Buying our 1st investment in this market?? Educated risk or silly move?? Help required

What are your plans?

What are your ages?

How old are the kids? Will there be additional education expenses for them soon?

What is career stability situation?

How are you going preparing for retirement with/without this property?

I often find people focus on the property rather than considering their whole situation. Spend a little time addressing some of the questions I have posed along with a myriad of others and you'll get a better understanding of what you should do.

Property is only the vehicle for your journey. You need to know the journey. 

Hi Mick,

Derek has made some very good points, look at the wider picture rather than just say ‘we won’t a IP’.

If you come full circle, I’d suggest investing in QLD – I live in Sydney but love investing in QLD – my two favourite right now are Mackay and Townsville. Both these areas are continue to grow (rather than a flat outlook for Melb), they both have multiple industries, increase population growth, government and industry investments plus if you invest in a new (house or unit) you get 10K from the QLD Gov (http://boost.treasury.qld.gov.au/buying-or-building/index.php), plus set it all up correctly and there are tax benefits.

I’ve mentioned it on a few of my other posts but I also like investing in shares as you can make both wealth creating assets work together!!

Good luck

If you have family with experience in developing, learn everything you can about how they are doing it,then replicate the process yourself. It is where the real money is to be made in property. Instead of purchasing at retail prices, you are creating value at wholesale prices. You don’t need to wait for capital growth and can instead manufacture significant profits up front. It took me years to realise this, but I don’t see myself buying at retail prices again.

In a position where you dont have too much to risk by extending yourself a little .. go ahead and buy as much property as you can for your buck. If you are more worried about a significant drop in property prices .. head out to a situation where there is less of a risk. As you are earning and could do with the tax benefits that can be established from having an investment property you should take full advantage of that.

In the current market there are still positively geared properties to take advantage of .. and deals that can be made that are worthwhile. My last seventeen purchases all start with a return over the 7.2% mark and surprisingly .. 6 are in the metropolitan area. People keep saying .. what about the capital growth? Make no mistake .. i want my capital growth. But I also want my  investments to pay for themselves and pay well. If the properties dont meet my stringent criteria .. then they dont get chosen.

There are too many people who think investor wealth is all about buying a property and hoping that when you come back to it in 6-8 years you can at least get your money back. Its not .. its about recognising that your property meets a social requirement that someone will pay money for .. that the area remains in demand .. and the property is worth having as an asset in later years. Yes .. thats right .. property is still an active investment.

If you are looking to swap and trade property .. now is not the best time to do that .. simply because the buyers have put their purchasing on hold. It is however a great time to do the bits that usually take time to do .. like renovating .. or painting .. or passing permits through council. Its also a good time to pickup the ones that are great value.

Hi Mick,

You are in a good financial shape, you are offsetting your mortgage, you have a solid combined income, equity and savings. You really are in a perfect position to enter the investor market. Should you wait for prices to drop? You could, but the wonderful thing about property investing is that you can make money at any stage of the property cycle if you buy the right property at the right price.
As an investor you ultimately want strong capital growth AND strong rental yield as well as low vacancy rates. Sounds like an unattainable perfect formula doesn’t it, but it is attainable – you just have to know the right areas.
You are correct that generally people will either focus on capital growth at the expense of rental yield or visa versa and serviceability is usually what influences the decision one way or the other.
A strong rental yield along with depreciation is what will offset any holding costs (along with tax reduction) if you want a neutrally geared property.
If you are wanting to offset your tax and don’t mind negative gearing for a few years while your property value is appreciating then you may not be so worried by lower rental yields.
But as you mentioned, property may be in for more of a bumpy ride on a downward slide in value, especially in the CBDs and if interest rates rise in a few years time, you don’t want to be stuck with higher holding costs and a property that has dropped in value.
However, it’s not all gloom and doom. If you are wanting to see strong capital growth even in an overall down economy, it’s entirely possible. Now be open here, you need to look beyond the borders of Melbourne. Melbourne has shown tremendous growth and been overheated, whereas certain regional areas are booming.
You mentioned you want to be able to drive to your property. While I understand your thinking (my first investments were within driving distance, now they are interstate from me), it’s important to remember why you are investing in property – to build your wealth and financial security! There’s no point in buying the property next door because you feel safer doing so if the property prices in your area are headed for a slump.
For example, a few years ago, Western Australia was going nuts, and recently Melbourne, however right now regional Queensland is what’s going nuts. The resources boom, growing infrastructure, work opportunity, housing shortage and the QLD gov building boost all make QLD regional property investing where the smart money is. Townsville, Mackay, Gladstone, these have been mentioned for good reason. You can buy and hold or build/develop etc and make money in several different ways. These regional areas are offering strong capital growth and handsome yields, you could definitely build a solid portfolio over the next five to ten years and generate more than enough income per annum through property to send your children to a private school.
Be brave and consider all your options, even if they are outside of the city or interstate. Property investing is fluid, you want to invest where the smart money is NOW, not where it’s easy to drive to. That’s what property managers are for!