Ok, so this might receive a few groans but for anyone prepared to hear me out and help out (by answering my questions with your personal experience) I would be most grateful.
I have been interested in property for roughly 12 months now, maybe more. I have attended seminars, read some books, and tried networking with other likeminded people. My goals are to be financially independent within 5 years.
It has been said that a Jack of All Trades and Master of None quite frequently fails but someone who focuses on one strategy and gets good at that; succeeds. How did you get your feet planted firmly on the ground and what was the turning point that made you stick to one strategy before tackling another? Perhaps you could share some of your own stories that got you on the path you are now travelling and tips to sticking to one strategy rather than swapping and changing when things get tough or we see a perceived “better” come along.
(To be fair I have earned some money this year – all of $10,500 – but still that is a little further toward my goal than 5 months ago)
Our path over the past 10 years.
10 years ago: Overeducated (scientist and engineer) Paranoid about debt. Scared of money. "What the hell is leverage?"
9 years ago: Started earning good money. Brilliant "saver". Worked out a budget with my fantastic partner. Took us years to get on the same "investment page".
8 years ago: Started investing in shares (post tax). Started educating myself. I think I subscribed to Money Magazine and read a Paul Clitheroe book "Money" or "More Money", or something like that. Opened a high-interest savings account.
7 years ago: same as 8. More saving.
6 years ago: same as 8. Realised I was paying a bit of tax. Started looking at margin loans for equities. Property was foreign. More saving.
5 years ago: Earning alot more. Paying way too much tax. Trying to have kids. Read a book by Noel Whittaker, "Borrowing, the fast way to wealth" (or something like that). A lightbulb went off about being ok with good debt. Still saving
4 years ago: Had a beautiful daughter. Decided I wanted to be financially free. Read a bunch of books on shares and property. Realised this was the way to get there. My partner started to come around to the same way of thinking. Much discussion. Saving and salary sacrificing as much as possible into super.
3 years ago: Worked out how much money/assets/income we needed to be financially free. Kept reading and learning. And I think I joined this forum that year (2008). Earning lots more money. Bought lots of shares during the GFC, was a great time to buy. Decided to buy a house to live in (but didn't find the right one). Read some stuff by Steve McKnight, Chan and Naylor, Margaret Lomas, Michael Yardney and a couple of others. Margaret Lomas's strategy struck a massive chord with me. Not too risky, not too conservative, "Goldilocks".
2 years ago: Bought land, started building house. Paid some money, got a property investment strategy and peer workshops for 3 months. Learnt lots! Hardcore number crunching becomes our new standard for investment evaluation. Our beautiful son arrived.
1 year ago: PPOR finished. IP1 purchased site-unseen, house (used a buyers agent to help get it right first time). IP2 purchased site-unseen (3 units). All neutral to cashflow positive. (Hundreds of hours of internet searching and phone calls to coucils, agents, valuers, businesses etc etc)
Now: Strata titling IP2 to give IP2, 3 and 4. If all goes well, purchase IP5 this year. Heavily investigating US property and Aust. commercial. As well as looking for Aus residential.Things are accelerating for us in the right direction.
What do I think are the keys?
Be curious – Ask questions. Learn extremely aggressively. Put in the time but make it fun, you will learn better.
Set goals – start with the long-term. Ask "Why do I want to be financially free?" "What will I do with that time and money when I get there?" Re-visit these moments and dream about them frequently. This will remind you why you are doing it when things get tough. It will inspire you to achieve.
Measure your progress regularly – How much savings to I have? How much equity? How is my weekly/monthly budget? How much tax am I paying? Am I claiming everything that is due to me? Do I think I am stepping towards my goals? If not, how can I, right now?
Other peoples money – understand it and learn how to use it. (I am a novice, but the more I learn the more I see a whole universe of possibilities here)
Be inspired by the success of others – Particularly those case studies in the API/YIP magazines. These are great for seeing how others are doing it. There are different paths to the top.
