Did you have a very clear goal when you bought your first IP?

[Chloe]

When you guys bought your first IP did you have a very clear plan or very well defined short/long term goals?

Do you think you can buy your first IP in a reasonable area that you're familiar with and just play it by ear with no definite short/long term goals?
I always thought I'd like something that can provide rental income in the future as well as some capital growth in case I choose to sell it later on.
As I've never done this before I don't know what I'm going to encounter on my journey or how many IP's I'll be able to afford (hoping I don't get stuck on just 1). That's why I don't really have a very clear and defined strategy.

As many of you already know, I'm in the process of looking for a PPOR. Once that is done I would like to start looking into purchasing an IP perhaps 12 months later (if the bank doesn't think i'm crazy!).

So have any of you just played it by ear and seen how you go and what you can afford to do along the way? Or did you have a very clear plan all mapped out? There's only 1 income to play with too as I'm a single parent.
I don't want to send myself insane with too much analysis or I'll never buy anything!

Would love to hear your experiences.

 

[natedog]

Hi Chloe,

10 years ago my wife and I built a house as our first home and PPOR, this really stretched our incomes at the time to afford servicing the loan and making ends meet

I had been exploring ways of creating an alternative income to working till 65 aswell as trying to relieve the mortgage stress we had created for ourselves.

I did some number crunching and with the help of a good broker back then discovered that by keeping the house we had built and turning it into an IP and buying a smaller established PPOR that we could own 2 houses and have it be a smaller burden on our cash flow month to month!!

Since then we have set down a more specific plan of how to use investing in property to achieve financial goals and have bought subsequent properties according to "the plan".....but back in the beginning it was more about making ends meet and just trying to get ahead, rather than any specific plan.

In hindsight it was the best thing we could have done, as the equity in that original property has been used 3 times to acquire more property since then.

Cheers,
Nathan

 

[Dazz]

When you guys bought your first IP did you have a very clear plan or very well defined short/long term goals?

No...not very clear or very well defined. There was a plan, but it was fairly rough, as the "life comes along" factor always throws it off course somewhat.

I think goals are best described as a series of rolling mountains. The initial goal is daunting and all consuming, but once you climb the first peak, your horizons are lifted, your view is expanded and pleasant options start opening up that before were never feasible nor achievable. In fact, you could scarcely know what pleasant options lay before you at the start, compared to the first peak, so in my opinion a "detailed plan", whilst admirable, rarely is productive.

'tis best to celebrate briefly the achieved first peak, then march on to goal # 2 and 3 etc.

There is an oft quoted saying (I'm probably going to get it wrong though) that says something like....

we often can exceed the results of a 1 year plan, but often underachieve what can be done in 10.​

I think I got that wrong, but someone else coming along will correct me.


This area of detailed planning also gets into the area of what I call the property ladder of investors.

Starting off on level 1, you simply couldn't write a detailed plan to achieve a level 8 or level 9 investor....you simply wouldn't have the skills, knowledge or anything necessary to even begin to know where to start writing down that detailed plan to get you that high.

You would need to slowly climb the ladder, graduating from one rung to the next, gathering assets, accumulating debt, learning the language, building relationships, applying various techniques, rolling with the punches (read bank policy and market conditions).

Only when you got to say level 4 investor could you even remotely see what was needed to achieve level 5 and 6. Once on level 6, you would know what you had to do to get on level 7, but a level 4 would be blind to it.

Even explaining it all in detail to a level 4, those steps to become a level 7 investor would be futile, they simply wouldn't have the language, the skills nor the comprehension to apply the techniques in an appropriate manner.

For a novice on level 1, writing a detailed plan to stretch all the way to a level 9 investor would be simply impossible.

If anyone says they wrote a detailed plan at the start and have exactly achieved it, they would probably be a level 3 or 4 investor by now....so not really someone to emulate.

 

[Chloe]

Thanks Nathan and Dazz for your input.

