Im very much "green" when it comes to investing. I have an IP that we purchased as a PPOR in 2005 for $97k. We still owe $80k on it but its now worth $280k and is bringing in $300 a week rent. i have only just recently started to get interesting in investing in property – and Ive spent the last 2 months ive been learning, researching and trying to get a feel of the market by looking at houses.
we are currently waiting back our diagnosis from the financial planner (this was held up due to hubby taking forever to track down his superannuation details), and in the meantime i have been reading everything i can get my hands on regarding renovating, investing, real estate market trends, different investing strategies and plans etc. im basically reading book after book in every spare minute i get.
and one strategy that caught my eye was one i read in a book im in the middle of reading.
in a nutshell its that you buy a quick cash IP for below market value, renovate and then sell. you then use the profit (plus other savings, equity etc) to purchase four positive cashflow IPs over a period of time in low to mid socio economic areas (so the real value is in the rent, as the capital growth is slower). Then once you have four of these you then use your rents to purchase a negatively geared more expensive IP where the rent you can charge wont cover all the expenses, but it will have a faster capital growth.
im interested in talking about this more to the financial planner, but we dont ahve another appointment with him for another 2 weeks.
so thought i would bring it here
my thoughts are that I wouldnt mind doing this over a 5 year time period where I purchase a house each year as part of this plan. but I guess it all depends on funds and the market.what are your thoughts on this process? what strategy do you use?
Your fin planner probably will advise against property.
These days rents are high and interest low so even a property in a good area is close to cashflow positive or neutral.
I am not keen on buying cheaper property in outer areas just cause the rent is high. You don't get rich on the rents, but on the capital growth.
I would look at somewhere in a major city, like some areas in Sydney offering 7% returns and potential capital growth when the next boom comes and more rent rises.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Your first deal is an excellent one why not repeat. How much did you spend on it?
literally the only renovations we did to that unit was a lick of paint – so a few hundred dollars at the time. it didnt (and hasnt) needed anything else done to it. we bought it with a new bathroom and kitchen. it was amazing – we did a valuation on the property 10 months after we bought it (in June 2006) and it was valued at $190k at the time. so we made nearly $100k in 10 months. nearly blew us over because we knew nothing about property – we just wanted a little unit to live in.
but since i posted this post we have gotten a house under contract. listed at $330 but we scooped it up at $250. the vendor just wanted it gone. Cosmetic renovations planned for once it settles (paint and a few minor things) – the renovations will come in under $10k. 850m2 block of land that is 3 blocks from the CBD. It has 3 bedroom, 2 sunroom and 1 study, and a new kitchen. house in good condition with good street value. and we will prob be able to get about $380 a week for it. waiting for the renos to be done to get the appraisal.
We have had a meeting with the financial planner and we've decided that we will valuate the property (and the unit) at the end of the year and redraw enough equity to put it towards a 20% deposit on two similar properties to the one we just bought. we are *hoping* that at the end of the year this new house will be valued at between $300 – $350k because we bought it below market value and did a little work.
so that is the short-term plan at the moment
Wow, where do you find houses like that?
my thoughts are that I wouldnt mind doing this over a 5 year time period where I purchase a house each year as part of this plan. but I guess it all depends on funds and the market.
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