Hi Patrick,
Darling, when I bought my first IP I was a stay-at-mum and ex husband was a welfare worker (not the highest paid bloke in town). By then, we had two kids under 3.
I simply followed my own formula, SWIM. Save, work, Invest, Manage.
We lived within our means, saved every penny, read every books from the library, cooked every meals, went and bought happy meal once a fortnight for the bubs. When we had 10% save, bought an IP a million miles away.
When I told friends that we were buying a house in Richmond, they all laughed their heads off. I mean, it was the end of the rail line, you couldn't get any further if you tried.
It was also a defense housing because I was so scared to death of being without a tenant, we chose to buy one that carried no risks.
When they laughed, I said, "we can't afford to buy where we live, it doesn't mean, we shouldn't buy. Even if we were the most unlucky investors ever, and only got $5,000 profit at the end of it, that's still $5,000 no one will ever give us for free." Hear the logic.
By the grace of God, the following year, we bought a house in Toukley for my mother-in-law to rent. Once again, it was a risk-free investment because we got ourselves a marvellous tenant.
The following year, we bought a 2-bed unit in Auburn, six months later a reiver-front 2-bed unit in Parramatta. We bought an IP every year just be being on budget, prudent, buying what we can afford and were positively geared.
When we divorce, we sold the two units, I got Richmond, he got Toukley. We still have them both.
It's not about lack of money. It's about having vision. It's about taking the bull by the horn and gritting your teeth. It's learning about fundamentals and most of all, having faith in yourself.
A million dollar lotto win can disappear just as quickly if you don't know what to do with it. But someone with $5,000 in his pocket can double that in six months (even two or three) if he knows what to do.
How did I manage to be so patient? I used every free time, generally when babies were asleep, calling banks and asking what we NEED to get a loan. Reading every property magazines I can lay my hands on. Time can be your enemy, but it can also be a friend. Befriend time. It is golden.
Take care.
Angel
Hey,
Thanks for that Angelina
I have a question based on the OP (original post):
– Does 'Sarah' have a PPoR that she has bought? Or is property #1 her PPoR?
– If it is her PPoR, how would she try to structure her loan? Should she be trying to get one which will assist with turning it in to a IP down the track? Is there even a difference at all?Thanks guys!
Patrick
Hi Patrick,
The original post was by Nathan, I'm not sure what scenario he had in mind. Regardless, it's not the point. You can buy it as an owner occupier first and then convert it to IP (like so many here). Or start out as IP.
The rule on taxation and loan structure is a long and convoluted issue to discuss in one post but it has been discussed here before. Read through some of the old threads, it would have a headline that goes like it, converting owner occupier to IP, something or other.
The thread will clarify it.
I hope this helps.
Angel
High praise to some people here from me :
Nathan for starting and fuelling this excellent post
Angel for explaining her journey and success, inspirational, (I'm going to chisel SWIM into stone and give it to my kids)
Richard for his journey and insight
Jake for the absolute gem about eagles & turkeys – just being here amongst this esteemed lot is flying with eagles.
lordopg to be congratulated for trying to change the average mindset into one of great success, and to achieve it you have placed yourself in the right place and surrounded yourself with successful like-minded people and said "I will succeed", and by doing so, you will.
You're all legends because you're here and doing it.
And I guess all this is ironic being done on the Forum of Steve McKnight who has written 2 books on the subject of acquiring a property portfolio in a short space of time – 0-100 properties…. and 0-130 properties …. , .We managed to get ahead by using a small deposit and borrowing against family real estate equity to buy and operate a motel leasehold, then bought the freehold, now sold that and expanding into buying several leaseholds to be run under management. Didn't own a home to start with and motels provide one free onsite so it seemed like a good idea and it worked just fine.
Just to repeat my earlier question – what's the average appreciation rate on NSW property since 1960 ?
Can anyone tell me or where I'd find it ? The reason for the question is that any strategy relying on natural increase in property value over time should at least know the long term average.Cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
OK,
awesome, thanksedit: naw shucks thecrest. The only thing I have at the moment is the knowledge that what I want is going to happen. There's just a few blanks I've got to fill in
Hi thecrest,
You are an example too. There are truly many ways to skin a cat. We are all only limited by our vision.
Someone who sees a gold nugget and thinks it is a gold nugget is a miner or a fossicker. An investor is someone who sees a gold nugget and thinks of it as a ring or a necklace, even a tiara.
