All Topics / Help Needed! / confused and needing confidence

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  • Profile photo of r.crawford51@gmail.com[email protected]
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    HI there everyone

    I have been studying property investment for a while now (during uni and since i graduated in June) and I really wnt to begin…BUt each time I come up with an idea, I hear what someone else has done and get confused and lack confidence.

    I wanted to begin with positive cash flow – but then I read books by MIchael Yardney who is adamant you need to create wealth (via capital growth). Then I have ideas such as build a PPOR (buy a block of land and get a house on it) then use that for equity once it goes up and then go from there..)

    I dont know IM getting confused with what to do for my first step. My partner wants to begin with PPOR, but the stampt duty exemmption finishes on 1/1/2012 for established houses….and rushing si not ideal

    I like the idea of buying a place and doing small cosmetic renno then renting it out, and using the increased equity from revaluation to continue – but Im not even sure I want to be a landlord!!! It sounds quite intense…

    What deals should I focus on if i want to get lump sums of cash as well as wealth and cash flow??

    I hope other people know how to overcome the fear of starting
    AS im only 22 I know i can resave my deposit ($25 K so far) – but I dont want to go wrong from my first one….

    I like the iea of buying PPOR and doing a reno and using the equity from that – but I wanted to begin with an IP…
    Thoughts????

    Profile photo of masky005masky005
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    @masky005
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    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.

    Profile photo of r.crawford51@gmail.com[email protected]
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    Ah ok nice one. Thats great your doing investing :)
    Well, we’re going to a proeprty investing seminar in SYD in NOV which we cant wait – its run by RESULTS and all about how to do positive cash flow deals.

    Because its our first deposit, im not sure whether to put it into a buy/hold (positive real estate or capital growth…because if its positive…how do u get money for your next deposit if its not going up in value and you cannot use equity)?

    Or whether to do subdivision (my brother works for council and is an engineer so he can help)..etc.. I’d like ot learn to do lease options or wraps as I dont think I want to be a landord…or also commercial is interesting (so need to do lump sum deals to get the cash to begin)

    I have the skills (as my partner does) for a small cosmetic reno, but nothing fancy – i’d probably pay someone to help…

    But yeah, as I do a share trading business, I’d probably like lump sum money to put into that- then get into commercial

    Profile photo of masky005masky005
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    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. 

    Profile photo of WomeninPropMelbWomeninPropMelb
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    If you are looking to do a reno and revise value quickly- get in touch with Ana Stankovic.
    There are too many options out there. Dont get analysis paralysis. Get “How to Build Wealth for Life with Property” by Chan and Naylor.
    Get someone to go over YOUR figures for you- someone objective. I have some suggestions of people who can help you here.
    “Positive Cash Flow” is hard to find these days. AND you need lots of knowledge to achieve this.
    You have posted many times here. You will get as many different views here as you post.
    I’m happy to chat to you if you want to sort things out in your head.
    Find a mentor and go with it- Most of them will help you make money- it is a matter of deciding which one to go with- dont keep changing. Just focus.

    Profile photo of CatalystCatalyst
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    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.

    Profile photo of lifestylezlifestylez
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    As a first home buyer, I would go for buying your own home and claim the FHOG.

    See how you go living in it for 6 months and if you decide you want to live somewhere else, then you can rent it out.

    If you think that is likely, then try and buy somewhere you can live for a while but with a view to making it an IP.  So you will need to focus more on it's capital growth potential and income potential (yield) so when you rent it out, it is still a reasonable investment.

    If you go straight for the IP, you won't get the FHOG. That's $7,000 you miss out on.

    Profile photo of Richard TaylorRichard Taylor
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    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

    Richard Taylor | Australia's leading private lender

    Profile photo of r.crawford51@gmail.com[email protected]
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    These are great repsonses
    I jsut went for a walk before and had an epiphany (ha ha) of why im getting frustrated and confused about proeprty
    my conviction, or my WHY has not been strong enough. When I decided for positive cash flow, I get sucked into capital gains because my WY for positive is not strong enough….
    I’ve been reading 0 to 260 in 7 yrs, and its so great because even though theres a million ways to d property, Steve is grounded in his reasons why.

    I want to acquire income producing real estate, and do lump sum deals to decrease my debt levels. I also prefer to get into commercial real estate asap as while the returns can be great, the tennant is liable for the costs etc.

