How do I become a Property Invester?

Hi Peter

Where is your current property located?  The new property is one to live in or to rent out?

What you can buy will of course depend on how much equity you have in your current property (ie its current market value minus the debt on it), and how much you have in cold hard cash to put towards the second property.  It will also depend on your income, which will dictate your serviceability for a loan.

The general rule is that the land is king, as it is what goes up in value, not the dwelling.  For this reason, houses are preferable, or second to that, villa units. 

The golden rules are generally – close to transport (ie train station), but not too close to the rail line.  Close to schools.  Close to shops.  Within reasonable commute of Melbourne CBD.  Close to the ocean if at all possible. 

Another golden rule is to follow the infrastructure.  ie build where new infrastructure is going in (rail stations, freeways, shopping centres etc).

Pete, I'd recommend reading Steve Mcknights books for a start. He'll have you convinced of buying cashflow positive properties from day one, and avoiding negatively geared properties as much as possible.

I plan on never buying a negatively geared property, ever. I still plan on buying many positively geared properties. I'm going to do it through dual occupancy houses. It feels almost impossible to find a positively geared property that is a single occupancy.  So, if I can't find a house that does the job, I'll build one.

This is what I have recently done.

I built a dual occupancy house, taking advantage of the first home owners grant of 21k. (yay!) I am renting out the second half of my house, and living in half on my side. But it doesnt stop there. I'm also going to be renting out 2 bedrooms on my side to japanese exchange students. This means, that I will be getting $300 rent from my granny flat, and a further $400 rent (after expenses have been paid.. they pay 290 per week EACH tax free) for the two rooms.  So I will be in a very unique situation where my house is cashflow positive… even though I'm also living in it!  It's a springboard to get me started onto my second, third and fourtieth property. Minimise expenses, maximise passive income.

Don't forget, that you can also buy investment property using your super fund if you know how.

flick me an email and I'll fill you in.

[email protected]

Nice work getting something in Sunshine before it got expensive!

Yes I think you can purchase another property.  For the deposit you will probably have to use equity in your current property, because all of your $20k savings will be eaten up by stamp duty and solicitors fees.

Suitable areas to look at would include Werribee, Hoppers Crossing and Ballarat (Ballarat has a uni and a hospital which makes for ease of rentability, so you'd want something within suitable commute of both, and also a train station to Melbourne).

With regards to Hoppers Crossing, avoid the Birdsville Estate, which is bordered by Heaths Road, Tarneit Road, Railway Avenue and Derrimut Road.  With regards to Werribee, avoid the area north of Werribee Station bordered generally by Market Road, Shaws Road and the river.  Werribee is older than Hoppers Crossing and as such tends to offer some property that needs a bit of a cosmetic makeover (carpets, paint, perhaps a kitchen makeover) to add instant value.

While Werribee is not without its fair share of weatherboard properties, you'll probably find that the norm is brick for Werribee and Hoppers.  I don't think I'd consider weatherboard unless I was looking in an area like Ballarat, or Yarraville where it fits in with the surroundings.

Both Werribee and Hoppers have plenty of families with children in school (so be near a primary and high school, but not right across the road), and have a family member commuting to Melbourne each day for work either by rail or road.  So make sure train station and road passage is conveniently placed.

Does this give you somewhere to start hunting?

If you can afford to do so, absolutely.  Check Wyndham Council for the current regulations for Werribee and Hoppers.  Last I heard it was minimum 300m2 per dwelling.

And remember – cover your IPs with landlord insurance WITH tenant protection

OK picture the scenario.  You put a tenant in your property and they stop paying rent, or damage your property. You have a bond (deposit).  Yay.  That'll be what, $1000?  That does not go far.  Landlord insurance with the "added extra" of tenant protection pays for lost rent while the tenant is not paying, or while the property is vacant due to need for repairs post-tenant.  It also covers much of the damage or theft to the property.

Here's a link to one such insurance offer;
http://www.aami.com.au/home-insurance/landlord-insurance.aspx

It's a must-have.  God help you if a tenant trashes your house and you don't have suitable insurance.

Hi Karen

Yes a DFT can be an effective tool when you are either acquring positive geared properties for the long hall or looking at carrying out short term buy, renovate and sell projects.

Funding such deals can sometimes cause issues especially if lenders believe you are doing the deal purely for profit however structured correctly you should be able to do this over and over again.

Jodie…I don't think it cost A$2000.. Last time I set up cost about 500 dollars

I totally disagree with you, not setup a DFT for purchasing property.
there more benefits using DFT than not

I don't want to hear spruiking around with TAX deduction or depreciation bla bla bla
sorry only novice investor that will fall into the trap

Hi God of Money,

I am not saying to to set up a DFT – I am simply saying that when starting out you need to understand why you would set it up and what benefits it gives you..

I am sorry if I gave the impression that I was against DFT (I absolutely am not!) I just hate seeing people rushing into setting something up that may or may not suit their circumstances or goals.. Thats all… 

I was not and do not spruck about tax deductions etc…  I was just wanting to encourage the reader to make sure they are informed about what benefits it will give them and then make a decision on that..

Thanks so much for your comment I didn't realise I gave that impression – as it wasn't my intention at all…

Thanks again God of Money… 

Take care

Jodie
Property Coach and Finance Specialist

http://www.multiplepropertyservices.com.au
I help people realise their lifestyle goals using property as the vehicle.. As me how today – no cost and obligation free!