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Best way to blow $50k...

Discussion in 'General Property Chat' started by Daryl, 10th Oct, 2015.

  1. Daryl

    Daryl Member

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    WA
    Hello,

    I am a new user to this forum and a new investor to Australia. I currently have around 50k to invest. Im a big believer that your first investment can either make or break your future portfolio and am therefore looking for some advice, professional or otherwise in the best action to take.

    Some questions i have are listed at end of this post, thanks again.

    A little bit about me:


    Originally from the UK. Im single and debt free. I have been living in OZ for 5yrs in WA.
    I have a trade in and work as a Mechanical Fitter, which i no longer really enjoy. Im however soon going to continue my education to become a Quantity Surveyor and eventually i hope to start my own construction firm, while at the same time building my asset portfolio. I am also looking at relocating East Coast as I believe there is more potential for investments as opposed to WA. I.e. Qld, Tas, Vic, NSW, NZ etc.
    I spent most of my 20s partying and travelling (hence 1st time buyer) and 2 things happened to me this year that help totally change my focus from travelling/partying, to buying and investing in assets:

    1: I turned 30.
    2: I read Robert Kiyosakis', Rich Dad Poor Dad.

    Im aiming for positive CF, buy & hold and possibly renos, units and/or houses.
    Some questions i would like others perspectives on are:

    1) What would you do in my situation, with 50k to invest?

    2) Should I take advantage of the 1st time buyers loan, as im still only buying my first property as an IP, and dont wish to live in it? (im still happy renting/house sharing).

    3) Should i use trusts, in order to build a big portfolio? Steves Mcknights 1st book says you will have trouble aquiring a trust loan if you have debt go your name, i.e. 1st time buyers house.

    4) Any tips on how to obtain good deals, i.e. auctions? (when & where to find them).

    Thanks in advance.
     
  2. MTR

    MTR Well-Known Member Premium Member

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    Hi there
    I am also from WA and invested in all the above markets you mentioned bar Tassie. You don't need to move East to play in all these markets, just means possibly more work required or sourcing the right person to help you.

    For starters I would read posts on somersoft forum and PC, search books recommended by forum members and just keep learning.
    Read posts by @sash on SS and PC this may be very helpful. Plenty of other forum members that mention various strategies that they have used successfully

    all the best

    MTR
     
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  3. Nemo

    Nemo Well-Known Member

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    Last edited: 10th Oct, 2015
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  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Welcome to the forum :)

    If you want to user the fhbg you'll need to live in for for a period of time - in WA, you can invest in property and still be eligible for the fhbg later, and qld is the same.

    The first thing I would suggest is to get your finance looked at to see exactly how much you can borrow, and plan ahead to make sure your finance is mapped out for the next few purchases rather than just this first one.

    Re trusts, they have their place but they can make finance more complex.
     
  5. datto

    datto Well-Known Member

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    G'da Dazz

    That's a tough one to call at the moment. Have you got a crystal ball or can you wait for the planets to line up?

    If I knew the best answer for you I'd be doing it myself.

    However, They reckon Sydney's boom is over and that Brisbane is the new place to invest. But I'm not convinced.

    And remember 50K won't get you far property wise. You have blown away your 20s but at least you got a trade and the wisdom to change (i blew way my teens and my 20s lol).

    Further education,savings and property investing could set you nicely in your 40s.

    Can't wait that long? You want it and you want it now? Then use that 50K to buy a cheap sports car, some nice threads and a fake tan, Then hook up with someone who has a rich daddy lol.
     
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  6. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Or for a faster revenue stream, hook up with a rich "daddy"
     
  7. datto

    datto Well-Known Member

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    Yes, faster, but I wouldn't stoop that low.
     
  8. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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  9. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    I knew someone who tried doing this.

    He met a Chinese lady online and started visiting her. Always bragging about how much money her dad was worth as he was some big contruction guy.

    Their relationship was always a big drama on and off every day.

    Even brought the dad over to meet his family and to his house to which the dad said was a bad house and he should sell it and move to China lol

    Anyway didn't end up working obviously, it was quite pathetic actually.
     
