Hi,
I am new to this forum, signed up because I would love to start investing in some property [blush2]
I have a few questions for you, very new to these so if they sound dumb please don’t make fun of me [mellow]
- If I bought say, 10 properties in a matter of 6 months (I know it isn’t realistic but humor me for a second please) how long would it take before I could live off the returns I am making on these properties? That is saying they are all 2-4 bedroom suburban houses ranging between $300-400,000.
- I was told by my accountant that investing in properties is better if you take out a load and gradually pay back. Is this true? Or is it better to pay in cold hard cash and have no interest or anything?
- Are there any places where there are articles for me to read up on that could help me out with some other questions I have, so that I am not pestering you for every question I have [smiling]
That is it for the moment, sorry for the ignorance in my posts [rolleyesanim]
Thanks,
BenWelcome illusion, its great to have you on board.
The best advice to offer to you now at this stage is to read books.
I recommend starting with Rich Dad Poor Dad by Richard Kiyosaki.
Also I recommend you read many other investment books.
They will provide you with so much of the basics so quick and will get you prepared in the heated discussions that spark up here from time to time.Um, the 10 properties in 6 months with financial freedom. Can’t really say. You would have to look at the level of leverage, or the amount owed compared to your equity.
If you have more and more equity when compared to your loan amounts then you become positively geared, this means you will be making a profit from your little property business and that is your income and will provide you with the starting blocks for you to leave your job and enjoy life.It is so much better to take out a loan and pay it back gradually. This is one of the strenghts in real estate investment.
Say for example you have $100k to invest.
You choose between shares or real estate.
Now option 1;
You invest the $100k in shares
Option 2; You borrow $900k from the bank and now have 1Mil in real estate(property).Say both went up by 10% in the first year.
The shares you have made a nice 10grand, but with property you have acheived 100K, now that is a 100% return on your money in one year compared to 10%.Compare this to saving up say a million(woah) or saving up a smaller portion(could be anything 10%,20%,99.9%, you get the picture) and leveraging against this to buy alot more property, quicker.
As you can save that little bit way before that full price saving comes around.There is no ignorance in your posts at all. Your questions are not silly or stupid.
The only question that is stupid is one not asked.
I was at your stage of the inveesting(building the basic knowledge) only last month.
At the start of August I showed a genuine and highly enthusiastic attraction towards investing and investing in property in particular. I was asking these exact questions only a few weeks ago. But my enthusiastic nature has helped me build my knowledge which I can comfortably pass on.Don’t be afraid to ask questions. By the way what else can we talk about in the Help Needed forum, there has to be questions.
Regards Christopher Fife.
Thanks for your prompt and helpful reply there Draconis. I have seen Kiyosaki’s book but I was under the impression it was more about telling people that education is not as much needed in todays day and age.
Correct me if I am wrong [smiling]
This time I would like to provide you with a scenario if you wouldn’t mind [smiling]
Let’s say I buy a nice little house in a rural area for $350,000. 4 bedrooms, 2 bathrooms, living room, kitchen, games room, garage and a nice backyard.
Ok now let’s say I paying back my loan at $650/month (don’t know if that is unreasonable). Would I get some tenants who are paying $700/month so I pocket $50? Or do you go for a more wild number like say $850 or $1,000/month just so you have some money kept away for when the house is unnocupied?
I am really liking the idea of quitting the job and working the property market, a long road to a joyous goal I imagine [smiling]
Here to learn [smiling]
Dear Illusion,
never be MISillusioned that education in not needed in this day and age!!!!Read books and attend any free information courses you can, you can play what if games all day long but the reality of the deal only comes when you are in the game with your own money.
D
Hi Ben,
Its not quite that easy to just quit a job and take up property investing. Especially if you plan on borrowing a lot of money, you need to be able to prove to the bank/lender that in the case that no-one is renting your properties you still need to be able to maintain the repayments. Which means you need to have a steady income from outside of your investment properties. Property investing is a long term thing, you need to work towards the final goal.
