hi,
i'm in need of some help/advice on which way to go with my property investing. first some background.
i'm young and dont feel the need to own my own home at the moment. im buying my first home because i want to start a portfolio. i'm in a situation where i can continue to live with my parents and as so intend to rent out my house imediately.
my qustion is, what is the better choice
– buy a house for as much money as i can afford and then, all going to plan, the larger amount of money increases in value. (more so than a lesser amount of money) or….
– buy a cheap house and and although profit not increasing as quickly as option 1 allows me the opertunity to buy a second house sooner…note: in the first option the aim is still to accrew properties, it just may take longer to fit the seccond one under the budget.
im pretty interested in building a property portfolio and who knows maybe get into managment or development. if theres any advice you'd care to share i'd love to hear it. even commercial real estate avenues… or any thing….
thanks
You need to decide if you want to
negative gear a property and hope for capital growth which may or may not occur (risk)Or
Go for positive cash flow
Where you pay off enough so the rent covers the expenses and earns you some money after expenses.
then buy another one.Hey and welcome to the forums. Thanks for your question.
Firstly, good on you starting young!!! The earlier you start the easier it will be. Note: If you want the first home owner grant you will have to live in the property you buy for at least 6 out of the first 12 months. That means no rental income for six months, so think about that if you are going after the first home owners grant.
Secondly, buying a more expensive property does not mean you will make more money quicker. You need to research your area (that you want to buy in) and find out what people want. If it's a family area you might want to look for 3-4 bedrooms near parks and studio apartments might not be in as high demand.
You also need to look at your cashflow. If you can't rent the property out could you afford the more expensive property? Do you want to be paying that much money into a property? What if you have to change jobs?
Robert Kiyosaki (Author of Rich Dad Poor Dad) recommends that people start with smaller deals first (as there is generally less risk) and then move onto bigger deals as your experience grows. You might want to think about that.
Hope all that helps.
Ryan McLean | On Property
http://onproperty.com.au
Email MeIf you want to build wealth the key is to build the size of your asset as big as you can as fast as you can. Its the size of the asset that will give you the return and will snowball (compounding growth). I have a video on my website you might want to take a look at regarding a simple strategy you could easily put into place. The strategy can be varied to suit your own investing rules i.e. adding value with buying well to start with and doing renos etc.
hey thanks for the replies duckster, ryan and on the money. lots to think about.
sounds like the better choice is a slightly cheaper place and get it payed off enough for the rent to cover the mortgage then get on to another house. this way ill end up ultimatly with bigger asset ( 2 cheap houses) than one expensive house (worth less than the other 2 combined).
i guess with this avenue the capital growth is less important than the rent? as getting the rent to cover the mortgage asap is most important. there fore a town house/unit style property would be suitable? any comments??? also how long would it take to pay off enough for rent to cover the repayments?ray jay wrote:hey thanks for the replies duckster, ryan and on the money. lots to think about.sounds like the better choice is a slightly cheaper place and get it payed off enough for the rent to cover the mortgage then get on to another house. this way ill end up ultimatly with bigger asset ( 2 cheap houses) than one expensive house (worth less than the other 2 combined).
i guess with this avenue the capital growth is less important than the rent? as getting the rent to cover the mortgage asap is most important. there fore a town house/unit style property would be suitable? any comments??? also how long would it take to pay off enough for rent to cover the repayments?Yes the bigger the asset the better off you are as you will get the return on the overall size of the investment. You don’t need to ‘pay off’ the property, just put extra funds into an offset account perhaps and have the funds available for draw down later for cash to settle another property purchase.
Also as time goes by the rents will increase as interest rates fluctuate. To me growth is everything as this is the ‘profit in the business’ so to speak.
Units usually return a higher rental yield than houses (generally). There are reports available that can give you information as to areas and rental yields etc. Just let me know if you want more info regarding this.
Re your last question.. it depends on how much you can put away into your offset account to reduce the interest you pay, but remember you will draw on that as well as any further equity in the property later on to fund another purchase and you can only grow as fast as your capacity to service the loans.
Shoot me an email and I will crunch the numbers for you if you like.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
