I'm new! How do I buy my next property?

Hi there,

Firstly, I'm new and naive to the game so any advice is greatly appreciated.

I'm 23, single and luckily (or unluckily) was able to borrow to my limit and buy my first house in Gregory Hills NSW, near Oran Park - South West Sydney development.

I decided to buy here for 2 main reasons:

- Government and business's are pumping millions into the area such as Camden private hospital, business district, schools, train stations, roads, shopping centres and social hubs. (long term)

- New road to connect up to M5 motorway and Campbelltown and Leumeah station - 5 mins drive, to be opened by October 2017. This will significantly reduce the daily commute (short term and will be close to home)

My investment goal is to retire comfortably at age ~45 using positively geared properties.

The one I just bought is negatively geared - returning a yield of 4% and it was obviously a speculative investment in the hope of significant capital gains.

Not sure if I made the right choice, as I've maxed out my borrowing power so now I'll have to wait a good 5 years before I can even think of buying another property.

What do I do in the mean time? Sell and start over? Save? Pay off the mortgage?

I definitely need to do more research about property management and financing.

Thanks again for any advice.

 

How would selling help?

 

I think the best thing to do is go through the search button and have a good read on the awesome advice on offer to give you a good grounding.

 

Having reached your serviceability limit, there's only two things you can to do improve how much you can borrow...

* Increase your income.
* Reduce your debts.

Increasing income has several solutions including:
* Increasing your salary - get a higher paying job or ask for a raise.
* Get a second job - lenders don't put a lot of weight on a second job because they know many people do it only temporarily to be able to borrow more.
* Increase the rent from your existing property - this might be possible via a basic renovation?
* Other investments that pay better dividends or have tangible medium term returns.
* Increase total household income by partnering up - can be a very effective strategy, but has it's own inherent risks.

Reducing debts:
* Reduce limits or close credit cards - this gives you the best return for paying off debt.
* Get rid of personal loans and novated leases.
* Sell the existing property, pay off the debt. This doesn't really improve things overall, a 4% yield is actually quite good for some locations. It's also going to cost you money in the buying and selling process.
* Pay off the debt by saving money. All this really does is pay off a dollar from one property to be able to borrow that dollar against the next property. Overall not a net gain.

Realistically you're probably just going to have to sit back and wait. Personal income will increase over time, so does rental income. There's a perception on this forum that people buy 2-3 properties a year, but most only purchase one property every 2-3 years. With a 20 year time frame, this still adds up to a lot of property.

 

I mean't sell and start small like units with high rental or something?

 

Yep, thanks. I definitely need to do my homework

 

Also start going to meetups. You will rapidly build your knowledge from talking to other investors.

There are a few regularly held, each about every 2 months:

• Wentworthville
• City/CBD
• Epping / North Ryde

Networking & Meetups

The next one is at Epping on Thursday night:

NSW - Epping Meetup - Thursday 20th April

 

Awesome! I'll definitely try to be there, thanks

 

Thank you

 

Thank you

 

An option I would like to expend on is joint venture.

3 things are needed to buy a property: capital, finance and time/knowledge.

If you could bring some of them to the table and partner with someone that could bring the rest, you could create something together.

It has its own risks (research well before proceeding!) and I personally get involved in JVs only on short term projects with defined exits but it could be something for you to consider while you wait for your own borrowing power to improve