Hello Everyone
I am 29 single and have just moved home with my parents in Melb to save some $$$$ for the first time in my life. I currently have $7000 in the bank, earnings of $66,000 and a personal loan of $28,000. Currently I am saving $1000 per fortnight.
I am reading Steve’s first book at the moment which is motivating me to get started in the property market.
Do I keep saving for my deposit or approach the banks to see what my borrowing power is and start looking to purchase a property..
Thanking you in anticipation..
Sarah [strum]
Hi Sarah,
Regardless of your current position, I would talk to a bank (not just one) or a broker in regards to your borrowing power. It will let you know where you stand, and give you an idea of what has to be done (it anything) to start your property portfolio. Remember to research before jumping into your chosen market though!
Cheers,
Nat.
wow sarah what do you do?
If i where you i would buy.
Hello.
I concur with cnat on speaking to a broker – it generally won’t cost you anything (especially f you go to one of these places like Wizard or Mortgage Choice) and will give you a good idea of where you stand and what you need to do to move forward.
Without fully knowing your circumstances I would certainly suggest you look into getting rid of that Personal Loan before you jump into an IP, and to pay down any credit card debt you may have as the lenders put a disproportionately high weighting on this when working out your borrowing power.
Good luck,
Art‘Great spirits have always encountered violent opposition from mediocre minds.’ – Albert Einstein
Hi Sarah,
If you want a contact number of a good mortgage broker, I’m happy to pass the contact details of the one we are using right now.
She has been VERY helful to us.
Please PM me if you are interested [smiling]……..
Sorry Sarah but your numbers don’t add up.
You have 7k in the bank live at home on 66k per year and have a 28k debt
Come on Sarah what is your real problem- do the maths!!!!
D
yeah definately buy ASAP
I heard someone say once that you will never save your way to riches.
The only way to do is leverage you money and have it working for you.
If you buy a house and it double’s in value every 7-10 years. Imagine how long it would take to save they same amount as the equity (lot longer then 10 years)
I’m a mortgage broker myself and banks and lenders are making it easier and easier to get into properties. If you don’t have enough for a deposit have a look on the forum here for examples of no money down deals.
Happy Investing,
Joshua
Multiple Property Strategist
Investor Finance
[email protected]Thanks Joshua
I am learning so much reading these forums and it’s great to see people like yourself sharing knowledge and tips…
The difference between success and failure is “knowledge” and there is so much information available my head is spinning although somewhat excited about the prospects of getting into the market.
Am going to see a broker this month to find out my options.
Have a great day
Sarah
Sarah, you need to identify the difference between someone ‘sharing knowledge” and someone ‘sharing BS’. Here is your first challenge – which do the following fall into:
yeah definately buy ASAPa) Knowledge?
b) BS?I heard someone say once that you will never save your way to riches.a) Knowledge?
b) BS?The only way to do is leverage you money and have it working for you.a) Knowledge?
b) BS?If you buy a house and it double’s in value every 7-10 years.a) BS?
b) BS?
c) BS?
d) All of the above?I’m a mortgage broker myselfa) Surprise Surprise?
Good luck Sarah.
F.[cowboy2]Thanks foundation I agree with you..
you do need to sort the real facts from the BS.
With properties doubling every 7-10 years , It is fact and if you look back over the last 200 years in australia it is a continuing trend that keeps repeating. Research yourself and you’ll find out its true.
Obviously in some areas it booms while other ares are more stable.
With Leveraging its common sense…. just need to do the figures with what you got.
For example ….say someone had $50,000 cash and wanted to put it into property.
If you put $50,000 into a $200,000 property your LVR would be approx 80 %
(Value:$200,000 Mortgage: $160,000 Fees/charges: $10,000 Deposit: $40,000)If you leveraged your money to buy 2 properties @ $200,000 the LVR would be approx 92%
(V:$200,000 M: $185,000 F/C: $10,000
$15,000)
Total would be assets of $400,000.These are just general figures however if you crunch some sums $400,000 will have a larger captial growth then $200,000. Effectively this would greatly increase your return on initial investment.
Hope this helps justify the comments earlier.
