Hi all,
I received a very generous xmas gift from my older brother this year of $250k. I’ve always been interested in property investing (read Steve’s two books and am a voracious reader of investment magazines), and now I have an excellent opportunity to get into it. I earn a good income ($140k p/a), so servicing a loan should not be a problem. My family are suggesting that I buy a home to live in. Not being an expert, it seems to me that this is not an effective use of the money. It seems to me that I should borrow some money to get some leverage, and maximise the opportunities. Is it better to get several IP’s rather than just one? Should I bee looking at regional areas? Finally, I’ve seen some websites on the internet with people offering to sources positive cashflow properties for a fee. Does anyone have any experience with such people (good/bad). Any recommendations?
Thank you, and peace to you and your family over the break.
cheers
[biggrin]
Benny
Put it all on BLACK!
Jokes aside…
Your brother is very generous. Yo only have about a million options open to you. You could buy a substantial portfolio in one swoop if you have no problem with gearing. The risk is that you will have to make payments if you have no tenants. This is highly unlikely to occur with all properties at once though.
I would only use a fully qualified spotter (ie: licensed). They are known as buyer’s agents. Check what they provide in the form of information regarding a property. If it is not substantial and enough to allow you to make your decision, then source another buyer’s agent.
Let us know what you decide to do.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdHi Benny,
The answer to your ‘what shall I do with the money’ question really lies in what your plans are and how the money can best be utilised to help you achieve those plans.
For some people their investment goals focus on capital growth and yet their are others who focus their investment goals on income streams. Of course there are also those who tend to like a bit of both.
I would also counsel you to establish a budget and because at the moment you haven’t indicated any other savings or investments that are actually in place – is this the case?
On an income of $140K/annum you are well placed to to borrow considerable sums of money and the $250K can be used to stump the deposits on any borrowings.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
Thanks Robert.
I’m pretty comfortable taking on debt, so developing a broad portofolio would be the goal.
I will take a look through the older threads to see if I can find anything on buyer’s agents. Are there any in particular that I should look at?
cheers
Benny
Thanks for your advice Derek.
True enough, I haven’t got a budget in place, nor any other savings. I was paying off a car loan and my credit card, so paying off debts was my main focus. Now that I can afford to pay these debts off immediately, I would like to start putting my money into investment.
In terms of what type of investments, and what my goals are, I would like to make some good capital returns and, if possible, do that through positive cashflow vehicles. With those goals in mind, does it make more sense to invest in several properties instead of one? And what level of gearing is thought to be appropriate? Is there a rule of thumb?
thanks again
Benny
[biggrin]
Originally posted by BouncingBenny:True enough, I haven’t got a budget in place, nor any other savings. I was paying off a car loan and my credit card, so paying off debts was my main focus. Now that I can afford to pay these debts off immediately, I would like to start putting my money into investment.
I would suggest that initially you put the money into a high interest bearing deposit with ING or someone similar for a 6 month period. This will give you time to really explore your investment alternatives and to narrow down the focus a little more.
As a little rider here – if the car and credit card debts are substantial then it would be prudent to clear those debts first. But on the proviso that you ‘repay yourself’ as quickly as possible.
During this 6 month period I would read some of the books reviewed on this thread as a couple of the books discuss a change the mindset approach too – which can be invaluable when you embark on an investment program.
https://www.propertyinvesting.com/forum/topic/6845.htmlA common thread that comes through in a lot of books is that a good budget is necessary with the concept of ‘paying yourself’ first a feature.
On an income of $140K you have the capacity to live well without being wasteful or frugal. There are many people who get caught up in the next gadget craze and will expend significant sums of money that could otherwise be used elsewhere – often this is a hard learned lesson that comes much later in life when the horse has already bolted for some.
In terms of what type of investments, and what my goals are, I would like to make some good capital returns and, if possible, do that through positive cashflow vehicles. With those goals in mind, does it make more sense to invest in several properties instead of one? And what level of gearing is thought to be appropriate? Is there a rule of thumb?
There is no investment ‘rule of thumb’ as like fingerprints we are all different and what suits one person may not suit another.
By way of example we initially geared to 80% and then 90% and now back 80%. While this may seem conservative to some people, others thought it aggressive. It is really a horses for courses approach.
Bear in mind that borrowings over 80% will incur some mortgage insurance which, while deductible over 5 years also costs around 1.5% (give or take a little) of the total loan.
Your long term and short term investment goals should also consider things such as career security and changes, family/marriage commitments, lifestyle changes, length of time in the work forces and your capacity to ride out investment risks.
