Investing off a low income

Discussion in 'Investment Strategy' started by JZ93, 29th Jan, 2016.

Join Australia's most dynamic and respected property investment community
Tags:
  1. JZ93

    JZ93 Well-Known Member

    Joined:
    29th Jan, 2016
    Posts:
    86
    Location:
    Melbourne
    Hi all, Would like to get peoples thoughts on growing a portfolio off a low (50k) income and how possible it is today. I'm still living at home with minimal expenses and no credit card debt, soon to settle on a 250k house in Woodridge with a 6.8 % yield.
    I'm confident I've got this under market value and with a reno I believe I'll be able to fund a similar second purchase in 6 months.
    Ive consulted 2 brokers and its disheartening to hear them say I probably won't be able to build a portfolio on my income..
    Will I have to bite the bullet and get a new job or second job, or is the broker just not investor savvy.. I get the vibe they aren't as they both suggested P&I instead of interest only with an offset and suggested I buy cheaper properties out in small regional areas..
    Thoughts ?
     
    Last edited: 30th Jan, 2016
    HUGH72, 2FAST4U, Adele and 3 others like this.
  2. euro73

    euro73 Well-Known Member Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,125
    Location:
    The beautiful Hills District, Sydney Australia
    You're going to have a difficult time getting beyond 2 or 3 sub 250K properties unless you can purchase very high yielding stock. The APRA changes introduced last year mean that all your debt will be assessed at 7-8% P&I, even if you're paying 4% I/O.

    To counter that, you either need much more income from employment or much more income from rental yields.

    By very high yielding, I mean 10% +. Remember, most banks only take 80% of rental income so with a 10% yield they treat it as 8% - and if debt is being assessed at 7-8% ....see where Im going with this?
     
  3. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

    Joined:
    12th Jul, 2015
    Posts:
    2,194
    Location:
    Melbourne, Australia
    Hi @JZ93

    It is possible that P&I was suggested due to the interest rate being lower than Interest Only thus making serviceability more viable.

    Have you saved a bit of a deposit for your next property purchase?
     
    Last edited: 29th Jan, 2016
    JZ93 likes this.
  4. LCK

    LCK Active Member

    Joined:
    20th Jul, 2015
    Posts:
    39
    Location:
    Sydney
    I think many of the users on here have the aim of retiring early on a passive income using 10+ properties.. But that is their aim, doesn't mean it needs to be yours

    Some investments are better than no investments and the sooner you start, the better.. I too am on a lowish income.. It's hard, the main thing is having a good buffer (20k at least) to cover you for vacancies, tenants not paying rent etc
     
  5. Tony Fleming

    Tony Fleming Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    717
    Location:
    Sydney
    It's harder now than it was a few years ago but I built a double digit portfolio on a 50k income over the past seven years. Your going to need a plan and a 100% can do attitude, a little luck and the ability to tell the negative people around you to get stuffed. Renovation is a good place to start to build equity but a lot of it comes down to serviceability. You need equity before you need cash flow to build a strong property portfolio. Can you pick U extra shifts, weekend work etc, maybe an online business to help boost your income. Good luck.
     
  6. JZ93

    JZ93 Well-Known Member

    Joined:
    29th Jan, 2016
    Posts:
    86
    Location:
    Melbourne
    Yeah wasn't aware of the extent of these APRA changes definitely make things a lot harder although it is protecting the market aswell, just need to work around it.
    @JacM second property would be no money down most likely. I'll have 7 or 8k left over after settlement and with a Reno House should be worth 285 +
    I am 22 so have plenty of time ahead of me, just keen to do things as quick and safe as possible.
    Thanks for the feedback!!
     
    MaddyG likes this.
  7. ellejay

    ellejay Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    2,192
    Location:
    Kimberley and NZ
    Have you read some accounts of how some very successful people overcame barriers to making money? "Screw it, let's do it" Richard Branson is one ( lots of other recommendations here if you search). The question isn't "can I do it?' but "how can I do it (legally)? Of course increase your income through working harder initially if it's needed to achieve your goal, property investing is a long term game. Maybe ask around and and see see if you can find examples of people who did as well as anyone else by investing in regional areas.
     
    MTR and JZ93 like this.
  8. D.T.

    D.T. Specialist Property Manager Business Member

    Joined:
    3rd Jun, 2015
    Posts:
    9,189
    Location:
    Adelaide and Gold Coast
    I've been in this situation myself, my tips are :

    1. Revise strategy and goals to reflect your capabilities. Find your own niche.

    2. If you're unhappy about your capabilities work on improving them. Get a better job or promotion or a 2nd job or small business. Some road-blocks like non deductible debts you have direct control over.

