Hi all,
I’m new to these forums and thought I should take the time to introduce myself before asking for a little bit of advice.
I’m 20 and I bought my first investment property at 18 for $360k. By using some of my parents equity I was able to secure a loan for $390k (with $195k fixed and $195k variable). It is a 3 bed, 2 bath apartment with 2 secure carports and there are great facilities in the complex it is situated (pool, tennis courts). Located about a 5-10 minute drive north of Canberra in Watson. It has good access to local public transport and shops so it ticks a lot of the boxes as far as seemingly good investment properties go. I am currently getting $380 pw rent and this is likely to increase to $480pw in the coming weeks as I plan to rent out one of the rooms which is now spare.Although this is nowhere near close to being able to provide positive cashflow, my salary more than meets the shortfall and I am content with the fact that it is best for me to focus on this as a negatively geared investment. I know that this area is doing well as far as capital gains go as in the last 18 months my property has gone up about $50k which is pleasing. So that’s my current investment portfolio! I know it’s nothing grand but I’m sure you all started somewhere too!
The advice I seek is, basically, if you where in my shoes, where too from here? Should I wait for a few years and continue to chip away at the mortgage and building the equity in that place before thinking about additional investments? I don’t think a public lender would finance me yet due to the relatively sizeable debt I’m sitting on.
Any advice would be greatly appreciated.
Regards.
P.S. I just read Steve’s 0-130 properties and it was a real motivation!
Firstly of all welcome and congratulations on such a good start.
If the property has increased in value i would possibly be looking to have your parents property released as quickly as possible so that the deal can stand on its own 2 feet.
Secondly i would not be chipping away at the loan at all in fact if it is a PrincipaI and Interest Loan i would be switching this to interest only with a fully transactional 100% offset account. (IO only loans can still be used on a PPOR).
Richard Taylor | Australia's leading private lender
Hi….Friends
I am new here from Delhi and welcome to everyone to get and share useful information in this forum….
I agree with Richard !
Because you have started at such a young age you have time on your side.
Set up an offset account on an interest only mortgage.Here is why
An offset account gives you flexibility and reduces the interest charged. So down the track you may have saved say $40,000 in the offset account and then you can use it as a deposit for the next investment property.Its really about that the value of your property will grow and compound over time while the loan stays the same.
years Loan property value growth 7%
1 $395,000 $360,000 25,200
2 $395,000 $385,200 26,964
3 $395,000 $412,164 28,851
4 $395,000 $441,015 30,,871
5 $395,000 $471,886 33,032
10 $395,000 $661,845 46,329
15 $395,000 $928,272 64,979
20 $395,000 $1,301,950 91,136
Now you will not get such an even growth but over twenty years it will average out at 7% p/aI definitely endorse the above comments regarding switching to an interest-only loan with an offset account. This strategy has certainly worked for me.
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