    But I’d love to chat to anyone who is in the market out there doing positive income real estate, Im a nubie and would love advice anyways :)

    Profile photo of Jacqui MiddletonJacqui Middleton
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    Why not target suburbs that give both decent rental yield and also decent capital growth?

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of r.crawford51@gmail.com[email protected]
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    This is what I aim to do. Outer areas of capital cities are great for that, but we live in Coffs so I dont know those areas…
    I lived in Brisbane during uni – so might begin there…but I also hve family that have lived in Sydney for 10 yrs who know the area well

    Coffs is great for decent priced homes, and a strong rental market, but not many positive deals just come up so I’d have to be creative whihc im learning how to do.

    Profile photo of CatalystCatalyst
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    lifestylez wrote:
    As a first home buyer, I would go for buying your own home and claim the FHOG.

    See how you go living in it for 6 months and if you decide you want to live somewhere else, then you can rent it out.

    If you think that is likely, then try and buy somewhere you can live for a while but with a view to making it an IP.  So you will need to focus more on it's capital growth potential and income potential (yield) so when you rent it out, it is still a reasonable investment.

    If you go straight for the IP, you won't get the FHOG. That's $7,000 you miss out on.

    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.

    Profile photo of robrokrobrok
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    Hi all

    Very informative posts and I understand the nervousness regarding the first ip and which strategy etc etc

    The short of it is these common ways to make money in real-estate although there are a lot more.

    A. Positive Cashflow that drives capital growth potential
    B. buying a problem property under market , solving the problem, and reselling for profit
    Subdivision and development
    D. Options and improving the property prior to the option ending

    A in au is about finding the right resource driven areas to play in on a 2-5 year basis
    B is all about local research
    C as above but also takes some accounting smarts to make it work
    D more for the sophisticated investor and lucrative if done correctly

    Apologies to all the lengthy best seller book writers who take 200 pages to describe the above.

    My recommendations is find a cash plus property in a progressive area to start of your portfolio. We have (unashamedly)
    Some of these coming up in the next 4 to 6 weeks. This will provide some positive Cashflow to explore other areas of investment without killing your day to day income.

    FYI

    I am the director of a company called house hunters Australia. Although I have been involved in ip stuff for many years I started with hha 3 years ago. Working with the staff of hha i have personally In the space of 3 years progressed to now own 8 properties in our business portfolio , 5 in my personal portfolio and have another 6 in the near future for settlement. The whole portfolio is cash positive ( 100k plus )

    Profile photo of WomeninPropMelbWomeninPropMelb
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    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!

    Profile photo of Richard TaylorRichard Taylor
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    r crawford whilst you might think that a Commercial property is the way to go in the current climate financing the deal is a lot higher than it used to be and probably maxing out at around 65% lvr depending on what it is.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of wisepearlwisepearl
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    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.

    Profile photo of Jamie MooreJamie Moore
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    wisepearl wrote:
    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.

    Yep – I like this option. This is the same method adopted by many of my FHB clients.

    It really isn't that difficult to add value to a property. If you can pick something up that's just in need of some cosmetic renovations and avoid over capitalising, then you're onto a winner (in my opinion).

    Once the renos are complete. Get it revalued – access the additional equity and use it towards your first IP….then repeat :)

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of lifestylezlifestylez
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    Catalyst wrote:
    lifestylez wrote:
    As a first home buyer, I would go for buying your own home and claim the FHOG.

    See how you go living in it for 6 months and if you decide you want to live somewhere else, then you can rent it out.

    If you think that is likely, then try and buy somewhere you can live for a while but with a view to making it an IP.  So you will need to focus more on it's capital growth potential and income potential (yield) so when you rent it out, it is still a reasonable investment.

    If you go straight for the IP, you won't get the FHOG. That's $7,000 you miss out on.

    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.

    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).

    Profile photo of gfreergfreer
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    You could consider a JV with another family member on a residential investment property. Bowen recommended due to affordable entry point and rail and (Abbot Point) port construction projects in pipeline to support Bowen and Galilee basin mining boom .

    Profile photo of TaylorChangTaylorChang
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    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

    TaylorChang | Finance Broker
    Email Me | Phone Me

    Home loan | Commercial loan | 0414 691 517

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