I certainly see that it's going to be a huge learning curve and I think the best way for me to do it is to learn as I go.
There's so much I don't know and when it comes to the legal and tax side of things then.... It's another language but it doesn't put me off as I'll let the experts in those fields help me with that.

Dazz, you're right about the current level of investor not being able to see too far past the next level. I can't see past the first investment property but i will have gained enough knowledge and experience to at least then be thinking about a second, even if that doesn't happen for a couple of years.

 

[skater]

When you guys bought your first IP did you have a very clear plan or very well defined short/long term goals?
.

Plan? What plan?

Our first one came as a complete surprise. We were on a very low income and looking at how to reduce the mortgage. Cutting a long story short, we had someone over who worked for a mortgage reduction scheme, where they monitor everything for a price.

They mentioned buying an IP. We looked into it. Did what they suggested without their help & ended up with the first IP. Before that, we hadn't given it a thought.

That seemed to work OK, so stuck around & bought a few more.

 

[handyandy]

Yes, I had a clear goal. (well sort off)

I was pondering how I was going to be rich and also fund my own retirement. The two thoughts were not concurrent but were inter-playing.

At the time we had bought our PPOR and we were both earning good money (for the time).

The plan I formulated was that investment property was the way to go and that I would need 7 properties (paid off) to replace the salaries at that point in life so adjusted for inflation in 30 years time they should replace a similar level of income.

This wasn't the get rich plan but simply the retirement plan.

This was also at a time ( early 80's) when the bank wanted 20+% deposit and saving history etc.

Live went on and eventually I received a redundancy payment so bought my first IP and then as we went, whenever I received a lump sum of sorts, we bought another property.

A very slow process but achievable over the longer term. It helped that I didn't mind working on them and getting involved in managing the property managers. Also during the first 10 years of my investing interest rates spike up to 23%, something to really make you wary.

I never really changed my investing style - as soon as I get a lump sum together I buy a property. The big difference over time is that the lump sums have gotten bigger and more frequent

The get rich plan sort of ran in parallel and consisted of spotting a business opportunity and running a very good business for 12 years. I would not have been able to exploit this business opportunity if I hadn't had the properties and draw down the equity.

Cheers

 

[Player]

No...not very clear or very well defined. There was a plan, but it was fairly rough, as the "life comes along" factor always throws it off course somewhat.

I think goals are best described as a series of rolling mountains. The initial goal is daunting and all consuming, but once you climb the first peak, your horizons are lifted, your view is expanded and pleasant options start opening up that before were never feasible nor achievable. In fact, you could scarcely know what pleasant options lay before you at the start, compared to the first peak, so in my opinion a "detailed plan", whilst admirable, rarely is productive.

'tis best to celebrate briefly the achieved first peak, then march on to goal # 2 and 3 etc.

There is an oft quoted saying (I'm probably going to get it wrong though) that says something like....

we often can exceed the results of a 1 year plan, but often underachieve what can be done in 10.​

I think I got that wrong, but someone else coming along will correct me.


Perhaps it's like this..........."People often over-estimate what they can achieve in one year, however completely underestimate what can be achieved in a decade."

This has certainly been the case for us, not only with regards investing however other life decisions and happenings also.


This area of detailed planning also gets into the area of what I call the property ladder of investors.

Starting off on level 1, you simply couldn't write a detailed plan to achieve a level 8 or level 9 investor....you simply wouldn't have the skills, knowledge or anything necessary to even begin to know where to start writing down that detailed plan to get you that high.

You would need to slowly climb the ladder, graduating from one rung to the next, gathering assets, accumulating debt, learning the language, building relationships, applying various techniques, rolling with the punches (read bank policy and market conditions).

Only when you got to say level 4 investor could you even remotely see what was needed to achieve level 5 and 6. Once on level 6, you would know what you had to do to get on level 7, but a level 4 would be blind to it.

