Life is whizzing by and I have just come to realize that I am in a pretty bad way! The only “investment” that I have is equity in my home (about $300,000). That is literally it. I live in Tasmania, and would be interested in exploring commercial (or residential) properties. Was anyone in a similar situation and has a wonderful success story to tell me?
Thanks
Hi,
My advice only, would be to pick up a couple of good investment books and read the property forums on the internet and then set out a plan or goal to reach your early retirement.
Good Luck
Dom [biggrin]
What do you mean you are in a bad way. You’re doing bettere than most people and are in a very good position to invest. Just work out what sort of investment (ie commercial property, residential property, shares etc) you are most comfortable with and go for it.
A good site for info on commercial property is http://www.gal.com.au by the way.
Regards
AlistairOriginally posted by rgranger:Life is whizzing by and I have just come to realize that I am in a pretty bad way! The only “investment” that I have is equity in my home (about $300,000). That is literally it. I live in Tasmania, and would be interested in exploring commercial (or residential) properties. Was anyone in a similar situation and has a wonderful success story to tell me?
Hi rgranger,
As stated in a previous post you are not in as bad a state as you think. $300K of equity in your home is a wonderful starting point – the challenge for you is to learn how to release that.
In many ways our mindset and the message we have had ‘forced’ into us over many years about debt being a bad thing have added to the perception that borrowing for investment is an evil. The key is to differentiate between what is borrowing for an appreciating asset as distinct to borrowing to guy gadgets and widgets which depreciate in value.
In many ways your situation is not dissimilar to where we were about five years ago.
Now I can comfortably say that we have been able to leverage off the equity we had to hold a multiple investment property portfolio, nearly $250K in managed share funds, $200K in developments and are looking at the possibly of no longer ‘working’ a 9 – 5 job, rather having the opportunity to pursue something I like.
This didn’t happen overnight and it did take some courage. The key for us was to spend some time researching what it is we wanted to achieve and which route to that end point was going to suit us from a financial, emotional, risk tolerance and timeline perspective.
Don’t loose hope.
Derek
[email protected]
The Investors Club http://www.monopoly.tic.com.au
0409 882 958
Skype – derekjones2113Hi,
I was 42 in 1994. I had $240000. I started looking at property in 1992 but bought only in 1998.Obviously, the timing means that I hit the jackpot.
A combination of fortuitous timing and personal circumstances.
I bought my sister’s house to save her agent’s fees. I lived in it free of charge for a couple of years after all.
I was $10000 short and it’d be hugely embarrassing to ask a lender for it when I had a house worth $240000 so I borrowed $100000.
I didn’t have income (I couldn’t get a job easily in Australia) so I had to go back overseas. The ATO would tax me and no bank would lend me what I wanted. I borrowed $200000 & bought house number 2. Then I thought those houses were too big for me but I could trade down when I returned and live in a small house and live off the rental from 2 others.
I bought a townhouse which I thought I’d live in and then through a mistake drew down too much & saw a 4 bedroom AV Jennings house I desperately wanted to buy.
Then I sold house 2 (to my everlasting regret) but the excess funds had to be reinvested & I bought 2 commercial properties.
Was I scared? Yes, scared <edited>less to use a rude word.
What the books do not tell us is the tough part. Throughout, I worked 16 hours a day 7 days a week, pressured by my own internal clock of saving half a million in 5 years. I never in my wildest dreams thought that the properties would earn me more than half a million.
What I wish to pass on to you now is that it is easier to get ahead through investment than through savings but there are many forms of investment. I made $80000 one year from dabbling in forex. It’s also very easy to get burned. I lost $30000 when I got scared.
$300000 equity now is like $50000 ten years ago. Please be cautious because the residential property is looking rather see-sawing.
If I were 41 and still working, I’d set up a private super fund to buy property so that I can cash in on employer contribution to super. Then, even if the property does not have capital gain, I’d still be ahead. However, I’m unsure whether this can work. Incidentally, I started putting away money in super when I was 25 because it’s compulsory where I came from.
This post is extraordinarily long but something in your position made it almost mandatory for me to tell you my story.
I wish you well & if you do see a property, run it by the people in this forum.
Good luck,
Kum YinHi,
I’m only 22 but have $20,000 saved up for a property. I plan to live in it for 12months to get FFOG and then turn it into an investment property and pay parents board. I’m looking around $120,000- $150,000. I earn ~$1200 per fortnight and save $700-$800 per fortnight.
