Just signed up to the website and I must say there is a great amount of information floating around! It's been useful already.
Down to business. 6 months ago my Partner (20) and I (23) bought our first home in which we decided to wait 11 months until we move in – this is so we can take advantage of taking a nice chunk out of our mortgage with renters in and still get the FHBG. So this has got me thinking about investment properties, renting, buying, renovations and selling! Basically I'm asking, how did you do it? Where did you start and did you have much at the beginning? What is your formula for finding properties in the right areas?
Currently I am a Apprentice Plumber with a couple years left, but driving machinery on the weekends makes up for that loss in wages – so at the moment my Partner and I average just over 100k a year together. Is it too risky to be thinking about investment properties already?
Any help would be great! Just need to know if I am wasting my time thinking about investments already.
Cheers,
Andrew.By the way – I thought I would go and buy a few books anyway, these are on there way. (Got a bit of reading to do)
* 52 properties in 52 weeks by Dolf De Roos
* From 0 to 130 Properties in 3.5 Years by Steve McKnight
* Rich Dad Poor Dad by Robert KiyosakiHi Andrew,
Its always a good time to start thinking about investing in another property, provided that you have the income to support it.
The key things that you need to remember when investing in a new property and with your example your looking to renovate the property and sell it for a profit.
You will first of all need to have a deposit to purchase the new property. Some of our clients will pull the equity that they have out of their existing properties and use this as a deposit.
You will need to allow for Stamp Duty to be paid for on the new property purchase, as well as other incidentals such as legals, pest and building inspections etc.
Another thing that you will need to consider if your renovating the property is that this property will not be earning an income while you are renovating it. As a result you will have your existing Home Loan plus the new loan to repay.
Do you currently have the funds to renovate the new Investment Property?
In regards to the potential profit that you may make from the property you need to consider the following costs:
– Purchase Price Plus Costs
– Interest on your Loan
– Renovation Costs (Clients will usually allow for 10% in additional cost overruns)
– Selling costs
– You will be required to pay Capital Gains Tax on any profit that you make on this propertyThese are just a couple of things that you will need to consider.
You will need to talk with your accountant about any Capital Gains Tax you are required to pay on the property once you sell it.
I hope this gives you a good starting point.
Thankyou Trent for the reply, it is much appreciated.
Currently we have saved around 10k for renovations if we end up going that way with plans to spend around 15k.
The property is in a good location so one other thought was to live in the property for 6 months so we can take advantage of the FHBG, fix up some minor things rather then renovating the property and put it back onto the market for rent at $350 per/week.
Meanwhile (living at the partners olds place as we are at this current time), continue saving up for our deposit for our 2nd house. Once we secure a 2nd property we could either rent it out and go in to renovate the first property or move into the 2nd house and keep the 1st up for rent.
One thing that I always get confused about is the financial side of things, I suppose its a matter of research and experience.
Thankyou again Trent, you have been very helpful!
Cheers,
Andrew.Hi Andrew,
That is my pleasure, I am glad that the information that I provided you was of some assistance.
As you suggested what you would have to do with your first property is move into it for 6 months to take advantage of FHOG and get it to a stage where you will receive a rental income of $350 per week. Then start saving for your second property. It can often be a good idea to move back in with your parents while your saving for your second property. Depending upon whether or not you have equity within your first property you may be able to take out a second loan to fund the deposit for your next property.
In regards to the second property, a lot of people will move into it while they are renovating it (Provided that you can live in the mess) and then look at renting it out once it's completed or onselling it for a profit. Some of my clients have done exactly that, though they have taken the decision to rent the property out rather than selling it as the rent that they were receiving covered the mortgage payment.
The financial side of things can get a little bit more complicated as banks will assess your full debt level that you currently have (I.e. Home Loan, Credit Cards, Car Loans etc) They will also use the rental income that you are receiving for your Investment Property (However they will generally only use 80% of this to service your loan)
There are various different loan structures that you can look at. What you need to do is to talk with an expert to ensure that the loan that you obtain for your second property is structured in the appropriate manner so it will continue to meet your needs not only now but into the future.
What state do you currently live in?
If you like you can send me a PM with more details so we can discuss it further.
I hope this helps you out.
Cheers
Thanks Trent, I will send off a PM this afternoon once I get back from work. You've been a great help.
Cheers,
AndrewHi Andrew,
Read Steves 'From 0 to 130 Properties in 3.5 Years' before you go out and buy your investment property (I could not put it down – so managed to read it within half a day!!!).
I have one investment property in QLD (formally the primary residence) and am in the process of purchasing my second in VIC. My regret – I wished I had read the book before signing the contracts on the weekend!!! Steve gives great, valuable advice (and love the humour throughout) that neither my Accountant, nor my Financial Planner has passed on to me – due to ingnorance I hope!
'Rich Dad Poor Dad' by Robert Kiyosaki is also a great read….
Anyway, good luck for your future……it's great to see a GEN Y taking charge of his future!
Nicole
Thanks for your comments Nicole.
I have been waiting and waiting for the copy of the book to arrival in the mail, I feel like its christmas I want to read it that much!
It won't be for a while until my partner and I are able to get another property so luckily I have all this time to research the in's and out of everything and make sure I know exactly what needs to be done. Getting our first property was bit of a whirlwind and so I am looking forward to our next one.
Also, I must say that looking at houses and researching all to do with investments is actually a bit exciting – can't wait to see whats to come!
Cheers,
AndrewHi Andrew,
I will take a step back and give you some overarching thoughts on the stages on getting into property investment.
1) Make sure you are clear on your own personal situation including goals, risk profile, lifestyle requirements etc
2) Increase your level of education on property so that you understand all the concepts
3) Build a good team of experts around you
4) Have a support structure / mentor to help you on your journeySound like you are starting on the right path with some research, but I would encourage you to keep on researching. Steve McNight's book is good but does flavour a positive cashflow strategy, so you might want to look at some other books favouring different strategies, so you can get a broad perspective.
Let me know if you want some ideas.
Cheers and good luck
Mark
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