I moved home to Sydney and only have $100,000 so can’t afford to buy. I am paying $340/wk rent and am thinking of buying an IP with it. But it seems strange to do this when I don’t have a home of my own. Does it make sense (to get an IP)or should my first thought be to get my own place?
there is an interesting article in Australian Property Investor magazine a few months ago. they did a profile on a lady from adelaide who had a number of investment properties, but still rented herself!!!
an interesting and unorthodox investment strategy indeed, but it worked for her. maybe for you too!
I’m not sure which part of Syd you’re living but you could probably get a unit for $350K with your deposit. This way your “dead money” rent is going to pay your P&I loan instead and you can start to build equity in your CGT free PPOR. Once built enough equity, set up LOC and move on from there.
2 years later sold 135,000
bought at auction prior to sale
renovate second storey addition current value 1.5 mil
primary residence no capital gain tax.
As for I can’t afford to buy look at sites with potential da possible sites (but I do need to push my own barrow every so often)live in it buy next door rent it and then put a 10 unit development on it, come to me for the development funding and we’ll do a joint venture development.
Buy a commercial property.
One that is tenanted.
And with some time left on the lease.
Organise refurb/renno/touch up.
Do this in negotiation with rent increase.
Property value gone up.
Rent has gone up.
Business still has premises to occupy.
Your loan is being payed off.
And your receiving nice passive income.
First step is to change your mindset. You ONLY have 100k. 100K is alot of money!!!!!!
So i would approach this problem as follows – repeat I am very fortunate to have 100k cash….whats the best way to live decently and at the same time grow my asset and income base.
Fortunes have been made starting with much much less ask the owner of this site. Your strategy should depend on many other things like your overall income, your age, your goals and your appetitie for risk.
But i think your first goal is to understand that you dont ONLY have 100k………but you HAVE 100k……..which is a fantastic position to be in especially if you have no debts (im reading between the lines here)
Yes Megan you are correct. My post purely related to cashflows between the two situations.
If capital issues are introduced, you are exposed to the growth (or loss) by purchasing.
The ‘differential cost’ of ownership in the first case is $ 69 p.w. ($ 3,588 p.a.). Therefore, the property needs to grow by only 1% p.a. for you to break even with the renting scenario. If it went up by 21K in the year, you’d be well and truly in front.
The ‘differential cost’ of ownership in the second case is minus $ 163 p.w. ($ -8,476 p.a.). Therefore, the property can sustain a loss of 4% p.a. and you’d still be ahead of the renting scenario.
Once the capital aspect of purchasing vs renting is introduced into the equation, it makes the buying alternative look attractive I suppose. The cheaper the place, the more attractive it becomes. Of course you can always downgrade the renting side as well and rent a hovel for $ 100 p.w., that would flip flop the numbers around again. Ah, so many choices and ways to skin the cat.
This discussion completely ignores investors ‘lifestyle standards’, and purely centres on the numbers. Once you know the numbers though, it’s easy to see what your lifestyle standard is *really* costing per annum. Only individuals can weigh up if the price is good value or not.
Surely this is only relevant when you are starting out and have to choose between renting and paying off a NTDD debt. You have to live somewhere – right…ignoring the third option of the free park bench. Maybe Mummy and Daddy’s hotel is a fourth ???
Surely the best solution (which many people already do) is to live in a fully paid off PPoR and carry on with their investing game. No renting, no NTDD debt and no park benches. [biggrin]
The only difficult bit before reaching this comfortable stage is deciding if the PPoR you’ve paid off matches your lifestyle expectations. If so, happy days, if not, you need to carry on with the bunny hop process of upgrading the PPoR and incurring more NTDD (or sell down productive assets).
I’d hazard a guess that it’s these draining and insidious ‘lifestyle expectations’, coupled with the expenses of raising a young family that prohibit the majority of the population from becoming wealthy investors, especially in the first 10 or 15 years out of school.