Hi All,
I am 24. I have been reading quite a bit and learning heaps along the way. Some of the authors include Steve McKnight, Margaret Lomas, Phil Jones, Robert Kiyosaki, API magazine and online sites and forums.
My position is as follows, I am currently living at home and paying rent. My first purchase I am going to be claiming the FHOG of 10k in VIC and using it as a PPOR, as I need to move out. I work close to the city so I am looking at a property in the SE area, i,e. Elwood, St Kilda, Elsternwick, Windsor, Prahran, Caulfield, Glen Huntly, Ormond, Malvern, Armadale.
Deposit – 40k
FHOG – 10kPurchase price range – 300-400k.
Financed (Interest Only) 320-380k.Estimated (min) 12 months Growth – 5%.
I am looking at private sales and if need be auction.
Clauses to include are:
1) Pending finance,
2) Pending any checks,
3) Pending any title issues.
4) 14-21 day conditional period.Renovation costs: 5k-20k – looking at 2 BR's, possible reno to 3 BR's, or equity increase changes, i.e rendering, kitchen, bathrooms. 6 months period, most work to be completed by myself, unless contractors required.
My aim at the 12 month mark is to have a formal revaluation of the property taking into consideration the growth and renovations to increase the equity and recycling it for an investment property. I beleive in the buy and hold strategy as being the strategy that I am looking to follow over the next few years.
My questions are,
Some of my concerns include, what the market is going to do due to subprime in the US, and the cycle being at such a high point. Am I better off waiting for the market to stabalise, or are we at that point now before further growth in the next 5-10 years.
Are the areas I am selecting going to provide what I am seeking?
Am I going about this in the right way?
Are my clauses suitable or should I have any added there?
Any recommendations or things to look out for?Any help with this us much appreciated as I don't have anyone that I can use as a mentor or as a knowledgable person when it comes to this.
Cheers,
MikeHi Mike
You seem to have covered off most of the basics. You might want to add in 5% of the purchase price in respect of estimated money required for costs. There are also a few mortgage brokers on this forum who could do a good desktop review for possible mortage capability.
In relation to the areas, the US, timing in the market, renos … these are all relative and it affects people in different ways according to their circs, how they feel about risk, and what their goals are.
There's never a good or bad time to invest but there may be regrets if you keep looking for perfect conditions that may or may not happen. Ask yourself why you want to get into property investing – is it to get your own place and move out of home and developp your own lifestyle, or is it to get into property investment, build a portfolio, and become wealthy. They may sound like the same goal but they're actually quite different because they may require you to sacrifice on different things. For example, living at home and renting out the property as an IP may be more beneficial to getting things started, 'saving' more money with rental income, and it would then also broaden your scope to find a property elsewhere (not necessarily one close to your work). On the other hand, if having your own place is more important, it comes down to how does your lifestyle and financial habits accomodate you in the style of property you can afford.
Working out your goals would be the first step. Then you need to think about how you can service all your liabilities and put in place some comfortable safeguards to be able to sustain your strategy and assets in any conditions (as much as it is possible to do so).
You should probably keep things about your personal and financial circs general on a public forum. Drop me a line at [email protected] if you like. I occasionally coach people but I'm happy to give you some initial 'free time' to get the ball rolling.
Thanks for your reply Gary.
In general these figures are not accurate (they are provided to figure out if my calculation method is accurate or not), thankyou for the advise on not displaying personal financial information in public forums.
The 5% purchase costs is something I did leave out, but am aware of.
I am in agreeance with you that there are 2 different goals re: Home Development vs Wealth Development.
In my present situation, my short term aim is to move out and setup the PPOR. However, I want to make it a positive outcome towards my goals of wealth building. In order to acheive this outcome I beleive that I need to purchase with the aim of renovations and light to moderate property growth.
The reason I am asking for opinions with the property industry at present is due to my push to reach my 12 month goal. As much as people say the key to success is slow progress, I also believe in doing the figures and having estimations in order to have to close as possible accuracy on what my investment is going to be doing at each stage (i.e. 12 months away).
My question in this case is if my circumstances and my estimations are correctly assesing my expectations and will it provide me with the outcome that I wish to acheive. This being the ability in 12 months time to recycle my equity into an IP and thus change my position from Home development to Wealth development.
As I have never been in the position to purchase property nor do I have any assistance from friends and family, I am left on my own with no real world knowledge and thus I rely on what I learn from others via internet resource (i.e. forums) and books.
Unfortunately there is not much information out there on things such as what types of clauses to have for conditional offers for private sales. And not much information on investing with the intent of using investments as a PPOR.
I hope this clears up more of my intentions.
Your help is appreciated and I look forward to further comments and experience that you can assist me with.Cheers,
Michael
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