Everyone loves a hypothetical

Thats a lot of rent you pay, oever 50% of your income!

The first thing you need to determine is if youc an borrow any money and then how much. If it is not enough then you need to work out ways to increase borrowing capacity.

Once you know you can borrow then you have to determine the strategy. Work out cashflow projections and see if you can cope and then work out profits estimates to make sure it is worth while. Make sure you know how to use excel.

Then I would suggest you look at which structure to do it in. You should probably talk to an accountant about this.

Corey,

3 things stand out on your hypothetical as limitations or barriers to your goal – “building a bank to purchase a home”
1) 10-12 hours of work a day
2) 50+% of your disposable income on rent.
3) short term investing in property.

The work hours will restrict you ability to add real value through renovation if you plan to do it yourself. You would basically be a weekend warrior, and weekends fly by very quickly. A lick of paint doesn’t add enough value, converting a 2 bedroom into 3 reno can, but it takes time, and expenses still keep coming while you are not getting rent doing a reno. And all of your savings will be used buying pretty much anything in Perth after costs are taken into account, which means you need to rely on your disposable income.

Most people who make money through reno’s generally still make most of the gain through the rising of the market in general. This isn’t really the case in Perth at the moment “short term”. Those that are able to make a success of it, have usually done it more that once, and are now working on properties that are will out of your hypothetical price range.

The costs to short term property investing are quite high if you plan to sell to get the money to uses for your own home, stamp duty, selling costs, tax etc all need to be taken into consideration. What is short term ? < 3 months, 12 months, 3-5 years.

Subdivision still takes a while, but the Joondalup area has a plan to rezone many areas to higher density, allowing for many properties to be subdivided, maybe it’s worth looking at potential sub-dividable blocks within the proposed areas. There are areas of Heathridge, which are close to schools, parks and shops that fall into the proposed rezone areas.

Alternatively, why wait to build a bank to buy your own property ? Why not buy something to move into yourself, putting your rent into your own property. Buy a unit that you can reno in your own time. This would leave you with more money as you could save on stamp duty through FHOG. Add value at your own pace to suit your work hours. When you’ve built up some equity, rather that sell, access the equity to buy another property, either investment or new home. Or if you sell, you don’t have to worry about CGT.

As Terry said, if you don’t know how to use excel, learn. Do the numbers to see if any scenario is worth it.

The stock market may be a better short term solution, costs are much less, it’s more liquid, and you have almost the same chance of stuffing up as short term investing in property if you have never done it before and don’t do your homework.

Also for short term, spend a few buck trying to pick the first 4 in race 7 at Flemington on Tuesday, I can almost guarantee that if you get that right, it will reap more that your first foray into short term property investing.

By the way, I’ve been doing a reno as a weekend warrior, but paying the pro’s for things I can’t do myself or don’t have time to do. I could walk you through Bunnings blindfolded to get anything you want, or tell you what to buy elsewhere. The time has blown out by about double, and I’ve done more that I intended to from the start. It was never intended to be a short term investment though, had it been I would be out of pocket. And I thought I had the money and equity to back myself, that was until I lost my job a couple of weeks ago. No income from a Job and no rent, is a bit of a wakeup call, you can’t put all your money on the table, you have to leave some in reserve ( a few month worth). Now I’m a weekday warrior also, to get it done, better go I have to finish the skirting so the carpet can go in.

Cheers

Hi Corey
10-12 hrs a day = 50 -60 hrs a week assuming only a 5 day week . . . hmmm. Long hours for $800 nett depending on the job.

This person can work long hours, that may come in handy.

For a single person, assuming that means no partner, no co-habitation person –  that's a lot of rent that could be probably halved by sharing and better spent ( invested in reno ), or saved as disposable income & used to increase borrowing capacity.

Assuming no prior knowledge in renos, this person should get a mentor or mentor program (see Steve McKnight's RESULTS in right hand column of this forum), but first see the accountant, like Terryw says, well said Terry, but accountants don't teach renos so the person will need to accumulate the reno & real estate investing knowledge and assemble the team  – reno advisor, mentor, accountant, network, etc. 

Wishing this person good luck on the journey.

Cheers
thecrest