confused and needing confidence

It normal to be unsure of things, especially when your first starting out.

What level of risk are you willing to take on?
What can you afford?
Do you have DIY skills to tackle a small renovation?

These are good questions to ask yourself. Each person in property will tell you a different story on how they made their money, and each one swears by something else. However you need to take the time, and work out what you can afford and how much risk you are willing to take on.

Have a look at the market around, API magazine is good for the numbers on the shape of the capital city markets.

Nothing is guareenteed in property especially in this market. There is a strong movement towards positive gearing verses negative gearing mainly due to the fact most people believe that the market will not grow significantly in the next 10 years therefore the capital growth in "most" areas will not be worth it. Would you keep an underperforming asset if its costing you money?

You sound in a similar position as me. We recently sold our investment property after realising a profit of 80% over 4 years; but we realised that our investment was no longer performing and was losing us money; if we sold a year earlier we would have realised a almost 100% return (the decision to sell has been a sound decision it would turn out now worth even less). This asset was cash neutral/rent wise when we sold. We cut our losses and are now waiting for our next investment- which currently we are leaning towards another renovate and hold- and hopefully either positively or neutrally geared. 

Goodluck on your decision. At the end of the day maximise your own skills towards an investment that works for you.

You've raised an important question "How do you get your money for the next deposit if its not going up in value?" eg the majority of positively geared properties.

For me I like the idea of buying something undervalued, rent below market rent, that needs a quick reno that will boost the value/ and rent, and hold onto it, getting it revalued at the end of the exercise. But again its all about finding, or sniffing out a good deal before someone else with more money than you does.  And for me this is taking a while……. but hoping it will get better towards the new year. 

Hi,
 it can get confusing. I know I was running around in circles for a while and panicking because I couldn't decide what to buy (being a bit older I didn't have time to waste).

You need to look at your own circumstances to see whether you are better with a PPOR or IP first. If you want to live in an area that has a low yield you may find it better to buy an IP in a better yielding area and rent for a while. Don't buy a PPOR just to get the stamp duty concession. You could buy and live in it for 6 months (to get the concession) then make it an IP if you want.

Your idea of doing a minor cosmetic reno is good but it will not give you enough of a CG to withdraw extra equity. You need to do a bit more than paint in order to get enough gain to withdraw.

As mentioned before you are not going to find the perfect property and you'll waste years searching for it. The problem is you are expecting to jump in at the top. That's not the way it works,. Sure listen to people that are doing it but it doesn't beat doing it yourself. There are hundreds of different ways to make money in real estate. There's no right/wrong. Even the "experts" disagree.
Some say only by within 15km of CBD. Others say out west is the way to go.

Look at your situation. What do you NEED? I'd say you need something with a decent yield (as it won't take all your wages each week and ruin your lifestyle).  So start looking for areas that have a decent yield. Now if you can buy something under market value and do it up a bit that will increase your yield a bit more and add a bit of equity. You may not be able to pull your money straight out but it's a start and as it's a high yield it gives you the oportunity to keep saving for the next one. And as the rent goes up (and hopefully the price of the property) you'll be able to refinance then to withdraw equity and it will not cost you anything to hold. Ok I know that's what I do and others may say do something different. Problem is lots of newcomers are looking for some magic formula to buy property. They look for wraps, options etc and waste years trying to find the perfect way. When really it's not that hard.

Happy to chat if you like. You can PM me.

lifestylez, whilst you would miss out on the FHOG for the IP you would still qualify for it when you purchase your PPOR (Assuming it is still around)

There are other perfectly good reasons why you would buy an IP first.

Cheers

Yours in Finance

Why not target suburbs that give both decent rental yield and also decent capital growth?

Sounds like guesswork to me. Buy a place, see if you like it, if you don't move out. That's just plain craz and will not lead to a property portfolio. But granted you will save $7,000. THINK BIG. You can make more than $7,000 on your first purchase but you can lose a hell of a lot more than that by buying in the wrong place JUST to save $7,000.

Purchasing a PPOR is VERY different to purchasing an IP. Decide which you are buying BEFORE you buy it. Even if you do decide to live in it for 6 months. You still need to know where you are going with it.

Read my signature.

Catalyst, you are so right- property investing is not about the FHOG. I was in real estate when the government was giving away $28k FHOG for new homes. First home buyers were running through the door, dying to spend their FHOG which had pushed prices up in our area by $40k. Prices have come back around $50K now- no need to spend the FHOG!

something which has been suggested a few times in recent property magazines (API and YPI) for young couples wanting to get started and without a current PPOR is to buy a house in need of renovation, and move in. Buy with the view to renovate and sell or convert to IP, but move in, claim FHOG, and over the timeframe of 6-12 months complete the renovation yourselves. Then either sell it, or get it revalued and use the equity to get IP #2. The magazines are a great read and have real life stories and coaching tips. Could be something worth considering.

I'm probably biased, because that method worked for me.  You are right, if you go for the PPOR you will probably have to sacrifice investment factors because you need to buy where you can live too.

I didn't know you could buy an IP first and then use the FHOG later on a PPOR.  It's been over 7 years since I claimed the FHOG so the rules must have changed (or I was ignorant in the first place).

1 )go and talk to the lender see how much you can borrow first.  if you can't borrow or financing the property then you don't have to worry what to buy or where to buy just focus on the deposit

2) if you can get the finance, then see what sort of area, suburb closer to you can you afford to buy. because for the first property you really want to be as close to you as possible, if there is anything goes wrong you can quickly fix it. ( for example you don't want to have a property interstate or oversea and vacant for long periond of time and later on find out managing agent just too lazy or busy to put the ad on the paper or internet)

3)once you decide the area/suburb then do the detail research about which streets of the suburb are good and the price on the each street. one side of the street can be very difference in price than the other side of street.

4) once you understand the street and property price then you can start thinking put in the offer on the property you wish to purchase

don't worry too much about renovation first. it's a good strategy.
but understand the area and suburb become an area expert is far more important than other thing.  

do your basic right from the beginning of you investing life, you will be far ahead from others.

learn to claw before walk, learn to walk before run, then you can start thinking about jump and fly …

Take you time, you are still young enjoy the journey

happy investing

Taylor Chang