Hi,
Just starting out and never knew if I should start small (in regional towns or city apartments with lower capital growth) or just go big (closer to city with higher capital growth). It was a never ending question for me so I just jumped in head first. Kind of learn as I go and went in big.
A mate of mine had to get rid of a block of land so gave it to me cheaper than what they were going for so I've gone all in and purchased the block and am going to build a house on it to rent out.
Thing is, I am doing this alone so only one income (under 50k) so until I get the place tenanted, my budget for personal use or savings is pretty much non-existent. Everything would go into the loan just to pay interest and live. Once I get a tenant, it'd be ok.
Just in general, was this not a good idea? Jumping into a big loan on my first go? I only really went for it because of the savings on the land and the fact that if everything went wrong, I could still probably get out of it in the same position I went in.
When people first started, did they go in like this or was it a bit by bit strategy?
Thanks
I dont think anyone can say you were right or wrong with your course, your on it now so be +ve and push for completion and tenancy. Most people with normal incomes are apprehensive and feel stretched going in so your basic concerns are not unusual. Just to show the other side of the coin (maybe belongs in the worst decision thread)….pre resource boom I withdrew from the puchase of an apartment in central Perth overlooking the Swan River….was 400k….seemed too much at the time……wish I had of gone big
Oh yeah, I'm very positive. If all goes according to plan, I should be able to go right into buying another property based on the instant equity the property will give me. I got a discount on the land and a relative is a builder and I'll behelping so the house should be a lot cheaper to erect also.
My main concern was I was wondering if anyone had swallowed something big in their first go. I mean, no experience or nothing. Then again, I reckon a small purchase (200-250k) would make any first time investor think the same thing, etc.
The difference between a big deal and a small deal is mostly numbers… Given that the majority of educated investments are profitable, why not go for a bigger deal? Good for you; go for it, and make sure you keep working the numbers and that the profit is there; my only caution would be not to assume that because you're "doing it" you'll make a profit. Ensure you're creating a product that's desirable to tenants and can get a rent that will give you a profit, and you're set!
Yeah, thanks.
Personally, I'm not in it for a quick buck. This property will be kept for a long time (hopefully) because I know how good the builder so I know this property will be very sound and not have the associated problems that come with a cheaply built property.
I guess everyone is right in regards to that if it works financially, why not do it. It will be negatively geared early on but I haven't factored in the tax savings yet on a new property so I might even be able to make it a positive cash flow after not too long. Another benefit is that the area where the property will be built is putting in a multi-million dollar water feature so I'm pretty positive. It will be tough early on but what first property isn't I suppose.
I always just thought that first time investors started off small and wasn't sure if it was the right move, etc. Hopefully it works out.
Thanks everyone for the comments.
Hey there,In June 2007 my parents offered to sell me a share of their IP at the price they paid for it (180k) so purchased 1/3 share for 60k.The property was instantly valued at 210k as they had bought it in NZ just before boom time and is now worth 240.I used my share of the equity to buy number 2 in November (also in NZ) which is now showing a 7.3% return and refinanced that instantly to buy number 3 which settles in 2 weeks and will be CF+ by $5 a week.I started off at 24 with a 60k investment which gave me the bug big time! I am now 25 and looking at moving back to New Zealand (I am currently living in Sydney) to invest full time.Interest rates are sitting at 10.5% over there at the mo, but if you can afford the holding costs there are loads of bargains out there.I look at the holding costs as savings, as long as you buy good capital growth property, you can't go wrong, I would much rather put $80 a week into my properties than into a savings account!
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