im new to this and havent started as of yet as im still trying to understand how its possible to keep getting loans and having a deposit each time for a house…especially when you buy them so close together. i am paying of my own house atm…i owe another 155000 still, and i have about 5000 in the bank for watever. how am i meant to move forward without using equity in my own home?
some options might be to sell the home and rent a place, the equity could then be used for deposits
pay smaller deposits
do some bird dogging and use the income to pay for deposits
otherwise i dont know, get creative, settle on long terms with early access fix some places up and sell them before you need the loan use the CG to pay for deposits on more REI!!!
If you don’t use equity, then it will take a very long time to save deposits. Most investors use equity in their homes, and then with growth they keep accessing the increased equity for more properties.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
What Terry says is correct. You need to access the increasing equity in your properties as they go up in value.
The problem is many begining investors go for high cash flow properties, that have little capital growth. Its very hard to save for your next deposit ‘from a few dollars a week +ve cash flow
Michael Yardney
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FREE subscription http://www.metropole.com.au“high cash flow properties, that have little capital growth. Its very hard to save for your next deposit ‘from a few dollars a week +ve cash flow”
Re the above, this is what most people believe, but they are wrong.
In NZ I bought 20-24 percent CF+ve properties and all of them went up more than 100 percent in 18 months. They were very cashflow positive and capital-gains-wise outperformed the market.
In NZ there was a news article the other day saying that regions such as Taranaki (where one of my houses is) and ‘the regional areas’ are outperforming cities in all areas – population, economically, etc etc
Now I didn’t KNOW this when I bought, but I since it happened to me I know so many other investors who tell the same story about Australian regional properties tripling in value. Yes, 300 percent. This is in the same year when Manly goes up 27 percent and that’s the supposedly best performing suburb in the whole of Australia two years in a row.
All I can do is keep spreading the word as best I can, and leave everyone else to their paradigms, I guess
cheers-
miniWhat you say, Minimogul, is true. It is possible to get CF+pve property that rises sharply in value. However traditionally chashflow rich places are exactly that becasue they have historically shown low or no growth.
Regional centres have for many years suffered from the young’uns up and moving into the city. Only recently has there been a significant interest in regional centres. However I think in time it will ebb and flow like a tide and the big gains in value in the country will stagnate while the city continues forward until such time as the cashflow and price is right in the country and boom it happens again.
What we can get from this is that like all things, if you do the right research and with a little luch you can get the goose that lays the golden egg (statistically 9 times out of 10 [biggrin])
An example from my life:
In mid 2000 I was umming and ahhing about buying a flat in Canberra. $45k getting $100 / week rent. I looked at the past 10 years sales and while the flat and other had been sold a couple of times the price was flat (actually retreated one year). I didn’t know muchat the time so I put my money elsewhere. 3 years later and the same flat is being sold for over $100k but still renting at about $100 / week. Oh well.Surrey.
Originally posted by MiniMogul:all of them went up more than 100 percent in 18 months.
Don’t they say ‘one sparrow doesn’t make a summer’?
If long term sustained growth is so good why is it that property in smaller towns/regional centres etc is generally cheaper than cities?
And while percentages sound impressive – raw dollars are equally as important.
And – if someone is spotting (whatever) in a smallish location it is possible to manipulate the market to create such results.
Speaking from experience we did it for our members in a suburb of Perth and also within another similarly coonfined area in Perth.
We ‘took out’ a great many suitable, right priced properties in the two areas and then left while maintaining the services to our purchasers.
All of a sudden there is nothing suitable left at the previous prices, people are paying the next tier of price, property sales stats are up and real estate agents start talking the areas up and the areas gain a momentum of their own.
Derek
[email protected]
0409 882 958
Property investment advice and researched property in quality locations available.> Don’t they say ‘one sparrow doesn’t make a summer’?
Yes, they do say that.
