starting out

Hi All..my 23yo son and 2 others his age are thinking of buying a 3br apartment in Sydney and moving into it to avoid paying dead money with rent and to get into the property market in Sydney..is this a good idea ..can you post pros and cons..it seems the only way young people can break into the market ..they are all uni students at present who finish this year..what kind of deposit do they have to have ...none have any equity in properties..just cash..and not much of that...many thanks Chris

It's a good idea. I did it when at uni, but in the end bought an IP and rented somewhere else.

Watch out for losing FHOG and stamp duty discounts for FHO. Buying it together will exclude them all in future.

Given it is an investment, they should probably buy it in a company or unit trust structure. It makes buying the partner's out easier and doesn't invalidate them as First Home Owners later.

Talk to one of the brokers in here for Loan Value Ratios. Conservatively they would need 20% plus legals and Stamp Duty. There are 90%+ loans out there but then they'd need to pay Lenders Mortgage Insurance.

Regards

Paulzag
Dreamspinner

Mates in business wont be mates for too long. Some mates are better to drink beer and chase girls with. I would try and help your son out instead of what you propose.

Hi Cosmo..interesting suggestion..how do you propose I help him out..?..Chris

Well………
Has your property increased in value like everbody elses has in Australia? How about you lend him the deposit via an equity loan on your property? He then sublets to his mates to use the IP.

I’m sure there’s heaps of other ways if you get a bit creative.

Hi christobel,

Can I just say this, IMHO we are at a peak at the moment with property prices. Some believe a fall will come, great news for your son, some believe a levelling off of prices will come, also great news for your son. He’s 23 so he has time on his side too……overall, what’s the rush?
In the last boom I watched a lot of my mates buy their PPOR’s at the absolute peak of that market in second rate locations that did not show a CG for many many years. They were hocked up to the eyeballs and they watched on as property prices corrected and locations far better than theirs came up at great prices.………too bad they were committed elsewhere with now hard to shift properties.
Getting in now on a property that might stagnate in value for years with mates who probably would want to get out of the deal to do their own thing is not the way to go I reckon.

We bought first PPOR in Concord West in 88 at peak of last boom for 205 k. Good area , good street, all of the right things for the area.

7 years later after putting in about 70k and untold hours we sold for 299k.

Last year we bought seven houses in logan for around 70k . Now each worth about 150-170K.

Any one who tells you that it's time in the market that matters and not timing , has rocks in their head.

If it was my daughter ( only 14 at moment ) asking me for my opinion,( my opinion) I'd be advising her now is not the time to buy in Sydney unless they came up with a really good deal. Problem is when you're buying your first home , you don't necessarily know what a good deal is.

Three mates straight out of uni buying a house together ? Again I'd be advising my kids against it. To many unknowns. What happens when one wants to sell and the others don't. Shared houses are complicated enough, but throwing joint ownership in as well ........

see change

Many thanks for your replies...I have sent this site to my son to download..he may have some questions of his own...Chris

Cosmo,

Thats so true, but Sydney property is still in high demand and the population is on the increase so IF THEY BUY WISELY there is less risk that they could be stuck with a property that is not easy to sell or that its worth less than they paid for.

Generally I stay clear of units because they are easy to duplicate and because there is less association to land.
I have seen unit prices rise but they are much slower that houses, and in some areas as in high rise inner-city apartments there could be some surprises to come..

The point you made on partnership is very valid.

What if they want out?
What if he wants to start a family and he needs the money and the others don't.

Why doesn't he buy something alone so that he can get the first home owners grant and rent the rooms out?
In my view if he wants to buy in the highrise developments in the city, the risk is high

Bill

Hi christobel,

Here's some info on Alexandria from the msn forum.


http://groups.msn.com/PropertyInves...Message=9663&LastModified=4675442154627955158

cristobel,

You're new to the forum- so you probably don't know that you can edit a post once you've sent it.

If you edit it within 15 minutes or so, there won't be anything on the post which shows it's been edited. After that, and "edited" notation will show on the post- and after a couple of days (I'm not sure of the time) you can't edit it any more.

