Hi all, we’re one of the many couples who realised later than we should have, that simply making a good wage will not make us wealthy.
We fell prey to a “get rich quick” scheme (I know, I know…how stupid were we) and are basically back at square one again. We don’t expect any sympathy, we made some really dumb decisions, so we deserved what we got.
I actually have a copy of “0 to 130 properties in 3.5 years” that I bought ages ago. No idea where it is now but I’ll make a point of digging it out and reading it again. Maybe this time round I should actually do something once I’ve read it.
We have three great kids, a cat and a dog. We have a home we bought for $620K last year that we owe about $150K on.
We also have about $30K in cash, that we decided to keep liquid in case there was ever a dire emergency.
We make about $160K a year and our monthly budget is around $7K (private school, mortgage, living expenses).
That’s it….
How do we get started in getting ahead? We’re a bit gun shy after our last “investment advice”, so be gentle!Hi 0to130
Welcome to the forum.
Sorry to hear about your experience.
If you’ve decided to invest in property, I’d spend the next few months getting clued up about it. Read widely – there’s some good books by Margaret Lomas, Michael Yardney, Steve McKnight, Jan Somers (to name a few). There’s also a couple of national magazines – Your Investment Property and Australian Property Investor.
This forum is also a great FREE resource – full of knowledgeable investors and professionals who are willing to answer questions.
It also helps to surround yourself with a team of IP savvy professionals (accountant, mortgage broker, etc)
Property isn’t going to make you rich overnight – you have to be in it for the long-term.
When you’re ready to purchase an IP, you could look at tapping into some of the equity in your current home (I would keep that $30k cash for emergencies as you’ve mentioned). Use the banks money (not yours).
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]
I think for the foreseeable future .. with a full basket of goodies .. 3 kids 2 pets and one home mortgage .. you are going to have to take small bites for your next nibble. Your pretax residual of around 5k leaves you with the possiblity of being able to borrow about 300k roughly in investment loan from the bank. Add to that a substantial equity that sits unused in your property, and .. what are you guys waiting for? With current vals you have given as long as they hold and are realistic .. you can go up to just under 600k (thats borrowing + existing equity in the PPOR).
Does that mean that you use all of it for your next investment?
Depends on your comfort level and your risk factor. If you've been burnt on schemers already .. invest to a comfort level rather than a performance target. The main issue you will have is remapping your idea of dollar values. You are used to a set wage packet and no more .. and for at least the first year or two of the new investment .. you'll have to still live like thats the case. But if you are doing things property .. your asset value .. your income value will increase around you, which means in a short time .. you'll again have more money .. more asset .. and have to do the whole thing all over again. So the smartest move .. play like you DONT have the investment .. and enjoy that you do
I'd also recommend fixed interest rates (interest only) for at least a 5 year period at the moment. Since interest rates have been too low for too long, and you want a period where the amounts you pay are the barest minimum and a known amount, it provides security in the longer term. Sure its a percentage point difference .. but thats also the security you have of your situation not changing in the short term when you will be vulnerable. PLEASE NOTE a fixed year term expects you to be paying the loan for that period, it does not allow for refinancing or changing terms until the end of the period. Keep that in mind.
Oh yes, your idea of keeping cash reserves is great, but .. they dont need to be huge unless you are planning to do something else with them. 30k is too much as a cash reserve .. its money losing against inflation. You should have roughly 2 – 3% of the property value as a cash reserve .. max. Which on a 600k property would be about 12-18k. The rest can be better spent .. say .. as a startup for your NEXT property???
I am aware of the fact that i havent included stamp duty and transfers with this deal. Thats simply because that varies from state to state. On avg its usually about slightly less than 5.5% in VIC .. and there are other inclusions in other states.
And finally … Jamie M is right (again !!!). Read up, grab some tips from any of the local property mags .. fill your head with pre-purchase knowhow .. so when the next invest comes .. its sweet and easy .. based on good knowledge.
Thanks guys! I get plenty of time to read in my job (I travel a lot), so that will be my first step, going back over all the books I have read in the past and getting some new ones form the authors you mentioned. I’m not hoping to get rich quick, I just want to be comfortable later in life and hopefully have something to show for myself. More importantly, I’d love to have experience and results that I can pass on to my kids so that they don’t make the same mistakes I did. We live in Tasmania so the temptation is to find something locally as there are some lower cost properties around that fit in with our lower risk level, but I realise that investing close to home doesn’t make sense if there are better deals elsewhere. I’d like to find something that is cash flow positive just to get us on the map.
Hello 0to130. If I was in your shoes (which I have), the best advice I can give you is to seek out an experieienced financial planner (one who is accredited to give you property investment advice) and let them prepare a plan presenting the options available. they will also provide you with all the tax efficiencies available and prepare your depreciation schedules in preparation for your tax return. If you use a good planner they will structure your debt and prepare a cash flow report to ensure your household budget and loans are fully affordable both now and the future. No need to be holding $30K in cash either. The planner will ensure you establish a buffer account with your lender to ensure you have a safety net under you to cover all unforseen circumstances. this will ensure you don't have to sell your properties in a time before they have achieved good capital growth. Well worth the small cost to put a complet plan together until retirement.
Hi 0to130
Where in Tassie do you live – there's property investors getting together in both north and south (not selling property just information) which you might like to hook up with for support on your journey?
Cheers,
TraceyTesse i hate to say most Financial Planners dont hold ACL so cannot provide any form of Credit advice.