I wasn’t the only sparrow, however there were all these big squawking magpies who were louder and there were much more of them, so nobody heard the sparrows, and said, hey, you’re just a sparrow, and you were just lucky, and I don’t believe you anyway, etc etc, yeah, I’ve heard it all for the last 2 years, and it bores me senseless, however I do consider it my public duty to correct the mis-information that is spread on these forums by people that don’t know any better.> If long term sustained growth is so good
hang on, UHHHHMMMMM, don’t put words in my mouth.
I am not expecting that to happen every year to the same property.
You wouldn’t expect it on your blue chip properties either, would you?
Well, then you’re in denial about periods of negative or flat (non) growth.In fact, I’d go as far as to say that the more blue chip you go, the bigger the risk is of capital loss. I.e. Walsh Bay apartments. People bought them off the plan for 2.5, 3.5 million and more. 65 percent sold to owner occupiers, and 35 percent to people as an ‘investment’ – to onsell for capital gains, or rent out (I suppose.) Now these are not only absolute waterfront, they have amazing views of the harbour, and they have not just one side of the apartment on the water but both sides, They are incredible. I don’t even like apartments that much ( poor people’s accom strumped up and sold to rich people!!-) but these are really amazing. Now they are having trouble renting them for a two percent yield, and they can’t sell them either – unless for a million dollar loss per property. I had a great chat with a RE agent onsite last weekend checking out the absolute carnage that is going on there.
Oh yeah, so the rent (2 percent on asking price) – nobody was willing to pay it, it had been vacant since December. We were going in to negotiate the price down a third and the agent said we absolutely had a good chance. This would have taken it down to a 1.4 percent yield.
I am just trying to contrast two extremes to show that somewhere between the cheapie houses and the 3M+ houses you get a difference in yield from 20, through 10, down to 7, to 5, 4, 3, and then 1.4.
And with CG’s, you get 300 percent (I would have told you about my friend’s property which 5 timesed in value in a year, but I thought you wouldn’t believe me!!!) at one end of the market, through to 25 percent p/a/ in the ‘top suburbs’ at the height of the boom, down to 1/3 capital losses or more at the very very top.
In fact I have been looking at properties in Double Bay, and let me tell you, they are absolutely giving them away at half price compared to a year or so ago.! No bull!!!
>why is it that property in smaller
> towns/regional centres etc is generally cheaper than cities?Um, because the land is worth less. (Is this a trick question?)
> And while percentages sound impressive – raw dollars are equally as important.
Yes, I am sorry this was not clear, but I meant this: high percentages of return (either CF or CG) equate to a high percentage of ‘raw dollars’ back, in relation to the amount of ‘raw dollars’ you have in the deal.> And – if someone is spotting (whatever) in a smallish location it is possible
> to manipulate the market to create such results.Yes indeed, and (if you are talking about ‘moi’, I wouldn’t be so brazen to suggest that little old me could cause a boom in a town of 5000 by name-checking it on a forum, but I’m flattered that you think I could!
It has been suggested to me before, actually!However, if you think that these figures were only achieved by buying in a ‘smallish location’ then telling everyone else to do the same, – it wasn’t just me. People all over the place were getting the same results, in places I wasn’t buying in. Also, for something you Aussies will be able to relate to, prior to NZ (before I was investing) the same story was going on in places like Elizabeth, South Australia where you could pick up a high yielding property for 30k or so, and then a few years later it was worth 90k.
> Speaking from experience we did it for our members in a suburb of Perth and
> also within another similarly coonfined area in Perth.
> We ‘took out’ a great many suitable, right priced properties in the two areas
> and then left while maintaining the services to our purchasers.Controlling the market, yeah sure, if you are big enough, you can do anything, but it doesn’t make you right. I.e. bill gates and microsoft,
the crappest operating system got the most popular. Or remember VHS vs Beta, beta was fabulous, and VHS was crap, but VHS got the monopoly.It’s just manipulation. I didn’t manipulate the market to ‘make’ my properties do this, honest!
