Hi All,
Since I was a little my goal was to buy a home by the time I was 18. Unfortuatly my dad fell sick and priorities changed for a while. At 21 I bought an apartment of the plans for $305,000. Now it is a few months out from settling. The plan is to move in there. But now what? My goal forever was to buy a place which I have done, but now I want more… I wasn’t planning to get into investing so I didn’t start small. But now I don’t know what the next step is to starting an investment portfolio. Anyone got any advice for me?
Hi YBS
Congratulations on your first purchase which is often the hardest step to take.
Subject to serviceability and a little equity there is no reason why you cannot purchase an additional property right away.
There are certain lenders who specialise in 100% IP loans but in most cases you are required to come up with the costs of acquisition. If the property you have purchased has an element of equity within it then there is no reason why you cannot access this and proceed.
In saying this property can be one of the areas to invest in when you are starting out there is also margin lending and gearing into a small portfolio of quality stock which requires very little amounts of initial capital.
Either way do your home and due diligence and obtain advise from a good MB or Fin Planner preferably one with a balanced attitude on risk and is not purely trying to sell you the new super duper managed fund..
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Good on you YBS,
The next step is to
1. save like mad for a deposit on the next property,
2. hammer away at the loan on your existing apartment,
3. wait for some capital growth and use the debt reduction to increase your equity in it. Then you can use the equity as a deposit on the next property. Or a combination of all three will do it. All 3 startegies will take time, so you need some patience.Or, you could use other more sophisticated strategies that allow you to buy with ‘no money down’, but this can be fraught with risk and you need to know what you are doing, so you would need to improve your education first. You should do this anyway as a matter of course. The more financially literate you are the safer your investing will be.
A quick short cut to your investing which is also financially more beneficial, is to use your apartment as an I.P (investment property) and you rent somewhere else. Most people won’t do this as they are emotionally attached to their PPoR (principal place of residence).
As a renter, your only cash responsibility is your rent and utilities and maybe some contents insurance if you think the contents are worth anything. clue: contents are worth next to nothing. If you don’t believe me; try to sell it all TODAY for cash.
As a home owner, you are responsible for rates, insurance, utilities, maintenance, home loan. Usually a lot more expensive than renting.
However, if you rent your PPoR to a tenant, all the outgoings on that property, including the loan interest, suddenly become tax deductible. Also add to this the Depreciation Schedule (a quantity surveyor prepares this for you) to your tax claims, which on a newer property can be significant. Switching to an interest only loan would lessen the burden on the cashflow as well, but you need professional advice from a mortgage broker and a good accountant about this.
The likely result will be that your tax return could be enough to cover any shortfall on the difference between the rent and the holding costs of your property. Bingo! you have an I.P that is costing you next to nothing, and may even make you a small profit every week. This profit is then re-invested back into the loan, thus improving your return, your cashflow, your equity increases and you can buy your next I.P a lot sooner.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Young,
I’m possibly in the same boat as you. I bought a unit as place of permanent residence at the start of last year. For most of last year my partner and I have been saving for our wedding (which happens next weekend). After that I’ve resolved myself to paying off my consumer debt (which was costing approx 600 a month in minimum payments (not including the mortgage in that)).Once the loans are paid I’m going to start saving again for an investment property, but I’ll probably be saving into a managed fund (possibly Navra’s blue chip fund) to accelerate saving, and further down the track I plan to use managed fund dividends to assist with any holding costs of investment properties.
I’d like to have positive cash flow properties, but I’d prefer to have capitol growth, and regularly draw down equity for more managed funds and more properties.
So right now (starting from next pay) I’m in clearing all debt except for the mortgage for where I live. Then I’ll have more cash flow for investing.
Make yourself a budget and start saving
Thanks for your advice guys. The idea to rent out my apartment to someone else had been going through my head for a while. Bu tone crucial thing Iforgot was that the interest on my loan then becomes tax deductable. I have to live in the apartment for 6 months so I get my stamp duty concession and first homebuyers grant but after that I think you have just convinced me to rent it out.
Thanks heaps [exhappy]
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