Hi All,
Hope everyone had a great xmas and new years.
Going into the new year I’ve found myself reflecting on what I’ve done in the past, and thinking about what the future holds, and more to the point what to do next as a step to achieve financial freedom.
I’m 26 years old and after following my passion with property I’m starting to understand that with the equity behind me if I play my cards right I could actually make the dream come true.
My problem now is to make sure I choose the right path and use my equity correctly! After investing in the WA property market over the last few years (mainly the northern corridor) I’ve witnessed unbelievable growth and am now questioning what is a sustainable strategy I can follow. Although I would like to see it happen this growth in WA has to come to a stop.
For those who would like to know, here’s a breakdown of my “investing†background:)
– 1999 – Got a diploma in Graphic Design by age of 19
– 1999 – Started fulltime employment age of 19. ($35k p/a)
– 1999 – Bought my first house for $104k in Merriwa, WA.
– 2000 – Rented this out for $165p/w and went traveling for 6 months (back then $165p/w covered the mortgage – the good old days of positive gearing in perth:)
– 2002 – Came back, started work again, went 50/50 in a block of land with my parents in Yanchep, WA for $110k.
– 2003 – Bought another 4×2 in Merriwa for $180k. Renovated this over a 4 month period and rented it for $220p/w
– 2004 – Rented a place in Duncraig with my new found love of my life;)
– 2005 (may) – Asked Girlfriend to go halfs in another block in Yanchep for $180k.
– 2006 (Jan) – Decided to build a new home with girlfriend in Somerley(clarkson) for $270k
– 2006 (May) – Ran into cash flow problems and sold both blocks of land in Yanchep. Sold the one bought in 2002 for $260k, and the one bought 11 months before for $315k. (Looking make this was probably a mistake)
– 2006 (Dec) – Moved into new house in Somerley! Both myself and girlfriend working – I’m on $45k p/a, she’s on $39k p/a.
– 2007 (Jan) – What to do next???End result;
3×2 rental in Merriwa
– rented at $210p/w – mortgage $165p/w
– owe $110k, worth $350k4×2 rental in Merriwa
– rented at $230p/w – mortage $310 p/w
– owe $219k, worth $360k4×2 PPOR in Somerly (Clarkson)
– owe $200, worth $500kEquity
– Owe: 110 + 219 + 198 = $527k
– Market vale = 1,210,000EQUITY: $683,000
I’ve been looking at a few possible strategies though ideally I would like to work with one that overtime allows me to work less and less and spend more time on Property Investing.
If anyone has any “words of wisdom†or opinions on what they think I should do I would love to hear from you.
Cheers
Wayne
Wayne Leech
http://www.WaynesGuide.com – Accommodation in Western Australia.
List your holiday home for FREE!Wayne Leech
http://www.WaynesGuide.com.au – Accommodation in Western Australia.
List your holiday home for FREE!
Looks like you have done very well there Wayne!
With that sort of equity, you could buy a <edited> load of property. If it has worked well so far, maybe keep on the same strategy. I would just be worried about prices being too high at the moment in Perth.
Also, have you considered some shares too – diversify a bit?
Terryw
Discover Home Loans
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Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Hi Terry,
Thanks:)
Yes, as you’ve mentioned my main problem is that Perth is just getting too pricey to make the numbers work out.
I’ve seen quite a few opportunities in the Northern Corridor, though the outlay has been at least $350K + for the same property I could have got for $90k 4-5yrs ago!
I don’t mind out laying this amount, though the rental returns are just to low – often with weekly shortfalls of $200p/w to cover.
Again if I believe the CG value would be there in the short term I would take the short fall in my stride, though with the Perth market peaking I may have to wait another 5-7yrs before I see another strong CG period – which would be a major cash flow strain.
I have been looking in regional areas of WA – though again most of these are getting too pricey for the potential rental returns.
Perhaps I should be looking over east – SA etc? or even NZ? Though with not having much experience I feel a little reluctant to go over east.
When you say I could get “a lot†of properties with that much equity – how much is a lot? As a ball park figure is it common that someone could get raise loans for say 2-3 properties with that amount of equity? (I guess these depends on the price of the properties rightïŠ) Perhaps if they were $250 – $300k each?
I have thought about shares, though again I don’t seem to have the time to sit down and research shares. If I had more time on my hands I would look at shares – though saying that I do like the “bricks and mortar†security of property. Perhaps if I was in a more financially comfortable position I wouldn’t be like this;)
Cheers
Wayne
Wayne Leech
http://www.WaynesGuide.com.au – Accommodation in Western Australia.
List your holiday home for FREE!Hi Wayne,
well done on your investing so far. I’m your age and a bit further behind but learning lots. I’m a mortgage broker from sydney
Have you thought of using a buyers agent whos job it is source great investment property for you. i’ve used http://www.positiverealestate.com.au and had great results.
