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Strategy to start investing how should I start

Discussion in 'General Property Chat' started by showtime94, 19th Jun, 2016.

  1. showtime94

    showtime94 Well-Known Member

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    Hi im a beginner and looking to start investing in real easte
    Im 21 , live in syd and looking to invest in brisbine , ive saved up 86k and going to use it as a deposit .
    Im going to use a buyers agent because I dunno how to get a good ip my self and I wouldn't want to make a mistake.

    So anyways how should I go on about this whats the best method .
    Also if you guys know a good buyers agent that buys in brisbine that u recommend let me know .
    Thanks!
     
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  2. markson

    markson Well-Known Member

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    Start by reading every thread posted by @Terry_w. You will then know 100 times more than what you know now.

    Read through these forums every day for the next couple of months will teach you everything you need to know. You then probably won't need a buyers agent.
     
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  3. MsAli

    MsAli Well-Known Member Premium Member

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    @Freedomlife94 - congrats on starting so young and those savings!

    • Suggest reading Jan Somers' book - building wealth through residential property. Start with that.
    • Look at Somersoft Interviews (previous forum) to look at how people did what they did. Gives one a good perspective on where to start and where you can end up
    • What's your big picture? What can you currently afford - don't look at just 1 property - look at it holistically as to can you afford 1 x 350k or 2 x 350k or 10 x 350k right now? Then work back (note: you may choose another figure than 350k - talking from experience tho about neutral-ish property mark right now in cities other than Sydney, some will be cheaper than this mark also. Though seems like you have enough savings for this kinda price point)
    • Figure out - what would make a GOOD IP for you? What are the negotiables & non-negotiables
    1. Cashflow - negative / neutral / positive
    2. Location - does that matter?
    3. Price Point
    4. Houses or Units?
    5. What sort of investment must be happening in the area so it's poised for CG e.g. new shopping malls, trains, roads, retailers coming into the area
    For a first IP, I'd go for a simple bread and butter neutral cashflow purchase - requiring minimal cosmetic renovation that positions you well to either make money going into the market or for Capital Growth (CG in the short term) so you can leap frog to the next one.

    First IP is the most difficult. However provided you have an ok income (for 21) and improving, you are positioned to do well!!

    Good luck!
     
    Last edited: 19th Jun, 2016
  4. eskander

    eskander Well-Known Member

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    What's the name of this book or where can we get a copy @MsAli ?
     
  5. MsAli

    MsAli Well-Known Member Premium Member

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    building wealth through residential property. Can get it via somersoft.com or try Dymocks
     
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  6. Chabs

    Chabs Well-Known Member

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    Back of the envelope numbers mean a starting budget of approx 350k ticket price for the first buy, as MsAli mentioned. Now you have that ball park, focus on studying homes at that price point /areas that have these homes.

    Focus on a step at a time, the books/forums definitely help.

    In general, I have noticed over the last few years, and poring through older posts on the forums, general sentiment on PC/somersoft has correlated to how markets perform. E.g. if the forum guys tend to think of brisbane favourably, its probably a good spot ;)
     
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  7. bobbyj

    bobbyj Well-Known Member

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    86,000 saved up is MASSIVE!
     
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  8. bobbyj

    bobbyj Well-Known Member

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    For someone 21. You're in a great position.
    Congrats and good luck.

    Start with something small that you can easily manage.
    Up to you with a buyer's agent. If you have the time to read on the forum and do some research/due diligence, then do that first and decide if you still need a BA
     
  9. Chabs

    Chabs Well-Known Member

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    I just checked out the interviews there, thanks for that. Really enjoyed reading your story too, I laughed a little with the hindsight bias when I was reading about your two western sydney purchases :p
     
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  10. MsAli

    MsAli Well-Known Member Premium Member

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    Thanks Chabs...what do you mean by hindsight bias :)?
     
  11. Chabs

    Chabs Well-Known Member

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    Sydney market has had a lot of progress in the years since that interview was done, so it was interesting reading your thoughts a few years ago before knowing about this boom, and the plight of the poor vendors who were desperate to sell their properties at a discounted price.

    I would be interested in seeing an updated interview too, would love to know what has happened snce!
     
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  12. MsAli

    MsAli Well-Known Member Premium Member

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    Hi Chabs - very true..didn't know there will be a boom actually. Just knew property was something we wanted to accumulate as fast as we could and as the circumstances would allow. It's challenging buying in a flat market unless you have a lot of equity to play with. So glad to have taken action with the available resources.

    I just read the same also...it was done at 26. wow.

    No one has a crystal ball. Though if one is single minded anything is possible.

    PC doesn't have an interviews section. However briefly...Sydney investing enabled us into our new home that we built recently for us and our family. We purchased the knock down block in the hot Sydney market within 4 years of starting our investing journey.

