Hi wealthyivd,

Most of the views so far have covered it for you.  With good investments, "time in the market" will help you have the ability to build your property portfolio.  Alongside this there are two primary strategies:

1) Capital growth and then refinace – Chris Gray / Michael Yardley strategy

– Property goes up in value
– Property is refinanced
– Some of the increased captial growth is used for deposit, some to help service the increasing debt
– Over time you will need to get into low doc or no doc loans as the banks will be nervous of your serviceability
– As long as capital growth increase is faster than debt levels then you are okay, but there is risk

2) Positive Cashflow properties – Steve McNight / Hans Jacobi strategy

– Positive cashflows enable you to make money and save for deposits
– You can continue to get further loans as your serviceablility is still good
– In this strategy it is all about trying to find a good property that has positve cashflow without too much risk (watch out for short term wonders) and whilst still having reasonable capital growth (this is where most of the money is made in property)

Of course, many people combine both in their portfolio

In both 1) & 2) investors look for opportunities to fast track their ability to leap frog into more properties quicker e.g.

– renovation opportunities
– strata titling opportunities
– buying below market value
– buying at the bottom of the market
– property development opportunities etc.

As always with property, I recommend that you build up your property education and then work (or get help  to work out) an individual strategy that works for your own needs, goals and financial profile.

Cheers

Mark

Hi Young Investor,

As you can probably gather from the posts, everyone has a view and there are pros and cons of different strategies.  You also need to factor in your individual circumstances (salary, cash reserve) and risk appetite.  The type of property you buy also makes a big difference ( gearing, maintenance costs etc)

My own strategy has been to minimise my deposits whilst I have been able to get full doc loans.  This kept my cash reserves high so that I was able to leap into more properties earlier and use more of the bank's money rather than my own.  I was also aiming to build my asset base quickly.

Of course the net benefit of a given strategy will depend on the market conditions and your specific investment decisions, but I have done fine so far. 

Commercial tends to scare off early investors, but many seasoned investors swear by it. If you go down this route, tap into someone who has some experience in this field

Mark Taylor

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser

Hi there,

I would suggest that you provide a little more detail on the specific strategies that you are interested in understanding.  Also be careful as companies will have a prejudice to their specific strategy.  Keep working on your understanding of the different strategies and your personal circumstances / objectives so that you can make the right decision for you.

Established v newly completed properties:

Off the plan / newly completed property are typically less maintenance and have some depreciation benefits (more significant for high income earners).  On the downside, newcomers can often pay too much and with established properties there is more likelihood of getting under market value,  Try and find someone who is street wise to help / support you on your first few investments…

As always, saying one route is better than the other is dangerous as every investment deal should be considered on its own merits.  Look at the numbers and do your own research.

I have a mix of both in my portfolio, but this is what fits my particularly circumstances.  Here are some questions you might want to be asking re the property:

1) What sort of gearing/cashflow strategy would they be recommending?
2) Are they advocating a hold and refiance, or a buy and sell strategy?
3) How would you source the properties?

I am not so across the covered call options on managed funds, mainly having done CFD trading and general managed funds.

However, I would be looking at how you extract your returns with sharemarket investments, the risk profile and then how this investment strategy interacts with your chosen property strategy…

Hope this helps!!

Mark

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

HI there,

There are a few considerations you need to take into account. 

When buying a house you need to look at all the entry costs (e.g. stamp duty etc) of purchasing not just the deposit

The banks will also look at your ability to service the loan, which based on the answers given, you would probably need a guarantor to cover it.

Don't forget that you also need to consider the ability to cover any cashflow shortages.

If you can find a way into the property market earlier rather than later then it is normally a good thing, but you will probably need to partner with someone to make it happen.

Cheers

Mark

Comments are of a general nature and may not be relevant to your individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

Hi there,

You will need to verify with good property accountant, but in terms of negative gearing and trusts, then what I have seen is the following:

1) A unit trust is set up with beneficiaries.  When a property is bought you allocate the capital growth units and the income units to the stated beneficiaries
2) A company is set up to adminster the trust with some directors
3) The beneficiary who has the income units takes out the loan with the bank
4) This beneficiary can claim negative gearing on the difference between the income from the property and the loan amount 

Mark