Where does all this equity come from?

You are somewhat fortunate that you have found PC so early in your journey.

It also sounds like you are going to accept some good advice and act on it.

Having a strategy on how you are going to make money from property is a great start.

It took us a long time to get to that point - not that it prevented us from making money from property.

But having the strategy gives you the confidence to act decisively.

 

Here is my "equity" story for the OP.

2009. Had no money saved at all, on a modest income, still living at home with the folks.

I wasn't wasting my money away, but I did decide to sort myself out and decided on investing in something. It was a choice between shares or property.

I understood property better than shares, so I resolved myself to try to buy a property "soon".

Fast forward 6 months of reading up, magazines, books, etc and I had saved about $5,000. Not a lot, but pretty damn good for six months.

Anyway...fortuitously went looking at some display homes, saw a sign in the office that they had 6 H&L's, 3 sold and 3 available. I enquired about the "cheapest" of the available ones and was told that there was only 2 left, a 2-bed and a 3-bed. I wanted the 3-bed.

Placed a $100 holding deposit that lasted 3 days, which gave me time to talk to a broker to see if I could even buy it. I still chuckle today about that $100...

It all happened pretty fast but basically here are the numbers.

Remember, the year was 2009.
$5000 deposit, less the $100!
$260,000 purchase price
$20,000 FHOG (Victoria)
Loan of $245,000 was arranged with broker.

A further six months later the house was built, 3 bedrooms on 325sqm and I moved in for six months.

After that, I rented it out for 2 years, and then moved in again. By end of 2011 it was my PPOR.

In 2012 I was ready to buy again, this time in Queensland. Had a budget of $300k to spend. This was a forced budget, I could have borrowed more but wasn't comfortable with the idea.

Same broker got a valuation for me and house was valued at $400,000. Three years and $140,000 increase in value.

So, that's how I got equity to buy my next IP. ($400,000 - $240,000 = $160,000 equity)

The end....of this part of the story

I'm sure other people have similar stories, a combination of timing, luck, research, and hard work.

 

That's good advice and I will, however I do have to live in the first one for 6 months.. still deciding how I'm going to play that.

 

Nice one! That's a pretty good gain. How's the QLD place going?

 

http://www.affordablehomes.sa.gov.au/

Move in, renovate, move out and rent. Release equity and buy again.

Quite a few of my clients have done very well from this program.

 

It went well. So well it allowed me to buy a 3rd IP in 2015

 

Its only short term and will make you money, wouldn't let your own judgement get in the way of it. I wouldn't live in any of my places.

 

Rent it out for cash and you don't have to worry

 

Don't listen to him.

 

We lived in the crappy little house for eight years and it was only the last one that was awful. The first seven was the honeymoon phase - we were quite happy counting all that increased equity .

 

Do I report this?? lol
Rent out a room for cash to a mate. I did this first up, 6 mth fhog turned into 18mth party house with minimal done.

So @Angel is correct do not listen to me

 

Thanks for sharing; it's great to hear the whole story - worts, figures, and all - about how other people have made it work.

And it is a great story - you clearly learnt a lot, and are in a better position for having made this decision. Sometimes, it's easy to look at the 'fireworks' stories (the ones with the exploding CG), and those of the people whose portfolios seem to double almost every week, and wonder how come we haven't been as successful as them.

But in reality, for a lot of us, it really does come down to a lot of hard work, reading, question-asking, research, and number crunching, combined with gut instinct, and a lot of finger-crossing.

 

Oops
I thought you meant to rent it out like a regular IP. Na, Bob's your man.

 

Get a 3 bed and rent the 2 spare rooms out to mates for cash. Sorry I mean ask them to pay "house keeping" not rent.
6 months will be gone before you know it. Bank your whole wage, live off the housekeeping money, and have some fun along the way.

 

This was actually my best idea haha. But then when would I renovate it..

It's not the bad suburbs that bother me, it's the distance from the city.

During uni I lived in a tiny unit in a single-level block of 32.. Apparently 50% of police call outs in the suburb were to my block of units.. But it was all I could afford. I stayed there for 2 years so now I've become desensitised

 

Heh that's exactly what I'm doing now, living with my girlfriend and renting a room to my brother. They're both suburb snobs though and don't want to move out of this place!

 

If its not to far from where you live it may be better not to live in it.

When you live in a place you'll want to make it more "homely"and over spend on things that aren't needed. Plus separating does mean its like a job, you go there hook in and get it done, and you have a deadline of 6 months to make sure it's done and tenant in on 6mth 1day!

 

Lol! Let them stay there then. If you decide to go down the build route I'm sure a shiny new house will be more appealing.

 

The smart money is on renting rooms out to people with trades. Plumber in one room, chippie in the other

 

So that's where I've gone wrong! I've got a doctor and a tiler