Tell Me How You Got Started :)

Correction – It's how high risk investors operate.

Are you telling me there is skill involved in borrowing money against the equity in your house and then buying another one? I wouldn't get too carried away there buddy.

All investment carries risk.

The only question is whether the return is worth the risk?

Personally, I would consider going in with three other investors much higher risk than borrowing money on my own home to buy an investment property…

I know I am reliable, and I know I have insurances to cover my **** if I lose my job or whatever. I also know that if I change my mind about how to manage my investments, the only person it affects is me.

So really it comes down to how you identify risk, and how you manage it.

In the example that has sparked this 'discussion', the first thing to consider is that the risk is minimised by ensuring that loans are not cross collatoralised. i.e. I won't lose my own home if I can't afford to make payments on the IP anymore…

(That's not to say there are not negative impacts still. I will lose my IP when the bank sells it, I will have a bad credit rating as a result, and I may still owe them money when the property has been sold. Does the risk of this occuring outweigh the potential benefits of achieving success???)

Secondly, just because you have cash does not mean the best way to use it is to blow it on a deposit for an investment property that you are planning to buy regardless… i.e. the interest paid on the IP can be tax deducted, where the interest on your car loan cannot.

Thirdly, the gamble is that you anticipate property values to increase… I mean, why would you buy the place if you expected it to go down in value? right???
So if the property does increase by the amount you anticipate, then you must have calculated that the anticipated increase over the anticipated time is worth enough to overcome the higher debt and interest repayments…… and of course, is enough to outweigh the risk of failure.

Is borrowing money on equity to buy an investment property a 'high risk' activity?
Personally I think not. But you must make your own decision…

The point of my 'discussion' though is to clarify that 'making your decision' and 'shoving your personal opinion down someone elses throat like they're a bunch of morons' are two completely different things. Whether you think you are right or not, you don't have to be rude about it.

So how bout for post number 6 of your membership here, you show a bit of respect for others here who are just trying to learn and help one another.

Fair enough lads, I guess as long as you're generating enough income to service the debt, and the banks are happy with your LVR's, then it's all good, I'm just uncomfortable with the idea of using debt as a deposit, but each to their own. Play on.

Well said.

Hi Scotty,

Well done on this post, very interesting post!!!

I am 28 and bought my first IP at the age of 22. My first property set me back $185,000 and I had saved 25K at the time.

I was working two jobs and studying at the same time.

I bought my 2nd IP two years later for $280,000 and my 3rd IP two years ago as well.

THE OUTCOME:

I got married last year and I actually sold two investment properties out of the 3.

MY PPOR loan is only 60K so my wife and I have no intention to pay it off.

Property is not my cup of tea at the moment in the Australian market!!!!

If you ever need anything please feel free to ask, we are all here to help.