Hi everyone – I am a 23 year old home owner who has a burning desire to begin an investment portfolio. I have spent the past year educating myself as much as possible by reading books and attending seminars. I now feel like I am well prepared to make some sound investment decisions.
The only thing stopping me at present is fear. I am packed with knowledge but completely unsure whether to bunker down and pay off our PPOR loan or to buy an IP on top of this. This indecisiveness is really frustrating me. My worry is that we will struggle to cover the loan payments with a vacant IP.
Our situation is as follows.
Our combined salary is 150k p.a.
Our mortgage repayments are 335000k
House value is 475000 therefore 140k in equity.I feel like we would really be putting ourselves under stress if we purchased another property but at the moment with the low interest rates I am frothing at the mouth with the possibility of a great deal.
I have a mind that is full of enthusiasm and knowledge but like many others I honestly can't work out whether to wait and concentrate on paying off the mortgage or take the plunge with the current buyers market.
Can an expereinced investor steer me in a direction they would tak in my situation? Bunker down or take the plunge?
I think our next move will be one of the most important ones we make, therefore I am mulling over it too much.
I would dearly appreciate your advice.Happy investing
Nic
Hi Nic and welcome,
Market conditions are somewhat dependent upon where you are. Personally, I'd wait a little longer, keep watching and pay off as much of your PPOR as you can. The market bottom will come at a different time in different places, and for different classes of real estate within the same area. It is pretty hard to pick when it is, easier to see once it's past (naturally). Wait, unless you can find a property that is well enough positively geared to put your mind at ease. Young marrieds? What about when you plan kids? What if one of you loses your job? Follow your gut. When the right opportunity comes up, you'll know it and you can pounce then. Better to miss the bottom by a little than to jeoporadise your situation by getting too highly leveraged now. I reckon you've probably got a bit of time up your sleeve. I'm keen to buy too, but waiting. The good value deals are too few and far between. I'd like to see a little more pain out there, and a little more value, before I sign up again.
Good luck
SThanks S – yes married, we are in Tassie, things are yet to bottom here, but with jobs losses I can see some desperate sellers in the next year or so. We are thinking of having kids in the coming years, so this would erally pressure us. I have a few ideas to set up a business and create extra income, pay down our mortgage, then invest in a few years time. This may be the safest option at the moment, but I will take any ideas out there. Thanks again
Pagey
pagey23 wrote:things are yet to bottom here, but with jobs losses I can see some desperate sellers in the next year or so.Here is your answer. You see, your fear was not just being a big wuss, it was your education kicking in. Good on you.
SBTW – I love business. If you've got a good idea, do alot of research, build a business plan and get some good quality professional advice. Think about market timing for that too – just as important as for real estate. My husband and I have our own business and a young family, and it all works really well.
sHi Nic,
Im same age as you and our combined income is much less than yours! im also looking to buy an investment property, but if i were in your place, I would actually take things a bit easier.
If you're planning to have kids in the close future (within 3 years), I wouldn't actually buy an IP. Firstly your partner will be out of work a year, and you'll want to be home to look after your new born occassionally. I see a lot of mums rushing back to work after 6 months because of no $$$ – I personally wouldn't do this. Its not good for the baby nor is it that great for the mum.
I would suggest you pay down your mortgage so you can sustain it on 1 person's income and still live comfortably (whilst adding extra repayments to the mortgage). Then have a kid, and once the kid is roughly 2-3 years old, you'll have enough equity and cash built up to buy.
this might even time well with the upswing in property market – or it might not. but the important thing is you don't overcommit yourself and down the line you realize your partner cant afford to take time off to have a baby.
investing and cash is important, but so are other things. do you want to work hard and retire rich at 40 then start having children? can you work your guts out until you're 30 and have enough passive income to be able to reach the same situation?
I've had a thought of some of these questions and I can't decide either – so i know exactly what you're going through.
Oneiricer
I am looking into internet biz's and also leasing a coffee van for a period of time. Lots of ideas, its just putting something in place! I don't have any previous business experience but everyone starts somewhere. I would like to build up something and eventually employ someone else to do all the work. Thanks again S
Pagey
Cheers Oneiricer – Im starting to feel better about what my gut was telling me. It is hard to build up such a varied amount of knowledge but feel like we cant act on it. In some ways I have felt very impatient and that I need to make things happe. I think your advice is sensible and if I can continue to learn and pay down the mortgage, coupled with gains in equity, I will hopefully be in a great position to invest in a couple of years time. I appreciate all the help and goodluck with decisions aswell.
Pagey
Don't either of you go thinking you can plan the kids thing quite like clockwork! Kids are great, I absolutely agree that it is best if you don't have to go back to work full time when they are babies. We've been very lucky in that regard. But when child no 1 is 2 or 3 years old, you may be thinking about child no 2. and so it goes. Make the best decision you can today for today, plan for thhe future but remember. Man (or woman) makes plans and God laughs.
SS – good advice – we have been planning kids for awhile and are finding that making the decision have kids is easy, but making it happen is a different story.
If anyone can give me some ideas on websites to assist with creating business ideas etc that would be great. Its like the baby scenario – its easy to make the choice to have one (a business), but following through and making it happen isn't quite so easy!!Cheers
Pagey
Try David Koch's website, somewhere on Yahoo7. He has a heap of info for small business there. I've never really used websites re business, though as I have a fair bit of training and experience myself. The ATO has some useful pages explaining your obligations under GST, Pay as you go withholding and superannuation law. If you buy a business, you should be able to get a fair bit of help off the person selling it. Be aware,though, there is alot more money in building a business from scratch, then selling it, than there is in buying and running a business.
SThanks S – just checked it out and it looks like a great website! Plenty of reading for me here – hopefully something amongst it I can put into practice. Its like a game really trying to find that one piece of information that creates a new idea. Fun though!
Cheers
Pagey
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