Hi everyone,
Just found this forum and am very pleased I did. I'd been looking for somewhere to learn and got lucky in google today and here I am.
Anyway, I'm new to the world of investing in property. Well, I've been reading a lot of books on it but have yet to make a move. I think they call it procrastinating, haha. I guess I don't know how to take that first step or am a little scared of taking that first step and hoping that some astute investors could maybe give me a little advice/guidance.
I'm 24 and have been working full time for about 18 months now. Prior to that I was just a Uni student. I've saved up a deposit that I hope is sizeable enough to get me a loan and just recently moved back in with my parents after living out of home for 4 years so I'm ready to take the leap but just can't take it. Also, live in Melbourne.
I guess my biggest worry is that I'll make a mistake and 5 years of saving a deposit could be worth nothing if I lose that (been saving it whilst in Uni and whilst working). I guess the worst case scenario is that I do just that but I want to go full steam into property investment.
My goals are to retire as early as possible. I guess most people are like me in that they don't like work but not many look at other areas to effectively stop working. I look at my sisters and notice that. I don't want to do that. I have an office job in the city and am sick of the corporate lifestyle after only 18 months. I want to get out of it and make property my full time job because I think I'd enjoy that a lot more. My Dad is a builder so I've grown up around houses and helping him build them on the weekends, etc.
From what I've read and researched, there are two main ways I can look at it. To invest for capital growth or invest for cashflow. Knowing I want to do this as soon as possible, I thought cashflow was the way to go. Find enough (30 or however many) cashflow properties and that would supply a fairly decent income. Then I could worry about owning them after that and paying them off. I've had meetings and property places (Domain Charter Group) but I found that all they were trying to do was sell me one of their developed properties so I promptly finished up with them.
Recently I've been looking at apartments in the CDB mainly because of the rent returns. Some of the ones I've looked into have a great rental return and are leased for another 6 months. With the deposit I have, I could get a positive return from something like this but I don't know if it's a good idea or I'm being nieve. From everything I've read on cashflow properties, you're not supposed to be able to find these in capital cities so I've got a fear that I'm making a big mistake if I did something like that even if the cashflow is positive.
Anyway, as you can gather, I'm fairly green and just want to go full steam into it to make a career out of it. Any guidance, advice or comments would be greatly appreciated.
Thanks
Donkey, high cashflow generally equates to low capital growth. check some of the previous forums on similar topics of investing in the CBD and its pitfalls. It all depends on your strategy.
FWIW i'd be looking at a few of the middle distance suburbs at the moment where there is good transport (rail, TWays & motorways). They may not be in favour in the next year or two but there will be a resurgence in people wanting to buy and redevelop in these middle distance suburbs (just a little past Parramatta). Not sure what the equivalent Melbourne suburbs would be but it would be the 'fibro belt' on 600 m2 + blocks just past the end of the tram infrastructure.
If my Dad was a builder I would be talking to him first. Explore the possibility of buying land and building a house to sell on it. If you do this a couple of times you will soon have enough savings to keep one as a pos cashflow rental. Keep doing this cycle and you could be wealthy by 30!
He should be able to build one for you at an attractive rate and help you choose the right housing estate etc. Another idea is buying an inner suburban dump and demolishing it and building a new home to sell. Some people do very well with this.
If you occupy one then you can get the FHOG and after 6 months sell it tax free. You can do this a few times before you will be seen as running it as a business. But a hell of a good start.
I wish my Dad had been a builder and got me started at 24.
Just some food for thought.
Be careful of high yielding inner city apartments – especially student rentals and serviced apartments. You will get very very low CG and this is where the real wealth lies.
Look at houses on land if possible.
Cheers,
Thank you for the replies.
My biggest problem is the initial outlay. I'd love to buy a house on land around the suburbs but the cost of doing that for someone like me is too great. The reason I was looking at apartments was because of the smaller inital outlay.
I understand that these inner suburban apartments/student apartments may not appreciate in growth but I wouldn't be buying them for that purpose. The whole purpose would be the high yield and with that high yield, the money that I put into the loan and other investment opportunities I will take on, I'd hope to own it outright in the near future and then I wouldn't have to worry about selling it. Just live off the rentals. If the rental demand is there, can someone tell me why that's a bad idea? Instead of buying for CG, buy for yield and build up a sizeable annual income.
On the topic of my Dad, I've thought of that before. Main obstacle I guess is the price of land at the moment but given that's the case and the fact I can help my Dad build them when I have free time, you'd think it'd cost us less to put a property on the land. I could easily move in for 6 months and save on the tax too.
On that as a whole, I noticed you mentioned that it could be done a couple of times before it would be considered a business. What did you mean by this? What business would it be? I'm only asking because I've always had the dream of going into business with my Dad and using his skills and my skills to create a business. If it's a viable option, I'd really like to look into it.
Thanks
Hey hey donkey33!
I find myself in a similar position to you. Have you come to any conclusions that you can share?
First of all donkey .. we'd all love to live off the rentals. Thats the goal in the end.
You have to think outside the box. Build Assets and Income so the bank can talk to you in a better light.
I have a friend who came to me with an issue. She had received an inheritance and needed to invest it. About 100k. The main issue there was that she had no reportable income and a rank job history. Now out of that it meant that she would not be able to borrow for her investments as the banks were not able to turn around and lend her money on the current terms. In other words .. 100k didnt buy enough and she didnt have enough to show for it.
So here was my creative solution for her. Go searching for a property thats close or near to 100k (they still exist). Purchase it OUTRIGHT. And then after three or four months with a 100% owned asset and a rental income from a property .. go to the banks.
She managed to find two investment properties side by side … at a reasonable level. And she went to her family and asked for a small 'family loan'. So she ended up purchasing TWO propertys at 100%. And owing family about 60k. But the banks dont see that. And nor should they need to.
Come this month .. she's taken that set of two properties to the bank .. and they say they are quite happy to lend her for ANOTHER property based on the total ownership she has on these two properties. She's building an asset base .. and an income base that after only a year will be substantial. And within another 6 months .. enough to look at a greater asset .. even a house locally.
Knowing what the banks will be looking for is the key. Banks will be looking for serviceablity of the loan. That means INCOME .. ASSETS .. RENTAL INCOME and EXTERNAL ASSETS (income from other sources .. shares .. etc.) So the more of this sort of thing you have .. the better and easier it is for the banks to deal with you.
Outside that .. negotiation on the deal can give you a lot more asset for a lot less dollar. Use your head to put creative solutions together and you can produce win-win deals. And further your interests.
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