First IP

Hi Paul

Here’s something for you to consider from Investment Property Financier Guru, Bill Zheng:

Let’s say you know where to pick the best properties with the highest growth. So you buy a 100k property with 30% growth a year, but you have to come up with 50% of your money ($50k) because that’s all the finance you can get. Your property has 30% growth, which is $30k for the next 12months (and interest repayments at 6% is $3k ($50K x 6%): therefore the return on your investment is 54% ([$30k – $3k])/$50k)

Let say I am a very average investor when I come to property selection, and I can only find $100k property at 10% growth per year, but I know finance well and manage to put in only $5k of my own cash, obtain 95% finance for the property. My property only has 10% growth which is $10k
for the next 12 months, and interest payments at 6% is $5.7k ($95k x 6%); so the return on my investment is 86% ([$10k – $5.7k])/5k)

86% is a higher return than 54%!

Although this is an oversimplified example, I’m sure you will agree that it is easier to pick a property that will grow at 10% a year than one that grows 30% per year.

Just thought you might find this handy as you essentially have a number of deposits sitting in your $50k nest egg. It just comes down to what suits you.

Cheers
Steve

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Hey everyone, i’m not only new to this forumn, but investing all together and hopefully some of you ppl will be able to give me some ideas or advice.
In Feb next year i finish my apprenticeship, and once guaranteed a full time job i would like to buy my first IP.
By that time i should have about $50,000 saved and would be looking at a property worth around the $200,000 mark.
Do you ppl think i would be better off to start with a unit or a house?
Also would $50,000 be enough considering i currently do not own any property.
Any ideas or advice would be great, thanks
Paul.

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