Joshua
Multiple Property Strategist
Investor Finance
[email protected]Originally posted by joshadelsa:With properties doubling every 7-10 years , It is fact and if you look back over the last 200 years in australia it is a continuing trend that keeps repeating. Research yourself and you’ll find out its true.
[angry2]
False.
Wrong.
Misleading.
Please direct me to any research showing 200 years of property ‘doubling every 7-10 years’. I’ll tear it to pieces.And if house prices were to double every 7 years until 2036, Australians would collectively be paying 100% of their pre-tax income in interest…
Is this a plausible scenario? No.
You do the sums. Currently almost $780 billion of housing debt. There is a very tight correlation between house price inflation and housing debt inflation – in fact of the last 23 years there have only been 3 when the following rule has not worked:
If DBI < 15.7% then HPI < 7%
If DBI > 15.7% then HPI >7%where DBI = Debt Bubble Inflation
and HPI = House Price Inflation.What’s more, if DBI falls below 10%, house prices don’t rise… and it requires DBI of around 20% for HPI to exceed 10%.
How many times can you compound housing debt at 20% (or even 10%!) before our interest payments (~7% of $780 billion currently) exceed our income (currently $440 billion)? Even accounting for 4.1% wage inflation, the most simple of fools can see that this cannot go on forever. It will stop. The question is when.
With all the current moaning about a $12pw increase in interest payments, I doubt we as a country have what it takes to keep this bubble inflating. I think we’re just about out of puff. And even if we’re not, the Japanese central bank is winding up to knock the wind out of us by cutting off our supply to tens of billions of dollars of their debt per year.
So Josh, consider your line “Research yourself and you’ll find out its true.” refuted. I’ve mused, I’ve fumbled, I’ve researched, I’ve modelled, I’ve written tens of thousands of words on the subject (who knows, you might even be able to buy the book one day) and I’ve read litterally hundreds of papers (no, not the tabloid type, the research type) and read dozens of books (of the Austrian economics variety, not the “How to bludge your way to riches beyond your wildest expectations by buying lots of houses and waiting for them to double in worth in seven years!!!” variety).
Let me suggest you spend less time parrotting the spruikers and more time with a pen, paper and calculator.
Phew. Yup this winds me up. Why is it, that as the old Chinese saying goes, “It takes three men to make a tiger”?
F.[cowboy2]
PS – while you’re researching, don’t forget to google the “Melbourne land boom” as it was once commonly known, but now largely forgotten. As that bubble burst, land values fell by 20%+ in a year, and in many areas by 50% in a decade. Just thought I’d point that out to you, since you’re interested in the Xtra long term view…[wink]
interesting point …
thanks for the info I’ll take that on board you’ve obviously had more experience with this topic, and you have put some great info in there.I’m going on what I’ve been told and will look into it.
Thanks foundation.Multiple Property Strategist
Investor Finance
[email protected]Good on you for thinking in the right direction.
My advice is to look at your interest rates for your personal loan & your savings. My guess is that the personal loan is higher than the savings interest.
Suggestion: Why not work on paying off the personal loan whilst saving for your deposit? More deposits into the loan but keep saving minimum of 10% gross pay at the same time. You probably are not paying rent so why not pretend you are & put that on your loan outstanding?
In the mean time get a feel for what is out there & what your goals are & where you want to be in what time? Set up your structures for investing in property & educate yourself as much as you can while looking for the deals.
Good luck…future is bright.[strum]
Dianne BurnsNo problem Jack, I appreciate your good humour in the face of my frustration.
I’d suggest you go looking for a copy of ‘The Land Boomers’, Melbourne University Press (1966), by M Cannon. It’s certainly eye-opening. I’ll attach some examples for any readers who may be unable to locate a copy.Victorian average rateable value 1891 = 500 pounds.
– at 10% (doubling every 7 years) that would be 32.768 million pounds, or $65 million in 2003 dollars.
– at 7% (doubling every 10 years) that would be 2.048 million pounds or $4.096 million dollars in 2001.Nowhere near reality.
Taking another measure, that of R Silberberg from ‘Rates of return on Melbourne land investments 1880-92’ from Economic Record, 51, pp203, 217, we can project both forwards and backwards many Melbourne land prices. Let’s look at Surrey Hills.
