Hi all,
After reading some of Steve’s great books, I was inspired and set my goals for financial independence. I would like to purchase my first PCFP within the next 6 months. I have around 40k in savings to use, though I would like to keep some of this as it provides cash flow via dividends.
My main uncertainties is where to place my focus as as 1st time investor.
Which is better -residential or commericial?
Should I start with as small an investment as possible to minimise risk and keep my dividends? I’m thinkin IP around 100k.
Is it better to look for a problem + Solution=profit scenario or look for a simple buy and hold strategy for the first IP?Any advice would be greatly appreciated.
Cheers [cap]
JonnoWhich ever market you look at, focus on it and become very knowledgeable in it. You want to know what every single property is worth in your target area.
As a first I.P, Commercial Property may be a little more risky, as there are more factors to consider than a Residential Property.lack of experience increases risk.
After all; people have to live somewhere, so a tenant is easier to find for residential properties.
The returns on C.P can be better, but the market can be fickle, and you may have trouble attracting a tenant if one leaves. It depends on the type of building you buy.
Starting with a cheaper one is a good idea, you can still get a great return and your mistakes don’t hurt your cheque book as much. As you get more experience and confidence you can scale up, but maybe you don’t need to.
I am still conservative and cautious even after a number of deals, so I keep aquiring cheaper, little pos cashflow deals as they are easy and don’t hurt the hip pocket. Lovely!
Problem+Solution=Profit will be good for cashflow, which is good to have at first, but this usually takes a bit of experience.
A well selected buy and hold can produce a pos cashflow (read Margaret Lomas’ books on this) and will provide a good base for your future endevours.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hi Jonno
Personally with a limited amount of deposit I would be looking at residential over commercial property for your first IP as your borrowing ability will mean you go to a higher LVR.
Residentially you could go upto 100% (less costs) however for a small commercial property you will limited to around 70/75% or larger commercial property maybe 80%.
In saying this most 100% loans are post code restricted so it is important to ensure that the security is acceptable otherwise you will be limited to a 95% loan.
Most important thing before you start looking is to ensure that you have your structure all set up and the entity you intend to buy the property in has been established i.e Trust etc.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Thanks Marc,
some great advise. I like the sound of residential, and starting small is good too.Good Luck. [thumbsupanim]
JonnoJonno
welcome to the forum.
Another point to consider.
Don’t look in the bottom 20% in whatever market you are looking.
Because it is often all that people can afford for their first property, there is more competition and often less value for money.
You will often also attract more difficult tenants.
There are several considerations regarding buy & hold and promblem + solution.
-They do not have to be mutually exclusive.
– It depends on you plans. If you are happy to start slowly, buy and hold is fine.
– If you want to move forward quickly, you may have to become more proactive and do some reno deals or subdivisions.
– You can just keep going with these deals or use them just to build up additional capital.Good Luck
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