My Property Investment Journey - Week by Week

Good stuff. I see you haven't mentioned anything about the meetups. From what I read, they seem to be an amazing source of knowledge. Make sure you listen to the podcasts by some of our rockstars here @Michael_X @Taku Ekanayake @Eric Wu and more.

 

Hey Jose,

Well done on sharing your learnings and goals. That's awesome!

I agree with what's been said about the apartment market. Not a fan right now.

Ultimately, with property investing, it's a case of balancing learning and knowledge vs taking action. You sound like someone who's got that balance right so well done.

 

Hi Jose,

I'm also in my "accumulation phase". I purchased my first IP in 2014 using a buyer's agent. I'm waiting on pre-approval for the second one now and it's taking a lot longer than the first one.

In 2014 my strategy was based on Pete Wargent's "Get a Financial Grip" and Michael Yardney's "What Every Property Investor Needs to Know" books.

They advocate buy-and-hold, favouring capital growth (CG) over yield. Note these books were released over 10 years ago, and as APRA tightens its grip and finance is harder to come by, many investors will tell you that yield (cash flow) is as important if not more so than capital growth now.

Articles like the one below put CG-weighted investment to shame: couple purchase 28 high yield properties in 7 years, net $300k PA and spend 6 months of the year travelling: This Gen Y couple from Sydney make $300,000 a year with 28 investment properties

It's interesting that the case study above doesn't fit at all with the experiences you'll read on here from more seasoned investors, and a bit of digging shows they run their own property buyer business. I'm skeptical, but it certainly makes me question the strategy of foregoing cash flow for the best possible CG.

The big challenge with property is its illiquidity. There's a great thread here full of gold on this subject:
Can or Will you retire on property alone?

Good luck!

 

congrats on your journey to date @Jose Eduardo Slompo.
As @aussieB if you're in Sydney come to the meetup. Next one on is this thursday 6th in the CBD. always get a strong turnout. hope to catch you there
NSW - Sydney CBD Meetup No. 6 - Thursday 6th April

 

Are you sure you want to get a pre-approval ? Its another useless inquiry on your file. I am almost certain you aren't using a broker from here - because most mortgage brokers here could tell you you if you will get an approval just by looking at your financial details.

 

Hi @aussieB. I am using a mortgage broker. Isn't it better to know what kind of finance I can get and under what terms before I commit to a purchase?

What else can you tell me about 'the file'? Is it shared between lenders?

 

I am talking about injuring your credit score. Do you what a credit file is or how seeking credit works ? 'the file' is what all lenders will look at before approving your credit. It isn't a secret file, you can request one copy a year for free. I don't understand the ins and outs of how it exactly works so I will let a mortgage broker (@Jess Peletier / @Eric Wu ?) address your question. In short, a good mb will be able to tell you almost accurately as to what kind of finance you can get under what terms. A pre approval means an enquiry in to your credit file which lowers your score - which lowers your reliability as someone who credit can be extended to.

 

This is true - also often pre-approvals don't convert within the 3-6 months deadline in which case it's a hit on your file for no reason - too many of these (from things like credit cards, multiple loan applications, store credit and so on) can mean an automatic decline with some lenders.
Unless you've got a quirky situation or are buying at auction they're often unnecessary.

 

Off track - check out the OP youtube channel. What a legend!

http://www.youtube.com/eduardoslompo

 

Spot on @aussieB, like @Jess Peletier advised above, pre approval may not be necessary for every case. if you wanting to buy at auction, or wanting to secure a deal with a lender ( before lender changes its policy), pre approval is a good idea, other than that, it might not be a feasible thing to do.

 

I'm leaning more towards better yield than CG. So far its been CG for me and have done well. I like the idea of being somewhere for 6 months of the year relaxing on 300k income. @euro73 is making more and more sense with his dual occ properties . There is another forum member on her that i know who only did dual occ for last 15 years. Most of his properties paid off too!

 

When you can accumulate while simultaneously reducing debt, you eventually end up with way more money coming in than expenses going out... simple as that

 

I asked my mortgage broker what possible downsides there are to seeking pre-approval.

To the comment "A pre approval means an enquiry in to your credit file which lowers your score", he replies:

"NOT true in Australia – It only looks bad if you have multiple enquiries with different funders within a month and continue to do so."

I wonder if I do find myself in that position, how long does the mark against my file remain? I assume it's Veda that they're checking with? I'll try to clarify that.

He goes on to say I would be crazy to secure a property without knowing what the funders are prepared to give, which makes perfect sense to me.

It's also worth mentioning he does provide modelling based on my profile before we seek out pre-approval.

 

Yeah it would be crazy.

What reason could they have for saying no? I believe he would check with them if there is anything unusual about your circumstances before trying for pre-approval so if there is anything unusual you would hopefully be able to rectify it before getting a no.

Also, after you have pre-approval, if you don't find a property within the time period that it is valid, you may not need to get pre-approval if you circumstances have not changed, in which case you only made the one enquiry so it doesn't look dodgy anyway - but yea I also think it would be crazy not to get the pre-approval initially.

 

Everytime you apply for finance there will be a credit hit. This will remain on your credit file for 5 years. If there is one hit not a big deal but 6 in 12 months and you might be automatically declined by some lenders.

There is no need for a pre-approval if the broker is experienced and knows what they are doing. They can see the likelihood of you getting the loan approved or not. If servicing is tight then it may be worth doing. If there is room to move then I would not get a pre-approval now, but wait until you are making offers.

 

I know most brokers on here are absolute guns but can you honestly say a pre approval in today's environment is "useless". I find that a very hard pill to swallow.
A PROPER pre-approval should lock in policy at the time of approval.
Do me a little favor, go into your inbox and "lender" folders and have a look at how many policy changes you have had in the past 3 months and tell me a pre-approval on a heap of those would not have been valuable??

 

In response to an earlier post from OP regarding your two friends different strategies then the one who buys only OTP is further exposed to risk via valuations coming in short.
You did note he only buys boutique which would reduce that risk but alas it's far more risky than buying established.

OTP does have some benefits (depreciation, usually easier to rent, reduced stamps). But don't let anyone try to sell it to you as "lock in tomorrow's prices at today's"...the days of buying OTP and the value coming in higher at completion are long gone.

Me personally would never touch OTP. Once completed your at the whim of Market forces. You have no control over what happens with the growth of the property. Established ideally with land opens up so many doors to make things happen when the market isn't.

 

Thanks a lot, @Kat, that's a great eye-opener!

 

Tks @Terry_w! I'm hoping this will foster some interesting discussions and might be useful in the future for those starting out.

 

Thanks @aussieB, I'll definitely start going to the meetups!