Caravan investment?

[Bignatesmith]

I'd like to start off by saying hello all as I am new to somersoft
I'm 21yrs old and am an apprentice diesel mechanic (3rd yr)
I've been very interested in property investment for a fair while now

As I'm an apprentice I don't have a fair amount of money to work with and will mostly be relying on a loan and gearing it.

To start off I was thinking of a relocatable home in a caravan park

I understand that the rent will have to cover the ground rent, loan repayment, and some left over to be kept in a bank account for repairs (which I will do minors myself) and when property is un-occupied.

Has any1 done this? Success? no success?
So pretty much what I'm asking is this a good or terrible idea?
if its terrible what are some other idea's on low wage or loans under $50,000
Any feedback is good...I want to LEARN!!

Thanks
Nathan

 

[Rolf Latham]

Hi Nathan

Welcome and good on you for looking at options !

Plenty of peops on 50 k a year have built MOUNTAINS over time

As a rule, demountables are tough to get finance for...............

ta

r

 

[Hooray]

Where's the capital gain?

 

[Bignatesmith]

Thanks rolf
Yeah the plan is to get a loan for the investment, any reason why demountables are hard to finance.

Hooray,
I'm not to worried about capital gains at the moment...just somthing to pay itself off to partly fund another investment (hopefully a Duplex) down the track

 

[Hooray]

Hooray,
I'm not to worried about capital gains at the moment...just somthing to pay itself off to partly fund another investment (hopefully a Duplex) down the track

Not smart.

Your starting with nothing. Capital gains is the only leverage you have.

 

[Bignatesmith]

Hooray,
Any chance you can explain what you mean

Why Capital gains in the only leverage and why I need it?
All this is new to me

Thanks heaps

 

[Rolf Latham]

Thanks rolf
Yeah the plan is to get a loan for the investment, any reason why demountables are hard to finance.

lenders see them as a depreciable asset............. like a car

Unlike house on land which tends to appreciate.

You can get a personal loan style finance, but the PI repayment over say 7 years and the ongoing rate are pretty yuck, thus killing any "paying it off"

ta

rolf

 

[Angel]

No, just no

 

[Angel]

Hello Nate and welcome.

My husband and I are both low income earners, we always have been. My BIL owns a truck and caravan building business and we get to see the downside of them. We have recently seen his friend's four year old top of the range van fall to pieces because it got wet and leaked. (He didn't build it). We have seen plenty of ads for "investments" being pitched to unsuspecting clients where the costs involved far outweighed any income producing potential (your idea above)

When you read other threads on Somersoft you will see there are plenty of us who own our homes and IPs who started out as very low income earners. It is always possible, but not as easy as it is for high income earners. You do not live in Sydney so you are already miles ahead of so many people your age trying to get ahead in life. Keep reading and asking questions and we will inspire and teach you. best wishes

 

[Macca]

Hi Nathan,

You are already way ahead of your peers, just thinking about it is the biggest step

If I was starting now I would look for something near home that I could do a gradual reno between tenants over a few years. You are a mechanic so it would seem you are a hands on sort of guy, so buy something that you can clean up, paint, install flat pack kitchen, stick some tiles on a wall etc

Try and find something within 2 hours of where you live so you can go there on a weekend and get plenty done.

So save up a deposit, buy something nearby that can be rented out, save some more, do it up a bit, increase rent, save some more etc etc.

Depends on the market how soon you can draw on any new equity but if you upgrade between tenants you will build it up slowly.

You HAVE to accept that the first 10 years is hard work, so pace yourself, have a bit of fun but keep tucking a bit away each pay.

It may take awhile but when the next cycle comes you are ready, it may be when you are 35-40 but it will come and when it does you can be first on the bus

 

[Perp]

Hi Nate, and welcome.

I agree with others this is a bad idea, but don't think that anybody's precisely broken down why yet.

Land appreciates - increases in value over time. It's a limited commodity, and over time, more people are competing for the same amount of available land.

Buildings depreciate - Buildings have a limited lifespan, they require maintenance, they get outdated, and eventually have to be replaced.

When you invest in property, you get a return in two ways:

1) Increase in value - i.e. capital growth - which comes from the land.

2) Income - i.e. yield - which comes from the building on the land.

And usually the return from the former is more significant than the latter.

So to invest in a caravan on a site, you're forgoing any possibility of the primary return of the investment. The yields would have to be astonishing for this to be worthwhile, e.g. yields in the 30%+ range.

Further, lenders don't like lending against these because the caravan is a depreciating asset, like a car. It only earns an income when it's attached to the site, and the site is secured by your lease, which is not anything of value to the lender. (Unlike a land title, which the lender can register an interest against, to protect themselves.)

 

[Scott No Mates]

Welcome Nate

Stupid suggestion here but
without knowing your circumstances could I suggest racking up some savings until you finish your apprenticeship then hit the mines for a couple of years. Diesel mechs in the bush are in demand getting over $100k .it may not be for everyone but can be great if you are young, single and don't drink.

A great way to save money to build your deposit and start a portfolio.

 

[willair]

I'd like to start off by saying hello all as I am new to somersoft
I'm 21yrs old and am an apprentice diesel mechanic (3rd yr)
I've been very interested in property investment for a fair while now

As I'm an apprentice I don't have a fair amount of money to work with and will mostly be relying on a loan and gearing it.

