Hey Simon,

you are experienced in both property and shares;
what's your take on the big contest, taking away the mitigating factor of risk?
You know my feelings on this issue; I prefer the safety versus risk of property to shares.

You don't see it that way; in your opinion, what is/has been the best return for your money? Are you nervous about the possibilty of a crash that would wipe out the value of your shares?

As a side note; were you in shares during the 1987 "crash", and if so, did it affect you? Are the crashes or corrections localised like property?

The reason why I ask this is we are mainly in property, and only recently, and in a small way, in shares. During the last "correction" of the property market in Aus since 2003 we have only had growth. We have no properties that have experienced a drop in value – quite the opposite thankfully.

I agree with Chris.
Education on finance and the real estate markets is crucial. Start now and never stop.
If you have a lot of comsumer debt (other than your home loan) it is not adviseable to go into property investing until this is cut out.
The reason why is that to be a property investor requires very good money management habits/practises, and unfortunately, people with lots of consumer debt tend to not have those habits.

If you are relatively free from comsumer debt  then well done, and you should start to formulate a plan.
Start with working out what percentage of your income you have free for investing, and work out how you can free up more of your income for this purpose.
Then set down a plan for saving a deposit, or being able to access any equity you might have in your existing home if you have one for a deposit.
Work out (with a mortgage broker's help) what you may be able to borrow SAFELY, what repayments you could afford should there be no tenants in the property for a while, what type of loan you will need.
This will give you a basic outline of your budgets and possible purchase price for an I.P.
Work out your strategy; buy and hold, flipper (or trader), renovating, subdivisions, developing, wrapping etc.
Then you can start to do some market research and try and identify some areas that may be viable for your strategy.

A couple of basic calculations for you to help work out cashflows on an I.P:

1. allow for approx 20% of the rent to be eaten up by the "holding costs" such as management, insurances, rates, repairs, 4 weeks vacancy, etc (this doesn't include the loan interest). This is probably a little on the over-cautious side, but it pays to over-estimate the expenses.
2. purchase costs for an I.P will be around 6% of the purchase price. Again; maybe a little high.
3. never take an agent's estimate of the likely rent as gospel. Do your own research on what the actual rents are for your type of property in the area.

Maybe if you can't find a pos cashflow property using a buyer's agent you could source one yourself. Anyone can buy a neg cashflow property; they're everywhere at the moment.

Make sure you get a Depreciation Schedule on the one about to be completed to help with the tax returns and improve the cashflow.

I'd wait until you have this one settled, tenanted and you know what the shortfall will be every week.

"Contrast this (of course) to the baby boomers, who: worked 25 hours a day for 10 years to save a 20% deposit. Once they got a loan, they had to walk 50 miles home from work (through snow) to their new house on the outskirts of town. Once home, they sat around on borrowed milk crates staring at the wall (couldn't afford a TV), and eating dirt."

This sounds like the "four Yorkshiremen" sketch by Monty Python. Funny sketch- was it art imitating life?

Nice photo Mike.

O.I.E,
The only time I can remember when the Govt caused house prices to be cheaper was when they stopped neg gearing on I.P's as a tax deduction back in the '80's. There was a fairly bad correction of house prices, and as all the investors were off-loading their non-tax deductible neg geared I.P's, there was a massive shortage of rental properties which caused the rents to skyrocket.
Nice one Paul and Bob.
They reversed the decision not long after this thank god.
Every time they introduce a new scheme to help out the first home buyers, or to generally try to keep prices down for all, it results in more cash available to buy houses, so then there are suddenly more people around wanting to buy with more money to spend. Demand is then on the increase, but stock doesn't always follow suit, and so the prices go up and absorb any of the 'savings' handed down from the suits. Good for investors – more cap growth.
The Govt should stay out of it, other than to cut back on stamp duty (good luck – too much of a cash cow).
Cutting back Stamp Duty won't make houses more affordable really, but it will at least get rid of some of the disgraceful rort that stamp duty is.
If it wasn't for the stamp duty from the last boom, Bracksy would have REALLY stuffed up the Vic economy. He did well despite himself.
Don't get me started on the water shortage – what's a dam? Thanks Bracksy and Thwaitesy. I know; let's hope it rains a lot.

As for the interest rate rises; I think it is out of the Govt hands; with our consumer economy continuing to roll along like an out of control train, the fed has no choice but to keep putting up the rates a little every few months to slow everyone down.
And of course; Xmas is only a couple of months away – more maxed out credit cards in Jan. That will cause another rae rise in Feb I'm guessing.

