Hello Wicki

One way to overcome information overload is make sure the information you received came from people you are investing in real estate or from real estate investment books written by savvy investors who gone before us.

There are couple of books I can recommend that you will benefit and these are  a) How to Grow Multi Million Dollar Property Portfolio by Michael Yardney…his investment strategy is "Negative Gearing" more related to option 1…excellent book…highly recommend it.         b) Managing Your Investment Property by Rachel Barnes & Geoff Doidge…deal with the nuts and bolts of IP. Great books for up coming investors (e.g.forming your strategies and managing your property).

I would recommend to ready as much as you can and learned the rules of the game of real estate investment. From experienced reading more than a dozen books.. you got to form your "strategy" to fit your investment needs (e.g. Buy & Hold, Buy & Sell or Buy, Reno & Hold etc).

Today, I spoke to 4 different property managers from different companies from one particular suburb that I was targeting. Believe me, property managers are truelly great source of information when it comes to IP.  The key when you speak to them is ask the the sort of property that is HIGHLY sought by tenants. I call this approach, finding the "Need" then satisfy it. A lot of newbie in IP makes mistake by buying a property without who is the target audience is. As Steve McKnight often said in his books, give the market what it wants.

Personally, I will go with the option 1 because, CG is the catalyst to help you build wealth plus you attract good quality tenant. But, that doesn't mean option 2 is viable as well…which is something to pursue as well provided you've done your research enough and the figures stacks up. Do your due diligence to make sure that you are investing on a target area that has good CG. In addition, manufacturing your equity (e.g. Buy, Reno then Hold) is a good way of accessing your deposit from an existing IP and use it for deposit to your second IP…I'm with Jamie M, 100%.

Knowing your strategies in IP is very important because it avoids you from wondering wasting time and help you to focus and refine your winning approach.  I read some of Margaret Lomas books and they are good books which mainly deal with Positive Cashflow. Investing in high CG area is mainly Negative Gear property which is high CG and low in rental yield which is the opposite of Positive Cashflow.

Since you have enough equity, get the right education, mentors (so important) and build your "A" team (e.g. savvy mortgage broker, savvy tax accountant, lawyers etc)…you cannot do it a lone. PLEASE MAKE SURE THESE PEOPLE ARE INVESTORS THEMSELVES. These people will SPEED UP your wealth creation and put your through the right path to achieve your goals. Don't forget to acquire "schedule of depreciation" because it could add thousands of dollars back into your pocket to servicing the loan – don't forget to get "interest loan" only mortgage. Pls have a chat with your mortgage broker about this.

All the best.

thanks for the clarification xdrew.

Hello Matt B,

Thanks mate. I couldn't agree more with you…..fall in love with the figures!

I know how time consuming doing your due diligence when looking for the right IP.

With this tool, I can see its advatanges (e.g., saves you an enormous time).

Excellent

Leo

Hi Wattoette

Due Diligence will mitigate your risk!

Get a qualified building / pest inspector to access the quality of the property to make sure it is not falling apart. The report will determine if there are any major issues with the property and if there are any structural damage (e.g. termites etc).

PCF mostly can be found in regional areas because they are relatively cheap. If you do your due diligence it certainly help you make inform decision about what you are purchasing.

Also, if you buying from regional area, get 3 different local property managers and have them visit the property and see if they find the property will required constant maintenance since they deal with this type of issue 24/7.

Don't ask the agent since he is working for the vendor and commission…so you won't get much help.

Good luck

Cheers Leo

Go to http://www.residex.com.au and get your self either a one off or annual subscription of IP report for all suburb in Vic include Australia. Such reputable report gives you historical CG of areas you wanting to target including suburbs that are experiencing good growth at present. But, of course you have to do tons of research before you spend your hard earned money to avoid costly mistake.

Put in your tenant hat on and what would think if you are a tenant, what would be a convenient way to have separate show room and toilet particular in busy morning? I assume there is an exhaust fan installed in the unit? Think about also, if you combine the two, if you live in the unit, and you have some visitors wanting to use your toilet while you are having a shower? Always, think from a tenant's perspective unless you decide to live in the unit yourself.

But do your due diligence first as Catalyst says. Very important!

Trippsy25

Everyone has his own opinion and I agree on most of them if not all.

If you hear from some that there is a booming town or area and the rental yield is excellent blah..blah..blah.  The first thingh I would do is conduct an immediate RESEARCH /DUE DILIGENCE of that particular area or town. Find out WHY that town is getting attractive for investors (e.g.., population growth, demographic, rental vacancy etc). I couldn't agree more with Den.

Then, if you are happy with your research outcome then make a move. I woudn't encourage you to wait for 4 years because by then the market would have changed which is a long time to want. Particularly, if that the town you are targeting is experience slow but steady growth, CG (capital growth) will rise due to DEMAND hence that $110,000 in 4 years,  might not be enough to secure that property. Let say if that town is undergoing slow but steady growth (e.g. 5 per cent per annual). If you wait for 4 years, that property you are eying will be worth $133K hence you missed out on the CG plus you have to find 23K to make up the difference.

Conversely, the opposite could also happened (e.g., decline in population etc) hence insufficient renters to rent you property. Hence, there are a lot of things that is fueling that growth, JUST FIND OUT WHY!!!!!!

By doing DUE DILIGENCE will mitigate the risk in pursue in IP and could avoid you making costly mistakes.

All the best.

Cheers Leo

Time value of money is important. If you invest that money to buy another property in high CG area, rather than paying of your debt, you could use the increased in equity in the future for another deposit of IP. Equity trapped in your Principle Place of Residence is lazy money, a money you can invest in come producing asset.

If you invest in area where it has history of high CG, plus every 7-10 yrs, historically, the value of your property doubles in value hence, in 10 years, you'll achieve your goal..better net worth whereby your equity has grown substantially.

I was exactly the same situation as you are now until as advised from people I met that who invested successful in real estate that I will miss out on CG each year if I pay substantial amount of money towards my home mortgage if i sell my IP.

You also need to factor in, you will need to paid CGT if you sell your IP. But, you also remember your Principle Place of Residence experiences capital growth each year, hence your equity goes up while your debt remain the same.