Adelaide: First Investment

Hey guys.

Ive been looking for a while now for an investment property (or 2), as its always something that has interested me. Being 22, and living at home has its benefits, as i am able to save a good amount of what i earn, and always have the family behind me for support (wog family :p).

I have been offered around $450k from the bank, but dont want to go anywhere near that level of borrowing just yet... i want to be able to fill my car with petrol haha.

I have been looking up North for the majority, at cheaper units around the Salisbury area. I have also looked into areas such as Norwood, Burnside etc, but im not sure whether i want to spend that much just yet. Have also looked around Hectorville/Tranmere (where i live), but are out of my price range.

The units i have seen around Salisbury, you can get a solid brick 2br unit with carport for $140 - 180k, yielding in excess $160 (even up to $180 for a unit sold for $145k. This is the option that interests me most atm, as if i buy one, with rent, costs will almost be covered... it will enable me to possibly buy another in <6 months, or save for another few yrs, and possibly buy something closer to the city.

The other option, is to come closer to the city, i prefer east, and look for a unit around $220-300k, in areas such as campbelltown, magill, through to norwood/burnside/kensignton. Rent around the 300k mark is around $240-280, so i would be needing to put in a lot more to cover the rent, meaning i wont be able to save as much for future investments in property/business etc.

Im not looking to live in any of them, as i would like to have 1-2 properties before i move out or get married, in which with my partner im sure we would both look at buying our own house.

What do you think is the best way to go? i dont want to put too much of a burden over my head just yet, being 22, but i do look to finally get into the market soon. Starting cheap enables me to have possibly 2-3 units up north or 1 up north, one closer to the city in 2-3 yrs if i play smart. Or start closer to the city, which means i may be able to afford something cheap in a few yrs, but probably not.

I honestly think the northern suburbs has strong growth potential, as these suburbs arent exactly miles from the city (salisbury being 20-25 mins), but not the growth potential of say an eastern suburbs property.

Thanks for any input, it will be a great help.
Hey! :)
Some things to consider.

1/ Cheaper does not necessarily mean better.

2/ Leverage is a key driver and goes hand in hand with the term 'wealth'

3/ You will laugh at the small debt level you once started out with if you become a serious investor over time, but only in hindsight will you see.

4/ You gotta start somewhere

5/ I recommend reading some good books on the topic before going any further, there are many available and I like to repeatedly rotate and refresh myself with them.

6/ At age 22, you have a good start, know your end goal(s) That will help you buy the right type of property and help with succession, or lack of depending. Would you like to retire before you're 30? Or do you just want a few extra bucks for a nice car? Know your goal.

7/ Congratulations and good luck.

Quite a few threads on Adelaide Northern suburbs (Elizabeth, Salisbury) on this forum... Do a search and you should come across them. Some very good detail/facts from investors that live locally or have IP's there. This should help you.

We have 2 x IP's in Elizabeth South & Vale .... They have shown excellent growth in the time we've had them. Adelaide seems to sneak under the radar, but there is a lot happening infrastructure/development wise to support future growth.

Good luck

There are large amounts of units in the salisbury area which could cause a problem finding tenants especially when you consider there is also allot of cheap housing available for rent.

Just my opinion but if you are looking at buying a unit I would buy elsewhere.
I agree a bit with Pablo here IFBB.
Remember to include all the costs when doing your sums for the yield. Include the rates, insurance, strata fees etc. Also as Pablo said have a good hard think about vacancy issues in the "cheaper" suburbs and also tennant troubles in terms of damage etc.

I am, at the end of the day, much happier paying a bit more and getting slightly less yield without the problems of vacancy, damage etc with units much closer to the CBD.

As I said above, there is more to it than purchase price and weekly rental.
Do your sums correctly and maybe think outside the box on ways you might be able to increase the yield after purchase.

Thanks guys!

A few of the houses i have looked at have tenants that have been in there 3-5 yrs, and wish to stay on if possible. If i can grab one of these, with a long-term tenant, i think it would be a good grab.

Im keen on reading a few books on the topic, so if anyone has some titles to suggest, im all ears.

With regards to my goals, the only thing i can say, is i wish to "own" 2 properties before i get married. Living at home may make this a possibility, so id rather be wise with my money while im young and earning it and invest, instead of buying a good car. Too many friends have gone that option, and to be honest, my car looks better than half of theirs and i didnt go spending $30k on it... also, ill get myself a real sweet ride if i make my millions on day haha.

Im all about helping to set myself up in doing this for later life. I know a lot of people who live very very comfortably off a single wage... ive now come to see that these people i know invested wisely in their younger days, and now can enjoy overseas trips, new cars etc all off working a few days a week, and rental returns.
I like your attitude! Sounds like you've got what it takes and congrats for starting so early, you won't regret it. Unless the bottom falls out of the housing market.. :D (jokes) Keep doing the opposite of what the majority do and everything will work out just great.

I recommend

1/ How to achieve wealth for life (Ed Chan)
2/ Retire young, retire rich (Robert Kiyosaki) any of the 'rich dad' series.
3/ How to grow a multi-million dollar property portfolio in your spare time (Michael Yardney)
4/ More wealth from residential property (Jan Somers)
5/ Secrets of property millionaires exposed

All very good books
Thanks Investor! Ill be sure to grab one (or a few) of them.

Its too hot to do much else here in A-Town, so may as well do something productive with my time.
In addition to the books already mentioned ... a couple of good mindset books are:
Broke to Millionaire in 7 years by Peter Spann
Secrets of the Millionaire mind by T Harv Eker

Both highly recommended, espeically the Peter Spann book (in my opinion)
Nice work with your investment ideas. You have 7 years on me, good on ya!

