I had to read it twice to even start to agree with the author. But after the re-read, I think I now understand what he is saying.
In essence, be careful which parameters you use in determining potential Capital Growth of an area. Though an area may be “sought after”, one of the common limitations is the number of available properties. e.g. Ascot in Brisbane, Vaucluse in Sydney, etc. And, if properties are not readily available, HOW can the population show Growth?
Seems reasonable to me – NOW !!! ;)
Are Ascot and Vaucluse NOT liable to grow in value because the population is not growing? If still sought after, the “Vacancy Rate” will likely be on the floor – in fact, there may be NO properties to rent in such a suburb!
Of course, his title (“Population Growth is bad for Capital Growth”) was designed to be eye-catching and thought-provoking – he got me !!
One similar statement caught my eye a few years back – designed to shock, and a knee-jerk “That can’t be right” comment. The one I heard was “Why do they put brakes on racing cars – Answer, So they can go FASTER!!” It too was dead right in its observation.
I have asked so many people around me but none of them seem to know the answer
Yeah, it is one of those questions that many of us don’t spend our lives thinking about. Based on figures I hear, less than 10% of people ever buy an Investment Property of any kind. And then, (like me), many investors don’t know all there is to know about every aspect of investing.
BUT, get all of the Investors in one place discussing property investing, and the combined information on tap is enormous !!
I am sure someone on here will :-
1. Have already done that, and can share what works and what doesn’t,
OR
2. Will have the knowledge about WHY this may not be a good way to go, and can tell you what to watch out for, or avoid, or expect, if you choose to go ahead with that plan.
And therefore, I agree with you – “There is a lot for me to learn in property investing and this forum seems to be a great place to start for me”.
Hi Jo,
Re your comment “Should I wait until I have 80% LVR so I don’t have to pay LMI?” I’d like to add a few thoughts:-
1. Many investors agree that the paying of LMI can make sense in the generation of wealth – but it may not be the best decision for everyone, so do have an adviser take a look at your situation and discuss things in full.
2. I’ve heard that LMI payments seem to take a huge jump once past 88%, so if you were able to stay at 88% max (borrowing $75k instead of $88k) would this be sufficient for you to invest? It could help you a bit by keeping it lower…. one to discuss.
3. The other side of borrowing at a high LVR is your DSR. If you earn a good income, this may not be a problem for you.
4. Is such a purchase in step with your goals?
Other things include setting up your loans and mortgage accounts in the right way to maximise your benefits (e.g. offset account, keeping certain accounts ONLY for investments, etc). Your adviser should be on top of this and guide you.
Good on you for taking a look at IP’s. Do keep us up with what is happening – we are only too happy to help,
Benny
This reply was modified 9 years, 8 months ago by Benny.
Hi Asou,
Welcome here !! I’m glad you decided to join us to ask your question. Why? Because there is SO MUCH you need to consider ahead of a decision like this, and you are in the right place to get some good pointers through the maze.
I haven’t done what you are thinking of doing, but I have heard enough from others to know that there are roadblocks that need to be negotiated and the final result may be way less than you expect.
That thread has a number of links within it, providing answers to many questions. One of these is “Is it better to buy my own home first, or an Investment Property”? That one may give you a better perspective re your thought of “I will need to rent somewhere else”. You see, it may be more advantageous than you think to do just that.
Anyway, great question, and lots to think about. Let’s see what thoughts others come up with, especially in relation to your direct question (doing a “half-rent” of your apartment).
Benny
Out of interest, I just Googled “Property Clock Gold Coast” and saw quite a few useful entries pop up. The concensus seems to be that 2015 is likely to look good for the GC.
I watched as values rose, then fell again from 2008. I am still holding one in the area that I plan to sell next year. Or even this year, if values return to “good numbers” before 2016.
Hi again Jason,
You seem to be in a rather good situation that can allow you a few choices – all thanks to already owning a PPOR. There is quite a wealth of information at this early level, and I wanted to suggest you take a look at this thread first :-
There were several titles and subjects in there, and I am sure a number of them would have piqued your interest. Your next move might be to discuss your situation with a suitable adviser (you’ll find a few on here) who can guide you toward where it is you wish to go.
There are also plenty on here who just love to help new starters and to point them in the right direction – whether advisers or not, there are many who “have a pretty good idea” of which way is up !!
Feel free to ask more as your questions force your brain further down the property investing path !! :p
Hi Jason,
I took your post out of the other thread, just so any replies to you don’t get confused with replies to “jcross”. I’ve got a few thoughts for you, but first I wanted to let you know what just happened !! I’ll be back !!
If you have an idea for a better title, let me know in a reply and I will adjust it.
Hi Loukediva,
Your question intrigued me, so I set about finding my copy of “0 – 130 properties” to get your quote from the source. But, on a quick “skim through”, I wasn’t able to spot the part you were quoting.
Can you help? If you could provide a page reference, or even just “which chapter”, that would be great – thanks,
Hi JC,
A good reply there from CRJ – but lets visit their warning :-
“Bear in mind the high costs of entry and exit probably about 10%”
Going by your words, I “think” the property you are talking of selling is your own PPOR – is that right? If so, then one of the common costs (CGT) of selling has gone away. But yes, there are still several other costs to consider when buying/selling.
My income is relatively low (60k) so the temptation is there to sell up in the next 6-12 months or alternatively purchase my first IP.
Another option would be (subject to serviceability) to borrow against the Equity to provide a deposit for IP#1. Do talk with one of the Finance Advisers re your possibilities (you may be surprised at how many options you might already have). Of course, any final decision should be taking you closer to your goals, not further away.
