Hi Guys,
This is my 2nd post, and based on the helpful responses I received last time I am hoping to hear from some of you again.
I currently own a townhouse which is my PPOR. Owe $240k and it is valued at $320k and have approx $15k in savings. I'm trying to put a plan into place of how I'm going to grow my portfolio, keeping in mind I'm still not earning an amazing income.
A mate of mine is about to move into a new rental property and is looking for a housemate…. So i've considered making my PPOR an interest only mortgage, renting it out which will pretty much cover the mortgage, move in with my mate for a while and buy another 1 or 2 investments this way. I'm a big advocate of 'rent money is dead money', however it will drastically reduce my weekly outgoing costs and allow me to put this surplus cash into an offset account ready to invest in other properties?
I've read articles of property investors who own multiple properties but actually rent themselves which got me thinking of going down this path in the short term, obviously there is nothing better than owning and living in your own home but this could be a small sacrifice to make to aid me in growing my portfolio for an early age.
I'd be keen to hear your thoughts on this scenario.
Cheers again for your help!
Ben
Hi Ben
Cant see an issue with the strategy and as long as the lending part is set up correctly there is no reason why you wont be able to expand your portfolio over time.
Remember living with a mate might sound all well and good short term but last thing you want to do is fall out over some minor issue so I would set down some ground rules i.e who does what and when.
Must admit i have a decent portfolio and would rent myself if my wife would allow me.
She is not the one who has to maintain a property on 2800 sq M but sometimes a happy wife is a happy life (As a client said to me yesterday).Good luck.
Richard Taylor | Australia's leading private lender
Thanks for your feedback Richard, I always find your posts helpful!
We both lead busy lives and don't spend a lot of time at home, it seems to make sense considering we both live on our own within a few mins of each other now. But yes, obviously some ground rules would need to be set.
I remember having to mow our 2700sqm block as a teenager, I don't envy you at all!
Enjoy your weekend
Cheers!
Dont worry i get a man in to mow and trim i just get worn out watching him.
Richard Taylor | Australia's leading private lender
When you are thinking about renting vs. buying think about this example scenario and what would benefit your lifestyle more.
Own a house and be paying mortgage every month on that house?
Renting, and having an IP (or two) that paid for your rent for you because they were positive cash flowed?Ultimately the best thing to do would be to own your own home and have someone else (through your IP’s) paying it off for you. Have you ever thought about getting your mate to move into your house and pay you rent?
I am a renter/investor. For the short term it saves me a lot of money and allows me to invest in positive cash flow properties more quickly. Owning my own home would max out my borrowing capacity, thus limiting my investments. So that is the path I have chosen. Eventually I want to own my own home AND have my investment properties pay for it for me.
Ryan McLean | On Property
http://onproperty.com.au
Email MeHi Ryan,
Thanks for your feedback….. seems like we are on the same page! My mate has a 6 month old labrador puppy, hence the reason he is moving into a bigger place with a decent sized yard, and unfortunately my backyard won't accommodate such an active dog otherwise it would work perfectly.
You are right, based on my living in my current property and paying the mortgage pretty much limits my borrowing capacity and therefore i'll continue plodding along with the 1 place. But when I crunch the numbers based on renting out my place it opens up opportunities for me to buy another 1 or 2 places quite quickly.
It's nice to hear of someone else that is doing it.
Cheers!
Hi Ben.
I have a son who has been in a very similar situation and considered the same options as you. His solution was to rent a room in his townhouse to various friends (1 at a time!) for a few years. Obviously there were a few hiccups, but overall he enjoyed the company and never had trouble with anyone paying. You could put this money into your $15,000 savings and it could boost it up an extra $6,000 a year? My son has now paid down his loan by about 50% over a 6-7 year period, and is now involved in building a courtyard home on a block we bought together, but subdivided into two single blocks, creating about $70-$80,000 equity. He now proudly says he will owe $300,000 which is the same as someone starting out to buy just the townhouse. I think you are headed in the same direction, and time will do some of the work for you.
Good luck,
G
@ Young Investor – I think we are on similar pages. I think the the faster your can buy property the more you can take advantage of the growth and you can build wealth quicker. So if renting out your home puts you in a position to buy 1 or 2 more investment properties you would then be getting growth in 2-3 properties instead of one.
I am only 22 and I am so glad that I have started investing now. I worked out that I only need to own 8 bottom of the barrel properties in order to be financially free. I have 40 years until I am meant to retire, so all I would have to do is buy one property every 5 years and use the rent to pay off the mortgage, and then use the equity to buy the next property. Once I bought the first property I probably wouldn’t have to save any more…just keep putting the profits back into it.
By the time I was 65 I would be financially free. It is so easy when you start young.
I definately plan on moving a lot quicker than that though…but that just gives you an idea of how good it is to start young. Good luck with everything
Ryan McLean | On Property
http://onproperty.com.au
Email MeRyan… sounds like you've got it all sorted mate!
I'm 22yo as well and am of the same opinion as you – make the sacrifices now while we are young, but hopefully be financially independant alot earlier than those who start once they have had kids etc.
The best thing I ever did was start working in the real estate industry from when I was 18, I soon realised how easy it can be if you do your research beforehand to make some serious cash from property. A lot of my mates make the typical comments "You must be loaded mate" and " I could never afford a property", when in hindsight, I have a mortgage with a bank and they were earning higher salaries than me to begin with… You just have to be smart about making your money work for you!
Good luck with your plan mate!
Well I actually already have kids…well I have a kid. Had a daughter one month ago. But kids should never stop anyone investing.
I didn’t start in the real estate industry when I was 18. If I did I would probably own a lot more properties that I do. But I have always been an avid studier of property and I want to be financially free in 4 years (before I turn 26). I have a lot of business ideas, as well as property investing skill that should easily get me there. It is fun trying to achieve such a huge goal.
What is your goal?
Do you invest in positive or negative cash flow property?
Ryan McLean | On Property
http://onproperty.com.au
Email MeHi Guys,
I loved reading this post, as it is similar to the one I've just posted, asking for advice see: https://www.propertyinvesting.com/forums/property-investing/creative-investing/4332468
If I can offer you some advice – living with your friend will be harder than you expect – if you can do it for the short term go for it. It might be easier than the situation I find myself in, in that you will be living with him – you sharing his space, rather than people sharing yours. I have shared with people since I was 18, and buying my own house, I thought that would be all behind me – at 26 I'm now fed up with sharing – but still want financial independence. Perhaps its easier for blokes, less emotional attachment I think??
I'm a 26 year old female – and I believe kids will have an impact on my ability to invest. I have my own 3 bedroom house and I rent out two of the rooms, the money I make is poured straight back into the house – normally at this point as renovations. Having gone through the sacrifices to attain my own home, now sharing it with people – well its horrible. I am considering renting a nice little place somewhere else and renting out my whole house instead of sharing – hopefully this will free up some cash for me to re-invest. My long term goal is to build a property portfolio, but having started only 12 months ago i'm not too sure on which step to take next. Any advice would be appreciated.
I would love to hear what decisions you made, and how your situation turned out.
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