All Topics / Help Needed! / Im 20, full time uni student and got 3 years till i graduate. Any ways i can go into investing right now without much income?

Viewing 17 posts - 1 through 17 (of 17 total)
  • Profile photo of AnythingsPossibleAnythingsPossible
    Participant
    @anythingspossible
    Join Date: 2009
    Post Count: 1

    Background
    Hi all, first i just want to say its great seeing so many like minded people on this forum who feel the same way about investing. People around me are usually not very interested in my new found enthusiasm with investing.
    I discovered Rich Dad Poor Dad about 4months ago and its completely changed the way i think. Now i actually have a goal in life and am much more motivated to finish uni so i can start making an income and begin accumulating wealth, and hopefully one day become financially independent.

    Question
    I just finished reading 0 to 130 Properties and it doesn't really mention about any specific risks so just want to ask:

    • Is positive cashflow property investments really possible, and if so, are there any times when it won't be possible?
    • What are the risks? What if interest rates rise and the mortgage gets too hard to pay off while the rent stays the same?
    • Are country areas the only way to go or can i invest in the city too. I live and study in Adelaide so has anyone here had any success in Adelaide?

    I am very new to this and i appreciate any help from you guys.

    Tim

    Profile photo of Kiwi Property GuyKiwi Property Guy
    Member
    @kiwi-property-guy
    Join Date: 2009
    Post Count: 82

    Hi there Tim,

    Great to read your post and see your passion for property investment at such a young age ;-)

    Go and have a read of my 'New Member Intro' post here https://www.propertyinvesting.com/forums/property-investing/overseas-deals/4327385

    If i could give you any advice at this stage, it would be get as well educated about PI as quickly as possible and then go and put it into practice asap. I have seen so many new investors get very excited about this, get educated, then for whatever reason they just didnt buy anything at all.

    There are many different ways that you can begin investing with out a job or very much income. So yes you can do it!

    Joint Venture – You could team up with someone else that does have borrowing power

    Borrow your parents equity

    Get private loans from family if possible

    Put together sandwich lease options

    Secure deals in contract and pass on to other investors for a fee (Bird dogging) Until you have enough cash profit and experience to buy them yourself.

    There are many more, I am sure others will chime in shortly with more ideas – But this should get you thinking.

    Profile photo of 4141915541419155
    Participant
    @41419155
    Join Date: 2008
    Post Count: 33

    okay i'm in pretty much the same position as "anythings possible". i tried to get a standard loan from one of the big 4 and i kinda felt a bit ridiculed when they turned me down. now i know that i'm risky. so conventional ways of borrowing arent the way yet.

    so how, what shoudl i do, to find people that would be willing one to borrow me there money (seeming i have no practical experience) and two how does bird dogging work in more detail please? i see deals quite regularly that would be great positive cashflow investments but i don't know how to find the money or the people to off load them too. does anyone have any suggestions on what could be my next options? i've been mulling over this problem for quite some time and if i'm honest with myself it has been too long. i want to get into … it is time. i'd like some more experienced approaches or fresh approaches in order to kick start my ideas back up.

    thank you for your help

    Profile photo of Kiwi Property GuyKiwi Property Guy
    Member
    @kiwi-property-guy
    Join Date: 2009
    Post Count: 82
    41419155 wrote:
    okay i'm in pretty much the same position as "anythings possible". i tried to get a standard loan from one of the big 4 and i kinda felt a bit ridiculed when they turned me down. now i know that i'm risky. so conventional ways of borrowing arent the way yet.

    so how, what shoudl i do, to find people that would be willing one to borrow me there money (seeming i have no practical experience) and two how does bird dogging work in more detail please? i see deals quite regularly that would be great positive cashflow investments but i don't know how to find the money or the people to off load them too. does anyone have any suggestions on what could be my next options? i've been mulling over this problem for quite some time and if i'm honest with myself it has been too long. i want to get into … it is time. i'd like some more experienced approaches or fresh approaches in order to kick start my ideas back up.

    thank you for your help

    Where are you located?

