Goal: Multi-families-keep saving or buy single family & leverage?

Question

Gday - Ill try keep this succinct! My goal is to invest in multi-families, in Australia this mean 5+ residences on a single block to qualify for a commercial property loan. To build a deposit I've been investing in a single, diversified index fund. Im not really in a rush but have no need to wait either. I believe I have 2.5 options:

A) Keep adding to this fund over the next few years until it reaches $300k+ and qualify for a $1mil+ loan
B) Use $100k to buy a $500k single family home and use as future leverage for option A (Deposits <20% of property value incur an insurance fee of 1.75% called LMI)

C) Use a 5% deposit/$25k for a $500k property, cop the LMI of $8500 but get in the market most soon and then leverage for option A

Which would you choose and why? TIA!

Steve Foulds · Answer

Haha, agreed! Average total household income in my capital city (Melbourne) is $80k AUD ($57k USD ), a typical 3 bedroom family home 40km (25Mile) from the city is $500k AUD ($355k USD). Rent would be apx $340AUD /wk ($240USD).

Dennis M. · Answer

In your market I’d say invest in paper assets  not real estate . Your RE is ridiculously priced

Steve Foulds · Answer

Thanks for the reply! Unfortunately $1mil doesnt get you much in Australia (It's about $700k USD), be lucky to get more than 2x 2 bedroom apartments near a city haha! Definitely will look to latch onto some more mentoring. Thanks!

Amanda G. · Answer

Starting with a $1mil loan is really jumping in the deep end. Do you have previous experience managing that size of property? If not, consider something where you can get your feet wet and gain some experience. It doesn't have to be a single family. Can you lend to someone who already has multi-properties to learn from them? Anyone in your local real estate group doing something like you want to do? Maybe do some research to open up your menu of options. good luck!