  10. monalisa

    monalisa Well-Known Member Premium Member

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    Hi @Daryl

    Welcome to the forum, and congratulations on taking charge of your financial future.

    As already mentioned, if I were you, I would invest time in educating myself in the Australian real estate market. Read posts on the Somersoft forum (which is now archived), and PC - there is a wealth of information, stories of what others have achieved, and learn from their experiences - good or bad.

    Secondly, work out how much you are able to spend i.e. your serviceability.

    I don't see why you will need a trust - keep it simple.

    In terms of good deals - best thing you can do is know exactly what you are after; have a set criteria for what type of properties will tick your boxes - this way your search would be directed at what is acceptable to you based on your risk profile, and will save valuable time.

    Once you are clear on this, you will be able to spot opportunities.

    Best of luck!
     
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  11. ErYan

    ErYan Well-Known Member

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    I don't believe the statement "Im a big believer that your first investment can either make or break your future portfolio" is true. Clearly it would be much better than if you had to start from scratch but that is part of the learning process.

    How long will it be until you might want to access this money? If it is anything less than 7 years the general rule is keeping it in cash, eg term deposits. This is because all of the other investments are volatile and unpredictable: you do not want to be forced to sell at $25k. If it is longer term, I agree that education is useful.

    I believe in diversification but $50k is not enough for that in my opinion. Read bogleheads and mymoneymoustache where you can get good information about investing across the global stock markets with only a couple of instruments.

    The trust structure is not appropriate for you at this stage in my opinion.

    These are just my ideas based on my own education. I am not a financial advisor and you should not do anything without understanding the reasons and implications yourself.
     
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  12. Daryl

    Daryl Member

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    Thanks for the comments guys, some useful info.

    Btw @ErYan, thanks for comments and links but im not on a property forum to invest in stocks and shares.

    Thanks
     
    Last edited: 11th Oct, 2015
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  13. ErYan

    ErYan Well-Known Member

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    Daryl,
    $50k might scrape you in at $200k after all associated costs. However you need to consider :
    - Do you have the income stream to support the loan if untenated?
    - Can you handle a change in interest rate to 8%?

    If yes to both, then $200k is your limit (confirm the calculations yourself). Once again you do not want to be forced to sell.

    If no? Decrease purchase price until you have a comfortable margin and can answer yes to both questions.

    Subsequently, read forum posts here and at somersoft to give you an indication where and what to buy. Research is the key. Some people say buy where the next McDonalds is being built: using the huge research that a conglomerate like that would use before investing large amounts of money.

    After getting an idea of some areas you might use a buyer's agent. I used one for my purchases and have been pleased with the results. The BA knows the true value and can negotiate better than you can, unless you negotiate fir a living. I used Matt Knight who posts on here and can recommend him, particularly for NSW. Others might have recommendations for other areas if you require.

    Good luck. Keep learning.
     
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  14. wylie

    wylie Moderator Staff Member

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    With $50k deposit, a steady income and the wish to buy an IP (continue to rent elsewhere) you should be able to borrow more than $200k.

    Someone I know has $75k deposit (equity, not cash) and has just got a loan for about $400k because the rental income is counted too.

    See one of the brokers and find out and then you have an idea of your limit. Don't go direct to a bank.
     
  15. D.T.

    D.T. Adelaide Property Manager Business Member

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    More like 400k I would have thought?
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    More like $320k @ 88% LVR.
     
  17. ErYan

    ErYan Well-Known Member

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    My assumption was that stamp duty and other fees would have to come out of the $50k AND best LVR would be 80%. However, it is indeed possible to go higher.
     
  18. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    The best lvr may be 80% for some people but for a first time buyer it doesn't achieve much other than to stall your portfolio and increase risk.

    Many people think it's 'safer' to have a large deposit, but I would much prefer to use lmi and store any extra cash in an offset account. That way you keep control of the cash rather than the bank, and have it available to use as a buffer if anything goes awry.

    LMI is supposed to be a protection for the bank (and it is) but if you use it well it can protect you too.
     
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