I received this message in my members inbox, and thought it would be best discussed with all forum members…
Sent by Chambo00
I hope this message finds you well.
I read your member story post and it is quite impressive…well done to you.
I wanted to send you a message because I am looking at investing and I want to start doing it ASAP because I need to start looking out for my future, instead of spending what I earn on things that have no value. Like many…I have no idea where to start…Do I look at off the plan apartments…investment properties in growth corridors…Do I look interstate? There are so many options that I get confused and just delay delay delay…I went and spoke to a property investor to get advice, he was just a salesman referring me to others so they all got paid…No thanks!
I have $30,000 saved and I know I can get a 3 bed/2 bathroom house in outer Melbourne to rent out and negatively gear…I just feel so lost and confused and have no idea what to do.
Any advice you can pass along or a starting point to look at would be most appreciated.
Rich, I would need a little more information from you to provide any type of advice, such as:
1. What are your investment goals (such as: own 1 investment property, achieve a certain income goal from investments)?
2. What is your time frame (5 years, 20 years etc, this will make a big difference)?
3. What is your level of investment knowledge and experience?
4. Have you completed a balance sheet, cash flow statement and calculated your net worth? (I can provide advice on how and why to do these).
5. How do you generate your income today (wages, pension, investment income, business income)?
6. How is your super going? Have you consolidated all your accounts? Do you maximise your contributions? Do you salary sacrifice (this is hands down the best investment option for most wage earners with lower net worth)
7. What is your investment risk profile
8. What are your expenses (lots of personal debt, child support, kids in private schools, car loans etc). If you have large debts it may make sense to pay these down before investing, as many lenders may look poorly on high levels of debts.
9. Are you a first home buyer?
10. Do you have equity in an existing house (owner-occupier)?
The list could go on, but these are the first 10 I can think of now.
In my experience you need to get your ‘house’ in order before considering investing in real estate.
You mention you have $30K saved, this is a great start, and would be a 10% deposit on a $300,000 property, but you would need extra for stamp duty, legals, searches etc.
I encourage you to let the forum know a little more about your situation so we can provide advice of real value.
.Chambo00Participant@chambo00Join Date: 2019Post Count: 0
Thanks for getting back to me.
I have tried to provide answers below as best I could…
1. What are your investment goals? I would like to own a small-medium portfolio that generates an additional income. The field I work in will never result in making significant amount through wages so would like to generate another income through property.
2. What is your time frame (5 years, 20 years etc, this will make a big difference)? Long-term strategy. I am not looking to buy and flip, get rich quick etc…this is for a reasonably early retirement and to secure my long term finances.
3. What is your level of investment knowledge and experience? Very beginner and basic…That is why so much of what I have been told and read just confuses me.
4. Have you completed a balance sheet, cash flow statement and calculated your net worth? (I can provide advice on how and why to do these). I have completed these.
5. How do you generate your income today (wages, pension, investment income, business income)? Income only
6. How is your super going? Have you consolidated all your accounts? Do you maximise your contributions? Do you salary sacrifice (this is hands down the best investment option for most wage earners with lower net worth) Only employer contributions, so nothing significant…another reason why I am looking at property to help this area. I don’t put anything extra into super and I do not salary sacrifice.
7. What is your investment risk profile? Probably low risk as I am looking long term
8. What are your expenses (lots of personal debt, child support, kids in private schools, car loans etc). If you have large debts it may make sense to pay these down before investing, as many lenders may look poorly on high levels of debts. No personal debt except a credit card with a small limit. No car loans, no personal loans etc.
9. Are you a first home buyer? Yes, I am a first home buyer. Another confusing issue I have is to buy my first home/apartment or an investment property first.
10. Do you have equity in an existing house (owner-occupier)? No.
Hope this provides some further insight. Just looking for some advice to get me started on the right track, I don’t think it is fair to come on here and expect step by step help but more in the direction of what to do and where to start. It can be confusing and scary and many of you would know.
Appreciate the time and help :)
Awesome, thanks for the additional info.
Firstly congratulations on setting yourself up so well to start investing, having no major debt is a great achievement. Having completed a balance sheet, cash flow statement and knowing your net worth means you are already ahead of the pack… well done.
My first bit of advice to everyone who is interested in investing is to read John Burley’s 7 levels of investors. You can read a PDF version here – http://belnapfamily.net/teach/7Levels.pdf
From what you have told us already you are a level 3 investor. My first goal was to become a level 4 investor within 1 month of reading this document (for me that was 18 years ago). Becoming a level 4 (automatic investor) will guarantee that you will become wealthy, and you won’t even have to invest in real estate.
Quoting from the document, the 7 money steps:
• Paying Yourself First
• Re-investing Your Investment Returns
• Receiving Level Four Automatic Investor Rates of Return
• Knowing What Your Money is Doing
• Adopting the Automatic Money System
• Financial Competence (Intelligence and Responsibility)
• Avoiding Debt and Living Debt-Free
You can use super to create the core strength of your finances. I do this by investing a minimum of 10% of my wage (gross) into super via salary sacrifice. Using salary sacrifice means I make an automatic return of 17.5% (the difference between my marginal rate of 32.5 and and the 15% super rate). Now I challenge anyone to show me an investment which is as low risk as this that returns 17.5%!!!
How is this possible? Well, If I invested after tax I would pay 32.5% on my income first, and then I would invest. Through salary sacrifice I pay only 15%. So, if I had $1,000 to invest, if I did this after tax I would only have $675 left to invest after paying my marginal tax (1000-325 = 675), using salary sacrifice I would have $850 to invest (1000-150 = 850).
Using the power of salary sacrifice I have increased my net worth by over $250,000, debt free!
Have a read of the 7 levels of investor and share your thoughts/questions.
Hey Rich, out of interest which part of Melbourne are you considering purchasing in? Which part of town would you consider living in yourself? Would you like a townhouse, unit, duplex, detached 3 bedroom house?
I will take a real example from your area and apply the analysis I complete when considering an investment, so if you have one you like share a link and we can discuss.
.Kumpapeat4Participant@kumpapeat4Join Date: 2019Post Count: 0
This thread is one of the best I ever read. You guys did so well by sharing it. Very informative.
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