In 1884 you could buy 1 ft of street frontage for 15 shillings. looking backwards, that would equal 3.54 shillings per average (2006) block in 1806 assuming 7% pa appreciation. Roughly 9c per 1/4 acre house block.
At 10% pa appreciation that would be reduced to 1c per 1/4 acre house block in 1807.
Neither is accurate. The best figures I can find value 1/4 acre at around 25 pounds per acre in the first decade of the 19th century. More on this later.
Projecting forward post land boom, with 15 pounds per foot (using Silberberg again) in 1887 terms that equals:
– $236 million per 1/4 acre house block at 10% annual appreciation by 2006.
– $7.37 million per 1/4 acre house block at 7% annual appreciation by2007.Clearly both rubish. Between 40 and 1000 times more than current values!
Now let’s take the analysis to it’s extreme silliness. Back to 7 pounds per 1/4 acre in 1806. That equates to:
– $7.34 million dollars for a house block in 2006 at 7% per annum.
– $375.8 BIILLION dollars for a house block in 2009 at 10% per annum!!!!Note – I’ve used 7% and 10% as proxies for doubling every 10 and 7 years, respectively. They’re very close.
Let’s please lay this to rest. House prices have averaged around 8.5% pa since 1970. No more, no less (time and value). I can explain “Why is this so?” if anybody cares to listen. Regardless, it’s the truth. Any statement to the contrary is wonky!
Love, F.[cowboy2]
Hi Sarah,
“I currently have $7000 in the bank, earnings of $66,000 and a personal loan of $28,000. Currently I am saving $1000 per fortnight.”
For what it is worth I believe there is a lot to be said for addressing this debt first – based on figures provided you could make a huge dent in this debt in a year, thereby placing you in a much stronger financial position.
A personal loan is non-deductible and as such will be a drain on your finances as long as it remains in situ.
Sure this means that you need to take a big breath but sometimes a little backward step to stabilise what you have is not a bad thing.
Tackle this debt head on and then move onto stage two of your investment journey – the actual investing. Spend the time between stage one and two learning and learning and you’ll be surprised how fast time flies – especially when you have an end point in sight.
Derek
[email protected]
The Investors Club http://www.monopoly.tic.com.au
0409 882 958
Skype – derekjones2113Hello Foundation
“House prices have averaged around 8.5% pa since 1970. No more, no less (time and value). I can explain “Why is this so?” if anybody cares to listen. “
I certainly care to listen.
Your knowledge and interest in this area is amazing. Please share some of it with us. [grad]
Wanting to learn.
Elka
Dito, Foundation.
Please start a new post on the topic.
Art
‘Great spirits have always encountered violent opposition from mediocre minds.’ – Albert Einstein
Hi,
I have recently been in similar situation to you (same age, income and looking to buy) and found it quite easy to find finance for a home loan up to $280k. Even though your deposit is not that high (neither was mine), you can take advantage of the first-home-owners grant which really made a difference for me. I bought in Qld though so I think the costs involved in the purchase differ from state to state. So depending on the property you are planning to buy, you may be able to borrow straight away! My advice would be to do all your research and then go for it!
TJ
Why the hell is everyone going on about the % of prices of houses. If you can read this is a post about saving money or buying.
Well heres my advice Sarah.
You definetely need to get rid of that personal loan, so all the money you are saving pays off the loan, you have to get rid of it quick. Also If you have any credit cards outstanding, pay them off.Then i suggest you get a cash management account(CMA) which has about 5times more interest than a savings account. Get one with interest calculated daily and paid monthly.
Have your pay from work direct debited into the CMA. Now grab a credt card with a free-interest period of more than a month(40-55days), and use that for all your living expenses and when it comes to the interest-freee period finishing then you just pay it all off the card from the CMA.
This means you will have all your available funds working for you to generate much more interest than a savings account. And with the credit card it will be in their longer allowing it to compound some more.Hope this helps. I have been reading about it lately and have finally understood it all. I like it, i hope you will to.Thanks.
Christopher.
$15,000)
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