The other possible solution is what is happening here in the US; so many people over-extended and continuing to do so; they go broke, have to foreclose the house, the housing market stalls, the people can't spend as much (but god, they find ways to keep trying) and the economy slows. No more interest rate rises for a while.

.

First thing after starting to aquire knowledge (which is a never-ending quest) is to get the finances in order.
Start to adopt the mindset of a business owner; run budgets for your personal finances, keep records of expenditure.
Banks like to see clients who are in control of their money, have good savings history.
Establish what your likely borrowing capacity might be, start to look at the markets, learning the prices and values, establish what strategy you may want to go with; are you going to be a flipper, a buy and holder etc, and what types of properties you may want to target.
 

DON"T GET ME STARTED!!  oops; you did.

I am a Jenman fan also Tarae, have read all his books and read his website info every other day. I have already bought and sold several properties, and was an agent myself for a time.

Not everyone likes Neil; he is outspoken and 'takes no prisoners', but someone needs to be doing it, and he has helped many people save money (including me). He has also been instrumental in rescuing many people from terrible rip-offs at the hands of spruikers, conmen and some agents; even lawyers (usually all colluding to do the rip-off).

Also read "13 Real Estate Mistakes" by Neil, and "Confessions of a Real Estate Agent" Terry Ryder (a lawyer; look up his r/e investing website; HotSpotting.com.au)

With advertising, in most cases it is a waste of YOUR money. If you look at the r/e pages of any major newspaper on the weekends, or visit realestate.com, or go to the agent's websites, there will be an enormous amount of houses of all price ranges and configurations to buy. There will advertising banners for the agencies plastered all over the place. The main benefit of all that advertising is for the agents – not you.

I can promise you; the buyers are already looking on the websites, driving the streets looking for signs in frontyards, walking up and down the main streets looking in the agents' windows (have you noticed how many agencies are grouped together?).

All you need is a few flyers for the front desk of the agency, a picture and description in the window and a picture and description on the internet. max cost: $100 for flyers. The photos will be free. The buyers WILL find your property. The agents will always try to sell you the benefits of spending lots on ads. It's all BS.

Commissions are negotiable, and it is one of my personal gripes that an agent (the agency) can get $12,500 for selling a $500k house, and then do the exact same amount of work (or maybe less) to sell a $1 mill house and earn double the money! This is a disgrace; the average person cannot improve their income at all over a year unless their boss gives them a pay rise, but by virtue of a rising market the agents can become rich. Why should they earn so much more for the sale of the same product with the same amount of work? Offer them 1.5%. And don't be put off by the saying 'you pay peanuts; you get monkeys'. That's BS as well. Agents need ANY listing to make a sale, and if they get an enquiry to buy your house, do you think they won't try because they are only getting $18k instead of $30k? They'll be trying; don't worry.

Maybe structure their payment; 1.5% up to $1 mill, then offer more if you wish if they achieve the desired price (that they quoted you). Anyone can sell a house for less than the asking price. If they want 2.5% make them earn it. You can even offer to pay a fixed amoun to sell the place. Agents don't like this, but as I said; the commission is negotiable and if they don't accept your offer you can change it or ask another agent.

The problem is, most people only sell maybe one or two houses in their lives, so don't know what can be done in the process of hiring an agent and buying/selling houses. Lack of knowledge is expensive.

At this point all the agents reading this will be up in arms and saying " but most agents only earn an average income!"
Well, my answer to that is; it's your chosen profession – the majority of the planet is earning an average wage or worse. If you can't earn a lot of money as an agent and don' like that, then find another job.

I agree with F about the cheaper property, but not the 100% financing;
many people go for the more expensive, and quite often new, luxury townhouses, apartments etc., thinking it will be a better investment. They are not necessarily so.
Staying well within your means (especially for the first one will quite often be just as good an investment; you can usually get better rent returns with the cheaper properties, there are more renters for that price range and the financial stress (especially to get finance) is less. 
My personal view is that when beginning investing (or even for experienced investors) if you need to get more than an 80% loan (LVR of 80%) which usually requires Mortgage Insurance as well,  then your financial position is heading towards precarious. Life happens and sometimes you need to sell quickly, and if you are over-exposed this can be a disaster.
With a $30k deposit, that puts you in the $150k purchase price category which doesn't buy a lot these days unless you look to country and regional areas.
So you have 2 choices;
1. borrow more (not F's or my preference)
2. keep saving the deposit until you can buy a more expensive property without going over the 80% LVR and have to pay Mortgage Insurance. 

Some will argue against this, but I would like to see your first plunge a safe one.