Also consider other realestate assett classes like commercial. Caravan and holiday parks are really great investments at the moment. often getting 25-50% cash flow returns to the invester + CG’s.
Feel free to give me a call if you want to chat.
Regards
Ashley Tuttle
0425208919Hi Wyane,
To answer your question about how much you could by… based on borrowing 80% of the value of your current property and any new purchases + 5% closing costs you could buy approximently another 1.7million worth of property providing you could service the loans (approximently $1.32 million).
Let me know if you have any questions.
Ashley
0425 208 919Hi Wyane,
To answer your question about how much you could by… based on borrowing 80% of the value of your current property and any new purchases + 5% closing costs you could buy approximently another 1.7million worth of property providing you could service the loans (approximently $1.32 million).
Let me know if you have any questions.
Ashley
0425 208 919Hi waynel2
Do you want to actively manage this portfolio yourself or have a more passive role? . If you want to actively manage this yourself ( always my preferred option) then have a look at Steve’s latest book “0-260+ Properties in 7 years” as he sets out how to achieve this.
You seem to have a lot of “lazy equity” lying around in the one you already have, sometimes the best way to utilitse this is to draw out equity but other times it is better to sell the lot, cash up and buy more. Steve’s book also talks about this and combined with the “property Clock” he outlines how best to strategize all this in various markets. More debt is not always the answer to buying more property.
Warm Regards
SueMIT | Owen Real Estate
Email MeHI Guys,
Thanks for all your responses;
Ashley, no I haven’t really looked at Buyers agents – I will do now though. I’ve been doing some sums on holiday rentals – though haven’t thought about the Caravan park aspect – sounds interesting. How do you get involved in areas like this?
Commercial realestate is another area that I plan to look at. I’m thinking that with WA having such a strong economy and with the general market coming to a peak – perhaps it’s time to switch over to commercial?
Wow – equity certainly is the key! Yes, servicing the loans is another issue. Over the last couple of years we have struggled a bit trying to service CG investments – which was worth it though it but a lot of strain on us financially – hence us selling the blocks in Yanchep.
Sue, if I had more time on my hands – yes I would love to get more involved – though it’s just been hard with working fulltime etc. That’s interesting about selling them all to buy more – do you have a link to where I can purchase his book from?
I think whatever we do next I’m definitely going to focus a positively geared move rather than putting us under more cash flow strain for the potential CG.
Just out of curiosity – do both of you work fulltime?
Cheers
Wayne
Wayne Leech
http://www.WaynesGuide.com.au – Accommodation in Western Australia.
List your holiday home for FREE!Hi Wayne
In answer to your questions:Steve’s third book 0-260 + properties in 7 years should now be available in most bookshops it was released on the 17th November 2006. If you are looking for his first two books it is available here under “Online Shop” as I understand it he is not marketing his latest book here but I guess that will happen over time. I think it retails for around $33.
No I am not working fulltime, having resigned from my job in Sept last year to do property inveesting amongst other things. I had a “snap point” in Dec 2005 that took me from my “safe” Public Service job (of 26yrs) in Canb to Adelaide. I arrived here on 5th Feb 2006 and have been doing all sorts of stuff since arriving here.
warm regards
SueMIT | Owen Real Estate
Email MeHi Sue (Millionaire in Training)
What made you decide to leave your govt job? I am to in a govt job which i don’t particulary like, though i am looking at starting a part time business to improve cashflow. How much equit did you have before you left your govt job?
And how do you become a full time investor how do you have cashflow to pay for living expenses etc.
any advice would be appreciated! [biggrin]
Hi Vic
I replied to your email rather than here. It is a long story.
SueMIT | Owen Real Estate
Email MeHi Wayne,
I am in a very similar position to yourself here in Perth, I have approx $600K of property equity, plus I am cashing in my long term shares totalling $60,000.I want to use this money as a deposit for another property or two. What is the next step? It is always dificult to know. I now going to investigate the east coast property market (Melb, Bris, Syd) to take advantage of the lower initial purhchase prices and higher rental return than Perth. but where do we start looking?
I’d consider selling 3×2 to pay off PPoR and keep 4×2. Rent will definately go up and you’ve alreading spent heaps on stamp duty. I think being coastal CG will continue to be good.
Amazing story! I’m inspired considering that I’m the same age. [thumbsupanim] [thumbsupanim] [thumbsupanim]
You might be able me more than I can help you.
I’ve about $6000 that I want to commit to property. If you wanted to turn this into $600,000 in 7 years what would your 1st 3 steps be?I’m not that novice in tax knowledge but I’m more of a novice in market experience.