    Profile photo of 4141915541419155
    Participant
    @41419155
    Join Date: 2008
    Post Count: 33

    i'm in brisbane. studying at university of queensland. i'm just lacking some ideas. i really want to do things but im scared that if i wait to long or don't find a solution soon i might loose motivations. which is something i am very affraid of. hence why i am asking for help

    Profile photo of 4141915541419155
    Participant
    @41419155
    Join Date: 2008
    Post Count: 33

    ideas for finance

    Profile photo of Kiwi Property GuyKiwi Property Guy
    Member
    @kiwi-property-guy
    Join Date: 2009
    Post Count: 82
    41419155 wrote:
    okay i'm in pretty much the same position as "anythings possible". i tried to get a standard loan from one of the big 4 and i kinda felt a bit ridiculed when they turned me down. now i know that i'm risky. so conventional ways of borrowing arent the way yet.

    so how, what shoudl i do, to find people that would be willing one to borrow me there money (seeming i have no practical experience) and two how does bird dogging work in more detail please? i see deals quite regularly that would be great positive cashflow investments but i don't know how to find the money or the people to off load them too. does anyone have any suggestions on what could be my next options? i've been mulling over this problem for quite some time and if i'm honest with myself it has been too long. i want to get into … it is time. i'd like some more experienced approaches or fresh approaches in order to kick start my ideas back up.

    thank you for your help

    Ok, basically what you need to do is gain some experience in the property market and how things work. Bird dogging (Property Finding) is a great way for you to get into the market and gain this valuable experience without the need/ability to buy the properties yourself, but you still get to make a profit.

    Essentially it goes like this – By getting to know a particular market and what certain types of property are selling at and renting for You identify a property that looks like it may have potential to give a positive cashflow (thats what many investors are looking for)

    By dealing with vendors/sellers that are more motivated than most, and by negotiating you secure the property under a conditional contract at a good price, normally below what it should be worth.

    This conditional contract that you have on the property, basically gives you the option of purchasing that property at the agreed price, but because of the cause's you have used in the contract, you are not compelled to go ahead with the contract and purchase the property.

    These type of clauses are know as 'due diligence' clauses (they are avaliable free from many different websites – Google is your friend), but be careful it needs to be worded correctly to give you a proper legal right to pull out of the deal and bring the contract to an end.

    You would attempt to secure the property under contract for as long as possible (due diligence period) as it is during this period that you market the deal and find another investor to take over your right as buyer and ultimatly purchase the property. This process is called 'assigning' the contract.

    The final buyer would pay you a 'finders fee' to take over your contract.

    If you were unable to find a buyer, you would cancel your conditional contract, and it would be at an end. I always word my due diligence cause, so that if I havnt confirmed the contract as unconditional by the due date, then the contract will be at an end – This is a fail safe mechanisium for me, so that if I forgot about a contract, it wouldnt cause me a drama.

    Basically the better the deal you secure. IE The higher the positive cashflow, or the larger the discount below valuation, and the more due diligence you have done – The larger the finders fee that you can justify.

    As far as finding the investor/buyer to assign the contract to. You could offer the deal via web forums or network with other groups of investors, or even just run a simple classified advert in the paper.

    It can be as simple or as complicated as you want to make it.

    Once you have successfully found, negotiated, secured and assigned a few deals you will have started to gain a fair bit of valuble experience, and also banked a few finders fees, which you could use towards a deposit for your very first investment property!

    Trust me, once you start actually getting out there and doing this, you can learn a lot really quickly.

    Just make sure you are using a bullet proof clause or clauses to give you an out of the contract, so that you dont get stuck having to settle a property that you havn't got the ability to do so.

    Hope this shed some light on the subject for you, and has opened up one option for you to proceed forward with property.

    Profile photo of 4141915541419155
    Participant
    @41419155
    Join Date: 2008
    Post Count: 33

    thanks alot. that was amazing clarification. and it is something i wanted to get into but knew very little about. thanks. i just have one further question shoudl i look into a lawer writing that contract? sure it may cost money but i am very worried about things … coming back. and becsue i don't know the ins and outs of the law wouldn't it be best to go see a lawyer? especially for the first few.

    what are your thoughts.

    thank you for your help.

