hi everyone. this is my first post.
I am 21yrs old, and have just purchased my first investment property at Largs Bay, Adelaide. It is a one bedroom unit with nice backyard and undercover carport, built in 1991. it cost $140,000. I have a secure tenant for 5yrs @ $140.00 per week with the option to increase rent in accordance with cpi.
What should I do next? I earn approx $25,000 per year, and my repayments are $200 per week. Do I pay the minimum repayments, and start saving any money i have left over in a high interest savings account? Or should I hammer away as much as possible into the mortgage? Keeping in mind I will be keen to purchase another property in the next few years, can anyone offer me some advice?
Thankyou kindly
Hi milenko
I don’t want to make too many comments on your current purchase as i don’t know that part of Adelaide, but i can see from the figures this property is making a heavy loss. You will only make money from this deal if it goes up in value.
My thoughts areyou can’t afford to buy more negative geared properties so only buy cash positive in future, you need ones that will put money in your pocket (not take it out),
For now start paying off the loan as much as you can, (make sure you have redraw facitlities on the loan so you can draw it out if you find a great deal.
If you invest the money rather than pay off debt you must make sure you are earning more than the interest on the loan for this property.Hope thats a start
regards westan
http://www.nzpropertytogo.com
check it out !Hi Milenko,
Congrats on your first IP.
Now you need to manage the property effectively to minimise costs and maximise income.
Costs:
Western has suggested off-set account with re-draw facilities. Put all your spare cash into this account and draw out as required. This will reduce interest $.
Have a depreciation schedule raised and claim against income eash year.
Work out all deductions and income for the year and approach your employer and request a tax variation. This will mean that you will pay less tax each pay day instead on claiming at the end of the tax year.
Have rent paid to you by direct credit to your loan account as frequently as possible. I get rent payments from one agent fortnightly.
Get the best value for money with your insurance (landlords)
See if there are any discounts from your body corp for paying earlier.
See if you can trim down any costs with your PM.
Find a low cost handyperson to do your maintenance.
Income:
“Tennant for 5 years @ $140 per week” ??????
Ensure you have annual rent reviews (increase)
Investigate ways / ideas to increase rent.
Good luck and I hope that this is of some help.
hrm
Congratulations on your first place
I bought my first place at 21, im 25 now and have four…
Feel free to PM me if you have any questions, happy to help if I can! [gossip][gossip]
Dev * [kid]
nice reply hmackay
milenko at 21 its along road so don’t start off with three wheels on the car make sure that you have set up the right structure to hold your investments.
Talk to your bank and find there financial advicer and talk to an accountant.
Every body has different views I won’t give you mine because you need to set this up for your own goals.
By the way I lived in adelaide for 6 months and I think its a very under rated city and you should get a reasonable good capital growth there.
as for the plunge everyone has to at sometime go out of their confort zone.
GOOD LUCKhere to help
Please don’t pay as much as you can into redraw!!!!
Pay IO and keep any other savings in offset.
Use equity to fund the next purchase if possible. Cash deposit from offset if not.
If you redraw money for any purpose other than investment you will lose tax deductibility and you will regret it.
There is a lot of info in earlier posts and I am more than happy to explain it further over the phone.
Cheers,
Simon Macks
Residential and Commercial Finance Broker[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Milenko
Congrats on such a great start – only wish I had known all this at your age!
Great advice in the posts above. If you do put savings into your mortage account (over and above interest) make sure you can re-draw it and, Simon’s right, only do it for other deductible purchases such as more properties. Otherwise using an offset is good advice.
My question is why a 5 year lease? Do you have the ability to raise the rent during the period. I personally only do 6mth or 1 yr leases or, on the odd occasion it’s more, I have stringent rent review clauses in the agreement. You might already have this covered but I thought it worth mentioning.
In your position, I also agree that next property should perhaps be positive – or at least neutral -to stop the drain on cashflow.
Hope this helps.
Megan
http://www.propertyhub.net
Your Investing and Developing Information Hub.Hey mate,
id be happy to talk to you. i just turned 21 a week ago, bought first property about a year ago at 19/20.
just in the process of finalising another 2!do you have msn? ill have a chat to you there. pm me and we can exchange email addresses etc.
cheers mate.
Jake
Thankyou everyone for your replies so far!
I will take all your great advice into considerationthanks again,
As an investor, your mortgage should be allowing you to increase your equity. This would be the most Tax effective way for you to accumulate funds for your next property. If your mortgage setup right, you will be able to utilize your cash-flow instead of increasing your payments.
I just wanted to say well done on your first IP. I applaud you and all the other young investers on the forum for starting to invest at your age. Whilst most other young people are buying cars, hunting the opposite sex, and boozing.
Keep the ball rolling and you will be able to do what they are doing in the future with more wisdom, more money, and a higher appreciation of life.[thumbsupanim] whilst the others are trying to work out how you did it.You amaze me,Well doneMilenko
Congratulations on your first property. That’s a fantastic accomplishment, especially at 21 and doing it on your own.
k.radzki
I agree with everybody else, congratulations, you are wise for your age[biggrin], wish you all the best.
Yasmina
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