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Hi Daniel and isco,
I started by reading Steves book 3 years ago, when the market was changing. I would recommend reading Steves second book, 260+ properties in 7.5 yrs, and then read a variety of books by different authors. It can be confusing, but I have found it really useful to "collect" a range of strategies from different authors, and you can begin to see that different strategies work for different people in different circumstances, at different times.
It is also a good idea to re-read books a few years later, because you will have skipped over stuff you didn't understand the first time and you will be able to absorb it the second time.
Get on some email newsletters. This will give you small amounts of information regularly. I find Michael Yardney's newsletter has useful articles attached. (His website is called property update I think)
Get involved in an investing group in your area, or start one yourself, where you can learn together. This helped me to see what I could do and gave me some more people to get ideas from. And some more people who I could borrow books from!
Then, once you have some more knowledge, make a plan of how you want to achieve whatever it is you want to achieve.
Some books I've found useful:
Rich Dad Poor Dad – Robert Kiyosaki (and his other books too)
Five Years to financial freedom – Morris Kaplan
Margaret Lomas's books on Positive cashflow property
Jan Somer's booksThere have been other threads on what are good books to start on. Maybe do a search and see if you can find it.
The point here is, by all means do your research, due diligence, and educate yourself…
but wouldn't you be a bit silly if it stopped you investing in a promising deal… and there are still promising deals (even with the statistics).
Just because there are no $45,000 properties anymore, doesn't mean you can't begin.
In order to get a positive cashflow property you may need to become more creative (Steveé second book has some ideas, as do other books on the market).
Find a place to start: maybe a unit, maybe build a share portfolio first, whatever suits your circumstances, but start somewhere. I suggest you read some more and subscribe to some investment email newsletters, or some money magazines, or take some other action to learn more. Education and research will show you the direction to take that is right for you.
Some businesses work with first time investors to help them begin to build thier property portfolio (for a fee). This may be worth checking out. Sometimes they give you some advice for free.
Get a wide range of advice and take action!
Research and education….
That was my starting place.
I guess may (very simplistic) view is to …. SAVE.
I would continue to pump money into my homeloan, save some in an investment account and begin small with some shares or something like that. Then, once the market has risen, and some extra is paid into the mortgage, your friend should have some equity there to play with, as well as some investments on the side.
Kelly
What do you want from your property? Do you want good capital growth? Do you want a median house? What sort of tenants do you want to target? (middle class, or lower?) Do you want to renovate or subdivide and sell?
In terms of potential capital growth:
Suburbs located near the new Eastlink tollway may be worth a look. Some of them may have already gone up in price, but surrounding areas may go up once it is open.Berwick and Pakenham are located at the end of the suburban crawl currently, so as demand for houses rise, Melbourne may continue to creep in that direction.
Kelly
How do you know the heritage listing of Property 1 will be removed?
Hopefully you have done all your research in the area and have written down what you would do in a worst case scenario. It seems good, and congratulations on your purchase.
Who pays the debt? The company or trust or you?
Kelly
Do you have a loan for the land? If you build a house and borrow more to do it, will the cost of the loan be too much to positively gear?
I would put in enough cash into your IP/land to make it pay for itself (I mean, so that the tenants pay for it all), and then put the rest of the cash into something else that will work for you, another investment maybe.
As to where you PPoR fits into that… You could put the extra cash into that… Remember that the costs associated with investment debt is tax deductible, whilst your home debt costs/interest/etc… isn't. That may influence where you want to put that extra money, as you would want to have the least debt on your home.
As far as a business, I wouldn't want to buy a business that required my presence or much of my time (by "much" I mean 12 hour days, and no holidays etc…). And I'm sure businesses are more complicated, in terms of accounting, staff, etc… But some businesses give a great return, so I think it will come back to your goals and where you want to be down the track.
Kelly
That is how it works. Usually the vendor doesn't go and physically go and get another mortgage, they just "lend" you 20% of their property, which you pay them back at a higher rate. Usually vendors who don't need the money immediately are the ones that are more open to doing this.
Sometimes the vendor does want some sort of deposit, say 10% or something, with the 2nd mortgage being taken out of the balance. But all that is negotiable with the vendor. I hope it works for you!
Kelly
Do you have to be a subscriber to the site?
How do you get loans for all that property???
Kelly
I have also recently looked at getting a brand new property, and I was told that a QS is THE qualified person who works out the depreciation schedule, while your accountant looks after the tax side of things.
That is the depth of my experience.
Kelly
Rental income increases differently in different circumstances.
Sometimes it is in the rental contract to increase according to inflation.
It rarely increases according to capital growth. (That I know of anyway)
But (in recent times) it has increased due to demand and supply (demand is high and supply is low).Kelly
Strata titled properties usually have a body corporate because they have some shared land.
The actual properties within the strata title can still be subdivided and be on separate titles though. (I think…can anyone else confirm?).
Kelly
Congratulations!
KellyThe Article was definitely interesting. I must say, I believe that when you earn something, you treasure it more. But I also believe in the power of positive thinking, and in believing in yourself to do the amazing things that you are capable of inside….
I find it a difficult concept to grasp that these two things are opposite.
Kelly
Call a mortgage broker now (I mean, don''t wait till you have a job) and ask them a series of questions. A lot of lenders are willing to lend if you have been in a secure job for a little while. This may give you an idea of how long before you can get a loan.
Talking to different people is a great way to learn things, even if its just other peoples opinion. It gives you more things to think about, and sometimes gives you more questions to ask.
And Steve didn't buy 260 properties in one hit. He bought them one at a time and he had a strategy to help him. (eg. Positive CF, Family trust, etc…) Maybe begin to think about some strategies that may work for you, or think about the direction that you want to take first.
Kelly
If you buy an IP first, you will be ineligible for the FHOG later, as you will have already bought one house.
If it is an IP straightaway, you should be able to claim any cost associated with the IP, but check with you accountant (who should specialise in tax stuff with IP's) and see what they say.
You will really have to crunch all the numbers to see which way will be more worthwhile. Good luck with that !!!!
Kelly
The other thing is, the more that you redraw, the longer it will take for the property to turn into a positively geared property. Or is it that you want the tax benefits over the positive cash flow?
Instead, could you use the equity (because you have a fair bit) to buy something. Obviously not your PPOR, but maybe another investment, thereby increasing your wealth…
Kelly
Look at the rental return you could achieve with your home – turning Investment prop. Will you be able to survive with the mortgage?
If you rent out the new house (the one you are building), you will have much more depreciation benefits from all the new fittings etc.. which is an on-paper loss that you can offset against your taxable income. This maybe more financially viable for you, and then you could look at making it your home in 4 years or so, when a large portion of the deprciation has been used.
As far as trusts, do some reading. It is hard to know because you haven't given much information. You could also talk to an accountant that speciallises or knows alot about trusts.
Kelly