Among many investment type books I've read, the Peter Spann one i found most useful.

One thing to maybe consider also are cheaper houses on larger blocks of land too. I'm looking at units close to the CBD and old houses on large blocks down south (only cus i live down south)

Good luck.:)
I think you might be correct!

I have 3 in the Northern suburbs in Elizabeth North, Paralowie, and Parafield Gardens...I bought them for 112k (2004), 190k (2007), and 185k (2007) respectively.

They are now worth 185K, 260K, and 260K respectively.

The growth will continue due the infrastructure being put in and employment being generated besides these suburbs also being affordable.

Hey guys.

I honestly think the northern suburbs has strong growth potential, as these suburbs arent exactly miles from the city (salisbury being 20-25 mins), but not the growth potential of say an eastern suburbs property.

Thanks for any input, it will be a great help.
Just went for another 2 open inspections today.

2 units in Salisbury... one near Parabanks shopping centre, and the other near Hollywood Plaza.

Both were asking 150k, with the one near Parabanks needing a bit of work done, and the tenants could be a little cleaner. Good potential, in a quiet area, but i would like to possibly get in there and give it a quick makeover once lease expires. Could easily get $185pw if in its state its currently at 160pw.

The one next to Hollywood Plaza was in great condition, in an up and coming area with plenty of new development. Larger than the previous one i had visited, with a great tenant who looks after it very well. The agent mentioned not to raise rent too much once lease expires in Feb, but $170-175pw i dont think is unfairly high, especially if thats what it will be set at for the next 6-12 months.

He mentioned this will get snapped up quick, so im keen on making an offer. I dont want to risk not offering enough and it going to another buyer.

Is there any strategy you guys have? If a property were listed at 175-185, would it be best to just go and offer 185 if you know there are a few interested buyers?
The asking price has nothing to do with the value of the unit.
Determine what you should pay on what other units have actually been selling for (not their asking price).

Don't get caught offering too much just because the asking price "says so". There are plenty more units out there, don't get stuck making offers against other purchasers that may or may not actually exist.

CHeers Gools... helped a lot.

This is tough stuff haha. I had planned on going out north to get my first (or first 2 IPS), and then look to move in closer to the city, perhaps around the eastern suburbs.

Starting out north means it is more affordable for me, and i wont have to outlay so much to cover the investments. It also means however, that the units in the east will go up at a higher rate than out north (which tends to be the case), making it harder to make affordable in the near future.

Have seen one in Magill, and one in Evandale for $250, 280k respectively... its making me guess myself, which is annoying :p.

Reading Robs story, he mentioned staying within 7km of the CBD. I also have goals similar to this, but am unsure whether to go for it now, or do as planned, and slowly build up a few more affordable IPs, then go from there (what i think i will go with).
Have seen one in Magill, and one in Evandale for $250, 280k respectively... its making me guess myself, which is annoying :p.

That's just the tip of the iceberg.
Wayville is a bit of a favourite of mine. Right in next to the CBD but not as expensive as the Rose Parks, Norwoods etc. I can point you to 4 sales on Rose Tce in the last 6 months that have been for less than $240k.

There are plenty more within Rob's 7km circle that have been selling lately for closer to $200k than $250k. That's what makes me wonder why units in Salisbury could sell for $185. I know the answer by the way but it still makes me wonder....

Now that you know the asking price has nothing to do with the selling price then you will start to realise that the impossible might just be possible and that 99 units in the Eastern Suburbs might be out of your price range just every now and again one will slip through that will be right in your "hitting zone". Take your time and make heaps of notes at what you see.

What others might disregard as a dump may only be a few weekends of painting and organising.

Awesome AWESOME advice guys.

Thanks for taking the time to answer my questions. It is tough at first, but i think it best not to rush into things. My strategy has changed slightly now due to taking some advice on, and spending more time looking, instead of getting my heart set on something.

The 2 units i was looking at have a few offers, so ill put one in the range i think it should go for... not going to overbid just to get a property which was tempting a week ago (amazing what a nights sleep can do to your train of thought).

One of the units is in Loades St, Salisbury. Rough sort of area, but dirt cheap at around 129K. Current rent is short around $25 on monthly repayments, so it basically does pay for itself, even if CG doesnt look too great in the near future. Been up for a while now... thinking of throwing in a bid of $120k, and if the seller bites, ill be making money off this first investment, which will enable me to still keep looking to purchase one as soon as i see one i like. The good thing about it is the tenant has been on for 13 yrs, and wishes to stay on... Still a little iffy, but hey... its just in the back of my mind atm.

If any of you know any horror stories of these units, please let me know haha. From Google maps, i can see the streets surrounding are all covered in burnout marks which does make me laugh a little.

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Wish me luck.

Just made my final offer on a unit. Took on a lot of advice from you guys, and it lead me to widen my searches and not just have the blinkers on for the northern suburbs. I looked <10km of the CBD, and found something in a small group with good tenants, at what i believe is a good price with good CG potential (in the group, a few ppl own multiple units, which i believe is a good sign... if theyre not worth it, why buy a second?).

The REA is seeing the owners tonight, so hopefully its good news, and hopefully i get some sleep tonight :p.

Thanks again for your advice, it did help a lot. I also purchased Smarter Property Investment by Peter Cerexhe, which i hope to read shortly. I looked for the suggested titles, but could find none on The Parade, so just picked up something to get my feet wet.