Build a team of experts around you – This is critical and takes time. Accountant, Solicitor, Buyers agents (if you need them), Mortgage Broker, Property Managers.
Learn to assess Risk/Reward – Work out how much leverage you are willing to go to. For us, it is 80% across the board. for others it is higher, and for others lower. all sorts of reasons why you may go one way or the other. What types of investment vehicles suit you right now? simple residential? strong -ve gearing? cashflow positive? development? commercial (retail, industrial, offices) REIT's? Equities?
TAKE ACTION! We took too long. Don't do what we did on this one. This is the most important lesson of all. Get in the game as soon as you can, get started small. Jump in the kiddies pool and learn to wade. Soon enough you will itching to be powering through the ocean wrestling with sharks!
Don't be afraid to make a few mistakes. Just plan for them and manage them effectively.Hope this helps. It helped me.
EV,
What a concise and methodical approach you and your partner applied.I'm trying to cram years 10-4 (year learning span) into a smaller time frame, my wife and I have had our kids (no more for us
).We have considerable equity and now have the finance ready for the IP, I have received considerable advise on the correct way forward; r.e. structure and strategy, now to find the right opportunity.
Chris
Well put empty vessel..
Can I ask why you chose to invest in the unseen IP2 and units as IP3 (was the risk worth taking?)
Was this the plan when you set out initially?
What is the future plan with IP 5? You mention commercial or US are you diversifying with each IP?
Just trying to understand your strategy..
Marie as for sticking to a strategy if it works thats always a good sign to stick with it! also areas of experience..
You wont generally know this until you do it and the final numbers are in (actual yield, bank value, total costs etc etc)
I wouldnt go taking on massive reno's as a strategy if you dont know the pointy end of a nail.. etc etc
There are horses for courses and you will probably already have a flavour in mind..
My best bit of advice is dont freak out, time in the market is your best friend (I havent sold any and im pretty happy with most of my decisions..)
You will learn more by trying/starting than any book or course(not that these are bad!) unfortunately mistakes will be made..!
My personal opinion is, if $$ isnt an issue there is no stress and all issues have a solution, if you try and stick to an unrealistic budget from the start things will become very stressful..
Research well, the tools are available (mostly free too), and make as much as you can during the purchase!
Cheers
A nice long read.
My exp:
– My family has always been a brick and mortar type of investor – so it was natural for me to enter this sort of investment as well.
– Investing in property involved a bit more intital cpaital and time VS shares– but overall less risky and more control.
– Didn’t want to rent, because moving is a hassle..and some places rent > mortgage repayments—-My 1st property:—-
– set a goal to save up $30,000 within 1 year while still at uni .but living at home
– With the help of my parents as guarantor of the loan – the loan was approved
– property bought for $720,000 in Epping NSW
– Valued now, 5 years later 1.3MBought 2 more ip over a 5 years period and no need for parents to be guarantor of the loan anymore, but instead used the equity form property 1 for the purchases.
I find getting your 1st property is the hardest part…once you owe the one property the next 2,3,4…are easier to finance and achieve.
So which, save save save for that 5-10% deposit.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Hi all and thanks for your input, most appreciated.
I have my PPOR and 1IP. I am currently in the process of adding the finishing touches to PPOR (build 10years ago) as I am wanting to sell. I am also in the process of approaching my tenant to see if they want to rent to buy. Once I have successfully sold both properties I will have .5 million to play around with. I am hestitate to put my money into property for the long term again, at this point in time, but as I have an eye for detail and an interest for renovations I guess that might be something I can pursue further. I know what I DONT want to do; -ve gearing properties, developments (maybe in the future), and paying big dollars for courses! I really want to get more involved with other people that are "doing" it. I have tried for 12 months now and always come away disgruntled as I either stumble by the poeple that know less then me or people that are far more advanced and consequently I have nothing to offer.