    3. Be very careful about lender choice (via an experienced broker) to get as far along as you can.

    3A. If your borrowings are limited, be conscious about maximising what benefit / return you get from each loaned dollar since they're in limited supply.
     
  9. WattleIdo

    WattleIdo midas touch

    Joined:
    18th Jun, 2015
    Posts:
    3,429
    Location:
    Riverina NSW
    No need to rush. As long as you consolidate each purchase with renos and maybe some extra in offset, you have time. Time means compounding. Nothing beats compounding. That's the Joker. Late twenties, early to mid-thirties, it'll all kick in. Good on you.
     
    New Town, Bender12, bwklau and 2 others like this.
  10. JacM

    JacM VIC Buyer's Agent - Melbourne, Geelong, Ballarat Business Member

    Joined:
    12th Jul, 2015
    Posts:
    2,194
    Location:
    Melbourne, Australia
    As you say you are super young. You have loads of time on your side so it won't be overly difficult for you. Good on you for having a property under your belt at such a young age!!
     
    New Town and JZ93 like this.
  11. Shazi

    Shazi Active Member

    Joined:
    4th Jan, 2016
    Posts:
    35
    Location:
    QLD
    Hi , good to know that you have taken the first step . You will not have trouble finding tenants but would be careful choosing a very good prop. manager as this area can have a bit of trouble with the clientele .All aside , it is going to be hard however it is possible to build a portfolio on your income . You just have to keep your eye on the ball and work hard as hell for the next couple of years even taking a second job . It isn't easy but possible.
     
    JZ93 likes this.
  12. Greyghost

    Greyghost Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    1,635
    Location:
    Brisbane
    Liberty are assessing at lower rates.
    I have a client whom is on about 62k and we have built 4 property portfolio.

    Yield is important though.
     
  13. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,091
    Location:
    Brisbane
    Find another broker.
    I know someone who was told by a broker they would never pay off their loan when they bought a unit at age 60.
    They paid it off in 5 years.
     
    Ross 355, MaddyG, Paterson00 and 4 others like this.
  14. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

    Joined:
    31st May, 2016
    Posts:
    2,738
    Location:
    Australia
    @JZ93

    Be driven by your dream. "When you know the "why" the how becomes easier" Keith Abraham

    Download some free resources from his website. You need to focus on your dream and keep the noises out. You'd be surprised about how things change and you find ways to make things happen for yourself.

    I have a vision board that I set up in 2012. Interestingly I've achieved most of the goals I had on there. One that my family thought was ....plain outright silly.

    Also, although you need to be realistic, you need to eliminate from your life and your property team, anybody who thinks you can't do something. Dream stealers are just that, dream stealers. Instead go find someone who has done well and started off with not much money but with a vision and resourcefulness.

    Keep focus on what you want and why you want it and the how will take care of itself.

    Keep focused. You will get there. No doubt.
     
    Paterson00, Sackie, JZ93 and 2 others like this.
  15. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    I have had exactly the same scenario.
    There are always challenges with investing just have to find the solution.
     
  16. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    This is good.
    Dream Stealers, never heard that before, that is great:)
     
    Sackie and Property Twins like this.
  17. Property Twins

    Property Twins Mortgage Brokers & Buyers Agents Business Member

    Joined:
    31st May, 2016
    Posts:
    2,738
    Location:
    Australia
  18. Ed Barton

    Ed Barton Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,229
    Location:
    Brisbane
    How did you get such a crappy yield??
     
    Waldo likes this.
  19. sauber

    sauber Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    889
    Location:
    Get me down to funky town!
    i have got 1 property and looking to extend now. im on apprentice wages but the tennants cover the costs of the loan which is nice which means i should be able to buy again very shortly.

    i agree with the dream stealers quote before, they are the kinda people you wanna say FU too! and i bet youd be glad to say that too.

    prove people wrong , that'll make them even more green with envy.
    sauber (formerly neeko on SS)
     
    Paterson00, Property Twins and JZ93 like this.
  20. JZ93

    JZ93 Well-Known Member

    Joined:
    29th Jan, 2016
    Posts:
    86
    Location:
    Melbourne
    Great feedback positivity definitely gets you a long way and I'm sure doors will open down the track! Too right
     
    Last edited: 30th Jan, 2016
    Paterson00, sauber and Property Twins like this.