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Lots of Equity but low income

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Tree Changer | 06 Nov 2013, 10:51 PM Agree 0
Hi all, my family and I recently made a tree change and are in a position where we own our own home ($400K) and have $100K cash. However, my income is now low at around $35K pa.

I am looking to buy an income generating property or properties. At this stage I am thinking of purchasing a regional 2 bedroom unit outright using the cash and then saving for a second IP. I am guessing that despite the equity I have the banks probably wouldn't lend me enough for a second IP until I either increase my income or save a significant deposit.

I am most interested in yield to boost my income. Any thoughts on my logic would be appreciated. Am I correct in my assumption regarding finance? ( I am 34)
  • michael | 10 Nov 2013, 08:49 AM Agree 0
    How does an investment property with a positive cash flow sound with room for growth.
    send me a reply if You're interested.
  • Daniel Shillito | 21 Jan 2014, 11:31 PM Agree 0
    Hi Michael,

    Your income is sufficient with a reasonable deposit, to buy an IP. It depends of course on how much you want to pay for the property.

    Have you done your research on the property area you desire and why?

    Its clear that many properties will be out of reach, however many will be within reach.
    Perhaps one property with great growth and income prospects is better than 2 properties in a regional area with low prospects.

    Yield on Australian property is generally around 4% gross. Then you have to factor in running costs and any mortgage interest if you borrow. It might be useful to consider other investments as well - if your focus is on income and not accumulating property for future capital growth.

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