Also, unless you find cashflow positive properties (which you are unlikely to do in any cities), you will still have additional payments to make on top of the rent.
In addition, you need to consider landlord insurance, property management (up to 10% of rent p/w), etc..
I don’t mean to scare you, but one thing I have learnt is that you need to do lots of research, reading books, attending seminars, before you go out and buy a couple of investment properties.
Having said that, well done on taking the first step and make sure you stay enthusiastic about investing because that is very important when looking through properties, reading books, attending seminars etc… Set short and long term goals to keep youself enthusiastic!
Hope this helps!
Cheers
Paul [suave2]Thanks for your prompt and helpful reply there Draconis. I have seen Kiyosaki’s book but I was under the impression it was more about telling people that education is not as much needed in todays day and age.Correct me if I am wrong
A ‘formal education’ perhaps, but successful investors are pretty clever and are always learning. They read books, go to seminars, hang around internet forum etc.
Let’s say I buy a nice little house in a rural area for $350,000. 4 bedrooms, 2 bathrooms, living room, kitchen, games room, garage and a nice backyard.Ok now let’s say I paying back my loan at $650/month (don’t know if that is unreasonable). Would I get some tenants who are paying $700/month so I pocket $50? Or do you go for a more wild number like say $850 or $1,000/month just so you have some money kept away for when the house is unnocupied?
The bank will dicate the rate at which you pay money back. Working in round figures, let’s say you borrow $350K at 7%. That’s going to be over $2,000 per month. Then there are rates, management fees, repairs/maintenance, insurance etc. As a rough rule of thumb, for a $350K purchase, you’re going to need about $700 per week in rent to break even.
There are hundreds of books out there to read. Some good, some bad. You might start with Steve’s books – you can order them from this site. Just remember the first book was written some years ago and the market has changed.
Scott
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http://www.depreciator.com.auYou asked how long would it take to be able to live off your investments? That depends on how much you own and what the rental returns are and what you consider a good figure to be living off per annum.
So for 10 houses if you owned them 100% and were making $12k per annum after expenses on each you’d be making $120k which would be satisfactory for a lot of people. You might own the same 10 properties and only have 10% equity in them and be heavily negetively geared and be paying out this amount, it all depends on so many factors, step one is set your goal like Steve and Dave did in book #1In rich dad poor dad he is referring to formal education rather than Investor education in the I quadrant he is referring to Quadrant E education. If you want to learn this approach to property investing look for a book called wealth magic written by Peter Spann. If you wish to do seminars check out http://www.freemanfox.com.au.
Steve uses a positive gearing approach where as
Peter uses negative gearing which relies on a growth strategy.
MArgaret Lomas is another book writer that you could look at getting her books.Thanks for all the help guys, I have been reading up a lot the last few days. Checking out the seminars at the moment, might attend a few in the near future [smiling]
Here to learn [smiling]
May you please give us some information to what stage you are in now. E.g. Own your own home(how much loan?How much equity?).
Whether you are in a relationship and have a dual income. What your income is?
We need to grab some info so that we can tailor our tips to your situation.Christopher.
At the moment, I am paying off my home. Every few years I am doing some renovations bit by bit. I am also paying off a large shed in a nearboughing town.
Single at the moment
Here to learn [smiling]
My advice to you is to do one of Steve McKnights seminars or read one or two of his books.
I did exactly this in January this year & now have the knowledge to buy a property with positive returns. I owned only one property in January that was very very negetive geared…We are talking $1450 per Week!!! EEEKKK.
I have since changed that property to a postive outcome & gone on to purchase more properties as well as quitting my job of 16 years. So as you can see, knowledge is powerful and actions speak louder than words.Get some knowledge…ask lots of questions, do lots of number crunching and most of all TAKE Action – even if you make mistakes. It is a great journey and you will learn lots. Good luck.
Cheers, Di Burns[cap]
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