Forums / Property Investing / Creative Investing / $200k to Start Portfolio

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  • Profile photo of StarglowStarglow
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    @starglow
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    What would be the most effective way to use $200k cash to begin a property portfolio from scratch? We can explore all manner of creative financing to maximise cash flow & return – that should be fun!

    Starglow

    Profile photo of zenergyzenergy
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    @zenergy
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    dude, that would be like asking what colour someone should bet on a poker game ….

    there are so many things to consider… everyone is individual, different risk profiles, Return on investment expectations, cash burn situations….

    is the earth round or square???

    are for specific questions and you will get answers…

    jo :)

    Profile photo of Fast LaneFast Lane
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    @fast-lane
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    You could really leverage that money and get off to a flying start, but just because you have it doesn’t mean you should invest it. Dont let it burn a hole in your pockets.

    Deciding on what outcomes you want from your investments will help you to determine exactly which direction to take. So just be patient, do your research and dont rush in!

    Good Luck…G7

    Profile photo of StarglowStarglow
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    @starglow
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    Great advice – many thanks. It’s leverage that’s perplexing. Each time I look at this creature, it’s added bits to itself. When you tinker with one part of it, all the figures collapse & need to be reconstructed. To keep it simple, we’ll collect the first of the four green houses to change for a red hotel.
    Property: 2 bedroom house
    Price: $300k
    Tenant: Self-employed conducting home-based business. Dreaming of owning a house one day.
    Question: How do we structure a win-win that will enable leveraging into additional properties?

    Starglow

    Profile photo of jonasjonas
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    @jonas
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    Hi There

    Congratulations on having some money to invest.

    I would just like to qoute Robert Kioysake “If you have money and don’t know what to do with it, well, then put it in the bank untill you do”

    I think he means that it is best first to invest in your financial literacy before putting a lot of money on the line. he also recommends to start small so that the inevitable misstakes will be less expensive.

    Cheers and best of luck with everything

    jb

    Profile photo of Fast LaneFast Lane
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    @fast-lane
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    You could wrap the property to the current tenant and use the excess cashflow to invest further.

    Profile photo of Endless SummerEndless Summer
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    @endless-summer
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    try and use your own money last as much as possible as it is limited in supply. ask lost of questions and do lots of reading to find out where you can get money from so that you can use your own money last.

    Profile photo of StarglowStarglow
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    @starglow
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    Thanks heaps for your suggestions. Wrap is definitely an option & yes, I’d love to use as little of my money as possible. Thanks also, Jonas. I’m a Kiyosaki fan & it’s my RichDad coach who’s concerned that I have no RE in my portfolio. She’s sent me loads of resources but things are somewhat different in the US. That’s why I’m trying the glean the wisdom of local experts before I wade in.

    Starglow

    Profile photo of aussiexjaussiexj
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    What do people think of property trusts for this situation and at this time. I mean a PT that concentrates on rental income from big business and gov dealings not capital gains?

    AXJ

    Profile photo of dial a chickendial a chicken
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    @dial-a-chicken
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    one very good saying to remember in business small or large when a rich man meet a wise man, the wise man gets richer and the rich man gets wiser. make sure you do your research on anything you may get into

    lawrence

    Profile photo of Richard TaylorRichard Taylor
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    Starglow

    Also remember a fool and his money are easily parted.

    By this i mean dont be in a hurry to burn a hole in your pocket. If you are happy to pay LMI then you could easily borrow 95% agaisnt the IP purchase price meaning you have more of your money to move onto the next deal.

    If you wrap the property (Please don’t exceed 80% as MI get a little toey)then yes you will get a higher cash flow but may loose out on some capital growth over the years.

    Forget the negative publicity of wrapping it is likely anything if you are ethical in your dealings and disclosure everything then you will have no problems.

    Why not consider a combination of both or consider venturing out to the US or Property Trusts as well.

    With $200,000 you can certainly have your cake and eat it at the same time.

    Feel free to email me should you need further ideas.

    Cheers Richard
    [email protected]
    http://www.yourstatefinance.com

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    our speciality

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of StarglowStarglow
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    Lawrence
    Love your saying about the rich man & the wise one. How true!

    Starglow

    Profile photo of GPSnetworkGPSnetwork
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    Be Careful & do your research!

    Leverage your money and borrow against it, your cash could be the deposit to a $1mil+ borrowing, it all depends on your situation.

    Seek expert advice that can study your situation, the sky is the limit with what you CAN do.

    Be careful & think Macro.

    Roy H.
    L.R.E.A., Dip FS (FP)
    Guardian Property Specialists (GPS)
    http://www.gpsnetwork.com.au

    Profile photo of gafamagafama
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    Here’s the way I do it. I always look at outcomes and then pick which best fits with my investment strategy. With $200K you could do one of the following:-

    Buy 1 property @ $400K with 50% deposit. In 10 years (hopefully) it’s worth $800K and your asset base is $600 (cost of house less loan owed).

    Buy 2 properties @ $400K each with 25% deposit each. In 10 years they’re worth $1.6M and your asset base is $1M

    Buy $1.6M worth of property. In 10 years you’re worth $1.8M.

    To me, it’s all about the leverage. Having said all the above, of course, I’ve made some assumptions.

    1. You can cope with the cashflow (probably will be negative) or have used equity to top up negative cashflow.
    2. You feel comfortable with debt (assuming that you do if you’re a fan of Kiyosaki’s).
    3. That property will double again in 10 years (I know some people on these forums will argue that point however in my 30 yrs of owning property I’ve found that’s happened to each and every one and only wish I had more!!
    4. You don’t want to borrow any more that 80% LVR (because if you go higher you will exponentially increase results as suggested above).

    There’s a good article in a Property investor mag about 6 issues ago about the whole leverage/using as little cash as possible scenario.

    Try to get hold of it.

    Just my thoughts, for what they’re worth.

    Hope this helps.

    Megan

    http://www.propertyhub.net
    Your Investing and Developing Information Hub.

    Profile photo of StarglowStarglow
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    @starglow
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    Hi

    AXJ: Property trusts are great. However, I prefer investing in specific companies. Like the one which has a really nice double-digit yield, fully franked, or the other one that moved up 25% since July. Thing is I’ve been advised to transfer some paper assets into bricks & mortar – a whole new ball game.

    Roy: I agree with you. I need to learn more about leveraging IP’s and structuring deals, keeping in mind the macro view. I’ve just reread Chapter 6 of Cashflow Quadrant where Kiyosaki got chewed up by his rich dad for paying out $150 per month on his first property. He renegotiated the deal so that he was +$80 per month instead. Same property, quite different outcomes.

    Megan: Thanks for the time & thought that you’ve put into that mail. Although I have no problems with gearing, my assets must produce positive CF which can be used to support my work, not the other way round. This allows me to work with groups who cannot afford my normal services.

    Anyway, everything should become much clearer after the masterclass on Saturday. We’ll be doing that much number crunching that I’ll have no excuse for pussyfooting around after that.
    Once again, thanks to all of you for your input & emails.
    Cheerio

    Starglow

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