Hi KSJA,

  Good on you for putting it out there !!   There have been several posts recently discussing this "Interest Only" side of things.   Probably because our Mums and Dads (or grandparents) were brought up that you "Pay cash for most things, and pay off as quickly as you can those large-ticket items like houses!"   Sound familiar?

  So many of us were in the same boat – and the concept of paying Interest only goes against all we were taught by our elders.   It is a learning curve, but one you can learn to handle.  Let's look at your questions one at a time…..

  Correct – Interest is calculated based on what you owe the bank.   Equity growth is your future gain (unrealised as yet – a paper gain if you will).

  No, there is far more to it than that !!   First, many would say to buy something that is positive geared – i.e. it pays you MORE in rent than the cost to purchase.  If the rent you will receive is only equal to what the Bank charges in Interest, then your example is of a NEGATIVE geared property,  Mostly these rely on growth of Equity – but meantime, you have to fund it from wages.  

  So first, decide whether you want to purchased positive geared properties (so the rent received WILL cover the Interest, Rates, maintenance, insurance, etc – plus a bit extra for your pocket).  Then, when buying, look for a property that you can quickly "add value to" – it could need a clean up, or "look daggy" (worst house in a good street).  It could need a new stove, or a whole new kitchen.   You buy it cheaper because of this – so less loan to pay interest on – do the work, and rent at a higher rate.  You might also be prepared to sacrifice Income for Growth (buy a place with enough land to be sub-divided later).   The latter might be negative geared, but if that works for you, then go for it.

  Many answers to this one. 

      a. Yes, IO loans are often only for 5 years.  But by then, you may well be in a position to completely re-structure your loans anyway, so you might take out new loans (with same lender, or another…)  

      b. Start paying principal in the 6th year?   Well, there are ways to do far better than that WITHOUT actually paying a cent off the Principal – have a read up on Offset Accounts – there are several current posts about these – Offsets are the bee's knees !! 

      c. The "living off rental income" likely won't begin for some years (depending on how quickly you amass a portfolio, and just how positively geared each one is).   But yes, you could quite soon be having your IP's paying you money, even if not enough to live on right away. 

  Here is someone else who was struggling a bit with Offsets and paying Interest Only – read their post (the first one) then some of the replies :-

https://www.propertyinvesting.com/forums/help-needed/4349510#comment-296688

  It might engender more questions, but that is OK too.  The main thing is to get you thinking of a new way that works really well…..  

Benny

Hi MI,

2 x $250k IP's should be able to do that. 

Or look outside the square – another post today mentioned "executive renting of apartments" – a huge return if furnished well.  Works in Sydney – but will it work in Brissy too?    That I don't know…..

Benny

Hi Boro,

  I see you have just joined up – welcome !!    Your name is on the bottom of the screen, but don't worry – it will be gone pretty quick as more people join and nudge you out of the way. 

  Good work for getting some of the early work out of the way (seminars, books, etc).  Don't worry, it gets exciting pretty quick. 

  Re your question "What is start small?" – I would say start with one property – don't try to buy four just because a lender will give you a million $$    Also, you might already be starting to get a feel for which branch of property investing takes your interest.  Do you have a particular area that appeals?  e.g. buy/hold, developing, buy/reno/sell, etc.

  A smart move to have a sit-down with a Broker first.  Those on here are well versed in this style of investing and likely have a bunch of properties of their own.   Watch for the sigs that show their expertise.   They'll probably be along soon to say g'day anyway.

  First, get a feel for WHAT you want to do.  Get your finance questions answered, and a plan for "the way forward".  Then pick an area in which to invest (ask on here for what it is you seek, and see what replies you get).   See, some areas are already moving, others are showing signs of moving.  You might be wanting to "ride the wave", or maybe you just want to paddle your feet first.  Buyers Agent?  Could be – I'm pretty sure we have some of them on here too.

  You appear to be starting out from a healthy base.   Decide where you are going, and I'm sure you will be steaming along in double-quick time.  

Benny

PS  Re free seminars, most of them ARE worth attending (IMHO).   I have attended several seminars over the years, and learned a lot, but also met some great people !!   The networking is worth gold, even if the seminar was a bit ho-hum !!  But be careful when a seminar leads on to a "Buy a property through us – and, by the way, how much Equity did you say you have in your PPOR?"   If you get that question, walk away QUICKLY !!!   They will be looking to sell you an over-priced piece of junk which will require equity from your PPOR to make it all work. 

