- [email protected]Participant@daeheonkanghotmail-comJoin Date: 2022Post Count: 0
We’ve just started my journey of property investment by purchasing the first property.
The deposit of the investing property comes from the equity of our first home.
At the moment, we’re repaying interest + principle of both equity and the second home loan(investment property) plus another repayment of the first home loan.
We’re making a plan for the next investing property but it seems pretty tough from repayments.
We guess that we may use equity of the second home for the third property when the value of the property increases.
How can investors keep purchasing investing properties?BennyModerator@bennyJoin Date: 2002Post Count: 1,416
Congratulations for taking that first step on the path to property investing. Did you have a goal re “How much to earn from our first property to enable us to grow?” or was it more like “Just get a foot onto the property ladder?” Whichever it was, you have made that first step, so that is worth celebrating.
Do you care to share some numbers re “where you are” or “where you are planning to be”? It’s up to you, and it is (of course) going to be public, so only share what you feel comfortable with. To me, the numbers are always the important part. Steve gets deep into these with his recent project “STEPS” that takes you through a VERY complete due diligence procedure. It starts out with helping you to quantify just what you are wanting to achieve, then guides you toward the kind of property that might suit you best, and finally takes you through the very complex part (due diligence) – to the point where you will be as certain as you can be of each purchase you make.
An agent’s job is to present a property to you and invite you to purchase – however, depending on various State laws, they are not obliged to lay out all of the possible “downsides”. Of course, if asked, they should reply truthfully (but then, if possible, that truth should be tested). It is up to you to discover, and attempt to verify, these truths – that is “due diligence”. This is where STEPS shines.
Re “what next”, or “How can investors keep purchasing investing properties”, that comes down to (largely) cashflow. If your situation has you struggling to pay the mortgages, or limiting your savings regime, then it is up to you to find ways to increase that cashflow. This can be done in a number of ways (always with the blessing of your advisers – accountant, lawyer, etc), and here are a few thoughts:-
1. Saving is a slow way to grow wealth, but investing savings to create wealth makes sense – like, if you can spend savings to grow rental income or equity in a property, then run the numbers on these options. It may be that renovating may cost in the first instance, but it might give your equity and rental income a huge kick along.
2. Adding any “missing” things that allow a rental increase are worth exploring – e.g. ask your tenants if there are things they would like (and would be prepared to pay an uplift to have them) and see if you can provide these for little cost. e.g. If the house isn’t insulated, or airconditioned, what are the costs of each, and would the $ uplift in rent MORE than cover the loan costs to implement these (or use savings and gain $x a week). What about a carport if there isn’t one? Landscaping? A garden shed if there isn’t one? etc.
3. Consider whether changing to Interest Only loans would be beneficial in your instance. Again, an accountant’s input would be crucial here.
4. Itemise your skills and risk profile to determine just what path might be more beneficial for you. Would learning to develop properties hold some interest? Certainly, though a very active role, the dollar outcomes can be outstanding. Is that for you?
5. Renovations? Buy/reno/sell properties (quick turnover for large cash injections to assist with the next buy/hold asset).
Daeheon, do consider Steve’s words too – they go something like this – “The first stage of investing is accumulation – at this time the focus is on growth. Residential investing works well in this phase. Once you have amassed the required amount of Equity, then switch your investing focus to Income rather than Growth. Steve recommends Commercial investing at this stage, where a tenant pays most/all expenses and the income provides your needs for living.
One final thing – part of purchasing each IP is knowing HOW and WHEN you will need to move it on. i.e. Plan your exit BEFORE you buy it.
I hope that gives you food for thought. Do come back with any questions,
BennySDHouseGuysParticipant@sdhouseguysJoin Date: 2022Post Count: 0StevenParticipant@steven1982Join Date: 2017Post Count: 189
Slightly harder to pull off in today’s environment, with all the increase in labour and material cost, it would definitely have an impact on your margin.
Having said that though… I was able to do this a few times… the only difference being I did buy/reno/refinance instead of buy/reno/sell.
Too much cost involved with the sell scenario… stamp duty, agent selling commission, CGT, etc….
I would not consider the sell option unless I desperately need to increase my equity or if I run out of borrowing power.DogherParticipant@dogherJoin Date: 2021Post Count: 0
Congratulations on taking the first step in your property investment journey! It’s great to see that you are already thinking about your next investment property.
In terms of keeping up with the repayments, it’s important to make sure that you have a solid financial plan in place. This includes budgeting for your expenses, setting aside funds for unexpected costs, and ensuring that you have a sufficient cash reserve for any potential cash flow issues.
One strategy that investors use to continue purchasing investment properties is leveraging equity. As you mentioned, you plan to use the equity from your second home to finance your third property. This is a common strategy that can help you maximize your purchasing power and grow your investment portfolio.
However, it’s important to keep in mind that leveraging can also increase your financial risk, particularly if property values decline or interest rates rise. It’s crucial to make sure that you can comfortably afford the repayments and have a backup plan in case of any unexpected changes in the market.
Another important consideration is to ensure that you are purchasing investment properties that generate positive cash flow. This means that the rental income exceeds the expenses, including mortgage repayments, property management fees, repairs, and maintenance costs. Positive cash flow properties can help you build wealth over time and provide a buffer against any potential cash flow issues.
Overall, property investment can be a great way to build wealth and achieve financial freedom, but it’s important to approach it with caution and a solid financial plan. Best of luck with your investment journey!