Where to go from here?

Hi all,

New to the forum so would just like to start by saying hello and I have already had a good read of a few posts and the wealth of information on here is great.

No doubt there have been many posts such as this but i'd just like to get some seasoned investors prospective on my situation.

I am 25 and currently working full time and earning a gross income of around 60k. I have purchased my PPOR at the end of 2013 for a price of 480k and it was valued at the end of 2014 at 510k. It is in the NT and the market has decreased recently so i doubt it would be valued at that much now but I've been doing some improvements around the place so hopefully it hasn't gone down too much. I currently owe 315k to the bank for this property.
I don't really have an investment strategy as yet other than to hopefully have enough passive income through investments to one day not have to work myself.

I have a bit saved in the bank and am looking to make my first investment purchase in the near future. However, i have a few questions i was hoping to get some insight into.


I am looking to purchase in the area of SE Qld and was wondering if anyone had any prospective suburbs to look at?
I am also a bit nervous about these new tax reforms being proposed by the government (in particular negative gearing) and am wondering whether it would be best to keep putting money into my PPOR and hold off on investing for another few years.
I'm also concerned with all these doom and gloom articles in the media lately predicting another big GFC and the Australian property market to significantly decrease in the near future as a result. I've only just started in the property investment game and don't really know where to start or if this is a good time to start.

Thanks in advance for any information or insight given.

 

Welcome mate. Good on you for wanting to start your journey.

Learn as much as you can about property investing. Strategies, NG, PG, Cashflow vs CG, Cycles, property clock, growth drivers, risk mitigation, negotiation, mindset development, LMI, Cross coll, building a team, how to do due diligence, avoiding the traps/common mistakes etc

If you learn all that via books, on line forum and network with other successful investors from here and elsewhere, you can do exceedingly well.

That's what I would tell me if I made your post above.

Good luck.

 

For general strategy themes, take a look at the fact sheets available here:

Strategy - WHEREGROUP
( note - I am not affiliated in anyway )

You might find these helpful in terms of thinking through different approaches.

Just remember that by delaying investment, you are delaying your capacity to grow equity. You are also delaying both the power of leverage and the use of additional income from a tenant/s to grow an asset base faster than if you just tried to pay down your PPOR.

Look into positive cashflow approaches that look to pay for interest payments on the investment loan ( interest only ) and also cover the other outgoings on the property. General rule of thumb is that you want a rental yield ideally 1 to 2% higher than the loan interest rate in order for the investment to be cashflow positive. This reduces the reliance on negative gearing.

One tricky thing is finding locations that provide a combination of acceptable rental yield and respectable capital growth. The concept of the property clock is key to this. You buy in areas that have just been though the bottom of the growth cycle or are stagnant yet have fundamentals and are showing signs of capital growth. If you can buy between 7 and 9 o'clock you are more likely to have the greatest benefit from the growth cycle.

Also recognise that changes to tax legislation for negative gearing changes would likely be grandfathered and not affect existing investments ( well that is the usual approach ).

As for doom and gloom. House prices are driven by supply and demand. Provided you buy in areas with fundamentals for capital growth in the medium to long term ( i.e where people actually want to live ), you will likely be okay.

The key is to not over-extend yourself for your level of income and not take on too much risk. You do this by keeping your portfolio loan to valuation ratio ( LVR ) across your portfolio ( PPOR and investments ) at a healthy level for your income. In time as your asset base grows you would try to reduce your LVR to reduce risk.

Diversification is also important. If you aim to build a stress-free portfolio, don't buy all your properties in one location. There is less chance that all of your properties will be affected in a downturn ( recognising that markets behave differently and at different speeds in different parts of Australia ).

One thing to be wary of is areas that have an over-supply of properties. This is the case for new apartments in many capital cities.

Edit - seminars are a worthwhile tool for rapid learning. Make sure you go along with your wallet closed. They always end with a pitch to try and convince you to part with $$$ that can be more wisely spent elsewhere.

 

Thanks for your input guys you have given me some more things to think about.

 

Hey @Adrian2016 , welcome aboard.