I recall this kind of thing happening around 2000 – 2002 (I think).  Everything was booming, and these groups would tout "cheap properties" by bussing people to smaller towns/cities.  Of course, ANY more remote town is going to have a completely different pricing structure to Syd, Mel, Bne, etc.   So they promoted these "cheap" places – even with their loaded commissions on top, the prices SOUNDED cheap to city buyers who hadn't become familiar with local prices.

Even trips to the Gold Coast (they flew you up from Syd for FREE) had Sydney-siders saying "Wow, that IS cheap!"   These buyers didn't know what they didn't know, so were lulled into purchasing properties that a local would have picked up for at least $50k less.   I heard even the route that took them to the inspection was carefully planned so that buyers wouldn't see any billboards promoting OTHER off-the-plan properties for way less cost….. 

Oh, and the buyers were "never left alone" to wander down the street (don't want them looking in local RE offices, now do we?).

And any "deal" would involve equity in their own PPOR, as the valuations for the new "investment" would never stack up on their own.   It is a shameful practice.  Be sure to wise up all of your friends who even sound like they are "looking at property investment".   Send 'em here instead !!!

Benny

Hi Chris,

   Let me echo what so many have already said !!   First, welcome – you have come to a good place.   Take notice of the helpful suggestions, and you will be blown away by what you can achieve.   It is great to see one so young, yet knowledgeable enough to know when they don't know enough….

  The answers are all here – and yes, +1 for the land option from me – it gives you so many more advantages. 

  Take special note re Offset accounts (there are several recent posts re these).  They are the best thing since sliced bread.   Seek specific advice from the experts (those whose signatures and replies show they know what they are talking about).   I'm sure many of them would jump at the chance to assist you with your first purchase.  

  Well done – go for it !!

Benny

Hi microchip,

  I can't help directly with your questions, but just wanted to offer an example of "options available to you" (possibly, depending on which Council…..)

  Here is a link to the Brisbane City Council website. 

http://www.brisbane.qld.gov.au/planning-building/applying-and-post-approval/how-to-get-advice/index.htm?utm_source=corphome&utm_medium=mega_nav&utm_term=-&utm_content=image-version&utm_campaign=mega_pb_aapa_how_to_get_advice

  Reading through that webpage, there are different offerings depending just where you are in the process. 

  In your case, perhaps the area titled "Development advice for people who are unfamiliar with the development assessment process" could work for you.   Perhaps your preliminary meeting might have you put questions like "What kind of dwelling would Council see as desirable for this part of town?"    Or "For this block size, in this area, could I build one/two/three separate dwellings?"  Or, "Is there a better dwelling style that would allow more homes to be built – e.g. duplex/triplex instead of separate dwellings?"   

  Could it be that they may look more favourably on STCA dwellings, so would allow more to be built?  If so, would you want that?  

  By asking them what they would want to see there, you should maximise your chances of having an easier approval process (almost like having "pre-approval" really!!)    Later on, for a fee, you can get specific information relating to just what it is you want to do.

  Good luck with your venture – and do keep in touch re results,

Benny

Hmm – perhaps they are at risk of running a nearly empty bus !!   I imagine groups like this would prefer to leverage a "full bus" when cajoling some buyers ("Look, there are all these people on the bus – if you don't sign now, you could miss out!" – that type of thing).

Sounds to me like a good place to stay the hell away from….  despite the free ride !!  

Who knows – your NOT turning up might save a couple of patsies from parting with their hard-earned….. 

Benny

Hi Qlds,

   They have said Yes to me, and I'm pretty sure I have it over you in years, son….. 

Benny

Hi Roben,

  I see you have recently joined us – Welcome !! 

  Sorry, I can't help with "one paint type", but your post prompted me to ask a couple of questions that may (or may not…) help somewhat.

  What I know of as "cladding" is often metal with a kind of colourfast surface (i.e. meaning "never needs painting").  Is that similar with the vinyl?   I don't know the stuff – the fact that it "doesn't need painting" would not preclude the point that it "may be possible to paint it".  I just don't know.  Do you have a local friendly paint shop that can help out?

  Maybe try three or four "local paint shops" until you find one who has "been there, done that" or has seen/heard of it happening.  Where a business operates for many years, the owners do collect a lot of "war stories" that might help in your situation.

  Can't think of much more than that right now, but good luck with your search,

Benny