Forums / Property Investing / Help Needed! / Possible New Investor looking for some advice

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  • Profile photo of phil28phil28
    Participant
    @phil28
    Join Date: 2014
    Post Count: 5

    Hi everyone,

    I have only recently started to look into investment property as of the past 2 months.
    I am in my early 20’s and am only looking at places within the $90,000-$130,000 range. I am trying to work out the best ways to look for positive cash-flow properties, such as the investment page on realestate.com.au, as some of the properties look to good to be true. Any advice anyone could lend would be greatly appreciated!!

    Thanks again,

    Phil

    EDIT – Sorry just found the other post where I should have been looking

    • This topic was modified 5 years, 1 month ago by Profile photo of phil28 phil28.
    Profile photo of Kinnon BellKinnon Bell
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    @kinnon
    Join Date: 2014
    Post Count: 151

    Hi Phil,

    If something appears too good to be true it usually is.

    You can get some CF+ properties in that price bracket but that would usually restrict you to regional towns which can have their own issues (but aren’t always a bad investment) or studio/student apartments the size of a shoe box which is a can of worms in itself.

    What are the factors making you look in that price range?

    Kinnon Bell | Kinetic Funding
    http://www.kineticfunding.com.au
    Email Me | Phone Me

    Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

    Profile photo of phil28phil28
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    @phil28
    Join Date: 2014
    Post Count: 5

    Thanks for the reply!

    I thought that would be the case, I saw the properties on realestate.com.au and thought if they are such a great deal then why hasn’t somebody else taken them?

    What are the problems associated with renting small studio apartments?

    The main factor making me choose that price range is the deposit I would need to save, around 20k-30k?

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Phil

    Welcome aboard.

    The size of the deposit required would depend on the location.

    Personally, I’m not a big fan of regional cheapies. Some investors do well – but some find it difficult to move forward with these properties in the portfolio. They might put a few dollars into your pocket due to strong yields but they usually have bugger all growth.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Kinnon BellKinnon Bell
    Participant
    @kinnon
    Join Date: 2014
    Post Count: 151

    No worries :)

    Sometimes there’s the odd gem out there that people put in the too hard basket. But with all the reno shows of late there’s too many weekend warriors wanting to make what they think is a quick and easy dollar and willing to pay top price without doing the proper due diligence.

    Few problems with small apartments with the main ones being most banks don’t like them if they are under 50sqm so you need to stump up a fair bit of cash to keep the Loan to Value Ratio (LVR) down, capital growth is limited as people find it hard to get money to buy them and there’s lots of them so there’s not really a unique selling point, can be hard to rent if there’s an over supply and there’s another 24 apartments the same as yours available for rent and body corp can be quite high (due to the lift/s pool, gym etc etc) which would eat in to what little cash flow you’d get from it.

    It would depend on what LVR you want to go – (ignoring serviceability and a few other things) with a 90% lend you could get a $220k place and use $22k for deposit ($198k mortgage) and another $8kish for purchasing costs or if you wanted an 80% lend then you could aim in the range you quoted in your OP. There’s a lot of variables but considering what LVR you want to go is one thing to consider.

    Kinnon Bell | Kinetic Funding
    http://www.kineticfunding.com.au
    Email Me | Phone Me

    Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

    Profile photo of phil28phil28
    Participant
    @phil28
    Join Date: 2014
    Post Count: 5

    Thanks Jamie!

    From what I have read in most places, lenders want a 20% deposit so thats the main reason I was looking in the 90-130k range, however if that is not the case I would be very interested in looking at places in the $220k range (is it more or less likely to have a CF+ in this range than my original?)
    I understand what kinetic is saying though as it is most likely that all the places I have looked at have multiple apartments in the same building that have a low demand in rent.
    By no means am I ready to go out and purchase an IP, but I am well on the way with my budget and time frame. I am just trying to get a little push in the right direction eg. how to know where to look, where to find out what areas are doing well…
    I have just finished reading From 0 to 130 properties in 3.5 years, I loved it and learnt a lot! Is there any other books you would recommend me having a look at?

    Sorry for the 101 questions :P any information you can share would be amazing!

    Thanks again,

    Phil

    Profile photo of Mick CMick C
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    @shape
    Join Date: 2010
    Post Count: 1,099

    Hi Phil.

    1. Smaller apartments under 40 sq meters generally requires a higher deposit – 30-40% in some cases, depending on the location…so this is one reason why it may sit on the market for a long time as really it’s targeted for cash up experienced investors.

    2. Rental yield is important but Capital growth is equally if not more important for your 1st property, as it’s your foundation property; this is where your going to “hope” to get more equity out in 1-2 years time so you can repeat the cycle

    3. Have you considered an 90-95% loan??? it’s available and for smaller purchases ie under $300,000 the lMI cost ( Lenders mortgage insurance) is not too bad and def more adorable.

    As long as you have an average-decent income and $25,000 in deposit, depending on the lender you choose and your servicing and overall credit file you should be able to buy in the $260,000- $300,000 bracket at a 95% lend.

    4. Focus on t he property, suburb, growth potential,. yield and return NOT THE PRICE.
    Just because it’s cheaper doesn’t mean it’s worth that price.