My philosophies are that all deals need to be a win/win in order to be a success. Taking risks are essential, but they must be calculated. Family comes first – but try your darn hardest to get them on your team.
MrDarcy, I loved your "make as much as you can during the purchase".
Emptyvessel, I too have been looking at purchasing over in the US. I am a little more uncertain now, however. I think I would prefer to keep things local as I have better control, but who knows what will come of that decision as there is always something else around the corner. Lately I have been looking into Rick Otton's course. Most of the people I know who are very succesfull have been and done a course or had a mentor – so even though I hate to fork out "wasted" money I got to focus on the end result <sigh>.
Shape, looks as though you are doing well, good luck with IP4.
Marie, one advice i can give you if are selling your IP, is to dilute and lower the CGT as much as possible.
There are a few ways to lower the CGT payment; and it can save you thousands in tax!Speak to your accountant.
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Hello Shape
Me and my partner had wondered about this. We couldn't think of anything off the top of our head – it is 90/10 as he is working, I am not and for negative gearing that was recommended. Any strategies off the top of your head?
Cheers
There are a few; but you will need to confirm with your accountant which one is suitable for your needs.
The way it works is, since your goign to be gaining $xxx,xxxx amount from the sales; you would want to reduce the income you get THAT year…and no im not taking about making a lost or retiring for one year ahah ( i wish) ….it’s about “shifting” the lost and gain over.
I list the 3 most common that my clients execute:
1. Do an interest in advance on another property; so your paying off 12 month worth of interest on another IP to offset the gain ( interest in advance can be achieved with ANY investment, not just a property)
2. If you have some stocks that are making a lost- good time to off load those as well.
3. Delay settlement till July 1st ( the new financial year)- this give you 1 full year to work around “making” this lost…ie renovations?, upgrade, interest in advance, another investments , great time to do the massive renovations on another IP ( no rent for a period of time etc…)End of the day, speak to your accountant and see what she/he thinks
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
MrDarcy wrote:Well put empty vessel..Can I ask why you chose to invest in the unseen IP2 and units as IP3 (was the risk worth taking?)
Was this the plan when you set out initially?
What is the future plan with IP 5? You mention commercial or US are you diversifying with each IP?
Just trying to understand your strategy..
Why site-unseen? Time, it was in another state. No real need. Happy with the numbers and fundamentals research. I am used to buying shares and I have never "seen" these. They are just numbers. Helps me remove the emotion. Sure, I get valuations, building inspections and the best solicitor I can find. (I am not totally nuts!)
Was it worth the risk? So far –> so good. Time will tell. I will buy the IP5 either site unseen or through a buyers agent (which is really seeing).IP5?
Commercial is a candidate. Low probability right now. Too much I don't know so too much risk. I am investigating it to make sure there isn't something great I am missing.US Property?
This is NOT IP5. This is more about diversifying my risk out of existing US shares I am holding. I don't want to repatriate the funds yet due to CG tax and AUD flying high. At the moment my asset allocation is heavy on Aust Property and these US shares. A nice win-win strategy seems to be if I can find some low risk US cashflow property to rebalance. The catch is, right now, the risk seems quite high because I don't know enough or who to trust. There seems to be a whole bunch of dodgy US scam artists and hardcore sales groups ready to relieve me of my hard-won gains. I am fairly certain many of them haunt these forums.Marie,
I wouldn't sell either of your current properties if you can avoid it. My advice here would be to find a fantastic broker like Shape to work up some options for you on leveraging into your next investment. Definately go with the accountant to help run the cost/risk/benefit analysis.I agree with you on the US. If I didn't have the funds over there ready to go, I wouldn't consider it.
Agree with you on development and renovation. Unless you have the time, knowledge and contacts, it is a big ask and big risk. But if you do have all those things and back yourself 100%, go nuts and call us from your yacht in a few years.