I hope you can get good value out of the forum.

see_change said:

Any one who tells you that it's time in the market that matters and not timing , has rocks in their head.
see change

Click to expand...

There are lots of people out there who are preaching this message, whether it is in regards to shares or property. Often, they are the same people who would like you to buy straight away from them.

I have also noticed that, in many areas, property prices tend to go in jumps, then plateau for a while. What is the point of holding a property during a plateau? If you have done the research to identify another area that is likely to "jump", you might as well put your equity towards that.

Of course, the other side of the argument is the transaction costs and taxes associated with selling.

I guess that there are not hard rules about this, it depends on the particular circumstances. In some cases, you might be better off to sell. In other cases, you might be better off to hold.

I use to believe in the "Buy and never sell" philosophy, but I am starting to tee the benefit of other strategies as well.

Hi House_Keeper
I see this is an old thread, but your comment today has raised some questions for me. I respect your thoughts, and still consider myself as having a LOT to learn, so with little trepidation, I ask;

"I have also noticed that, in many areas, property prices tend to go in jumps, then plateau for a while. What is the point of holding a property during a plateau? If you have done the research to identify another area that is likely to "jump", you might as well put your equity towards that."...

In order to acquire a continual portfolio, isn't it better to hold a property through more than 1 peak (encompassing a plateau or two), and reap the capital appreciation over more than 1 cycle, than to sell and start over agian, making it more difficult (perhaps through the loss of momentum (passion/courage) and equity) to get back into the market?

Also, isn't the identification of areas of projected growth only ever a "prediction" until it becomes a reality through statistics? As you mentioned, it is dependant on each individuals' circumstances as some investors might benefit more through the "a bird in the hand is worth two..." scenario over the long term?

See_Change - "Any one who tells you that it's time in the market that matters and not timing , has rocks in their head."
For some - the right "timing" might never come - fear might be the only inhibitor to getting into investing - in which case - they will ALWAYS find a reason NOT to invest. I appreciate we should all try to buy at the right time, however, do those people who buy at the high point of the cycle have any les chance at success, given that it might be the best chance to take advantage of other conditions at that point?

I would value additional comments.

Lustre,

Please note that I am also a novice investor, so don't take my opinions as gospel.

It all depends on your strategy. Some people do well using a buy & hold strategy. Others do well using a buy & sell strategy, recycling profits fairly quickly. Both strategies can work, given the right skills and personality. The buy & sell strategy requires a lot more work, but it suits some people.

If all you want to do is acquire a continual portfolio, then you do not need to be concerned with buying & selling. I am aware of people who have managed to speed up the equity build up phase through timely buying & selling though. I haven't done it myself so I can't give any more specific recommendations. I can only guess that it takes much more skill, experience, and more time too.

Cheers,

Hi See Change,

I would be interested to know what that house you bought in 88 and sold in 95 would be worth now?

thanks

lily

It is worth a lot more than 299 now, at least doubled. We would have done well if we'd kept it , however we have done better by selling and buying somewhere else.

We developed that site , which we subsequently sold , and then bought another place which we have just got approval for a Dual Occ.

See Change

Hi House_Keeper and see_change

I understand. Buy and Sell to fast track wealth. A valid strategy.
Thanks for your opinion.
Lustre

Hi Everyone,


My current thoughts about property investing are that it is 'horses for courses'. The type/s of strategies you use largely depend on the type of investor that you are. The advantage of a buy and hold strategy is that you ride out a lot of the peaks and troughs that one might experience when looking at short periods of time. And this suits a lot of people because it is a lower risk strategy. But in saying that usually lower risk is associated with relatively lower rates of return.
If you are going to 'buy and sell' frequently and within short terms you could stand to have higher rates of return or conversely higher rates of loss. And this will largely come down to whether you've done your home work.
But why put yourself in a box? Why not do both? Build your portfolio with particular properties for long term growth/return and boost your portfolio income with properties on a 'buy and sell' strategy. I think Kyoskai has a similar strategy where his real estate portfolio provides his investment foundation with which he fuels with a 'buy and sell' share strategy.
I love this forum because within it you find a smorgasbord of strategies and its just a matter of picking which one you think would work for you (at that time).


Cheers, DOC.