    Profile photo of kaiseriqbalkaiseriqbal
    Member
    @kaiseriqbal
    Join Date: 2009
    Post Count: 11

    I am in a similar boat, being 19 (turning 20 in August) and have been working full time for a year and a half.

    I bought an investment property last year and am looking for another one to buy.

    I was particularly interested in Display homes and I have found three which I like since they are at market price and are positively geared.

    Well my details are as follows and if you can help me out, it would be of great help.

    Income:
    – 1st Income (PKF Chartered Accountants): $30,000 annually
    – 2nd Income (Doing tax returns and accounts for individuals and small businesses): $20,000 annually. (This is an on the side business so is low documentation)
    – Investment Income (Dividend Income): $2,000 annually
    – Rental Income from first Investment property: $180 pw or $9,360 annually (I can raise this to $200.00 pw as there are other units in the complex that are renting at $205 to $210, but have not been bothered much to do so, since current tenants are very good)

    Expenses:
    – Mortgage repayment on current Investment Property: $650 per month (Principal + Interest)
    – Personal Loan repayment: $504 per month

    Since I live with my parents, I do not have any boarding or lodging expenses.

    Details on current Investment Property:

    Loan Balance = $119,500
    Value of Property= $155,000

    This investment property is positively geared and is a renovated apartment in Minto

    The property I want to buy has the following details:

    Brand New house in Minto.

    Price= $360,000
    Rental Return= $28,000 pa

    This property will also be positively geared.

    I know the above rental income can be used in the loan application.

    Since I have minimal cash savings as I also have a Share Portfolio to the value of $10,000 which provides me dividend income of $2,000 pa, I was wondering If it is possible to capitalise the Lenders Mortgage Insurance.

    Furthermore since I have equity of over 20% in my current investment property, is there anyway I can utilise the equity to reduce LMI.

    The Loan I have currently is with CBA and do not want to move it from there due to exit costs.

    Since you guys are experienced investors, it would be very much appreaciated if you can help a new beginner like me.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Look dont want to cut you off in your pride but if you dont want to move the loan from CBA but want to utilise some of the equity then you have little choice but to go back and speak with WHAT BANK.

    CBA will add the 2 loan amounts together and divide this figure by the combined property values. 
    You will pay LMI on the total figure which as the loan will be over $300K will not be cheap.

    Only other alternative is to look at taking out a 90% LOC with CBA and then using this as deposit on the new IP as well covering your acquisition costs.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    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 kaiseriqbalkaiseriqbal
    Member
    @kaiseriqbal
    Join Date: 2009
    Post Count: 11

    Thanks for the advice,

    Im quite sure I wont get a loan from CBA.

    So based on my situation, what is the most cost effective thing to do, considering the break fee for the loan is $700.00 and interest rate I pay is 5.06% and would you have any lenders or loan products in mind.

    Thanks and Cheers,

    Mohammad

    Profile photo of Kiwi Property GuyKiwi Property Guy
    Member
    @kiwi-property-guy
    Join Date: 2009
    Post Count: 82
    kaiseriqbal wrote:
    Thanks for the advice, Im quite sure I wont get a loan from CBA. So based on my situation, what is the most cost effective thing to do, considering the break fee for the loan is $700.00 and interest rate I pay is 5.06% and would you have any lenders or loan products in mind. Thanks and Cheers, Mohammad

    When I first started out, i had to pay the LMI as well, as you dont have too much equity when you are first starting out with nothing ;-)

    Pretty much you do whatever you have to do to be able to move forward and purchase more. So if the only way is to pay a $700 break fee, or LMI then so be it. Generally most lenders will capitalise the LMI, so its not really a drama.

    Those fees you have to pay to move forward are nothing in comparison to the equity/cashflow gained in the next deal, and certainly the Capital Growth over time on a larger asset value.

    Because of the fact that banks normally only lend to 80% of the purchase price or the valuation (whatevers the lowest) Many times when i bought well below what it valued at I settled a new property with one bank, at 80% of PP and then a month later refinanced it away to another lender, so that i could utilise the higher valuation to move forward again quickly and purchase another property.