How much would I need to save up before I can buy a property with the intentions of turning it into an investment property in a years time? (note $10,000 FFOG in Victoria where I live)Thanks[suave2]
Paul41! Its not like your 80!
And you have hundreds of thousands of dollars to play with!
You’re a lucky, lucky man!
I was fired from a very well paid job in the US when I was in my late 30’s. Career down the pan, I suddenly realised that we had been living a very consumerist lifestlye – and we had very little apart from our home equity (about $250k) to show for all the years I had slaved for my idiot of a boss (who, by the way, sold his business for US750 million recently and none of the wage slaves got a red cent – and the moral of that story is “work for yourself”) .
So, my wife and I and our four kids have had to make a few adjustments – including emigrating to Oz (which was a very good adjustment!), cutting our spending by 65%, downsizing everything from house to holidays (camper trailers are just superb!), and deciding that working for someone else is a joke.
One of the best things we decided to do was go for broke and start buying and selling properties. We basically buy, renovate and sell but hold the decent returners.
We’ve been in Tassie about 18 months now and we own two houses and are building two more, all of which are just about neutrally geared. And, I’m looking for more as we speak. I also earn about $80k a year from renos and a bit of land speculation and spec building.
As you’re from Tassie, you’ll appreciate that that’s enough to live pretty well off now – and the renters will bear fruit in later years as someone else is paying off our mortgages on four houses! In five years time, we aim to own 10 properties and that will more than assure our retirement. And, in the meantime, I’ll keep flogging the odd reno to keep the cash flow turning over.
So, 41 and 300k! The world’s your oyster mate. Attend some courses, read as many books as you can, ask questions, get familiar with the market, decide on an approach that suits your lifestyle and then dive on in – that water temperature is a bit of a shock at first but crikey its nice when you get used to it!
And as for opportunities in Tassie, I’ve just printed four off the internet today – and they were all in one locality that I know well. You just need to know what to look for. PM me if you want a bit of advice about how I make the Tassie market work for me.
I’m no genius so if I can do it anyone can.
Best of luck
Andy
Hi again, since I’ve told my story ( like giving away a bit of myself) let me add this.
I don’t wish you to rush out and buy a property. Need to appreciate that the most successful property investors built on a mountain of knowledge.
I feel like I’ve read every retirement and investment book ever written.
“Live long and profit” – very useful. American. Haven’t seen it locally.
“The richest man in Babylon” – well-known but I find it less readable.
“The millionaire next door” – must read. Australians have caught up to the Americans and you may find next door to you what’s described.Andrew Tobias is my personal favourite. His contrarian attitude is so me.
I was away and didn’t discover the Australian books until I came back last year. Steve Mcknight is the most practical and to me the most discerning. Reno Kings is also a must read because they’re hilarious. Read beneath the laughs and appreciate the seriousness of what they’ve done. Note that they were investing from gut feelings through the bad bad times when you could not give a house away. Notice that Elin Power is now with their team? Peter Cerexhe is very knowledgeable and the checklists are precious guides.
I’ve been back in Australia barely a year. I spent Saturdays and Sundays looking at open inspections. I don’t own a car. I take the train, the bus and I walk.
rgranger and Paul, if you’re serious and want to invest, start like this.
1) Develop a burning desire to manage your own wealth FIRST. Paul, you’re doing very well. Continue in that track. All the people around me who didn’t do anything was because they were afraid that they’d LOSE THEIR PENSION if they own multiple properties.
2) Do you know those books that I’ve mentioned, and hundreds of others like Kiyosaki etc? In Singapore, I was so exasperated with the little voice that said “Look at New Zealand, look, look”. I was so busy with my business but the end result is I have close to a million dollars worth of property in NZ. And then the stupid said, apropos of nowhere, “Look commercial, look commercial” It was insistent I snapped “How?” The voice said “www.realestate.com.au”
I looked around me. I was alone in my office, talking to myself. Un known even to me, thousands of miles away, I had been trawling the Internet for 2 years. Because I had invested in Australian property and I was afraid.
Success will come when your hunches are so strong that you hear that little voice.
rgranger and Paul, how many properties have you looked at? How many stocks have you tracked? How many investing mistakes have you made?
3) DO SOMETHING. SET A GOAL. MAKE A PLAN. Then ask “What’s the worst case scenario and what will I do in that case?”
3) is the best I did.