    Hence I cannot get my head around when people say Sydney is unaffordable. If we can do it.......others can do it. Needs prioritisation though, which can be really difficult especially if you are really comfortable where you are (e.g. already in a nice ppor) unless "failure is not an option". For us, failure was not an option. Happy Sydney boom happened. Not sure if Brisbane will do the same, however I believe, who cares, just knuckle down and accumulate as the returns are decent and let the markets do their own thing!!
     
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  13. UrbanDingo

    UrbanDingo Member

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    Ms Ali, When you started investment journey.....did you concentrate on Capital growth or capital flow.........wt would you have done different, if anything, retrospectively...........
     
  14. MsAli

    MsAli Well-Known Member Premium Member

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    Hi Urban Dingo
    Focused on Cash Flow - 7% plus returns. The rates were much higher too. Great for now tho as those same rental returns have risen ....slow capital growth initially did make it slightly difficult to go on to the next IP. The capital growth really only started from 2013. The introduction to Mount Druitt was great (in lieu of immediate capital growth) as we did buy more properties there and the area has done really well since.

    What could have been done differently:
    1. Looked at the big picture from day 1. Sat with a broker who wanted to work out a big picture plan as to my income and hence servicebility (regardless of the equity available to build a big portfolio). IMO it's better to know if you can afford $x million from the start (contingent upon the lending) than to be buying one property at a time and hoping you can continue buying. As my mentor says, hope is not a strategy
    2. Have had a better savings plan as opposed to only relying on equity given the market was flat and there was little equity initially
    3. Focused on real estate only while I educated myself on other asset classes. No other asset class appears to give the same sort of leverage
    4. Focus on a neutral to positive cashflow overall portfolio as opposed to the number of properties. Thankfully we didn't buy regional!
    5. Not fix rates till understanding the implications. Can be portfolio limiting as you can't move lenders

    What did work was:
    1. Having a clear criteria on the type of properties we would buy - negotiables and non negotiables. That helped seperate what won't tick our boxes. It helps making the decisions much faster. This did enable purchasing in Brisbane.
    2. Doing overall cashflows before considering a property (PI 101). You do so many cashflow analysis that you could then discount properties that won't even meet your criteria by just looking at the deal
    3. Talking to a lot of real estate agents and asking questions...I have a habit of saving every real estate agent's details that I speak with. Helped get a purchase across the line in Western Sydney where the agency doesn't put the property address or agent contact details! Had never met the agent before. Only just exchanged text messages re different listings
    4. Build a team around you - solicitor, accountant, building and pest and strata inspectors
     
    Last edited: 20th Jun, 2016
  15. Hodor

    Hodor Well-Known Member

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    You have already selected your direction (Ba and Bris) so it is easier, you still need;
    - To select a broker to confirm your finances and budget
    - Decide what your goals are, why are you investing? What budget? Cash flow? Capital Growth etc are you looking for. A good BA will ask a lot of these questions so best to have answers. If they don't ask what you are after find another, they should be aligned to your goals, not what they believe is good stock.
    - Find a BA, can't recommend one for Brisbane sorry.

    Well done so far, great savings at your age.
     
  16. Chabs

    Chabs Well-Known Member

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    Thank you for the insight MsAli, really appreciated your story and the advice.

    In particular I related to this,

    I did something similar very recently, bought a commercial property in Western Syd returning 4.5% p.a. on equity commitment + stamp duty to buy it. This is net positive inflow (e.g. if I commited 100k deposit + 10k stamp duty, it would be returning $4950 a year inflow after interest + outgoings)

    By focusing on cashflow, this has become a bit of a set and forget, until it is time for the block to be developed.
     
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  17. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Wow, epic level of savings @Freedomlife94!

    • Find an awesome broker (plenty on here) and get an idea of what's possible + clarify your investing goals and build a plan together - this will include purchase price, LVR, required rent return, how to go from IP1 to IP2 to IP10 and so on
    • Learn as much as you can (PC is a great start, also read over some posts on Somersoft and you'll be 95% of the way there)
    • With the above done, engaging a BA will be the easy part. Depending on what/where you're looking, you'll probably want to select a specialist BA - e.g. some of my clients have a $1mil budget, want to buy 5-10km from the CBD and and rent return is of no consequence so I refer them to a different BA than those who want to spend under $350k and achieve a 6.5% return return or higher
    Welcome aboard and well done on saving so much so young!
     
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  18. Daniel007

    Daniel007 Well-Known Member

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    Great effort on the savings.

    You're so young, so why not learn how to catch the fish yourself? It's a lifeskill and if you dedicate some time reading somersoft/propertychat everyday for an extended period of time, i don't think you'll be inquiring about a BA.

    You have clearly worked hard to accumulate the deposit, become educated so you don't fear making a mistake. A BA doesn't guarantee a successful investment.

    I assume you're referring to a net yield?
     
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  19. Chabs

    Chabs Well-Known Member

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    @Daniel007
    Net yield is a little different, I was referring to return on the amount commited to the investment (deposit equity+ stamp duty + legals).
     
  20. Daniel007

    Daniel007 Well-Known Member

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    O right, i missed the equity part.