    Banks generally have a rule that they wont lend against a higher valuation for  x number of months – So simple go to another bank, and say I own this property, here is the valuation, can I please borrow upto 80% of that. Job done – The first bank can get a little p*ssd off tho, when you make a habit of it.

    Once again, do what you have to do to more forward.

    I am quite agressive tho.

    Profile photo of ducksterduckster
    Participant
    @duckster
    Join Date: 2004
    Post Count: 1,674
    41419155 wrote:
    okay i'm in pretty much the same position as "anythings possible". i tried to get a standard loan from one of the big 4 and i kinda felt a bit ridiculed when they turned me down. now i know that i'm risky. so conventional ways of borrowing arent the way yet.

    so how, what shoudl i do, to find people that would be willing one to borrow me there money (seeming i have no practical experience) and two how does bird dogging work in more detail please? i see deals quite regularly that would be great positive cashflow investments but i don't know how to find the money or the people to off load them too. does anyone have any suggestions on what could be my next options? i've been mulling over this problem for quite some time and if i'm honest with myself it has been too long. i want to get into … it is time. i'd like some more experienced approaches or fresh approaches in order to kick start my ideas back up.

    thank you for your help

    Don't take the bank's rejection personally – The banks only see income from 70% rent and 100% income from a job as acceptable. I am in the same situation as I went to Uni and came out to four years of unemployment and have not been able to borrow more money even though I have $200,000 in equity. Low doc loans are getting harder to get with the credit crunch.
    My advice to the original poster is try and get a part time job while at University as employers are really overboard  with expecting recent graduates to have work experience when they come out of University in order to get a job.
    I am currently looking for an apprenticeship as I wasted 3 years doing a degree as it is worthless if no one employs me.

    Profile photo of Kiwi Property GuyKiwi Property Guy
    Member
    @kiwi-property-guy
    Join Date: 2009
    Post Count: 82

    If you go and get a part time job, why not try and get a part time job in some sort of Real Estate Company, so you may be able to learn something more about property at the same time as making a bit of cash ;-)

    Here in NZ most banks will accept 85% of rental income, and only 30-40% of personal (job income) to put towards servicing  mortgages.

    So as you go on and your portfolio gets larger, you can see how the rental income becomes far more important.

    These are general figures, and they do very from bank to bank, and vary according to the banks current lending policy.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi kaiseriqbal

    Without knowing all of the facts it is difficult to advise you whether the deal could be achieved elsewhere however CBA have tightened up their serviceability criteria so doesnt suprise me that they wont look at it.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    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 erin_newbieerin_newbie
    Member
    @erin_newbie
    Join Date: 2009
    Post Count: 4

    Tim-you are only young once. Enjoy your youth and think about investing in 5 years. I am a pallative care nurse and have patients who are 30 with cancer dying, never had a chance to travel went straight from school to uni to work. Dont assume you will have 80yrs of life. Buying a property is huge and can really tie you down if you want to travel. My Dad didn't buy til he was 30 but invested in shares, travelled, enjoyed himself then bought at 32 when he married. He is now very sucessful and an inspiration to me.
    If you want to invest consider shares for now.
    Good luck in whatever you do though.

    Profile photo of keikokeiko
    Participant
    @keiko
    Join Date: 2008
    Post Count: 513

    anythingspossible. is cash flow positive possible, yes it is in todays market. will there be times when it won't be, yes when there is a boom but we have just come out of a boom.
    what are the risks, that depends on alot but yes there are risks just like anything.
    if the interest rates get too high and you cant pay your mortgage the bank will take the property and sell it, if it sells for less than you owe the bank then will come to you and make you pay the balance.
    yes definitly invest in the city, banks will loan you money easier than if you buy in the bush.
     do what you think is best for you and don't always listen to what other people say because more than likely they have not done what you want to do.
    there is lots of cash flow possitve properties on the market at the moment and people will go and buy plenty but when the rates rise they normaly go broke because they cant afford the mortgage payments.
    i only target property with 10% plus nett return and then when interest rates are high i can still cover my mortgage but if the rates go to 12 14 15 20%%%% then i will more than likely go broke but i will be around longer than the people that have bought 6 and 7% nett returns.

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