I am never put off by advertised returns, if it says 5%, I will go find out why and check if I can make it 9%. Why not? Can I not create my own cash flow? If it says a "dump" can I polish it and make it beautiful? After all, a person's nose can be altered, why not a room?
More than anything, I see this forum more as a source of ideas and inspiration. Sometimes it is good to follow a well trodden path; but sometimes, we have to make our own way.
I've been inspired by many people, I look at what is unique in what they do. People are amazing. I'm amazed at what you have done. In my mind, that takes a lot of courage. Well done.
Angel
PS I have no answer ti your question.
Thanks Angel, you're very kind, inspirational and energising.
Cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
http://www.statewidemotelbrokers.com.au
Email Me | Phone Meselling motels in NSW
Hey
I was just wondering do the banks actually lend you so much money.. for example:
I buy house number 1 with a loan of $170K and its neutral geared. Will the banks actually lend me more money to buy another house even thought i already have $170k dept? Is there not a limit that they will lend to a single individual on a 50K p/a income?
For house number five they will be lending to someone with over $500K of dept.. and a 50k income?
larrytheinvestor wrote:Hey I was just wondering do the banks actually lend you so much money.. for example: I buy house number 1 with a loan of $170K and its neutral geared. Will the banks actually lend me more money to buy another house even thought i already have $170k dept? Is there not a limit that they will lend to a single individual on a 50K p/a income? For house number five they will be lending to someone with over $500K of dept.. and a 50k income?When you purchase properties if you purchase the correct properties with strong cashflow the bank actually sees this as a positive and includes the rent as income therefore your borrowing capacity increases.
So $50kpa and you buy $200k IP with $300pw ($15,6000pa) rent, new income is $$65,600 and debt $200k.
Hope this helps.
Nathan Birch wrote:When you purchase properties if you purchase the correct properties with strong cashflow the bank actually sees this as a positive and includes the rent as income therefore your borrowing capacity increases.
So $50kpa and you buy $200k IP with $300pw ($15,6000pa) rent, new income is $$65,600 and debt $200k.
Hope this helps.
That would also have a lot of how you present yourself when asking for the loan? Right?
very inspirational read…thank you!
angelinsydney wrote:Hi Larry,Indeed, Larry, you would be paying interest on the additional loan of $36K. So hopefully, you would be wise and purchase your next property with a minimum 8% net return.
Let's work on the above scenario you supplied: You now have $36K as a deposit for your next house. For the sake of the exercise let's pretend you want to buy 59 Douglas St., Tenterfield, NSW. This is being advertised on realestate.com.au
Here is what the ad says:
Investment Opportunity
Here is a chance to invest in a rental property with potential.
The property comprises 2 x 1 bedroom units and 3 x 2 bedroom units which rent furnished.
Located on a corner allotment within walking distance to all amenities and set in low maintenance grounds, these units have the potential to earn $470 per week
Long term tenants in place.
Vendor keen to move on.
Let's pretend, for the sake of the exercise, you got the seller to accept $260K. You put in $26K (10%) and the rest was for LMI, bit of reno and other costs.
Your total loan for the property is $234,000 and $36,000 = $270K. Pretend you fixed loan for 3 years and it is 7.5%. You decided to pay interest only. The interest payable per month is $1687.00. You rental income is $2,036.66 ($470 x 52 weeks / 12).
Now, you can see that this property number 2 is also self-supporting.
Repeat the process for investment number 3.I hope this helps.
Angel
Hi Angel,
I did some research for rental market in Sydney and mostly the rental return is around 5%pa.
Let say Sydney CBD, 1bedroom apartment can cost me $530,000 and with rental income is around $520/week ($520x52week=$27,040.00~around 5%pa from investment)
Is there any area with rental income 7-10% pa?
Do you consider 5% return pa is healthy investment?Thanks,
dc99dc99 wrote:Hi Angel, I did some research for rental market in Sydney and mostly the rental return is around 5%pa. Let say Sydney CBD, 1bedroom apartment can cost me $530,000 and with rental income is around $520/week ($520x52week=$27,040.00~around 5%pa from investment) Is there any area with rental income 7-10% pa? Do you consider 5% return pa is healthy investment? Thanks, dc99Ouch, Sydney market sounds BRUTAL!
lordopg wrote:dc99 wrote:Hi Angel, I did some research for rental market in Sydney and mostly the rental return is around 5%pa. Let say Sydney CBD, 1bedroom apartment can cost me $530,000 and with rental income is around $520/week ($520x52week=$27,040.00~around 5%pa from investment) Is there any area with rental income 7-10% pa? Do you consider 5% return pa is healthy investment? Thanks, dc99Ouch, Sydney market sounds BRUTAL!