    5. This is your 1st property and most importantly this money you saved up is your HARD EARNED cash invest in it wisely, dont get the price bracket drive you into the wrong purchase.

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

    Profile photo of phil28phil28
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    @phil28
    Join Date: 2014
    Post Count: 5

    Hi mick!

    Thank you so much for your insight! Makes a lot more sense to me now!

    That means I can look into a few more options than previously.

    Is the growth potential related to new things coming to the area ie. Schools, shopping, transport?

    With a 95% lend is it still possible to find CF+ properties in the 250-300k range? Or would it have to be negatively geared? I’m am just worried about not being able to find a tenant and then have this massive debt?

    Thanks!

    Profile photo of Adrian CahillAdrian Cahill
    Participant
    @adriannqld
    Join Date: 2003
    Post Count: 127

    Love reading all the comments, thanks for sharing! Something a lot of us can learn from.

    Adrian Cahill | AdrianCahill.com Personal Development Expert
    http://adriancahill.com/from-investor-to-coach/
    Email Me | Phone Me

    Here since 2002, however things have evolved over the years.

    Profile photo of BennyBenny
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    @benny
    Join Date: 2002
    Post Count: 1,366

    Hi Phil,

    Is the growth potential related to new things coming to the area ie. Schools, shopping, transport?

    Anything that increases demand for a property in an area will lead to a lift in price growth. With more demand, supply can’t keep up, so buyers have to pay more to “get in”. So schools, transport etc can certainly have an effect. So too can adding value to YOUR place. e.g. buy a large 2 bedder that can easily be made into a 3 bedder. This will usually lead to an increase in both rental income and growth. Maybe install an air conditioner, or a garage or carport – can have the same result. BUT, all of these depend on the area in which you purchase and the demographic that you are targetting. Or buy a house with a block large enough to be subdivided into the future to add your own growth – or reno the place, or change its purpose, or ……..

    With a 95% lend is it still possible to find CF+ properties in the 250-300k range? Or would it have to be negatively geared?

    Again, that will depend on the area. In a country town, $300k might be paying too much – these areas are USUALLY positive geared, but can be dependent on just one industry, so be careful…. Outer suburbs of major cities are usually the areas that you can still buy for these prices, and are usually positive geared. Take a look at this link below – it shows what a young bloke did in two years – all positive geared and returning him both positive income and growth (he manufactures some growth with renos too) :-
    https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697977

    While at the link above, do take a look at other posts in that thread – it was created to cover many of the “early questions”, so read ’em all – either to learn more, or for a refresher !!

    I’m am just worried about not being able to find a tenant and then have this massive debt?

    Good for you, Phil !! It is sensible to be considering the “What ifs” and addressing as many as possible before buying. Ask RE agents in your “area of interest” how many rentals are on their books, then how many are available today for rent. From that, determine what percentage of their rentals are vacant. 3% is considered “normal” – anything less than 3% is said to be tightening, or tight (around 1.5%). Above 3%, landlords might have to cut rents to get a tenant !!!

    Benny

    • This reply was modified 5 years, 1 month ago by Profile photo of Benny Benny.
    Profile photo of phil28phil28
    Participant
    @phil28
    Join Date: 2014
    Post Count: 5

    Hi Benny!

    That information is so helpful and has kept me busy for a long while looking over all the links!

    Just what I needed starting out to gather some great information in an easy and understandable explanation!

    I’m just wondering what are the best resources for finding information about how certain suburbs are trending and changes in the market?
    I have heard of Residex, RP Data, SQM, info on realestate.com.au
    Or is it best getting in and amongst the areas I am interested talking to agents and going to open houses and so on?

    Thanks so much once again!

    Phil

    Profile photo of JayJay
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    @ches
    Join Date: 2014
    Post Count: 8

    Hi Everyone

    Thanks for sharing all your thoughts I am looking in to invest at the moment I’m currently in the reading stage to get information about properties and how it works, by going through comments on this page just helps put thoughts in to perspective thanks again.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,366

    Hi Phil, and Ches too,

    I’m just wondering what are the best resources for finding information about how certain suburbs are trending and changes in the market?
    I have heard of Residex, RP Data, SQM, info on realestate.com.au
    Or is it best getting in and amongst the areas I am interested talking to agents and going to open houses and so on?

    Much will depend on how you decide to proceed – like, if you choose to buy in an area remote from where you are, then Open Houses might naturally be forced OFF the list. I like the idea of becoming an RE agent’s “newest best friend” in your chosen area. Even if remote, much can be done by phone/email (though it would likely be smart to meet up with them when you are “sounding out” your chosen area/suburbs initially to form a relationship).

    With the others you mention (Residex etc), I’ve read that some are more up-to-date than others – and some can tell downright untruths (I have noticed median values posted that seem to indicate massive spikes on a Monthly basis – as useful as an ashtray on a motorbike). A median should be a “rolling window” figure over several months so that spikes are minimised, and overall growth becomes more easily noticed, not the spikes.

    In the end, IMHO, nothing beats being in touch with an RE Agent who is “living the market”. They will tell you almost instantly of changes as noted by them.

    Benny

    PS Glad you enjoyed the “big picture” thread !!! :)

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