Hi All,
I have posted on here before as my husband and I are completely new to property but have been doing a lot of research lately and this forum has been great for ideas. I was hoping to get some opinions from experienced property investors as yourselves as to what option is best for a first time
Our strategy is to buy a number of properties (ie 10) over the next 10 years and hold these for long term (10-20 years). We are looking at property as a way to early retirement and do not expect to receive income from it during the next 10 years.
We are 30 and 40 years old.
Our combined income is $160k pa.
Our current rent is $26k pa.
We have a pre-approval for $550k (based on First Home). Deposit $30k cash and up to $100k equity in parent's property for use.
We cant currently buy anything we want to live in for under $700k. Therefore, we think it is better to continue renting and invest our money in investment properties.
We are considering 2 options:
1. Buy in an established suburb 12k, from CBD for $450-500k and rent at $300-$320p/w short term until can get additional money to subdivide (approx worth of courtyards in area is still around $450k with rental at $400p/w).2. Buy 1 house for $300k, rental return of $300 per week in a less established suburb 25km from CBD (but we have heard from a property manager that there can be difficulty retaining worth tenants and timely rent repayments in this suburb). However, long-term this suburb has a lot of infrastructure going in but not sure whether the "executive" type families would ever move there. By only using $300k, we would expect to build enough savings in a year or 2 to purchase a second property of similar worth.
I read another poster's comments that sometimes people dont make a decision because they are so overwhelmed with information – that is us right now!!!!! We really want to do the right thing but unfortunately noone in our families or close friendship circles are savvy property investors so trying to find a mentor is difficult.
Does anyone recommend going to see a professional for first time such as Destiny Financial Solutions?
Hi Wickl
Firstly, best of luck with reaching your goal. The first one is always the hardest but with some vision, knowledge and a bit of creativity I'm sure you'll own multiple properties in no time.
There's absolutely nothing wrong with renting in the area you'd like to live and investing elsewhere. A mortgage on a $700k PPOR can effect your borrowing capacity. Therefore, if you're aiming to own multiple properties then renting (providing the rent is lower than what the repayments would be) is not a bad option.
Either option 1 or 2 could work. If it were me, I'd be looking for something I can add value you to – something that will enable me to create equity straight away – so I can get moving on the next IP. It doesn't need to be a full-blown reno – it's amazing how much value new flooring, a lick of paint, some nice light fittings and a spruced up kitchen can add .
This is what my wife and I done when we started. We purchased a run-down unit that just needed some cosmetic touch ups. We spent one month doing up the place (after work hours and w/ends – which I don't get too many of anymore!). We were also granted access to the property after exchange and before settlement. Therefore, when we finally settled on the property – all the reno's were complete and the tenant moved in the next day. We had it revalued 3 months later – it was worth $40k more. We used that equity for the next IP. There was a write up on this little story in Your Investment Property mag a few months back – feel free to shoot me an email if you'd like to have a read and I'll send you the PDF copy.
I guess that didn't directly answer your question re options 1 or 2 but it might give some food for thought.
All the best with the investing!
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Jamie,
Thanks so much for your help – ive sent you an email!
So grateful for all advice on forums like this!
No worries at all. Always happy to help. Just replied to your email!
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hello Wicki
One way to overcome information overload is make sure the information you received came from people you are investing in real estate or from real estate investment books written by savvy investors who gone before us.
There are couple of books I can recommend that you will benefit and these are a) How to Grow Multi Million Dollar Property Portfolio by Michael Yardney…his investment strategy is "Negative Gearing" more related to option 1…excellent book…highly recommend it. b) Managing Your Investment Property by Rachel Barnes & Geoff Doidge…deal with the nuts and bolts of IP. Great books for up coming investors (e.g.forming your strategies and managing your property).
I would recommend to ready as much as you can and learned the rules of the game of real estate investment. From experienced reading more than a dozen books.. you got to form your "strategy" to fit your investment needs (e.g. Buy & Hold, Buy & Sell or Buy, Reno & Hold etc).
Today, I spoke to 4 different property managers from different companies from one particular suburb that I was targeting. Believe me, property managers are truelly great source of information when it comes to IP. The key when you speak to them is ask the the sort of property that is HIGHLY sought by tenants. I call this approach, finding the "Need" then satisfy it. A lot of newbie in IP makes mistake by buying a property without who is the target audience is. As Steve McKnight often said in his books, give the market what it wants.
Personally, I will go with the option 1 because, CG is the catalyst to help you build wealth plus you attract good quality tenant. But, that doesn't mean option 2 is viable as well…which is something to pursue as well provided you've done your research enough and the figures stacks up. Do your due diligence to make sure that you are investing on a target area that has good CG. In addition, manufacturing your equity (e.g. Buy, Reno then Hold) is a good way of accessing your deposit from an existing IP and use it for deposit to your second IP…I'm with Jamie M, 100%.
Knowing your strategies in IP is very important because it avoids you from wondering wasting time and help you to focus and refine your winning approach. I read some of Margaret Lomas books and they are good books which mainly deal with Positive Cashflow. Investing in high CG area is mainly Negative Gear property which is high CG and low in rental yield which is the opposite of Positive Cashflow.
Since you have enough equity, get the right education, mentors (so important) and build your "A" team (e.g. savvy mortgage broker, savvy tax accountant, lawyers etc)…you cannot do it a lone. PLEASE MAKE SURE THESE PEOPLE ARE INVESTORS THEMSELVES. These people will SPEED UP your wealth creation and put your through the right path to achieve your goals. Don't forget to acquire "schedule of depreciation" because it could add thousands of dollars back into your pocket to servicing the loan – don't forget to get "interest loan" only mortgage. Pls have a chat with your mortgage broker about this.
All the best.
Doing both is probably the only way you'll know for sure. Hahaha
Good luck and please keep us posted. McKnight's analysis paralysis section in the investing guide I quite like for this scenario.
As a current active spectator it is always better in the arena…
Hi DHCP,
Great advice, thank you. I will make sure we get a copy of those books.
I note you say about education and mentors – do you recommend any courses etc or basically books and speaking to property managers etc? Happy to educate ourselves, just not quite sure where to start!
We have a great mortgage broker so will talk to them about finance etc.
Does anyone know a good tax accountant in Easter Suburbs Sydney for property investors?
Jonesi, yes if it were a perfect well we could do both – just need an extra couple of thousand $$$s to put that strategy into place! I know sitting back doing nothing is not the right way ahead but then everyone also says "research research research" first!!! So….have to start somewhere!
Thanks for you help again everyone.
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