Originally posted by elbowgrease:Hi hiphop. Good on you for making the decision to start. And it’s great that you are a good saver. I’m newish at this myself but I offer the following to you.
First of all, if I may ask, what is your situation now – How much savings do you have now?
what do you save each week?
Do you have a mortgage, rent, live at home?
If you have enough savings now, there’s your first deposit! And if you haven’t bought a home before you have access to the FHOG. If you can, maybe borrow from friends/family? This will give you a great head start.
Maybe buy something that needs a little doing up, have it revalued so you can access the new equity(and if you can do the work yourself it’ll save a lot) – then voila, the deposit for the next place. (Although if claiming FHOG you may/will? need to live in the place while doing it up, then move out (back home?) when you rent if out). For your second and subsequent doer-upper-ers finance them at 100% if you really don’t have enough to put even a small deposit on them, and find a bank that will take into account 100% of rent as income. If you need the name of a good broker to help with finance my guy is great.
Maybe do a couple of wraps as well.
If you are after a passive income of 50K within 5 years you will need properties returning $50 each to your pocket every week (ie: $50 more than the loan interest payment – have interest only loans too btw). Unless you buy very well at the moment, that may be a difficult task to achieve. Although if you’re happy to rely on it, you can take into account what you might get back on depreciation, to go towards that $50 per week.
Perhaps set your goal date a few years longer so you have a chance of riding up the next boom. If you can wait that long, the value of your properties will have gone up – more equity, more deposits for more houses, and by then there may be much more of a chance of getting 50K income you desire. I know it means waiting til you are 33, but at 33 and having a property portfolio of possibly over 2 million you’d be doing pretty well!
You may end up starting out with -ve cashflow properties, but if you are happy to contribute an amount each week to make up the shortfall, and can wait for the next boom, you can then sell one or two of them and distribute the profits over the remaining properties making them cash +ve.
If you still set your goal at 50K income in 5 years time, you will need 20 properties to do this. That’s 4 per year – not unachievable. If you move the goal posts to about 8 years, that’s only 2.5 houses per year, really quite achievable.
Don’t despair, if you set your goals and work very hard at them you’ll get there. My very best of luck to you.
wow, excellent advice here. I appreciate it greatly.
As far as my self I have about $7000 saved and am saving about $150 per week although this will increase to $250 (or even more) in a couple of months time once I hopefully overcome a health challenge that is costing me a bit at the moment (but is important). At the moment I’m living with my mother and we share all the expenses. My rent and living expenses are relatively low.
I guess I almost have enough for a deposit now but I plan on saving and researching for another 3 months or so and then once my health is fine and I’m confident in the investment knowledge I have – I’ll jump in and get my first investment property (after finding the best possible investment property with in my price limits of course).
I haven’t used the FHOG but probably wounldn’t use it unless I do something like you suggested as far as move in and do up the property although at this stage I would prefer my first investment property to not require too much work (if any).
Interesting advice about “interest only” loans. If possible, I’d prefer to do “p & i” loans so that I own the asset after the 25 years HOWEVER, there are times when interest only loans may be the only way to still get positive cashflow, so I’ll definitely use this method to my advantage. I wonder what the best exit strategy is with “interest only” loans? Is it to realise capital gans and sell the property once it increases significantly? Or would it be better to just keep borrowing to invest from the equity as the value of the property increases?
I will consider 100% financing where necessary (maybe with my 2nd or 3rd properties) however I feel that once I have built up some decent investments and have an excellent understanding of the property game I should be able to go back to paying a deposit etc. I’d greatly appreciate the details of your finance guy. Please email it to me at; [email protected]
I agree that my current goal is quite challenging however I do find it motivating. I am realistic though, and even if it takes twice as long to achieve, as long as I know I gave it my best shot, I’ll be happy.
Thanks again and I wish you all the best as well!
Adam
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