By way of another example my investment plan, in a nutshell is to buy well researched property in long term growth areas of Perth and SEQ and then to leverage off these as they increase in value.
Supplementing this is a share fund and a couple of other income producing investments that provide the cashflow.
As an aside you may well find that your brother is able to mentor you through the infancy stages of the journey. I am assuming here that he has some business or investment acumen given the generosity of his gift.
Ultimately the journey you take must be yours as it comes back to a question of what do you want to achieve.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
Originally posted by Derek:I would suggest that initially you put the money into a high interest bearing deposit with ING or someone similar for a 6 month period. This will give you time to really explore your investment alternatives and to narrow down the focus a little. During this 6 month period I would read some of the books reviewed on this thread as a couple of the books discuss a change the mindset approach too – which can be invaluable when you embark on an investment program.
https://www.propertyinvesting.com/forum/topic/6845.html
By way of another example my investment plan, in a nutshell is to buy well researched property in long term growth areas of Perth and SEQ and then to leverage off these as they increase in value.
DerekHi Bouncing Benny
I agree wholeheartedly with Derek, and I hope you appreciate the quality of advice he (and others) have already given you. You could do a lot worse than emulating Derek. As for your “What should I do now?” question, please DO NOTHING until you’ve:
1. Written up your budget
2. Read and meditated deeply upon the links provided by Derek
3. Written down your Business Plan
4. Put your 5 Year plan IN WRITING, with:
a) Your 5 Year Goal Statement
b) Your 5 x 1 year plans
5. Established your Family Trust structure/s
6. Bought Dale Gatherum-Goss’ 2 books, Trust magic and Tax Battles:
http://www.gatherumgoss.comThe list is actually much longer, but in a nutshell: This magnificent country of ours doesn’t have one single property market, but rather a plethora of mini-markets, many of them at vastly different stages of their OWN, PERSONALISED PROPERTY CYCLES.
To make yourself into a real property tycoon, I’d urge you to set aside $5,000 – $10,000 for your personal professional development, and get yourself off to a few highly-regarded seminars / “boot camps”. I hate the term myself, but they REALLY DO WORK, and the networking contacts they bring into your life are awesome.
Have you read Peter Spann’s “$10 Million Property Portfolio in just 10 Years?” (published 2004) or ever gone to one of his seminars? If “yes”, I’m thinking about Spann’s brilliant tips on how to PRACTICALLY APPLY Median Price Data to time your entry into the markets at the most advantageous point of a particular suburb’s cycle (Ch.13, pp56-66).
I was so impressed with this chapter, I even invented a “212” mnemonic to help me remember and apply it:
2 years + 1 year + 2 years = 5 year cycle
2 = 1st 2 years of cycle: RELATIVELY FLAT GROWTH
1 = 3rd year of cycle: STARTS MOVING UP
2 = 4th and 5th years: MAJOR GROWTH SPURT
ACTION/MORAL: Buy at the end of the 2nd year or early on in the 3rd year of the cycleSpann’s talking city suburban cycles here; I doubt it works so clearly in regional/rural towns, which are so sensitive to regional employment factors etc. Spann gives an example of suburbs which have risen ON AVERAGE 8% over a decade:
“You’ll see that property growth comes in spurts…. many suburbs follow this pattern: two years flat, one year up, two years jump, followed by a repeat – two years flat, one year up, two years jump. Let’s look at this suburb’s growth and plot it. The first year is coming off a flat period. Very frequently a big growth spurt will follow a flat period like this. Then the growth rate kicks up tp 7% in year 2. This is our warning of the growth spurt to follow. If we had bought then we would have picked up the natural growth of the next couple of years. Year 3 the growth is 16% and year 4 the growth is 20%. If we had bought a $100,000 property at the end of the SECOND year in the cycle, it would be worth $139,000 at the end of year 4, or a growth of just over 39% in 2 years. And this is all pure profit to us. The growth rate then stagnates for a couple of years – no problem, we just sit and wait – and then it moves up to 8% for year 8. This is our warning of the next big jump, and we see 14% and 21% over the next 2 years. That would mean our $100,000 property would now be worth $233,000. Pretty exciting! While you don’t have to be this precise in timing property to make money over the long term, it will shorten the time it takes for your property to double in value and it saves you buying before the stagnant years.”
Cheers
GregThat’s brilliant advice guys. It’s strikingly clear to me that I need to spend 6 months or so just educating myself about this before I jump in. Thanks again for the words of wisdom.
Benny
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