They also cannot prepare a Depreciation schedule unless they are licensed to do so.I have no issue in Oto130 holding 30K in cash especially if it is held in an offset account.
Certainly do not use any of the cash reserves to put down as deposit or cover costs of a future IP especially when you still owe $160K on your existing non deductible home loan.
Suggestions like that simply are not sound when it comes to maximising your Taxable deductions.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
500k in equity and 30k in the bank is not starting out.
Think of a young person who has nothing having to buy in an overpriced real estate market.
Thanks for the replies and advice.
We’re both in our mid forties Paullie, and we have 3 kids to put through high school (two still in primary), and (hopefully) they will also want to go to university. I guess to a young person starting out we are considered well off, but I don’t think we’ll be enjoying financial security if we don’t improve our position. I don’t think there’s anything wrong or greedy in wanting to be better off unless you fall for a snake oil salesman (as we previously did). Experience can be a cruel teacher, but you never forget lessons like that. I think we’d prefer to learn from people who have actually done the things we want to do, i.e. start slowly, get good advice and support, and progress steadily.The young people you refer to as starting out with nothing will be our children if we don’t get organised and prepare ourselves (and our children) for the future.
Again, thanks everyone for the input.That's an impressive square one to be back at, I like the game you play!
It's a strong starting square in terms of all the components, net worth + income + saving habitKey take away from your post is that your lifestyle is well covered by your income, that's pretty important. I see people who earn more money than 160k, sometimes significantly more who struggle to make ends meet and get ahead.
First step I think is to work on the knowledge base, for property I quite like the investor group meetings that are available in most places, the kind of evenings where you pay $20-$30, get some coffee and bikkies and make contacts and listen to different people speak about their business or investing experiences.
Thanks Qlds007. My FP does hold an ACL and has in-house chartered accountants working with the company. They manage all of my financial and legal services so that I only have one body to go to for all my financial affairs. Absolutely best and most convenient way to do business. There are not too many FP's who can offer the full range of services from doing my will and estate planning thru to writing my risk insurances, administrate on all my salary packaging questions and when needed to lease a new car recently, they bought my car and wrote an novated lease thru my salary packaing.WOW !!!!
Be suprised Tesse due to the reduction in a FP client base and revenue income since 2008 many of them have applied for a ACL (Australian Credit License) to enable them to undertake finance activities. Still of course very much the minority.
In saying that more and more are teaming up with accreditated mortgage brokers to provide a complete package.
Having an in house Accountant is not new most practises do and of course to provide you with legal advice such a preparing a will they need to be legally qualified.
Good to hear you have it in hand but as i mentioned in my initial post to Oto a FP who doesnt hold an ACL cannot provide him with any loan advice.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Oto130,
0to130 wrote:Thanks for the replies and advice. We're both in our mid forties Paullie, and we have 3 kids to put through high school (two still in primary), and (hopefully) they will also want to go to university. I guess to a young person starting out we are considered well off, but I don't think we'll be enjoying financial security if we don't improve our position. I don't think there's anything wrong or greedy in wanting to be better off unless you fall for a snake oil salesman (as we previously did). Experience can be a cruel teacher, but you never forget lessons like that. I think we'd prefer to learn from people who have actually done the things we want to do, i.e. start slowly, get good advice and support, and progress steadily.The young people you refer to as starting out with nothing will be our children if we don't get organised and prepare ourselves (and our children) for the future. Again, thanks everyone for the input.I think you're still in a pretty good position.
Most people don't think about their financial position until it's way too late!!You're both still relatively young. (I'm 43, so to me you're young).
You have a good amount of equity in your house
and you've had the experience and will now be better able to recognise shonky customers.Gather a good team around you, listen to the great advice offered here for free, and go for it!
Quote:I don't think there's anything wrong or greedy in wanting to be better offI hope not! Or a lot of people on here are in trouble
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MarkOK, so I’ve found a block of flats yielding 11% gross or 9% nett. They look to be about 40 years old but are reported to be in “good condition” and are on a good sized block in a central location. All are currently tenanted and the property is within our price range. Problem is, they are in a different state and I can’t get out to look at them. I’m thinking I’ll ask the agent the following: When do each of the leases expire, are there any planning restrictions, do the properties contain any asbestos, what is the occupancy history, what are the management agents fees…..What else should I be asking the agent? Would it be sensible to get a local builder to give me a building report or do I ned to go myself? Any help would be appreciated.
Why is the vendor selling?
Asbestos in properties of that age is not uncommon.
You should be able to appoint a new PM if you think you can get a better deal elsewhere. In fact, I’d call the current PM (and a couple of others) and ask them about the area and those units in particular.
If it’s a small town, call the local cop shop and ask questions.
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]
It is great to see that you have recognized the need to make a change in your life.
The first thing you should do is identify exactly how much you will be able to borrow based on your income and obligations situation.
The site I usually go to for all my home loans is http://www.webdeal.com.auDo not buy anything until you receive a pre-approval for an investment loan.
Next you should look for an undervalued qualify property in a postcode that is not too far away from the city centre in your home state. It is best to start with something simple, stay away from development and subdivision until you have bought well , improved the value of the property and held it for some time.
I feel that it is always best to stay in an area that you have some familiarity with. Choose a suburb with a shortage of quality properties and spend some time researching property prices, capital growth and rental yield. After several months you will be an expert in your chosen suburb and will be able to recognize a worthwhile purchase.
Remember, always purchase 'subject to finance' and get a solicitor to check all the paperwork before making an offer.
Good Luck!
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