As for negative gearing, it can put extra cash in your pocket each week if combined with claiming everything the tax rules allow. This is positive cashflow. It is also my aim for every property I buy. This is why the numbers analysis kills 99% of properties I come across. I only go for the 1% and most of the time I don't get them. Someone else beats me to it 90% of the time. Which usually tells me I am doing something right.
A couple of good positive cashflow properties can make up for a negative geared property that might have higher growth potential. I believe it is all about having a balanced view across your entire wealth portfolio.
chappy1970 wrote:EV,
What a concise and methodical approach you and your partner applied.I'm trying to cram years 10-4 (year learning span) into a smaller time frame, my wife and I have had our kids (no more for us
).We have considerable equity and now have the finance ready for the IP, I have received considerable advise on the correct way forward; r.e. structure and strategy, now to find the right opportunity.
Chris
Thanks mate. Sometimes I get a bit cranky with myself for taking so long to get moving. Then I realised that there is no point, it is what it is and I am where I am.
Sounds to me like you are ready to pull the trigger! Get off these forums and do some number crunching brother! Keep us posted on your successes. I am keen to learn any lessons you have. Saves me learning them again!
Livestrong.
EV
You know, it probably sounds stupid, and we all know that fear and greed don't get us anywhere when we speak about financial independence but one reason for selling is so I can diversify a little to reduce my risk. All my money is tied up in property… bar 10k. I feel that property prices in Australia are going down – in the long term. I would rather get the money I have earnt now considering my property hasn't increased in value for quite some time. If I could invest it in a better suburb, or even half in passive income then I would feel like I have made some money and been able to keep it. Perhaps I haven't thought the market through well enough.
I definately like the sound of the 1% properties, I want to buy closer to the city this time around, though. It's even harder to source them there.
Can I ask what state you reside in?
CheersMarie
Im pretty sure that Buffet has a different opinion on fear and greed but its up to you to interpret..By the sound of it, you diversifying means you have a few IP's and wish to sell one to take profit and use it elsewhere? (shares etc?)
If this is the case the property that you are selling would also have equity would it not?
Borrow the equity thats available, have a safe buffer for any bad times that you feel may exist in the near future, continue with the advantages of gearing and invest the rest to diversify as you feel the need..
If you sell for the wrong reasons it has the same impact as buying for the wrong reasons..
Do all your research first, Profit to me generally means another deposit.
But im currently Greedy as most others are Fearful!
EV
Thanks for the reply, I still wonder how you went house > units > commercial/other?
Was this a suggestion by the Property Buyer?
Im glad your happy with his advice its good to know for future reference..
As for the US property, keep us posted!
Thanks MrDarcy. It seems I came in all guns blazing. Care to explain Buffets thoughts on greed and fear?
MrDarcy wrote:But im currently Greedy as most others are Fearful!
EV
Thanks for the reply, I still wonder how you went house > units > commercial/other?
Was this a suggestion by the Property Buyer?
Im glad your happy with his advice its good to know for future reference..
As for the US property, keep us posted!
Couldn't agree more. I am a contrarian by nature. I can't help but get greedy when others are fearful. I am almost compelled to do so by some sort of unstoppable internal force. Almost.
Houses/units –> I don't really care which as long as the numbers stack up. Buyers agent had nothing to do with these.
Commercial –> My missus suggested it back before we started investing. We looked but had no idea what to do, so it seemed too risky for us. We went back to houses/units because they are familiar. Recently my missus poked me about commercial again when we were discussing all the options we had available. So I started reading a few forums. Around the same time, my Buyers Agent asked me if commercial interested me recently after we had a discussion about all sorts of other residential options. They know we are deciding on what steps to take over the next few months, so acted like good advisors and suggested the option. I am still considering it, but there is alot to learn. I am not in a rush to pull the trigger on anything, but I am on the right thing in the next few months.On the US thing, I found a couple of interesting blogs that others may find useful;
http://www.buyingpropertyinusa.net/
http://howtobuyamericanproperty.com/I am thinking of subscribing to the latter for a month or two. I am just so curious to see if this process really can work well for me. I will cancel my bigpond movies subscription to cover the cost.