Re Gold Coast, I have the impression that GC prices (like Brisbane’s) have been suppressed for some years. With Brisbane now moving, it is likely the GC will be moving already, or might be ready to start moving. We had our dip following GFC – now, 6 years later, I’d think a gentle increase is on the cards. But note, I don’t “follow” the Gold Coast in any depth – so that’s really just another opinion…..
If I use the strategy of selling soon and then looking to buy again when/if prices fall, due to the market cycle, am I losing valuable time in the market.
I was just reading one of Jason’s recent Articles – and one of the points made therein was on that very subject !! Go here to take a look:- https://www.propertyinvesting.com/the-7-most-fatal-property-investing-mistakes/ Now scroll to subject “#5 – Buying at the Wrong Time”. Have a think around that, as it also has a bearing on “Selling at the wrong time”.
In short, know WHY you are wanting to sell before actually selling. Know just how the figures will work, the advantages selling will provide you, and the disadvantages too – BEFORE you sell. Having a chat with one of our members who is an adviser on money matters would be a good idea too. Use the knowledge of someone else who knows things you need to know – and maybe make them part of your “team”.
Hi all,
Well, thanks to Jason Staggers, this Article (the Seven Most Fatal Property Investing Mistakes) hit the website recently – and it SCREAMED to me to post a reference into this “New Readers” thread. Take a quick look by all means, but then go back and read it all deeply. Commit the thoughts therein to memory, make this link a Favourite, or whatever.
You will WANT to find this one again to review prior to buying your first IP. Or when you receive your first “cold call” with the “Real Estate offer of the Century – guaranteed to save you Tax!!!” Buyer beware when that happens !!
When I tried to calculate this all I could see was that there was a -$42,000 difference between our current annual expenses and how much we would have available for ‘guilt free’ living.
It would help if you shared the data you were using (even if not “actual” figures – e.g. you might not wish to share your actual income on a free-for-all website) but at least show us WHAT data you used.
Like this – If your ACTUAL Income is $152k per Annum, and your expenses are $110k, you might retype them as $82k Income and $40k Expenses (a $42k difference). See, we DON’T need to know the actual numbers in use, but more WHAT data you are using (what is being subtracted from waht, etc).
I quite appreciate I have probably picked the WRONG data as I haven’t taken 70% of anything yet – but you tell us which is the data you are using so we can help,
Is it essential to have a cash deposit saved up to buy a house up for auction? Or is equity in an investment property I own enough to do this?
No need to have a cash deposit, as equity in a property will do – but the auction rules might state 10% deposit. Call the RE agent ahead of the auction, as even these rules are negotiable.
It is a good idea to have your finance “pre-approved” with your lender as, with an auction, there is no cooling-off period. If the hammer falls and you are the buyer, then you would lose substantially if unable to complete the deal. By the way, I am not an accredited adviser – Some who are may well follow on with more useful information, so do listen to them if their words disagree with mine. :(
Hi Coogee,
Probably more important than “which suburb?” is your answer to “What kind of purchase leads me toward my goals?” e.g. Are you wanting to build positive cashflow, or are you looking for a different outcome?
“Set and forget” by buying in a +ve cashflow area (like Woodridge or many other outer burbs)
“Reno and bump rent” to bring your purchase near cash neutral, with a more likely equity growth advantage. (Any suburb)
“Go for Equity” and don’t worry if negative geared (your other IP’s might be funding an Equity “giant”?). Inner suburbs better?
But first, let us know what your situation needs at this time.
Hi Jesse,
One I know, and used personally while based in Sydney a few years back, is Nick Moustacas of Strategic Wealth Management. He is located around Hurstville. Here is his website – http://strategicwealth.com.au/financial-planning/
There are some on here too who are FP’s, but I don’t know any of them like I know Nick M. I hope others on here can recommend other FP’s to give you some choice,
Hi Jeh,
As a new member, welcome aboard – you have come to a good place !! And good on you for asking the questions you need to.
It is always good to know how to EXIT an investment before getting into it – hence, useful advice from Catalyst.
Re Pimpama, I don’t know that there is a lot there – are there plans for schools, shops, etc? Or, is it mainly being considered for “tourist rentals”, with its easy access to Dreamworld, Movie World, etc.
What I do know is that there is PLENTY of land there, so scarcity is unlikely to be a problem for some time to come. Do you have documents re expected prices, rentals, land sizes, facilities, etc?
I’m currently renting out to great long term tenants for $450 a week, with a balance of $315k,
.. which makes you about neutrally geared at the moment (or even positive geared?)
Would you look at cashing out the Sydney property to gather a few 20% deposits for some strong positive cashflow properties here in the USA? The ultimate goal is to generate a passive income from rental income.
I’d probably look at using some of the Equity and KEEP your Sydney place while immediately releasing enough Equity to buy your first few US ones. Selling involves a lot of extra cost.
With Valuation of $530k and $315k owing, there is over $100k of Equity available even on an 80% lend.
Let’s see what some of the finance people say about that one – oh, and maybe some “US centric investors” too,
Hi Brunowa,
I bet you are delighted that you asked on forum eh? There are so many of these little traps that “the average Joe” leaves to their professionals. If accountants got it wrong, how would you have known? I’m glad you thought to get a second opinion.
As you said, it didn’t sound right, and could have cost you dearly. But now it won’t – and you should reach around and pat yourself on the back for “double-checking”, rather than just accepting that “my accountant knows best”.
Hi Janelle,
Sounds like your gut is trying to say something !!! Another popular saying is “If in doubt, don’t…”
If you had no doubts, then you would be feeling quite different about things. Since you are not, ask your gut “Why not?” :p It may simply be that you don’t yet know enough to be SURE. It may have nothing to do with Yale themselves, but simply “YOU are not yet ready for this!”
Give yourself some time to get “easy” about property and investing in it. If someone is trying to rush you, it is not usually to your benefit !!
Benny
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