yes indeed…
where r u investing lordopg?
perhaps you can advise me on better suburbs?dc99 wrote:yes indeed… where r u investing lordopg? perhaps you can advise me on better suburbs?Hey mate,
I am yet to invest – and not really at a level where I could give any advice!My plans for the next 6-12 months are:
# Save, save, save!
# Buy first property as owner occupier and pretty much follow the plan outlined in the Original Post..I live in QLD so I'm not familiar with the Sydney market. In QLD I will be trying to invest in the St.Lucia/Toowong/Taringa area as it is very close to The University of Queensland. My partner and I would be looking to buy a 3 bedroom and then renting out an extra room to a student. Then eventually move on from that house and open up as a sharehouse – each room for rent. That, or, we just rent the whole house. I have not done enough research as to which is a better choice. (most likely a thread later?)
I am very, very excited for the next 6 months to come and go!
Congrate on your investing so far Nathan!
My investing style is different to Nathan- mine is more similar to Richards one….Rather then buy a place that’s +Ve already..i tend to buy a property with potential to create this “+VE + capital growth” …
So block of units, subdivision and Muti rent ( students, 2-3 family etc..)I currently have only bought in the Sydney Metro area ( all with 25min drive to Sydney CBD) so i find if i bought a property that had rental yield advertised at 6% + the price of the place is just simply NOT worth it.
* I bought a Unit in Chippendale 2 years ago for $410,000 – I changed the inside to allow for Another bedroom ( council and strata approved) at the cost of $4,000 it nows rents for $670 PW.
* House in Cheltenham – Bought 4 years ago, subdivided with split title and 2 road access — the vacant land at the back has $390,000 capital gain ( not yet sold) . Main house still rented out for $550 PW.
* Currently in the process of buying Block of 4 units in Rockdale.
So i tend to buy to expand and “Create” growth and Yield. I’m still learning so may change my strategy as i progress; but my current strategy has worked well for me so why change
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
Thanks for the feedback everyone.
You cannot just stumble across 10% yields and the vendors dont know the value of what their property (product) is worth when selling.
There are TWO must's when buying any property IMO and a further two which should always be taken on board.
1) Buying below market value. This is based on recent sales and others on the market. They must be identical comparions and between 10-20% below market.
2) The cashflow should support itself, or close to it, ideally putting money in your pocket.The further two comments are
3) The property needs to have growth upside (ideally in metro states or regional populations with 10,000 + population)
4) The property should fit in line with your plans and be getting you closer to your end goal.Nathan.
Thanks everyone for sharing your investing journey. You are all truly an inspiration.
I am in my mid 30s and I wish I had this kind of mindset when I was younger. But I reckon that does not matter. What matters is what you are doing with information that you have, year in and year out, so you could reach your goals.We are just starting. We are currently in the process of subdividing our existing property (we actually own half of the property only, tenants-in-common). Build on the second lot, then use the equity to buy the next investment property. My initial plan is buy at least one investment property each year. But I reckon that will increase with each property as I accumulate a lot experience and confidence.
At face value it looks very easy and straightforward, but in reality there are many factors you have to deal with, like if you have a partner who does not have the same mindset as you. It could be frustrating but if you focus on your goals, you eventually get there i suppose.
@shape
i’m newbie need advise
so before you bought on your chippendale unit, do you check with council and strata first? or you bought it then check it later?what’s the most chance for approval of changing a studio becoming1 bedroom apartment?
is it worthed?thanks… : )
You can’t get the approval done first – because EVEN if council approves it …it needs to go strata for approval as well and strata would not look at any request that’s NOT from the “owner” of the strata scheme
Yes i took a risk, but i had a builder to come and look at the place too make sure any changes i made did NOT touch or affect the common walls ( any walls you share with your neighborer – Floor boards, roof, side walls) or plumbing.
The unit i bought was lucky; because i changed Laundry ( which was 2.7 x3.8 m) into a room; and i took out the dish washing and replaced it with a washing machine instead ( Very European + HK style) – > easy approval at the cost of $4,000
—-
In your case for a studio it’s a lot hardier! because it needs to meet a Min space requirement- i know Sydney of city council allows a “partition wall” to be added as long as it meet’s building standards, fire standards and it’s strata approved But it’s not easy especially the strata part!
Regards
MichaelMick C | Shape Home Loans
http://www.shapehomeloans.com.au/
Email Me | Phone MeSame Banks. Better Rates. Served With a Passion.
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