> All of a sudden there is nothing suitable left at the previous prices,
Yes, it’s called capital growth.
>people
> are paying the next tier of price, property sales stats are up and real estate
> agents start talking the areas up and the areas gain a momentum of their own.Yes, and my job is to purchase in the areas *before* this happens, by looking for the same patterns and conditions. For example, let’s say you hear of plans for a westfield shopping mall going in to an area. Now if you buy there as soon as it’s built, you will beat a whole bunch of people who will only notice the area is ‘going off’ when the westfield actually starts construction. And then those people will buy there. And those people will beat a whole other group of people who will wait until the westfield actually exists, and then notice it and say ‘wow, that suburb used to be crap but it’s become quite trendy now’ and buy there. Where are the prices now? And who is controlling the market? who made that happen? me? westfield? people? real estate agents?
Westfield is an investor, just like me. They do their research, and plan to build their complex. developers hear about it and build apartments ‘just near the new westfield’. Councils design new bus routes to stop ‘at the new westfield’. But the great unwashed don’t see it until it’s there. So I try and go in at the same time as westfield. Is it a surprise that , badabing, everything went up in value? No, duh.
So small towns. Maybe it’s not a Westfield, maybe it’s a new Bunnings warehouse, or a Warehouse (a NZ thing.) Maybe it’s a new hospital, or a school. or an extension of a motorway. Maybe it’s even just the ‘announcement’ of this ‘maybe’ happening. This is of course when is the absolute perfect time to buy! Even if that announcement doesn’t happen, you get the sign that people are ‘thinking’ about doing stuff in this town. Whatever it is, it is the sparrow of capital gains, and it can be a big or a small town.
The idea is to try to outperform the market, and so far , so good. I did it sorta accidentally before, but now I do it deliberately. I learned a lot from Westan who has done it in three countries now using this technique.
and surrey, “Only recently has there been a significant interest in regional centres”
Well, that could be true. The cities are getting bigger and uglier and more expensive, and sprawl out, and the roads get ‘faster’ with bypasses and so on, and suddenly Orewa (north of Auckland) is only 25 minutes drive not an hour’s drive.
It’s as if the country got ‘closer’ and more doable. Couple this with the city prices getting sooo expensive, and people go, hey! look, if we just go 40 minutes out of town, we can buy all this house for our money. And once they move there, they realise that 20 minutes further they can get an absolute palace for their money. And other people go, hey, i’ll buy it for the cashflow, or to have a weekend getaway. Remember that NZ is smaller than Australia and the small towns are not ‘remote’ like you get here, i.e. coober Pedy, 6 hours drive from anywhere, not really on the way to anything. NZ towns are all perfectly spaced close together between cities.
Or close to the sea. or close to ‘something’. A lot of the CF spots in Aus are just not comparable at all. I mean, in the North Island, the furthest you can be from a major city (auckland, wellington) is generally about 3-4 hours, and if you are further than that, then at least you will be 1 hour away from a major regional town of 50-100k people. Also all the towns are lush rather than barren. They get through traffic. They are not like the Aus regional small towns. Aus is so bloomin ‘ big, that it’s hard to comprehend. but NZ is wincy. and accessible.I sorta know that I will not convince any closed-minded people that it’s OKAY!! however, I will bloody give it my best shot to try!
back to the topic…
charmed, I don;t think there is anything wrong with using equity in your home to fund property investing. It becomes “good debt” to make your passive asset income-producing- in fact, your home is not much of an asset *unless* it becomes part of an income-producing machine.
If you have a PPOR worth $350k, for example, that’s about 7 deposits… worth thinking about. I think the only reason someone wouldn’t want to use their PPOR as purchasing power, is if they fely that buying investment property was too “risky” and that they might lose their home (you can counter this by entering into the proper tax structure). If you feel that property is too risky, then it might be better to invest in other asset classes.
Have faith, and buy well- use your PPOR as deposits- having the “risk” of the PPOR will mean that you’ll purchase better.
kay henry
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