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What would you do?

Discussion in 'Real Estate' started by Jebb, 20th Feb, 2009.

  1. Jebb

    Jebb New Member

    20th Feb, 2009
    Hi guys, I am currently working in Japan (although I am in Perth for two months right now) and have a fully owned 2x1 here in Perth, probably valued at around 330k. I also have a lot of money stored as cash at the moment, but all I am doing now is paying tax on the interest. Id like to use it more in my favour. Ill be working in Japan for another 4 or 5 years, then planning to move back to Perth and raise my family here, eventually buying/building a new house.

    Im thinking about buying two more 2x1 investment townhouse/apartments at around 300k each using the 100% equity in my own place as deposit. Ill also be renting out my own place, so at current rates, three rental incomes servicing just over 600k will be cash flow neutral or even positive. The cash I have lying about will be placed into an offset account for each one.

    Will buying two properties be too risky in today's market? Perhaps a slightly larger 3x2 at around 400k may be better...but not sure of the best course of action.

    Let me know what you would do in this situation. I need to use my equity to build more wealth, and I believe property is an appropriate vehicle to use in today's climate.


  2. Billv

    Billv Getting there

    15th Jul, 2007
    Sydney, NSW

    I've heard that the Perth market could be due for a correction but don't know if this will eventuate and how big any correction will be.
    I'm thinking that if your IP's are near cash flow neutral and you have some equity in there to keep the bank happy then it doesn't matter what property prices do in the short term.

    It's a difficult one.
    Since you've mentioned the use of your equity I think you should consider the safety of your existing property. IMO don't use existing equity, use your cash instead and leave your first IP as is.
    Property prices won't double overnight so there is no reason to load yourself with debt.

    If you don't buy IP's what are your other options?
    Can you do something better with your money?
    I think in times like this diversifying is important.
    With interest rates coming down property looks attractive but IMO shares could be a very good investment vehicle as well.
  3. dudek

    dudek Well-Known Member

    10th Sep, 2008

    Think about your situation as if there was no “gloom and doom”, just property cycles. Market will turn around in the future. It always does. If you are ready to get into another IP just do it. Calculate your costs, analyse your risks. Perhaps you would be better off splitting risk across of more locations. Sydney is looking attractive again. You could snap something very close to positive gearing in the west. Since you are living in Japan it should not make much difference whare your next IP is. If you believe half of what Chris is writing on this forum there is a chance of high inflation in the future and regardless of how much you borrow from the bank today it will still be the same amount tomorrow.

    If you have some cash on site you may look at getting into shares as some companies are looking very attractive ATM. Not all companies will collapse and some will emerge even stronger than before so with good homework you should kill it as well.