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Discussion in 'General Property Chat' started by _niko_, 17th Feb, 2016.

  1. _niko_

    _niko_ Member

    Joined:
    15th Feb, 2016
    Posts:
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    Location:
    Melbourne
    Hi everyone, recently joined the forum and loving it. No doubt many of you would have seen a thread like mine time and time again but I'd appreciate any advice or recommendations you may have. My current situation is I've got about $40k (gradually rising with time) saved to get me going. I don't have a property in my name and am currently living with the folks to allow myself to save quicker.

    Right now my goal is to learn as much as I can and with that knowledge to formulate a plan on how I'm going to get started and how I will continue to grow and move onto bigger projects. Without having owned my own property before I'm a little bit unsure as to what type of investment I can begin with. My goal however once I have enough equity is to move into property development. Reason being that it seems to be one of the more profitable vehicles for creating wealth in property. I'm sure through learning and experience this may alter slightly but right now this is the way I see it.

    I know roughly what my endgame is and the things I want to achieve however I really need to get these things down as a part of my plan so it helps me plan my journey more accurately.

    So getting back to my current situation I'm a little bit unsure on what options are viable at this stage to get me going. It seems with the current amount I have saved I would be able to afford a property around 300k which I can look to rent out. My other thought is getting a syndicate started involving a handful of people and looking to develop. This unfortunately is as far as my limited knowledge takes me :(.

    If anyone has some thoughts or some guidance it'd be much appreciated.

    Nik
     
  2. York

    York Finance Broker Business Member

    Joined:
    24th Jun, 2015
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    Location:
    Sydney
    Welcome to the forum Nico.

    There are several factors which will determine how much and if you could borrow to purchase your first property. Some of these are your income, deposit, evidence of savings and employment stability.

    Also, to aid in your success in property investment it is important to have an end goal. Doesn't have to be exact. But at least close. This way it enables you to decide on your strategy. That is, HOW you will get there. This may be either buy and hold in capital cities, flipping in regional areas, chasing cash flow or focusing on capital gain properties, developments and many others. Many experienced investors use a combination of the above. Investing is a very individual thing and will vary from one person to another in regards to strategy. You need to find the strategy that suits you best.

    I'd say the absolute first thing to do is educate yourself. Use this forum especially, and any resource you can including websites, magazines, blogs etc to get you familiar with the world of property investing. There is no such thing as enough leaning. When you believe you have learned enough (be patient), then I would see an investment mortgage broker and see what is possible regarding finance. This will also give you some time to build up your deposit and buffer for your first purchase.

    Just something to think about.
     
    Leo2413, Keen novice and _niko_ like this.
  3. Big Will

    Big Will Well-Known Member

    Joined:
    18th Jun, 2015
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    1,546
    Location:
    Melbourne, Australia
    Hi Nik,

    Welcome to the forum and congrats on taking the steps towards independence.

    1. My opinion is to keep away from developments until you are far more experience, yes there is great profits but there can also be great losses. A unit block near the office is running 4 months behind schedule which would of burnt ALOT of extra money holding it.

    2. Keep away from JV, you are adding another complexity and would need to seek even more legal advice. You would need to work out who does/gets what and exit strategies, what if one person wants to sell?

    3. I would have to assume you are younger in age (less than 30) if so you have plenty of time on your hands, I would be looking for higher capital growth properties then higher yield properties. Yes it isn't a glamourist lifestyle or gloating facts however going regional without the knowledge set has additional risk especially if you look at mining towns.

    Something to always keep in mind.

    1. Who is paying the person for their advice? If a financial planner is saying buy OTP you would need to rethink what they are saying.

    2. Does it sound to good to be true

    3. There is no such thing as a free lunch.

    4. Slow and steady wins the race

    5. The greater the reward the greater the risk, you can put your 40k in the bank and earn 3% interest (very low risk) or you can go to the casino and put it all on red on a 1 in 2 chance of doubling. If you do the casino route it works out really nicely when you get it right but if you get it wrong it can be devastating. E.g. say you put the 40k all in each time for 5x in a row within 5 minutes you could walk out of the casino from anywhere between $0-1,280,000. Fantastic if you get to the 1.2M but if you stuff up on the 4th (640k) you lose a lot!.

    Read lots, learn lots and ask a lot.
     
    _niko_ likes this.
  4. MsAli

    MsAli Well-Known Member Premium Member

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    Location:
    Sydney, Australia
    Hi @_niko_ I'd look at what your current affordability is. Even though you are equity dependent, what sort of portfolio can you still afford? Talking from personal experience.