Good luck.
Kum YinHi Kum Yin,
I’ve looked at thousands of properties on realestate.com.au all across Australia. In Mildura, where I live, i’ve looked at hundreds of properties. Unfortunately, i’m limited to Mildura if I want to live in it for 12months and be able to take the FHOG. I’m slightly concerned because the vacancy rate in Mildura is around 6 %. There are a lot of subdivisions going up everywhere and a Marina (the first every on the Murray River that the company I work for is designing!!).
Also, prices in Mildura have sky-rocked in the last few years so I don’t expect any large boom in housing prices and with the LARGE amount of subdivisions i’m a bit concerned that their will be an oversupply of properties. The advantage for me is that I can hopefully bargain prices down a fair bit, but that doesn’t solve the problem of renting it out once/if I move back to Adelaide. Lastly, I can probably only get returns of around 6% max. gross which means it would be negatively geared for a few years. If i’m going to negatively gear a property i’d rather do it closer to a major city (although Mildura is 50,000 inc. outer suburbs now).
What do you think of my reasoning? Any thoughts about my ideas? Also, Victoria is the only state that offers $10,000 FHOG (not $7,000) which is also why i’d like to buy in Victoria and before I move back to Adelaide in 18months.
Cheers,
Paul[suave2]P.S. Is their any advantages in buying in NZ just out of interest? Do they still have stamp duty and all other fees?
Legend has it that colonel sanders (guy that created KFC) was on the pension at 65, and decided it was not enough money, and he went out pitching his idea of fried chicken and got rejected an enormous amount of times (imagine the people that said no to him, theyd be kicking themselves!) He finally got a yes and went on to become a very rich man at the age of 65.
Also, my parents just bought their very first property at the ages of 39 and 46. Thanks to my persistant nagging that they needed to stop renting! Your never too old or young to start. Dont let that be a wall to your success. As everyone else has said, read read read, and get out there and chat to as many agents as possible, and see as many properties as possible. You will soon pick it all up.
Good luck, the only thing stopping you is your mindset! [crying]P.S. Is their any advantages in buying in NZ just out of interest? Do they still have stamp duty and all other fees?Hi Paul,
No. There is no stamp duty or capital gains tax in nz. Entry and exist costs are very low and will amount to lawyers fees and bank fees.
But some investors forget that if you are a oz tax resident the ato still wants to know about your worldwide income so you need to talk to an accountant about that. There are many on the forum who pop up from time to time that should be able to help here..
Many just gloss over this but why not get it right at the start rather than having a huge tax bill.
I am looking at a small commerical proeprty at the moment with an net return of 11%. Although I am having alot of “fun” for want of a better word getting the deal done.
I am also looking at another property with a 8% net which is a fairly good yield given the growth potential of that particular property.
I also have contracts out (no back yet so may not get it) on a resi property with a 8.4% gross yield with potential to renovate to 10% and has subdivision potential. Not many have been building in this area but I have just seen the rental returns on some brand new stuff a few streets away which are blowing away property managers.
Kum Yin – I like your style. Sometimes you do have to listen to that “voice” .
But like you said we probably all have the same thoughts in a way but not many people make the plan that you spoke of and actually get things done.
I had a similar feeling about Perth and did nothing about it (we had a trip planned and did not follow through). That’s okay as one door closes another opens.
The fact is people are making money out of property all over the world. I recently when for a trip to fiji and on denaru island there is a new massive keys style development and a few new hotels. Someone is making money oout of those.
Nigel on this forum is doing the US and is from what i read moving there. I would be great to have someone on the ground actually looking at these flips.
There are people on here who invest in thailand and other asia market and people from all over the world investing in nz, oz etc etc.
At 41 – to answer the original question – you will have to make a move and do it quick smart. I am not necessarily advocating a rampant buying spree but get the level of education and confidence to a level that when an opportunity presents you will be able to recognise it and the take advantage.
cheers
Sourcing Positive Cashflow Investment Property http://www.cashflowproperties.co.nz
Cash Flow PropertyDon Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
Hi Paul, good reasoning. If you buy the standard residential property anywhere in Australia now, it’d be -ve cashflow. This is OK if you inject earned income & take advantage of -ve gearing. The cash injection will ensure that it becomes neutral or positive at some point.
Better yet, do what Jan Somers suggests. Buy a property that’s under the median price.
