Should I buy an IP?

Hi There,

Just wanted some advice on whether I should buy an Investment property and what areas I should be looking at. I'm 27M who is living at home, have saved up approx $90k and have a savings rate of $750 per week going into a savings account. My income is approx $78K per annum, and am thinking of buying an investment property in the next 12 months, preferably around the leppington area but am flexible on location.

I suppose my question is, do you think the market is going to continue to be slow for the foreseeable future? Would I be better off not getting a mortgage and instead investing in some other asset class? What sort of rental yield should I be looking for? I'm a bit of a beginner, so all advice would be helpful and welcomed!

 

How many years is "foreseeable" in your mind?

Do you have any experience buying shares? or other assets?

What rental yield do you need?

Better than these questions is to first establish what you are trying to achieve first. Then you are probably better off having a mix of asset types - property, shares, managed funds etc.

 

The next 12-24 months I suppose.

[/QUOTE]Do you have any experience buying shares? or other assets?[/QUOTE]

I have minimal experience with purchasing shares, I'm essentially a total beginner in this.

[/QUOTE]What rental yield do you need?

Better than these questions is to first establish what you are trying to achieve first. Then you are probably better off having a mix of asset types - property, shares, managed funds etc.[/QUOTE]

I would hope for at least a 4% Gross rental yield, I'm really just trying to ensure that my cashflow doesn't take to big a hit, although I believe I could afford it.

 

Rental yields are typically 3 - 5% atm, so 4% is easily achievable.
You have a good savings record - congrats on that! But you are right to be thinking of investing rather than leaving money in the bank at 2% interest.
You need to get an education on investing - start reading some good books, attending some free seminars (not signing up to the $5K ones), listening to some podcasts, attending some investor meetups etc.
Use the next 12-24 months to get some knowledge. Hang around here too

 

Alan has provided some really good insights above to get you started

Regardless which type of asset class you end up going with, I think it's always important to educate yourself and you can start off by simply read up on this forum - not just on property but also for other asset classes if you're considering alternatives. Lots of gold nuggets to be found here and there depending on what you're looking to get into.

Personally I would always prefer to jump into property first because simply put, your working life is limited so your time to be able to maximize leverage to get into this type of asset class is also limited. Plus property investing is about compound growth, so the earlier you can get in the better and keep the long term view.

Once you get into property you can always save up again and diversify into other asset classes such as shares which you wouldn't be able to leverage as much (if at all) so you'll need to use more of your cash.

Cheers,
David