To start off I was thinking of a relocatable home in a caravan park

I understand that the rent will have to cover the ground rent, loan repayment, and some left over to be kept in a bank account for repairs (which I will do minors myself) and when property is un-occupied.

Has any1 done this? Success? no success?
So pretty much what I'm asking is this a good or terrible idea?
if its terrible what are some other idea's on low wage or loans under $50,000
Any feedback is good...I want to LEARN!!

Thanks
Nathan

That will only be for another year Nathan,then your apprentership is finished and you can sell yourself on the open market,i know a few young
diesel mechanics in the nth rivers sons of mates of mine all work fly in fly out from coolangatta airport,one who worked his way onto a mobile service
unit was on above 200k,so they money factor will not be a problem..

I started with a trade back ground 4k and a hq holden ute in 1983,and that was before the internet,fast buck soap box speakers,bank managers,and people who did not understand how to pay bills,lot different these days and welcome to the site and sometimes it comes with a peculiar sense of hospitality,and at your age your starting with the right mindset..

 

[Bignatesmith]

Thanks all,
Very helpful information
I looked into it further and i see it wont be worth it as to make a profit it will have to be rented out for $300+ p/w after the ground rent, interest & loan repayments....and who's going to do that..

What Macca said is definitely what I'd like to do but can't afford it but the plan is to head out to the mines mid next year if I can finish my apprenticeship early and move to airlie beach in nth QLD, so I'm probably better off waiting till then like Scott and willair suggested.

Thanks perp very helpful info there, I never knew it was the land that appreciates and the house depreciates but it makes complete sense as there's always more and more people but only a set amount of land.

Probably not the right forum to ask but what about investing money into shares aswell been interested in that aswell but I'm just abit wary as I always here about people losing money.
I have an interest account that earns 3.05% that I put a little away each week into but would I be better off saving a couple thousand and put it into shares?

Cheers,
Nathan

 

[Hooray]

but I'm just abit wary as I always here about people losing money.

First, get past this. If you can't, forget it.

 

[Scott No Mates]

Nath, play the share market game on the asx website - great resources too.

A managed fund may suit asyou aren't doing the share selection but having a fund manager builda portfolio.

 

[Bignatesmith]

Yeah I've played the asx share market game but I ended up getting over it as it was slow progress for a game (ut would be different if it were real money) but I've played many other virtual trading games that are quicker and have had success but obviously not with real stocks.

The managed fund sounds like a pretty good idea though I'll look into that
Thanks

 

[Phiber]

Hi Nathan,

Welcome to the site!
Very good inputs you have received so far.
Try and save what you can until you can afford something more long term than the caravan.

Regarding shares, you have to think about it as a long term play (5-10 years): don't get sucked into trying to pick stocks or trying to time the market: statistically it just does not work. Ideally you want to purchase on a regular basis to smooth out the market up and downs. Now, based on what you are saying if you have couple Ks to invest you probably won't be able to buy regularly (minimum buy is $500), so you expose yourself to a timing risk. Also keep in mind each trade (like when you buy a share) has a cost: for instance with CommSec (commonwealth's bank trading platform) it's $19.90 per trade - there are cheaper options out there but you can see how on a buy of say $1000 it eats into your capital already.
If you want to try shares, you should look into index funds: they trade like a share Except instead of buying a single share you buy a basket of shares, and as such you spread your risk. On the ASX, the fund with code "VAS" replicates the Aussie share market top 300 companies.

Keeping cash in your interest savings account is not a bad option of you have a few thousand to invest: if they are invested in shares you won't be able to access them or if you do, you risk selling at a bad time and will incur trading fees.

If you can contribute monthly, perhaps this is something you can consider but you must keep at it on a regular basis, regardless whether the market is up or down: this is difficult to do!

Wishing you all the best !

 

[datto]

Gday bignath. Great to see you live south of the border.

When I hear "caravan" I think of instant granny flat~ just add water (and power). Granny flats sit next to IPs.......and that's what you should be aiming for.

As mentioned, you are going to earn big $ as a diesel mechanic. You know about Cummins, Volvos. Fords, common rail injectors etc and you also need to know the guts of property investing.

Start earning the big dollars and the IPs will hook onto you like a trailer on a turntable. Within a few years you'll see your portfolio grow fast. Be patient and start earning the big bucks first.

 

[Bignatesmith]

Phiber, good info there thanks mate
Yeah there's know way I could afford $500 a month at the moment, so the index fund is the same as a mutual fund I take it? I salary sac 3% a week (which I now realise I'll end up paying more tax on cause my income is taxed under 15% so I'll be changing that) and that's doing pretty good at the moment, I've got it invested into a couple of different funds (within the fund itself) that iv been keeping an eye on the last couple of months.
From what I just seen from "VAS" my super is doing better. So the only advantage I can see at the moment is being able to access the money before your 65.
If I were to invest into shares though, is it blue chip shares that are the go for investments over 10years? And is it only certain company's that pay dividends? How do I find out if they pay dividends?

Datto, so you reckon granny flats are the go to start out? I don't really know anything other then what you just said.
Any chance you could fill me in with abit more detail about them? Do you rent the IP and the flat out seperatly? is there a market for them?

Thanks all again great help!