HI there, I am a new to this forum, and also new to investing, I am a 27 yr old guy living in Sydney. I am working as network engineer, with a so so salary, I already have an investment in Melbourne but unfortunately that falls under negatively geared investment. At the moment, I have two of my friends who share the vision with me of wanting to actively pursue property investment, However there is a couple of questions that I would really need somebody to answer:
1. I have read the book 0 to 130 properties in 3.5 years by Steve Mcknight. and I think it is a very good book for positively geared investment. HOwever, I have witnesses a lot of my friends who are successfully earn lots of money by buying lands, buiding it and sell in about 8 to 12 months. Have anyone else also done this? What do you think about this strategy compared to the positively geared investment??
2.As I have said, I have 2 of my friends who share the same vision as me, IN order to reach financial independence by positively geared investment , do you think it can be reached by having three people doing together instead of only 1 (myself) doing it? I know that from Steve’s book, he was doing it with his friend as well ( Dave), What do you think?
3.Is it still possible to be able to find property that can give you positively geared investment in Sydney in current market? .This is so as the price of the properties in Sydney are mostly already averaged about more than $400.000
By applying the “11 second” solution , that means in order to pass the positively geared rule according to Steve, the minimum weekly rent has to be at least $800 , which is virtually impossible to find out this situation in Sydney nowadays.4.What do you think of paying interest only for the loan? ( I understand mostly this can be done for the period of 5 years or less only). As paying interest only, means that we can maximise the net cashflow.
Thanks in advance for answering my questions
Hi CygnusIce,
I can only give you an opinion on your Q1.What you would have to look at is:
Where are you buying the land??Because where I live( S.E. Qld) land is astonomical. Building costs are going up every day and getting tradesman esp. brickies and carpenters so hard you may have to wait for these trades up to 6 mths. Blow out your schedule a bit esp if borrowing for the land.
At present Builders margins are just not there like they used to be. It’s the developers that are making the big bucks.
I know that in Sydney and SA. the tradesmen are much dearer than Qld.
Regards
RitaIn answer to Q4.
I normally advise clients to pay IO on an IP esp when they are still paying off a PPOR.
You can get IO for ten years with some lenders.
It will maximise your cashflow.
However some clients are more comfortable knowing they are paying down the mortgage and that they will be debt free on retirement. These people typically only intend purchasing a few IPs.
Good luck,
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985Thanks for replying to my question ,Rita st and Mortgage Hunter, Is there anyone out there that have found a property in Sydney that is giving positive cash flow ? I would really like to know that if it is still possible to do this in the current market in Sydney
Thanks
two things id like to query; actually maybe three
(following from what is discussed above)1. what is PPOR? i see it used often here. im assuming its an owner occ? what does it stand for?
2. is it right to assume most people are pro-positive gearing (attributable to steve’s book? i am keen to get a copy in very near future; because i dont mind the concept of negative gearing, when depreciation comes into play coupled equity growth; is it not a win-win situation anyways?
do positively geared props benefits outway negatively geared ones?
if i was to buy an IP (im yet to make the leap)i would account for it to be negatively geared. is it wise to be conservative like this?
3. IO VS P & I, to me P & I is the way to go. My perception is that IO are for investors who plan to sell their investment props in 3 to 5 yrs (ive been told a major rule to prop investing is to never sell; until your living in your very own yacht anyways).
– does not paying off P & I maximise one’s equity 3 to 5 yrs down the track? equity one can draw upon.
I know thats its been mentioned, that it is ones preferences really. But general perception that i have is IO is bad; for long term goals anyways.
Just some of my thoughts. Please discuss.
p.s mortg hunter – thank you for your feedback to my prev post.
An answer to some of your questions…
Buying land and building is a great idea, but to make good money you need to be able to dedicate yourself to the job, meaning that the more work you put into other peoples hande the less money you make. knowing ppl in the trades is also a bonus! (be prepared to take time off work, and do an owner builders course at tafe)
At the moment im also thinking of doing the same, im looking for a block to develop in a timeframe of 2-5 years. My advice… FORGET about Sydney! its a joke what people want for land down here. and especially when some councils are asking for 40 and $50K community contributions per residence its a wonder ppl are making any money unless they bought the land 30 years ago…
look outside of sydney, country NSW is still an untapped Gold mine in my opinion, Dubbo, Bathurst, Cowra, Forbes, Parkes.
In the last 6 months i hav purchased 3 properties in the above mentioned areas, all paying for them selves (and missed out on many more) so they are out there to find, but are getting snapped up VERY fast by ppl who do this full time 7 days a week.
Walking down the main street of Bathurst will show you many properties under $55K that hav been sold in the last 2 months… just an example.
As for doing it with friends? all i can say is you better be good friends… tread carefully when money is involved…
Interest only is a great idea, not only to leave more money in your bank account, but you can still inject lump sum payments every now and again into the loan… when the 5 or 10 years is up, re finance the property, chances are the place has at least doubled in value and u now hav a ton of new equity at your disposal…
hope it helps
Just on TeacherK6’s comment on the lump sum repayments. I might be mistaken, but i think you can only make twice the normal repayments; and it has to be regular.
Any higher on the repayments and you’ll end up paying on the principle, which defeats the purpose, and banks dont like it.
Cheers.
p.s cheers by the way TeacherK6 on your other comments, very interesting
Some points.
PPOR = Principal Place of Residence + Your home.
IO vs P&I… I would still consider IO for the first 5 years to maximise cashflow. After this period you should have equity to tap and higher rent available. But it really is your choice.
Lump sums…you can pay lump sums into most products with no penalties. Certainly cash should be stored in your PPOR pref in an offset account. What if the banks don’t like it….who cares?[
]Cheers folks,
Simon Macks
Mortgage Hunter
[email protected]
0425 228 985
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