Hi everyone
I suppose Im looking for a little bit of a pat on the back or I am looking to be torn to shreds,but this is only my second post and I am very new to property investing but man do I love it
i cant seem to get enough info. I just wanted to know what you experienced people think of our first IP. we purchased for 150K with an xtra 10K for costs (160k) we obviously used equity in our home, it is tenanted for 250pw until 0805 our rates are1180pa body corp 610pa sinking fund 210pa management fee 10.1%. we are having it quantity surveyed and expect to be able to deprieciate it by at least $4500pa (the prop is a 2 b/r fully furnished unit which is approx 9 yrs old). have we done well for our first time around? we think we have but would like to hear what you guys think.Also what id really like to know is how people manage to buy 6or more props a year do they already have quite a bit of cash to begin with and do us beginners just have to wait the passage of time to realize CG or move into ventures such as flipping to gain cash deposits. I am so eager to buy another prop but we just dont have the cash.we still have a little eqiuty in our PPOR but not enough to secure abigish loan, I think maybe I just should be patient and not over commit. any advice or comments would be great.
crikey that took me a long time to type I think I might have to learn to type with my other 8 fingers as well! anyhoo looking forward to your comments.
regards mandy[lmao]
<<<<it is tenanted for 250pw until 0805 >>
Do you reckon you can still get this rent when the lease is up? I have properties I have bought about 5-6 yrs ago for half this price and cannot get $250 rent.
Where is the property?
Good luck with it.
Hi Mandy,
I have to say that I’m a bit worried that you’ve been sold a property with an artificially inflated rent. If you can still get $250 rent after the lease is up then I’d say you’d bought well.
Good luck.
LandtHi landt64 and yack,
thanks for the reply.
I do think Ill be able to get this rent when the lease is up as it is in a mining town with great demand.regards mandy [happy3]
Congratulations.
We have used a combination of saving for deposits and using equity in out PPOR and IP’s as it came up. If your IP’s are in areas that get captial growth then then the more IP’s you have the quicker you get equity to go again.
Our problem now, is more to do with having income to service loans which is why we look more for +ve cashflow now.
I believe having a combination has allowed us to keep moving forward.
Regards
PKCongratulations on your purchase. You have made the first move and the next will be easier. I think you have done well.
We bought a 2 b/r unit over 2 years ago and since sold, for $95,000 and it was getting $250 a week. The reason we sold was that B/C went up a lot and more money was wanted for updating the 15 year old block. That was in FNQ where we still have 4 units all doing nicely.
Five years ago we purchased one unit which was negatively geared, then two years ago purchased another 10 properties using equity and L/C. I have found it is easy to have a line of credit available for purchasing which can then be financed later. That way, the money is available up front for deposit etc and when you finance you can include the costs.
Anna
Hey Mandy,
Welcome to the forum and thanks for your post.
Before answering – what is your investing purpose/goal for this property?
Depending on how you have leveraged, it is unlikly to be +ve cashflow (even with the attractive rent… unless you do things with depreciation).
In that case it will be a matter of capital gains – yes? if so, how much per annum do you need to achieve your goal?
In any event, I’m a bit worried about the 10.1% mngt fee as this seems a little hefty. I’m wondering… is this an ‘off the plan’ property of some sort? It may pay to shop around and see if you can get this down given you have a guaranteed tenant.
In the end though, it doesn’t matter what I or others think as it’s your investment. I’d encourage you by saying that the easy part is buying. The investing skill comes in managing and knowing when to sell.
Anyway, well done for getting in the game as what you learn will take on new meaning now that your money is on the line!
Warm regards,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Originally posted by landt64:Hi Mandy,
I have to say that I’m a bit worried that you’ve been sold a property with an artificially inflated rent. If you can still get $250 rent after the lease is up then I’d say you’d bought well.
Good luck.
LandtWhy do you say that Landt?
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi steve,
I must say I am pretty excited to receive a reply from you,and apreciate your few words of encouragement. I feel my passion is so strong in becoming a success I know I will do it and having you as my mentor has been great.I have just about finished your latest book and if that is not an incentive for any doubting thomas to have ago then Idont know what is. Steve can you just answer me this how does one get to purchase many properties in one year? do they have to sell their homes to put forward large deposits to be able to purchase several? We have used most of the equity in our home to purchase our IP and we have no cash funds other than a 20k line of credit which my huband doesnt want to touch in cash we need it for the IP, is that the right way of thinking? I would love to get another IP asap but do you think it would be too highly leveraged?