Please be aware that the property cycle is at its peak & no one knows what’s round the corner. Having said that, it is never truer that today is a good time to buy, today is a good time to sell. How do we know when to make a start?
That’s why I’m now known as a “developer”. Heck, what do I know about property development? I’m an English teacher. But that stupid little voice kept badgering me & I bought a ‘weird’ property at Taperoo that I’m now building 4 houses on. Demolition is to occur this week.
By sub-dividing, I ensure that the cost of each house is far below the median. Then I can keep the properties forever if the prices are not what I wish to sell at. And if the rental vacancies go up, I can still make sure that my properties can rent by matching other people’s rental. The difference is my properties are new so if my rents are competitive, tenants will want them.
I saw a couple of opportunities for development in Elizabeth. That was 4 weeks ago. But once I went to Elizabeth, the air of hopelessness was depressing and I’m biased against the idea of investing there. however, the govt is building a big industrial park there.
You might want to read the posts on this forum on investing in Elizabeth.
If you ever want to invest in Adelaide and wish to talk about it, send me an e-mail. [email protected]
Sincerely wishing you well,
Kum YinHi, rgranger
Your situation looks pretty good. With A$300k in equity, you are looking at 3 CF+ investment properties or more (With smart investing).
In 5 – 7 years time, you could be all set for retirement.
I agree with many of the other respondents. You are not in ‘a pretty bad way’.
Just learn more about various forms in investing from books and magazines.
We will all get there some day.
Cheers
Daniel [specs]Hi Paul, I was reading your numbers again. You’re saving an impressive amount of money in % terms. A young man who’d walk to the end of the earth with me was like you. He was 24. He came to me and said, “I’d work for no pay if you teach me how to invest.” I’m not like Kiyosaki’s rich dad. I didn’t have the heart to exploit him. I paid him 25000 a year. He diligently saved $1700 every month. He had $10000 to invest. I took him to my stock-broking firm. He bought 1000 shares in Devt Bank of Singapore. He had no more money left but he had a margin account even though he paid cash and didn’t owe any money.
Then came Sept 11. If that was not enough, in Singapore, we had SARS. That period was the darkest I had ever seen in Singapore. The fear was thick enough you could reach out and touch it.
I said to Pengzhi, “In crisis is opportunity. Buy another 1000 shares in DBS using debt. You pay 7.5% , so what? You can pay down $1700 every month. To me, that’s earning 7.5% on every dollar saved thereon.”
Pengzhi feared debt. He didn’t dare. 3 months later, DBS was $12.90 Together with another transaction, he made $4000. In his position, I would have made $9000.
I share this story with you because you’re so young, so ernest and dare to dream.
The lesson here is DEBT IS OK IF YOU MAKE A PLAN TO REPAY.
I hope that you’re reading and not feel bored by a long-winded old fart.
In April 2006, I saw an old house in Blair Athol here in Adelaide. I had no more cash. I asked Pengzhi & he wired me $35000 to buy it. Here are the numbers:
Purchase price = $223000
Closing costs = $12000 approx.
Cash needed [20%LVR] I’m on lo doc = $56600 approx
Survey cost = $400 approx
Running costs: [the close was 1 May] The tenant started paying 3 weeks from 1 May
1st month’s interest = $1000 approx
2nd month onwards = about $350-400 negativeWe took 3 weeks to tenant the property because we screened out all those we didn’t like.
The plan is to cut a skinny block down the side and build a new house on it. I’ve budgetted $160000. This is a fairly generous sum.
The new house will be worth at least $260000. Even if it’s only $250000, we can get a loan of $200000 on it. We can then rent it at $250-$260 a week, sell the old house. This way, we get back our original cash outlay and we keep the new house as a rental property for 5 years.
Paul, 2 weeks later, I saw another one a few streets away with the same potential and almost the same financials.
This was in May 2006, only 2-3 months back. And there was another one in Clearview.
You may already have enough to do the same. You may have better access to funding at higher LVR. Just make sure that the property you choose have ‘potential’ and a plan to follow.
GOOD LUCK & HAVE FUN
An addendum to Pengzhi’s story: he got more confident & bought 20000 shares @ $1.70 I bought SGX @ 0.88 and told him to buy it at $1.26 He didn’t dare. He said, “Wait and see.” I sold my shares at $1.45 to fund the NZ investments. He is now laughing because SGX is $4.00 and he has 20000 of them. This young man has gone to the top of the class. He has made more money out of the stock market than me!
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