Originally posted by waynel2:End result;
3×2 rental in Merriwa
– rented at $210p/w – mortgage $165p/w
– owe $110k, worth $350k4×2 rental in Merriwa
– rented at $230p/w – mortage $310 p/w
– owe $219k, worth $360k4×2 PPOR in Somerly (Clarkson)
– owe $200, worth $500kEquity
– Owe: 110 + 219 + 198 = $527k
– Market vale = 1,210,000EQUITY: $683,000
Hi Wayne, isit $200k or $198k owing on PPoR?
I have Loans at $529k and Value at $1,210,000.00 for a LVR of 43.7%(great work mate)
Potentially you could take out $200k from equity and control a reasonable share portfolio to assist with income and another IP , guessit ll depends on where you want to go?
With the rising equity you’ve had in your properties, why did you “have” to sell though for the cashflow reasons; could your equity not have assisted?
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsOriginally posted by waynel2:End result;
3×2 rental in Merriwa
– rented at $210p/w – mortgage $165p/w
– owe $110k, worth $350k4×2 rental in Merriwa
– rented at $230p/w – mortage $310 p/w
– owe $219k, worth $360k4×2 PPOR in Somerly (Clarkson)
– owe $200, worth $500kEquity
– Owe: 110 + 219 + 198 = $527k
– Market vale = 1,210,000EQUITY: $683,000
Hi Wayne, isit $200k or $198k owing on PPoR?
I have Loans at $529k and Value at $1,210,000.00 for a LVR of 43.7% (great work mate)
Potentially you could take out $200k from equity and control a reasonable share portfolio to assist with income and another IP , guessit ll depends on where you want to go?
With the rising equity you’ve had in your properties, why did you “have” to sell though for the cashflow reasons; could your equity not have assisted?
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsAccommmodation Wyndham
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wyndham-wa.waynesguide.com.auHi All,
Sorry for the delay in replying – have been away from the computer for the last night or so.
millions – why do you think I should sell the 3×2? This is already very cash positive, so wouldn’t I be better keeping this one?
Hi chancelot – I’m no expert and have had more good luck in the past as we’ve had such a boom in WA. However, saying that I have learn’t that the one main advantage that younger investors have is TIME. No matter what happens in the short term, property (according to history) always goes up over time. Therefore I would look at using the $6,000 towards a deposit on your first property and then wait for the equity.
Rather than wait – try to get creative with your purhcase and buy something that you can add value to allowing you to create equity straight away – via rennovations, sub dividing etc. This will then give you instant equity!
Keep in mind you need money to make money. Once you have equity you can then use the banks money, to make you more money;)
Another strategy that I used for the blocks of land was to borrow 50% of the repayments for say 2 years ahead. This was some what risky, though at the time I was confident that the CG would cover the extra loan amount.
Redwing, it’s actually $194,580 – just got my latest statement after switching home loans:)
Yeah this is a mistake I wish I didn’t make. At the time, I was caught up in the moment and with Lisa (my girlfriend) unhappy to continue paying for the block it was a joint decision to sell it. I did consider borrowing the repayments for the block though the banks said I couldn’t service the loan. I guess you learn from your mistakes – a block of land next to that one is now priced at $445k!!!
I have thought about shares though as I mentioned before without much knowledge it’s something I’m a little cautious of. One area I am interested in is commercial property. I believe you’ve had some experience with this redwing?
Cheers all,
Wayne
Wayne Leech
http://www.WaynesGuide.com.au – Accommodation in Western Australia.
List your holiday home for FREE!Hi Wayne, if you had to sell any properties I suggested you sell the 3×2 as you have the most equity in it and could pay off most of your PPOR debt. I think if your looking at CF+ properties they may offset the CF- property that you keep. Another thing that I would consider though is capital growth. Is one block substantially bigger then the other? Is one block in a much better location? Is one property harder to rent than the other? Is there more depreciation in the bigger home? I would take these into consideration too. Write it all down. Good luck.
Well done Wayne!
I’m in a similar position to you, i have equity from the WA boom but cautious about my next step since the market has turned here. I’m thinking about checking out opportunities over east for better rental yields.
If you are thinking of using a buyers agent and want to continue investing in Perth, I recommend ‘Property Wizards’ in Subiaco. I have worked with them for a short time and the agents all have a lot of personal and professional experience in property investing and particularly in finding good subdivisible property deals.
If you want to check out their website – http://www.propertywizards.com.au
Good luck
JulieHi All,
Thanks DLPP – that’s good advice. Since posting that I have spoken to my partner and she is happy to commit to more investments as long as it doesn’t put more strain on our cash flow so we are going to start looking for + geared properties to add to our portfolio. The next step is how to find these. I’m going to do more research into commercial property which should be interesting.
Thanks Julie – do you know of a buyers agent that specializes in commercial property?
cheers
Wayne
Wayne Leech
http://www.WaynesGuide.com.au – Accommodation in Western Australia.
List your holiday home for FREE!
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