Brought two IPs and one naughty pug (the latter was definately my proudest purchase)

Your welcome. Following on from what Shelley said – Margaret Lomas has some really good books. I enjoyed her "20 must ask questions" book.

In fact, a good way to learn on the cheap is to check out the IP books in your library or have a quick search of Ebay every once and a while.

Jamie

Congrats on the decision to delve into the world of property.

It can be a scary time for first home buyers – the process can seem confusing and it feels like there's so much to learn.

As a mortgage broker, this is obviously going to sound biased, but I think your first step should be to consult with a good mortgage broker. One that will explain the process to you, provide you with sound advice, answer your questions promptly and make your first purchase a hassle free experience – you also need to feel comfortable dealing with them.

The mortgage broker will also be able to analyse your current situation, determine how much you can borrow and source you the best deal for your circumstance. An investment savvy broker will also ensure your finances are set up correctly from the start (avoiding cross collaterisation of properties to help you build your portfolio without the hassle that crossing loans can bring – this is a more complex concept and something that you don't need to worry too much about right now).

A financial advisor, and I don't want to appear to be generalising, is probably not going to steer you towards investing in property – they don't get paid a comission on the investment property you buy.

Speaking with an accountant will help. However, as for the mortgage broker, it's important to find an accountant that has a sound understanding of property investing.

Cheers,

Jamie

Hi Stacey,

I agree with the rationale behind not saving the 20% to simply avoid paying mortgage insurance. Your spot on, it will take years to save the 20% deposit – however, you can get into the market sooner with a much lower deposit (possibly 5%). Yes, you'll have to pay some mortgage insurance (which can often be capitalised onto the loan anyway) but you stand the chance of owning a property that's likely to appreciate in value over the next two years.

Just say, in very simplistic terms, that you purchase something for $200k that increased by 10% p.a – and you took out a 95% loan. In this scenerio, you would have paid about $5k in mortgage insurance (which some banks will allow you to capitalise onto the loan) and your property would have increased to around the $240k mark. By using a smaller deposit, paying some mortgage insurance and getting into the market sooner, you've just made $40k in equity….sure beats spending the two years saving the 20% deposit 

This is a very simplistic explanation – but the point is, mortgage insurance allows you to enter the market sooner rather than later and as a borrowing expense, it is deductable over a 5 year period.

Jamie

Hey Scotty,

I think knowledge is the key. The more you learn, the better informed you become and the less mistakes you're likely to make. Nothing wrong with making mistakes though – we learn from them.

How I got started
In late 2007, after being overseas for two years my then partner (now wife) and I bought our first PPOR (three bedroom townhouse in Canberra). At this stage our only aim was to pay off this PPOR as fast as possible.

In August 2009 my wife brought up the idea of renovating and selling a house. We ended up having a long chat with a Real Estate Agent at LJ Hooker who talked us through the pro’s and con’s of buying, renovating and selling and property investment in general – he also steered us towards some good books . To this day, I don’t know why he showed such an interest in us (giving us two hours of his time) – it’s easy to think that he wanted to sell us property but he actually talked us out of buying then and there. We are forever grateful and make sure we keep him informed of our progress.

We had our PPOR re-valued and took out a Line of Credit for $50k. This was used as a deposit for IP#1 and IP#2.

IP#1
In October 2009 we exchanged on a 2-bedroom unit in Queanbeyan, NSW. We bought under market value – the vendors being desperate to sell because their tenant was a drug addict who hadn’t paid any rent. Renovations were done after exchange and before settlement.

We spent just over $2,500 on renovations – new kitchen (wholesale price courtesy of my brother in law), tiled over existing tiles in the bathroom, new vanity (free, thanks to my father in law who is a cabinet maker) and new paint. We also did a lot of cleaning…. The property was re-vauled at $40k more than we bought it for.

IP#2
In January 2010 we bought a three-bedroom house in Wagga Wagga, NSW. This is tenanted and is neutrally geared.

IP#3
In May 2010, we exchange on IP#3. It’s a three-bedroom house in Canberra. The deposit we used was from a Line Of Credit we took out  on IP#1 (after renos, we had $40k in equity we could access). 

We're now on the search for IP#4 which we will use this years tax return as a deposit.

During this time, I've also changed careers and have become a mortgage broker. It just made sense, I enjoy everything property related and now I'm able to help others structure their finances to grow their portfolios.

As for the books, my person faves for explaining the fundamentals are:

Building Wealth through Investment Property – Jan Somers
Real Estate Riches – Dolf de Roos
Seven Steps to Wealth – John Fitzgerald

There's also a couple of monthly magazines – Your Investment Property (YIP) and Australian Property Investor (API)

Forums – There's a couple of good Australian ones (this included) that hold a wealth of up-to-date information

When you're ready to start building your portfolio, surround yourself with an experienced team that will make your life easier. A good IP savvy accountant, a good mortgage broker who know's how to structure finances for IP accumulation and good property managers.

All the best

Jamie

There's plenty of good sources of information. I like the early Jan Somers stuff that teaches the basics of investing. Somewhat outdated, but the messages in the book remain relevant today. Forums like this are also a great source of info.

If you haven't already purchased a property, then I'd make that a priority. The first one is often the hardest.

Jamie

Sounds fine – why not use the LOC for a 20% deposit? That way you can avoid paying lenders mortgage insurance. In most cases, I have no probs with paying lenders mortgage insurance to purchase a property, but if you've got a $250k line of credit then it might be worthwhile chipping in the additional 10% for the deposit.

Jamie

A good mortgage broker in Canberra

Most of us (myself included) are paid a comission from the lender you decide to go with. The beauty of using a broker is that we have access to a variety of lenders, all with different lending criteria and policies. Therefore, while one bank might knock you back, another might be more than happy to take you on as a customer.

Jamie

Personally, I wouldn't get too concerned about mortgage insurance and therefore wouldn't allow it to be the main factor that determines my decision.

It's a borrowing cost that can be depreciated over 5 years, and without it, we would all have to save 20% deposits to purchase a property 

Like prop said as well, any 1 bedroom unit under 50m2 will be difficult to source finance for.

Jamie