    It's a longer journey if you are doing one purchase at a time. When starting out, I'd look at what's possible for me in the mid to long term versus what's possible for me today.

    If you know what's possible in the mid to long term, it would well be a big motivator to make it happen. As opposed to just doing a 300k purchase now and waiting. It's a stab in the dark and you can do with a plan.
     
  5. Moych

    Moych Well-Known Member

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    3rd Sep, 2015
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    Location:
    NSW
    Hi @_niko_ while your still saving for a deposit, grab some books to learn about the process of investing in property and then continue coming back to this forum. Once you get an understanding of the basics the rest starts to fall into place, also there are many helpful people here willing to provide advice from their own experiences.

    Here's a thread with a few books to get you started:
    Book list
     
  6. _niko_

    _niko_ Member

    Joined:
    15th Feb, 2016
    Posts:
    17
    Location:
    Melbourne
    Thanks for the replies. Regarding my end goal I have a pretty clear idea of the things I want to achieve and where I want to get to. I'd say I have a general understanding of the risks and rewards of the different investment pathways but most definitely not a strong grasp of them.
    @MsAli i guess that's probably where I'm unsure at this stage of how I would go about learning what my possibilities would be mid to long term. That seems to be a good idea though to see a mortgage broker to see what my borrowing capacity may be.
     
    MsAli likes this.
  7. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Location:
    Sydney
    I'd suggest to read this forum and past posts from Somersoft for 3 to 4 hours a day/night for the next 30 days.
    All categories except for Coffee Lounge/Living Room and also Commercial for now.
    Then, you would have a much, much greater understanding of the whole concept of property investing.
    Your proposed strategy will probably change 3-4 times during this period as you learn more and see how it fits in with your personality and circumstances.
     
    Noobert, Bran and Erida like this.
  8. _niko_

    _niko_ Member

    Joined:
    15th Feb, 2016
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    Location:
    Melbourne
    Thanks @Ace in the Hole im probably already reading on here a couple of hours a day already. I'll be starting with a few books including some that were mentioned in the link @Moych posted.
     
  9. Venca77

    Venca77 New Member

    Joined:
    16th Feb, 2016
    Posts:
    2
    Location:
    SE QLD
    Hi All,
    I am also new to this and loving the wealth of information - my family and living situation is a little different to the OP but the financials would be similar ($40K deposit saved + $50 / wk to service loan), no houses yet (currently renting and will be for the foreseeable future). Looking in regional SE QLD for our first IP. I've been going over these forums, somersoft forums, everyones links to the websites in their signature block and any other tool / resource that I can get my hands on from my keyboard.
    I've learnt a lot and am still learning so if you've any more advice for those starting out I thank you in advance.
    Cheers.
     
  10. Cat

    Cat Active Member

    Joined:
    18th Feb, 2016
    Posts:
    31
    Location:
    Brisbane
    Hi @Venca77. If you are eligible for first home buyers grant I'd definitely be looking at that as if you buy an investment property as your first property it means you won't be able to get the grant in the future. We build homes for a finance company that do zero deposit home loans and with rates how they are at the moment these owners are paying a similar amount to what they are in rent. If you have a deposit you should always put that into your principle place of residence and then use the equity in the home you live in to be the deposit for an investment property. You want to keep your deductible debt high (investment property debt) and your non-deductible debt (home loan debt) low from a tax point of view. As a pie in the sky idea, if you were to use the rent you are paying, the $50 week savings, the deposit you have, with the right broker you could essentially get yourself into a new home for same price as rent and then also buy an investment property using the equity from the deposit in the new home. The key is to get them to val up but that is the job of the broker and for us builders to make sure we are providing a competitively priced property.
     
  11. _niko_

    _niko_ Member

    Joined:
    15th Feb, 2016
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    Location:
    Melbourne
    @Venca77 Ive started out by reading some good introductory books. I've read the Effortless Empire (Book)
    It's not quite a step by step book but it goes over the basics of building a property portfolio.
    Currently I'm reading The Property Puzzle by Stuart Wemyss. So far a very good read.
     
  12. Venca77

    Venca77 New Member

    Joined:
    16th Feb, 2016
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    2
    Location:
    SE QLD
    @WGC Thanks for the advice, I've spent the last few hours crunching numbers to see if I could jump into a PPOR instead of renting and investing. The jury is still out as my rent is really low. Any chance you could send me a link to the finance company ?

    @_niko_ thanks, I've already downloaded the Effortless Empire and begun reading.
     
  13. Cat

    Cat Active Member

    Joined:
    18th Feb, 2016
    Posts:
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    Location:
    Brisbane
    @Venca77 I've just sent you the finance guys email address by private message.