Recently I have begun to discuss with others about how in the current market can a couple with little current equity become active investors. Scenario PPOR worth $500,000 loan of $434,000...very little equity. Some people have given us the old advice of simply sit and wait for 10 years and hope that things may happen, but thats a very lazy approach to investing. I realise there is a wealth of advice and opinions on this site, and we would love to hear all of them (if possible) on how to become active investors in property with very little to start with????
Becoming an investor from very little???
- Thread starter debden
- Start date
How much time have you got to read? Taking the lazy way out and asking that question on a property forum will give you a distorted response. If that's all you do, you deserve to fail.
You must ignore the "popular press" and the "popular gurus". Read widely on WORLD events and economics and make up your own mind on what's happening in the US, China/India/Russia/Brazil etc. (BRIC if you want to google them). Study global warming and peak-oil and form an independent opinion about their relevance.
For what it's worth, I believe there will be fortunes made/lost in the next few years. You have no time to lose...... Start reading!!!!!!!
The small amount of investment capital you have will grow dramatically if you draw the right conclusions. It did for me.
You must ignore the "popular press" and the "popular gurus". Read widely on WORLD events and economics and make up your own mind on what's happening in the US, China/India/Russia/Brazil etc. (BRIC if you want to google them). Study global warming and peak-oil and form an independent opinion about their relevance.
For what it's worth, I believe there will be fortunes made/lost in the next few years. You have no time to lose...... Start reading!!!!!!!
The small amount of investment capital you have will grow dramatically if you draw the right conclusions. It did for me.
Last edited:
Start with a plan and have a high degree of self-discipline,and then work out the approach you will use ,the extreme way or the moderate way
just depends on your understanding of risk,a beginning is made and in making a beginning,the most difficult part is over..willair..IMHO..
My advice is to sit and wait for one year, but spend that year investing in your own education... and I mean really dedicate some significant time to this... a couple of hours a day at least.
The property market and stock market are not going anywhere fast for the next year or two, so there's no rush, and you don't really have enough equity to risk on speculative investments right now.
My tips for future long term investment are Alternative Energy Stocks, and Sydney Property, but you will find heaps of people on this forum who totally disagree. So it's best to do your own research and decide what's best for you.
But as I said, there's no rush. Give it another year and the global economic environment should be much clearer. There is really nothing that is guaranteed to make you money over the next couple of years given the current global uncertainty.
Just pay down your PPOR debt as fast as possible, then you will be in a better position to invest in a couple of years.
Shadow.
My question would be, how much more borrowing power do you have?
I'm guessing you haven't borrowed to the max, so work out what the max you can borrow up to is (minus $434k), and then look at what you can buy in that price range and if you're happy then find a way to service the loan. Speak to a mortgage broker who specialises in property investing, they'll know some tricks, no doubt. Then see an accountant who also has property investment knowledge.
Having said that, I don't think you'll be able to borrow any equity from your PPOR. I could be wrong there, but assuming the bank will only lend up to 80% of the value, you're already over that.
I'm guessing you haven't borrowed to the max, so work out what the max you can borrow up to is (minus $434k), and then look at what you can buy in that price range and if you're happy then find a way to service the loan. Speak to a mortgage broker who specialises in property investing, they'll know some tricks, no doubt. Then see an accountant who also has property investment knowledge.
Having said that, I don't think you'll be able to borrow any equity from your PPOR. I could be wrong there, but assuming the bank will only lend up to 80% of the value, you're already over that.
Can do it with small numbers on low income if you keep it all in scale, can still service it and don't overcommit (sounds like you've struck out there unfortunately).
I started with a $15k deposit on a house I bought for $40k. Sold that for $80k (silly me), bought a car and some toys
, some land and another house for $25k. Sold the land (silly me - had I known then what I know now I would have got a creative loan and put townhouses on it) for basically no gain, but we've recently used the $25k house - renovated now and worth a bit more - to buy an (undervalued) $65k house+land, which we are renovating up to being a $130k house+$30k land, which we will then use to build either another IP or a new PPoR on the land depending on how we go with broadband. And currently we're quite low income - I haven't been working for a while now and the other half is self-employed.
If anyone knows how to get babies to sleep at night instead of partying until 1am I'm sure a lot more work would get done in this household That, and did you know that gap filler takes over 3 days to dry in winter?
I started with a $15k deposit on a house I bought for $40k. Sold that for $80k (silly me), bought a car and some toys
, some land and another house for $25k. Sold the land (silly me - had I known then what I know now I would have got a creative loan and put townhouses on it) for basically no gain, but we've recently used the $25k house - renovated now and worth a bit more - to buy an (undervalued) $65k house+land, which we are renovating up to being a $130k house+$30k land, which we will then use to build either another IP or a new PPoR on the land depending on how we go with broadband. And currently we're quite low income - I haven't been working for a while now and the other half is self-employed.If anyone knows how to get babies to sleep at night instead of partying until 1am I'm sure a lot more work would get done in this household
That, and did you know that gap filler takes over 3 days to dry in winter?I disagree. I'm a strong believer in power tools, gapfiller and enthusiasm over book learning anyday
*engages Lara Croft pose, caulking gun cocked and ready*
Spot on Boom, spot on...
