Advice Please

[penny]

Hi, seeking some advice please on what experienced investors think is a good move for me.

I'm keen to start building an investment portfolio and live in Brisbane and can see that the market is starting to go crazy. My gut (and the research i've been doing) is telling me that prices are only going to continue to rise in and I want to act as soon as I can to buy an investment property but I don't know if it is a smart idea to act now or wait until i build more equity in my PPOR. My situation is -

PPOR - value = $230k
Loan - $170k

My wage is over $100k but I am a contractor so may have trouble finding a lender (i was permanent when I got the loan for my PPOR).

What do people suggest? The area I am looking to find a property in is around the Zillmere, Chermside, Nundah, Northgate area. My other idea is to invest in Caboolture due to growth around that area and because of the lower purchase price.

Any suggestions would be extremely welcome, including the maximum value of the investment property that i should go to.

I hope I don't sound too naive but i figure this is one of the best places to ask for this advice and the more i ask the more I'll learn!

Thanks
Penny

 

[Glucose]

Dear Penny,
Have you estimated the current value of your PPOR or is the $230k the price you purchased it for?

 

[penny]

It's an estimate. I've been following sales of similiar properties in my area in recent months. Keeping in mind that valuers are very conservative but based on similiar sales I think they'd have to come in around this amount.

 

[Peter_Tersteeg]

I don't know the area, so I can't help you there, but from the finance side you should be okay. These days lenders are starting to understand contractors a little.

It will help a lot of you're employed in the same industry. A copy of the contract showing yourself as the key person to the role is also useful.

 

[Glucose]

So, if you're keeping your LVR at 80% that gives you about $14K to play with for your new property. I reckon your serviceability should be fine to go ahead & get an IP. You'd have to go to a pretty high LVR on it though. But you have to weigh up how much capital gain you'd miss out on if you left it till later to buy it. My philosophy is BUY NOW if you possibly can, so that in 2 or 3 years time you're not saying "Darn look how much that house is worth now! I could have bought it 3 years ago for $x (so much less)!!!"

 

[penny]

Thanks! I really needed to hear that. I wasn't sure if i was jumping the gun but I think it's a good idea to act now

 

[Kenny]

Hi Penny,

I found the first step was the always the hardest and it's easy to succumb to "Analysis Paralysis" where you keep looking and studying in case you get it wrong.

I think it would be a good idea to speak to one or more mortgage brokers to get a feel for what you are comfortable borrowing and then tailor your search for IP's within that bracket.

Consider the big picture too and plan your investment structure with the future in mind. Where do you see yourself in 5 - 10 years time? Is contracting a long term prospect? Is your career in a highly litigious field and asset protection a concern? Even though buying the first one in your own name may still be the best option after considering, it won't hurt to have thought a bit about it.

Consider how involved you want to be with your IP's. Do you want to add value with reno's? Buy with landbanking in mind? Lock in future opportunities to subdivide? Or are you happy with positive cashflow and some growth?

Hope this is food for thought.

Regards,

Kenny

 

[penny]

Thanks Kenny - definitely food for thought. I've heard that the first IP is the hardest one and it gets easier after that (thank goodness!)

There's so much to think about but now that I've got some encouragement that I'm not being unrealistic I'm eager to take action and work out my options. I'll take your advice and find a few mortgage brokers to see what I can borrow. I spoke to one mortgage broker a few months ago and he essentially said no lender would give me the money because of my work status (contractor) but I know that can't be true!

 

[urban cowboy]

you won't have too many problems Penny, talk to a few of the MB's on the forums here - there are plenty...if they can't help you i have a few i can recommend that clients of mine in similar situations use and they got loans ok...and no i don't get kickbacks from them - just pass details on 'cos i know they know their stuff!!

between this and your other thread it sounds like you've been doing your homework so well done!! you have your areas pretty right there too - i've sold plenty in those suburbs and they all do well...there are also a lot of folks here that invest in these areas to so they will be able to give you some info as well.

cheers
UC

 

[buzzlightyear]

I found the first step was the always the hardest and it's easy to succumb to "Analysis Paralysis" where you keep looking and studying in case you get it wrong.

Agree 100%, just don't feel desparate to follow the pack and buy something because you see prices going upwards and the hype takes control. Take your time and make a considered decision.

Consider the big picture too and plan your investment structure with the future in mind. Where do you see yourself in 5 - 10 years time? Is contracting a long term prospect? Is your career in a highly litigious field and asset protection a concern? Even though buying the first one in your own name may still be the best option after considering, it won't hurt to have thought a bit about it.

Consider how involved you want to be with your IP's. Do you want to add value with reno's? Buy with landbanking in mind? Lock in future opportunities to subdivide? Or are you happy with positive cashflow and some growth?

I think this is the often the most missed part of long term investing, where people do not have long term goal(s), an action plan and key milestones to get there. Whilst it takes a bit of time to translate those thoughts into a strategy and path forward, it does make subsequent decisions more clearer, faster and usually provides for a comprehensive filter against making poor choices..

Good luck with it...

 

[flatout]

Penny,

I doubt you'd have any trouble getting finance as a contractor. Both my husband and I have been contracting for 7 years and have never had any problems. Over here in WA, contracting almost seems to be the norm so I guess most lenders have had to come to terms with it.

Flatout

 

[cosy]

Hi All,

Glucose
But you have to weigh up how much capital gain you'd miss out on if you left it till later to buy it. My philosophy is BUY NOW if you possibly can, so that in 2 or 3 years time you're not saying "Darn look how much that house is worth now! I could have bought it 3 years ago for $x (so much less)!!!"-

I'm In melbourne and i own a house and also looking to buy my first IP in East or South East area. Now my Question is exactly this but remember i'm looking to invest in East or South East area ?

telling me that Land prices are only going to continue to rise in and I want to act as soon as I can to buy an investment property but I don't know if it is a smart idea to act now or wait ?

And also with this boom, is that good idea to wait next 2 -3?

What would be the impact of further Interest rate rises?

wont we start seeing some forclosures again with people way overextended?

and some very good deals to be had at that time?

If it's good time, What are the good areas in East or South East area for IP ?

 

[Glucose]

Hi, seeking some advice please on what experienced investors think is a good move for me.

I'm keen to start building an investment portfolio and live in Brisbane and can see that the market is starting to go crazy. My gut (and the research i've been doing) is telling me that prices are only going to continue to rise in and I want to act as soon as I can to buy an investment property but I don't know if it is a smart idea to act now or wait until i build more equity in my PPOR. My situation is -

PPOR - value = $230k
Loan - $170k

My wage is over $100k but I am a contractor so may have trouble finding a lender (i was permanent when I got the loan for my PPOR).

What do people suggest? The area I am looking to find a property in is around the Zillmere, Chermside, Nundah, Northgate area. My other idea is to invest in Caboolture due to growth around that area and because of the lower purchase price.

Any suggestions would be extremely welcome, including the maximum value of the investment property that i should go to.

I hope I don't sound too naive but i figure this is one of the best places to ask for this advice and the more i ask the more I'll learn!

Thanks
Penny

Penny,
How did you go? Would love to hear if you've been able to extend your property investing, and if so where & how?
Glucose.