Where does all this equity come from?

So I may as well ask the question for some inspiration.

I'm seeing lots of posts about renos and development projects creating equity to the tune of anything up into the hundreds of thousands of $.. How do you guys and girls do this? Where do you find the deposit? How long did it take? Is it just the first one that's the hardest?

I'm on an average income and still saving for my first place (target price of 250k ish), even 50k would be more money than I have ever seen before.

 

I'm interested to hear your story/strategy if you care to share

 

You work hard to get a start & understand that it is not a quick process usually.

So you may work for 5 or 10 years before you buy first place, then as you continue to work, over time equity should build in your place.

You can make it as well, but again, doing it quickly I do not think is easy, for instance you may buy a place 100k under what a done up place sells for, you do it up by working yourself and managing the work, keep it under 30k lets say, you then have created equity as it may now be valued higher, but as said, I do not think it is that easy and costs can blow out & you could get caught if the market turns and drops (and yes, property prices can and do go down, and if your forced to sell when down, you get a real loss).

I think that property investing and renovations have become "trendy", buy you can build equity by just buying a home to live in, and if things do not work out the way you planned, you have a place to live. Be aware, things are not as easy as they may seem, and there is risk in everything you do, but buying the place you live in is the least risky if you can afford to pay it off.

 

I found my deposit by the usual means...

Increasing income as much as possible and decreasing expenses as much as possible.

 

Nice interview! Would you have taken the same approach if there was little to no CG to be had?

As for expenses, I save 60% of my net income so I guess that's a good start.

 

Never rest in the pursuit of your goals and dreams.

 

Definately a nice start! Just remember to run your own race, try not to worry about what every one else is doing. Everyone has different circumstances.

As for me personally, I slept my way to the top....

 

If you want it bad enough you will find a way, keep persevering and don't give up, network with those who have achieved what up you want.

BtW, love your avatar

 

Save for your deposit anyway you can.

First property is generally the hardest. Gets easier as you go along.

Over time properties build equity. Improvements to property also incease equity.

Learn from others but don't ask dumb questions.

Newdart I nearly spelt your name with an "f" after the "w" . I'd probably change the second bit of your name.

 

Worked my ass off. As @The Y-man said, did heaps of overtime, got a second and 3rd job. It wasn't easy but it was worth it. Once you have 2 or 3 ips and you chose some in good locations, the equity machine starts to build by itself and before you know it you have more equity than serviceability!

I have found beginning investors have a hard time with equity and progress to fixing the equity issue only to start having serviceability issues. Monopoly is fun

 

I ask dumb questions all the time. It's the internet... I've learn't heaps about this property thing by being prepared to look stupid to anonymous people on the internet.

But seriously: My first deposit was a mix of some small savings, first home owners grant, and $15k from Dad.

 

Side note: can you change your user name on here??

 

Send @Simon Hampel a private message and I'm sure he'll be able to help you out.

 

@Newdart. If it helps, I borrowed most of my first deposit as a first home buyer. Waited a while to build some equity and used that for a deposit to buy a house 50/50 with a mate. We have just listed it for sale. Reserve is set a double what we paid for it 7 years ago. Now we can each afford to invest on our own. Much better to do it in one name if you can

 

I married my handyman.

But seriously, I will give you an example of one scenario for getting onto the ladder.

There is a basic three bedroom house just down the road from where we live and it has been unloved for many years. When it was placed on the market last year after the elderly owner died, a single gentleman bought it and he is slowly doing it up. We seriously looked into buying it ourselves and living in it (PPOR, no CGT on any profit) while renovating it in our spare time, a job which cannot be done if we lived somewhere else.

Now if you buy something like this, and live in it yourself, you would be entitled to all the discounts that apply as a FHB - I don't know about your state but in Qld there is no Stamp Duty, a considerable saving. In Qld the buyer would forfeit the grant buying an established property, but by buying an older house with significant renovation potential, the price would be way lower than the grant one is forfeiting.

When we bought our first home, it was the cheapest house in the greater Brisbane area and our work colleagues thought we were nuts. However we were able to buy it with the same amount of deposit as other people were paying for their overseas trip or a nice car. Lending criteria may or may not be as generous these days. We qualified with 10% deposit and LMI, but had two incomes for the mortgage. We could not have bought singly on our incomes. Once you can get finance sorted, you can then take in a friend, brother etc to stay in the spare room and share expenses. The bank doesn't have to know about this.

We found that once we got into a house of our own, it was easy enough to do the renovations one at a time while saving the cash for the next project. While our friends and rellies were spending $$$ every second weekend at the Gold Coast, we poured our $ into painting, laying a driveway, building kitchen cupboards etc, all fairly easy things to do ourselves on the weekends. Painting doesn't make any noise and can be done at night too. A nice low maintenance garden can be growing by itself while the other jobs are being done.

Another $ benefit of doing any renoes yourself while living in the house is that you will have all the time in the world to source cheap products. Buying an IP and doing a quick reno so it can be rented asap does not allow for the owner to do most of the labour himself. Paying tradies can often make a reno uneconomical.

Cherie Barber, for example, talks about renovations adding hundreds of thousands of dollars value to houses, but she lives on a different planet to you and I. Her videos showing results like that are in the sort-after suburbs of Sydney and Melbourne in the >$1m markets. Where you will purchase a $250K house around Adelaide, your renovation might be more like spending $10K to add 30 - $40K value, it is relative to the purchase price. Even her small house renovations shown on TV can appear deceptive - while you are slogging away at your day job, she is sourcing second-hand baths and kitchens on Gumtree and getting the items delivered to the site. Her building company does the labour charged to herself - it doesn't work the same way when you are paying a building company owned by someone else.

Hope this offers some encouragement. And remember, there is never a dumb question.