The quickest way to start would be to move out of your PPoR and rent it out. Instant IP.
Not many people would consider this of course, as the PPoR emotion is strong. Not only that, the combined cashflow drain of the rent you would have to pay, and the shortfall between the rent you receive and the loan interest repayments might be hard on the pocket.
Failing that, you are on the right path with your education, and being here to learn more.
My suggestion would be to try and accelerate your nett worth position and increase your equity in your PPoR through trying to reduce your PPoR debt as fast as possible.
Sit down and look at your household outgoings very critically and find ways to minimise your outgoings so you can free up more dollars to pay down the loan.
Basically, run your household like a business.
You will need to do this anyway if you are going to be an active IP owner/accumulator, so now is the time to start getting serious about money management.
The more debt/assets you control, the better you have to be.
Not many people would consider this of course, as the PPoR emotion is strong. Not only that, the combined cashflow drain of the rent you would have to pay, and the shortfall between the rent you receive and the loan interest repayments might be hard on the pocket.
Failing that, you are on the right path with your education, and being here to learn more.
My suggestion would be to try and accelerate your nett worth position and increase your equity in your PPoR through trying to reduce your PPoR debt as fast as possible.
Sit down and look at your household outgoings very critically and find ways to minimise your outgoings so you can free up more dollars to pay down the loan.
Basically, run your household like a business.
You will need to do this anyway if you are going to be an active IP owner/accumulator, so now is the time to start getting serious about money management.
The more debt/assets you control, the better you have to be.
Last edited:
I was thinking more "current" reading. Jim Rogers, author of Adventure Capitalist has a lot to say on commodities and the US dollar. Bill Murphy is the founder of GATA and has a lot to say about precious metals. Jim Sinclair is a "gold-bug". Jim Puplava does three or four hours pod-cast every Sat afternoon, Don Coxe does another on Fri night and Al Korelin does one daily. Kitco and 321Gold and 321Energy have hundreds of links. I prefer these to CNN and Bloomberg but I'm not saying don't read them. You could do worse than getting The Australian daily too. Peakoil.com will inform you about that if these guys don't do it first. You will learn about Hubbard's Peak and Matt Simmons will keep you up to date and you could read his Twilight in the Desert. Zapata George is good value too.
OK. These are all "resource" believers (no worse than rusted-on RE investors
) but they go to lengths to explain what is happening now and what it means for the future. BTW Kiyosaki is now a gold-bug and reckons the US$ is junk. The guys I mention were telling me that years ago and specifically warning about the sub-prime fiasco long ago too. They are all very bright men and I doubt they are pushing a barrow. A few here on SS read them but don't mention it lest they be branded D&Gers. Once armed with knowledge, there are fortunes to be made.
I read the Fin Review almost every day pretty much cover to cover.
I dont necessarily agree with what is printed in there but at least it gives me a pretty good idea of market sentiment which is more important than the fundamentals in the short term and shaped by the fundamentals in the long term.
I dont necessarily agree with what is printed in there but at least it gives me a pretty good idea of market sentiment which is more important than the fundamentals in the short term and shaped by the fundamentals in the long term.
My mind wanders when people speak of "funnymentals" now. Sentiment is far more important. People who avow faith in fundamentals and confidently boast they can stay the course (they're in for the long haul, you know) remind me of Monty Python's Black Knight. "'Tis only a scratch". LOL
Me? I hate blood, especially my own.
Well Ive been "lucky" so far. No price drops in my area and extremely low vacancy so havent spilt a drop of blood. I might feel differently if there really had been a 10% drop affecting me.
Even my super has only dropped about 3% in nominal value (excluding contributions) which I think is an extraordinarily good performance in this climate.
Even my super has only dropped about 3% in nominal value (excluding contributions) which I think is an extraordinarily good performance in this climate.
It's not a choice between doing nothing for 10 years and jumping into an investment with borrowed funds now.
I think the more prudent approach for you over the next 2 years is to pay down that loan, you have a very high LVR given the times we're in, looking to increase it would be reckless. After 2 years re-evaluate.
If moving out and renting your PPOR is an option this can help pay down your loan.
My daughter is moving (today) out of her PPOR and moving into a smaller place.
The difference between the rent she is getting for her place and the rent on the new place gives her $100 in the bank (after agents fees). Then she can claim her interest, strata fees, rates etc on the unit she owns. She plans to do this for about 3 years thus reducing her loan to a more manageable figure.
My daughter is moving (today) out of her PPOR and moving into a smaller place.
The difference between the rent she is getting for her place and the rent on the new place gives her $100 in the bank (after agents fees). Then she can claim her interest, strata fees, rates etc on the unit she owns. She plans to do this for about 3 years thus reducing her loan to a more manageable figure.
You could do that but what if nothing happens over the next 10 years, you've invested (wasted) 10 years in waiting. Will you wait another 10 ?
I'd go with what L.A said, while you sit and wait deciding which way to go why not rent it out and get the tax benefits ? In 6 years or so when you have to move back it'd be probably paid off or very close to it.