Hi all,
I'm particularly impressed at the way emptyvessel has gone about describing the path to becoming a property investor – well done!
I was in a similar position, but I wasn't as well organised and planned. Now, after purchasing my 10th investment property last month, I have to say that I wish I'd started planning and goal-setting earlier, and I certainly wish I'd started investing earlier. My goal is to be financially free in five years, which will be fifteen years after I started investing. I've always had a below-average income so I'm not expecting to suddenly be wealthy and able to retire.
Perhaps, Marie, your goal of being financially free in five years is a little optimistic. Maybe you earn more than me and it's not. Either way, make sure you clearly define your goals and stick to them!
Good luck – and I'd love to hear how you go!
<br /:)” title=”>:)” class=”bbcode_smiley” />EV – I have met someone on this forum over in the states buying their first property now. I will find out more about how they went at the conference coming up soon. I might check out those websites you posted, cheers!
EPI_Den
Thanks for your thoughts on being overly optimistic. Knowing the person I am it sounds like an oxymoron but I will take it as a compliment
I am not sure what figure you have down for you as "financially independent" but perhaps mine is a great deal smaller than yours? I am not much into fast cars, flash houses or even travel (boring?) Mm… oh and I wouldn't say we earn much; single income and 3 children. I think I worked out I was to increase my income by a certain amount each year, over 5 years for this to be achievable. While we have made progress (and had a plan for this year) we are already 6 months behind. Things change, but yes, I need to get a better plan together!Thanks again.
EPI_Den wrote:Hi all,I'm particularly impressed at the way emptyvessel has gone about describing the path to becoming a property investor – well done!
Thanks for the vote of confidence. Although it looks like I planned it precisely from the beginning 10 years ago, it just seems that way in hindsight.
The plan has really "evolved" or "crystallised" out of a constant desire and effort to become financially free. I now have a core plan that I view as my "equity engine" and am constantly evaluating "upgrades" that can help me (and my family) reach the goal faster. My golden rule: the "upgrades" are never allowed to slow the core "equity engine" down or break it in some way. This really comes down to risk assessment and hard numbers analysis. As well as asking "does this feel right"? My gut/intuition plays a key role too! So does my missus to cross-check my thinking.
Just keep planting those seeds, water them every single day, even if you can only spare a drop. One day you have a bunch of seedlings, the next you have trees and then you have an orchard full of mature trees bearing fruit for the picking. (I have visited this visualization so many times that I can now walk through the orchard, pick the fruit and "almost" taste it.)
Marie123 wrote:EVYou know, it probably sounds stupid, and we all know that fear and greed don't get us anywhere when we speak about financial independence but one reason for selling is so I can diversify a little to reduce my risk. All my money is tied up in property… bar 10k. I feel that property prices in Australia are going down – in the long term. I would rather get the money I have earnt now considering my property hasn't increased in value for quite some time. If I could invest it in a better suburb, or even half in passive income then I would feel like I have made some money and been able to keep it. Perhaps I haven't thought the market through well enough.
I definately like the sound of the 1% properties, I want to buy closer to the city this time around, though. It's even harder to source them there.
Can I ask what state you reside in?
CheersFair enough. you have your reasons. My advice is to make sure they are based on rational analysis rather than being emotionally driven. Most of our decisions are emotional by default, it is the way our brains work. Try to override that natural reaction with the boring logical analysis. Your fears may be validated, but then again, they may not.
I reside in Queensland. Invest in QLD and NSW. Looking in all states. I don't care where my fruit trees are located as long as the sun will shine, they get enough rain and the soil is good!
).
:)” title=”>:)” class=”bbcode_smiley” />
Things change, but yes, I need to get a better plan together!You must be logged in to reply to this topic. If you don't have an account, you can register here.
