My Property Investment Journey - Week by Week

haha it depends on the instrument!

Are you a musician too? Happy to chat about it!

 

Yep, maybe he got unlucky, or maybe he didn't do proper DD. Anyway, it got me a bit concerned, since one of the options I'm considering for my first property is regional (Orange). It would be dual occ, though, so things could be different.

Thanks for the link on borrowing power, I'll definitely go through it in detail. Have a great week mate.

 

Very interesting thread. I'm in the same boat as your friend. Bought two houses in regional areas. One that's had no growth/ gone backwards in the NT.... but as my plan is to keep them long term I'll keep them. I think I'll just keep chipping away putting more cash into the offsets and buy my next one in a city with more growth potential.

 

Makes sense, that's what I would do if I was in your position as well.

 

Cool stuff. Got anything on YouTube? Do you sing at all?

 

Interesting stuff, man, you are creative in your arrangements. Never thought of singing?

 

Week 7: 30/4/17 to 6/5/17

Another very interesting week.

- Heard back from the broker and had a very productive call with him - loving his service so far. He's actually a member of the PC forum, I'll disclose his identity if everything goes well.

- Spent quite a lot of time playing around with a cash flow spreadsheet for a cash flow positive property that I'm seriously considering buying. The numbers are awesome when it's I/O only (first 5 years), but when P&I kicks in on the 6th year, things go south a bit. It's not that bad, though: only about 5k negative per year, and there's also the fact that I'll be reducing debt (which, under the new APRA regulations, means a lot and must not be overlooked).

- Attended to my first auction ever. It was for a 2/1/1 unit very close to where I live, and I only went so that I could see how an auction was. Funnily enough, there were only 5 groups of people (plus me) and nobody made an offer. This is the unit: 10/40 Military Road Neutral Bay NSW 2089 - Apartment for Sale #125197318 - realestate.com.au and the initial price was 900k. It's a great property, in great condition, in a nice building and a perfect location.

- Apparently the Sydney correction has started. Too early to say with 100% confidence, but all signs lead to believe that's really the case. Can't wait to see what will happen in the next few months.

The main challenge for me this week will be to find a way to represent multiple properties in this spreadsheet. I'll be able to buy a new property roughly every 2 years (until my borrowing capacity is reached, obviously), therefore I need to be able to see what the numbers will look like when the 2nd and 3rd properties (at a minimum) are added to the portfolio.

 

Week 8: 7/5/17 to 13/5/17

Starting with the budged: from what I've read and understood so far, it didn't seem to have much impact on investors. My only consideration would be the power that APRA will now have to adopt different policies for different regions, which leads me to believe they'll tighten things up in Sydney and Melbourne, which in turn would possibly drive investors to other areas (Brisbane in particular).

Heard a very nice podcast from Property Couch about buyer's agents, link is here: http://www.thepropertycouch.com.au/ep-018-what-is-a-buyers-agent/

Also read a blog post from Michael Yardney about the difference between market value and intrisic value, which was an interesting read. His explanation for this difference was something along the lines of the following question: am I buying for a price that, if I had to construct again, I would spend more than what I'm spending on the construction component of the purchase?

Example: purchase for 800k, land is worth 600k and construction worth is 200k. If I had to rebuild and it would cost me 300k, which is more than the 200k I'm paying for the construction component of the purchase, than it's a good deal (i.e. below intrinsic value), because, over time, land value will appreciate and construction value will depreciate. On other hand, if I buy something below market value, but it sits on an area with no potential for growth, the amount I'm saving by buying below market value is nothing compared to how much I would make if I had bought in a location with good growth. Coming from him, you wouldn't expect anything different than "location, location, location", and that's pretty much the underlying message behind this.

Whether that's still the best strategy, I'm still undecided. Times are changing and cash flow is becoming more and more important.

Cya all next week.

 

Come on Slompo pal, get in there.

 

hahahah good one... But that's just not how I operate. For me, it's all about planning and due diligence. I've taken too many emotional investment decisions in the past and paid a high enough price (lost a lot of money in Brazil). Now I wanna do the right thing: be analytical and leave my emotions aside.

 

Hi Slompo,
Good on you for doing all the research -well done !
A thought I had when just reading yr last 2 pages was you mentioned you lived near neautral bay yes?
Have you considered living in a cheaper area(assuming you are paying high rent ) and pocketing the extra rent money saved to go towards your investing ?This can be a really good way to get ahead quicker and increase yr borrowing capacity

 

Great point, @Luke T. Yeah, Neutral Bay is bloody expensive and a lot of money goes on rent every week. However, it's extremely convenient for both me and my wife, given I work in Wynyard (10 min max by bus) and she works 80 meters (that's right, 80 METERS) from where we live. We're willing to pay the price (literally!) for this convenience, so leaving Neutral Bay is not an option. Good thinking though! And thanks for following my journey

 

Week 9: 14/5/17 to 20/5/17

Not much time spent on studying properties this week. Had a recording session for my YouTube channel and spent most of my free time this week preparing for it. For those who don't know, my channel is www.youtube.com/eduardoslompo and there's a new video every Sunday, I won't mind if you subscribe!

Nonetheless, a few interesting learnings here and there:
- When buying, consider the possibility of advertising the property for rental prior to settlement to expedite the process of finding a tenant.
- Importance of buying in an owner-occupier region. OO's are emotional, they drive prices up.
- Some learnings around some economic concepts: weak economy and low inflation keep interest rates low (why?). Weak dollar pushes interest rates up (why?). As you can see, there are two "why's" for which I'd love to know the answers, so if you know them please help me out!

Cya next week

 

@Jose Eduardo Slompo
Further to what the Y-man has said above this link may be useful

How The Economic Machine Works by Ray Dalio

 

Tks @The Y-man and @Coota9, really useful info!

 

Week 10: 21/5/17 to 27/5/17

Learnings this week:
- It’s worth enlisting a professional conveyancer to undertake a title search when buying a property. The title search will reveal any easements (shared access) or covenants (restrictions)
- If possible, advertise the property for rental prior to settlement to expedite the process of finding a tenant
- Read a post from Michael Yardney's blog about things to do once you have your first investment prop:

- The first thing you need to do is use a good property manager.
- Rental appraisals should be conducted annually to determine if the current price is still fair or could reasonably be increased.
- The right improvements to a property can manufacture immediate equity, boosting your borrowing power or allowing you to build a greater cash buffer for security during possible downturns. Simple changes such as interior painting, new benchtops or cupboard facades, or sprucing up front and back yards can instantly raise the value of a property. Restorations and improvements also allow you to review and potentially increase the rent, immediately boosting your rental yields.
- Mortgages should be evaluated regularly so you can be sure you’re taking advantage of fluctuating interest rates, deals from lenders, and changes to your circumstances, which may allow you to refinance your loans to a more competitive rate.
- An experienced, property-savvy accountant won’t cost you the earth and they should be able to guide you through the process of claiming all legal deductions, while also keeping on top of each property’s depreciation schedule, which must be drawn up by a Quantity Surveyor.​

My strategy is starting to shift a bit more towards capital growth rather than cash flow. I'm starting to realise the importance of the fundamentals, which leads me to focus on something in Sydney, Melbourne or Brisbane, even if they have a CF-, rather than regional stuff with CF+. The only affordable city out of these three for me at the moment is Brisbane, so that's where I'll be focusing my research in the upcoming weeks.