IN reply to your question about our IP it isnt off the plan and I will take your advice and shop around for a better management rate. yes it is +CF through deprieciation but I think it will have slow CG so im wondering if that is going to hamper our progress to acquiring more props sooner. sorry ive been a bit long winded but I dont know how often I will get the opportunity to communicate with you so I thought Id give it a real go.
thanks for being agreat inspiration,kindest regards mandy.[thumbsupanim]
Hi Simon,
my thought was that a property worth $150K would not get a rental income of $250 per week, and I wondered if maybe the RE had inflated the rent to make it more attractive to buyers. Of course I’m really happy and a bit jealous if this is not the case.
Landt.Originally posted by landt64:my thought was that a property worth $150K would not get a rental income of $250 per week, and I wondered if maybe the RE had inflated the rent to make it more attractive to buyers.
This can happen (read up on GEHA leases), but the figures Mant gives are reasonable for the regional city that I’m pretty sure it’s in.
My two 3br IPs there are as follows:
Cost $92k (2003) Rent $180pw
Cost $112.5k (2004) Rent $205pwBoth are unfurnished. They’re older than yours (late 80s/early 90s) so get less depreciation but have higher gross yield.
Furnished IPs rent for more; I’ve seen 1br f/f units claim to rent for $180pw.
Steve, a 10.1% management fee for a furnished IP there would not be uncommon. The standard there for unfurnished is 9.35%, but I’ve been able to get it for 7.5% due to the two IPs there.
Mant, as for whether it’s a good buy, only you can answer that when comparing with other sales data and what you want to do. But depending on your tax rate it should at least break even after tax.
For me though, it wouldn’t be my cup of tea; I’d prefer longer term tenants & 3br unfurnished, not in a large complex and with no body corporate if possible.
The main thing is that you’ve taken the first step. Most people don’t get that far.
It might not make you a bucketload of capital gain but you will have learned a great deal and it shouldn’t cost you much (if anything) to own.
Thus you should be able to get No 2 pretty soon!
Rgds, Peter
Hi Mant,
Just adding my congratulations and a few thoughts – some of which have already been stated but are worth repeating.
Congratulations on your purchase – however I would be wary of throwing all of your hard earned into a single industry town. Without knowing where your property is this may be an irrelevant comment.
The second property may not be as far away as you imagine. Talk to an investment savvy broker and they can crunch your income figures and see what your borrowing capacity is.
Be aware this is only your borrowing capacity – there are other matters to consider including, your state of mind, risk tolerance levels, budgetary contraints, what you investment goals are and how you will use these properties as part of your wealth strategy.
Given you believe that your equity levels are limited it may also be time to plough some cash into an offset account or redraw home loan to reduce your non-deductible debt levels.
Derek
[email protected]
0409 882 958
Property investment advice and researched property in quality locations available.Hi again Mandy,
To answer your questions:
Funding Growth
The three ways to fund growth are through (1) Savings, (2) Debt and (2) Realised Gains.
If you use debt then you may find that you reach a glass ceiling. Dave and I saw this limitation from the start, so we used savings (surplus of income over expenses) and realised gains (multiplication by division) to fund our growth.
That is why, although we have bought around 200ish properties over the past few years, we currently own around the 80ish mark. As a general rule, we only borrow 80% (max) of the purchase price and look to repay debt quickly (funnel +ve cashflow to repay debt and also use a P&I repayment basis).
I’m worried for people who have use/are using debt as it may leave them open to problems should interest rates keep rising or else costs of ownership increase.
Mandy, be very careful about funding further purchases from debt. Good on you for getting in the market, but don’t leave yourself open to unforseen risk. Do your sums based on +1/+2% interest rates to see what impact that has on your affordability.
As we are no longer in a growth market cycle, my thoughts are that it is better to go slower but using a sustainable system, than it is to ramp up using debt.
Finally, make sure you have a plan for your property. Don’t just let it plod away… the skill of investing isn’t just getting a return but rather maximising your opportunities.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Thanks steve for the reply and I will heed your advice. Can I just ask you one other thing? I agree that you hit the glass ceiling when it comes to purchasing thru debt but would it be wise to go into partnership with afriend to buy a property that needs minimal renovation do it up together and then flip it for some quick cash, if we can get it for the right price?
and as so far as our investment prop goes we had in mind that we were just so wrapt to find something that was +CF that we were happy but we are also hoping that will gain in CG a little bit quicker with what is happening within the industry at the moment there, I suppose only time will tell.
thanks steve your advice is invaluable or is it valuable, anyhoo I mean it in the nicest possible way.
warm regards mandy[biggrin]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
