{"id":4870,"date":"2017-05-28T10:21:07","date_gmt":"2017-05-28T00:21:07","guid":{"rendered":"http:\/\/www.catebakos.com.au\/?p=4870"},"modified":"2017-05-28T13:39:34","modified_gmt":"2017-05-28T03:39:34","slug":"invest-million-dollars-property","status":"publish","type":"post","link":"https:\/\/www.catebakos.com.au\/staging\/invest-million-dollars-property\/","title":{"rendered":"How would you invest a million dollars in property?"},"content":{"rendered":"

I am often asked this question. Risk averse buyers like the idea of spreading their risk and often ask whether three or four regional purchases would aid a safer<\/em> journey. Buyers who apply their own love of period properties will ask where they could buy in order to secure a beautiful Victorian at this level.<\/p>\n

The answer is simple. It is all about cashflow.<\/p><\/blockquote>\n

Investors who ignore their own potential to cover the ‘out of pocket’ costs of property ownership risk taking on an investment which costs them more than their desired spend, or wasting the opportunity to buy a strong capital growth asset by applying ultra-conservatism.<\/p>\n

There are four things to ask yourself as you plan an investment property purchase. <\/p>\n

What do I want to achieve out of property investing?<\/strong> Is it a passive income stream at retirement? If so, how much and when?<\/p>\n

How much out-of-pocket cashflow <\/strong>can I comfortably apportion to property ownership on a monthly basis?<\/p>\n

What is my borrowing capacity?<\/strong> Not just for this first property, but for subsequent others too?<\/p>\n

How much time and emotional energy can I afford?<\/strong> This must take into account stress associated with tenant-issues or maintenance requests.<\/p>\n

Not every investor is suited to a Victorian-era, 120 year old property. And likewise, not all investors can shoulder the expensive cost of ownership of such a property.<\/p>\n

Some investors find the prospect of a challenging tenant nightmarish and the mere thought any tribunal issues sends a shiver up their spine.<\/p>\n

Understanding demographics, target tenants, likely maintenance issues and local property manager support is really important.<\/p>\n

But projecting the figures is vital.<\/p><\/blockquote>\n

Factoring in a likely <\/em>rent relies on a good local property manager appraising<\/em> the property thoroughly. Finding information on rates, insurances and other outgoings is easy – this can be found in the contract of sale. Maintenance is the tricky variable but a good building inspection should shed light on some maintenance items to anticipate. From this point, likely out-of-pocket holding costs can be understood.<\/p>\n

\"Cashflows\"<\/p>\n

An exciting assignment we recently had with an energetic duo raised this important question.  <\/p><\/blockquote>\n

After making the bold decision to release capital and equity by selling their home and reap the benefits of rentvesting, <\/strong>where they can target properties which are more likely to meet their financial goals than the property they would choose as a home. <\/p>\n

Their broker coordinated their borrowing capacity in collaboration with our strategy within days of finalising their sale.<\/p>\n

They had access to a spend limit of just over $1M based on a combination of gross rental returns at 3% and 4.5-5% respectively.Their desired out-of-pocket monthly contributions, goal for a specific (and larger) number of rental properties, desired time remaining in the workforce and focus on actively managing their portfolio and maintenance meant that they had to balance<\/em> their portfolio and be particularly mindful of leaving loan servicingcapacity for the next properties.<\/p>\n

Where could they spend their million dollars?<\/p><\/blockquote>\n

We targeted their capital growth<\/em> property first. Selecting this carefully would ensure that the more significant sized purchase didn’t adversely effect their ability to buy a second, more cashflow-centric property.<\/p>\n

\"28 \"28<\/p>\n

This two bedroom character house in Pascoe Vale South ticked many boxes. Having been subdivided meant that the land footprint was not as great as other full-block properties, however the rental yield would be higher and the capital growth of a quality neighbourhood rewarding. Secured for $750,000 and offering a rental return of ~$440pw met the first part of the brief.<\/p>\n

\"RIpon \"Ripon<\/p>\n

Our 4.5-5% target was going to be particularly challenging at our  ~$300,000 price point in metro Melbourne, and heading to Ballarat was an obvious choice. This cute Victorian miner’s cottage in the city grid just two blocks back from Sturt Street met the criteria. Boasting a meticulously neat interior and a side street access garage meant that a single or couple tenant arrangement would be easily achievable in this regional city of tight-vacancy rates. Negotiated for $282,500 and appraised at $270pw exceeded the cashflow goal and left them a buffer for upgrading Pascoe Vale.<\/p>\n

The most important outcome for our investors going forward is to maintain the cashflow goals in tandem with their acquisition plans. They will need to balance capital growth<\/em> selections with higher rental yield<\/em> selections in order to build a portfolio that can pay itself down over time.<\/p>\n

Building a strategy and guiding them through two completely different briefs (in quick succession!) was a real privilege and a great journey to watch.<\/p>\n

Wishing them success now and into the future…..<\/p>\n","protected":false},"excerpt":{"rendered":"

I am often asked this question. Risk averse buyers like the idea of spreading their risk and often ask whether three or four regional purchases would aid a safer journey. Buyers who apply their own love of period properties will ask where they could buy in order to secure a beautiful Victorian at this level. The… Read more »<\/a><\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ngg_post_thumbnail":0,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[10],"tags":[],"class_list":["post-4870","post","type-post","status-publish","format-standard","hentry","category-sundayblog"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts\/4870","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/comments?post=4870"}],"version-history":[{"count":5,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts\/4870\/revisions"}],"predecessor-version":[{"id":4880,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/posts\/4870\/revisions\/4880"}],"wp:attachment":[{"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/media?parent=4870"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/categories?post=4870"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.catebakos.com.au\/staging\/wp-json\/wp\/v2\/tags?post=4870"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}