't really see it going very far, at least not anytime soon. Kind of like Cabramatta (if you know the area), it just seems to me like its forever, or at least for a long time going to be considered one of them more 'slummy' areas, which in my opinion will limit the CG for one, but also mean that you tennants you attract will probably be much worse.

Although, I trust your judgement n opinions a lot, I'm sure there is perhaps something I'm missing..? Would you be able to elaborate a little on perhaps why Blacktown may be good? Aside from the cheap buy prices.

 

Sk3tchy

Sorry to be contrarian at this point but have you considered diversifying into shares rather than buying another IP? If I were you, especially on your time frame (looking to invest in the next 12-18mths), I would invest in the sharemarket via a basket of shares, listed investment company or a managed fund.

I am not yet convinced of the near term capital growth prospects for property in Australia. The RBA is trying very hard to avoid a serious downturn in our property market with rate cuts but there are other factors to consider:

- Rising unemployment
- Possible reduction in migrant intake
- Australian housing market very overpriced compared to other countries
- Still a lot of household debt and some people are getting foreclosed on their mortgages even despite falling interest rates.

If you look at the comparative yields, my bet is that from day one you'd be better off investing in shares. Especially looking at what the sharemarket has done this year, I would also expect that your capital growth prospects are much better from this point onwards.

Just something to ponder as you plan towards making your next investment.

 

Hmm.. You do make a valid point..

The share market just seems so volatile right now, which I guess could also work in my favour.

Mmm.. Now you got me thinking..

I have had a lot of bad luck with shares so basically completely forgot about them. I bought a lot of SGB/CBA and some others before the market crashed, so yeah..

It's definitely something to consider though, I guess it will depend on how the market is when it comes time for me to consider buying.

At the same time though, I would really really like to try and get myself a piece of real estate in parramatta asap because I think long term it would probably end up being my best investment, as I'm fairly confident Parra will boom.

 

I like some of the suburbs in this LGA- yes Blacktown is cheap but take a drive and find the nicer parts- you might be well surprised. Kings Park, Seven Hills, Quakers Hill- all good value (depending on where and what you buy, naturally) surrounding suburbs as well. Yields are currently great in Blacktown as well, esp in the unit market. Close to rail, shopping centres (Westpoint was revamped in recent years and looks pretty good now) with lots of families in their populations. Yes, there are good and bad parts, just as there are with any of these lower income suburbs, but you do need to take a look around and judge for yourself as well.

 

Mmm.. True I spose..

I just have a really good feeling about Parra, someone mentioned to me that not long ago the legal building height in parra was doubled, a long with a few other nice things.

I've also noticed that if you go for a drive through parra you'll see several construction sites for new commercial building being built all the time.

There's also a huge hype about how Parramatta is going to be the next Sydney, it's already the second largest CBD after Sydney I believe.

While other areas may also be a good investment, I just think Parra is almost a garuntee'd place to boom. It may take a few years, but you can already see all the signs.

I think that in 10 years from now parra will be much more developed and commercial, and the resedential units will be highly saught after, much like units within the Sydney CBD are.

 

Hey you,
Congrats on your purchase! But seriously GET INSURANCE NOW! Yes your buidling is insured through the strata company, but that insurance only goes as far as the outside wall of your unit. If there was a fire, flood etc you would have to pay for your contents (kitchen, bathroom, tiles, internal walls, doors, carpets, lights etc) Replacing all of this could cost you $75,000!!! Ask yourself, can you afford that? I'm really trying to restrain myself here, but I have to tell you that not having insurance is really, really silly. It'll only cost you about about $1 a day and all you have to do is call an insurance company and set it up over the phone. Easy peasy.