Even explaining it all in detail to a level 4, those steps to become a level 7 investor would be futile, they simply wouldn't have the language, the skills nor the comprehension to apply the techniques in an appropriate manner.

For a novice on level 1, writing a detailed plan to stretch all the way to a level 9 investor would be simply impossible.

If anyone says they wrote a detailed plan at the start and have exactly achieved it, they would probably be a level 3 or 4 investor by now....so not really someone to emulate.

Good post, Dazz.

I started not knowing what I didn't know, however accumulated aggressively with a rough format/plan in my head from a young age. Nothing was ever articulated on paper though.

Just start within your means.

Be careful with LVR's initially; when equity has allowed to duplicate and you have compounding from progressive acquisitions working for you, then you may have a clearer idea of what's next.

Be flexible.......life does, from time to time, throw us curve balls out of left field. Adapt and make good from what may appear to be bad.

Keep reading this site and ask questions. I am a relative late comer here, however the old adage...."you don't know what you have until you lose it" whilst sometimes true also has a flip side..........."you don't know what you've been missing until it arrives. This forum is brilliant

Happy investing

 

[beachgurl]

I think if you try to create a firm goal or strategy before you buy anything you place yourself at risk of analysis paralysis and not buy anything. Your life states will also affect your investing strategy - I had 2 properties of my own and was renting when I met my now husband. Together we had an even bigger borrowing capacity to be aggressive in our investing. Then having kids you usually step it back a notch either by choice or by a diminished borrowing capacity.

Educate yourself in areas you are already familiar with. Get yourself ready to buy so when the right property appears (after lots of research they will just appear and u know straight away u need to buy it) you can make an offer.

As dazz said your strategy will change through experience. We didn't have a strategy we just bought when it felt right.

 

[DaveM]

I bought my first IP in 2001'ish... I had been working full time for 2 years (was 22) having relocated from Newcastle to Sydney due to there being no IT industry in Newcastle.

I had a goal that I wanted to buy my PPOR by age 25 and wanted to invest in property as a passive investment to achieve this (ie I was not comfortable with shares apart from managed funds). Apart from that I had no other clear end game.

 

[Bigtone]

i didn't have a plan initially but once i found my feet i developed one.

 

[geoffw]

I bought an IP 15 years ago as a result of a DHA presentation. I had no plans ever to buy another ever again. Until Peter Spann.

We bought two more IPs, one a block of flats, then left the job to run a business- financed from the IPs.

The sale of the businesses has left us in a fairly good position.

I have no plans now, just some idea of where I want to go. The ability to get a job will have a big influence on where I go from now.

 

[nhg]

I'm at #3 now. I started with a rough end result I wanted by 45 (i am 26 now) and a value/gross cashow I wanted to increment yearly.

As Dazz stated. You adapt as you go. I made so many mistakes with no. 1 then more on no.2 and again no.3, mistakes I would never had seen at the start. You just get better as you learn, network, evolve your investment strategy.

Never thought of CIP before, now I'm trying to learn as much as I can. At the start I was planning to be a developer

 

[Chloe]

Thanks, I feel better that I don't have a plan or in depth strategy.

So what happens in the end, when you decide that you won't buy any more?
Do you want to live off the rent? Or sell? Or a bit of both?

I have a close friend who thinks that there is no reason to keep them later on, that you should sell and enjoy yourself. Another friend recommends accumulating about 5 properties and never selling. He thinks this will give you a very good lifestyle down the track.

Thoughts?

 

[kathryn d]

Our first was to help our oldest child.
Then I read a story about Brenda Irwin, and it energized me into thinking "why can't we do that".

We used the equity and small savings we had and just started.
All the Banks in our town told us no, and it took 8 months to finally get financing for our 11 unit apt bilding.( IP# 2)
Creative thinking was needed to push it across the line !!!

As others have said...do something and be willing to change plans as required.

Good luck

PS- Don't worry about the end for now. Economies and circumstances change.