Did you overextend yourself buying 1st IP - Importance of Buffer

I've never bought an IP as an IP, just had a spare house rented out for a bit. Every house I've bought (until now) has been a cheap doer-upper.

Since we currently can't get a loan with anyone for any reason, we're sitting tight until the house is either paid off or we have enough in the bank to buy some land - then we want to build and sell. Partner isn't interested in the ongoing bother and expense of being a landlord.

So my efforts this year are going into completely non-property related projects (while madly trying to convert our dustbowl backyard to a verdant oasis).
 
Hey Alex P!

No, I don't see my 1st IP as an over-extension, I do kinda see myself over-extended now but it's the way I like it and wouldn't do it any other way because in time, I will be much better off than if I had not. Plus it has done wonders for my savings and spending habits.

If I look back, I do remember being scared shitless after purchasing that first property but now it seems like nothing.
 
I regret selling an IP my hubby had built before we met :)o). After we got married and had our first child (and I wasn't working) I had a panic attack re our finances. Hubby was rather aggressive with his investing in property back then (early to mid-90's) and it used to scare me after I stopped working to have kids -but when I look back on that time, there was no need for me to worry at all! Anyway, we sold that IP and, ofcourse, it was the one that performed the best CG-wise over the next couple of years. I shed a tear if ever I drive past it... :D.
 
Nope, no regrets in relation to buffer. We bought ppor first, with offset and redraw facility. Paid in advance, plus left a buffer in offset account. Bought first IP, cash flow pos from day one. Happy with that but should have put more thought into the structure of it. We structured it to suit us at the time but times change and so do plans and goals. Still OK though :)
 
i bought my first ip in west ryde sydney in 2009

was basically caught up in the FHB hoo ha and was scrounging around every saturday looking at 2 + 1 + 1 every other fresh uni graduate was looking at (most units i went to had lines to go and inspect!)

my regret was not sticking to my guts and going with the suburbs i researched and knew would make good investments in the longer term (alexandria, waterloo, redfern)

At the time, 2 + 1 + 1's were going for $400 - $450k in those areas and i thought that was wayyyy too expensive

It's now 2012 and ohhhhhh am i kicking myself now. :(
 
It's not the 1st one I 'regret', it's the 4th one! When one calculates one's servicability when interest rates are at record lows, and forgets to consider the strata fees :eek:, whoops! things get a bit tight at times!

The only other regret is not getting educated sooner, and hence focusing appropriately earlier on.

Ah, well! The most expensive lessons are the ones we end up appreciating and remembering best!!
 
Our first IP was good.... We bought at a good spot in the cycle and sold right at the top. The apartments are still selling for the same price we sold for in around 2005.
Our second IP was a good purchase, but we had to sell when our business failed. We had already used up all of our buffer in trying to support the business.
I definitely regret not killing the business sooner. Of the money we lost, at least 3/4 was lost in the last 6 months of the business operation. It basically hamstrung us from investing for at least 5 years......
 
How much money did you lose Nemo between selling to buying back? If the put the money to good use maybe you didn't lose.
 
JWR said:
How much money did you lose Nemo between selling to buying back? If the put the money to good use maybe you didn't lose.
Click to expand...

I bought for $182k in 2002, sold for $282k in 2005 and bought again for $385k in Dec 11.

House was mine prior to meeting hubby. He wanted to buy a place together so we upgraded to a bigger PPOR in joint names. I didnt have to sell to buy the new place. Sold with the intention of investing in other properties, however didn't know at the time that hubby was risk adverse and it would take me 6 years to convince him to buy our first IP.

Hubby didn't want to buy it again, so I bought it myself. He wasn't impressed :D

I didnt put the money to good use, but certainly enjoyed it :)
 
tess85 said:
Thanks Alex for your honesty in sharing your situation. I have always read your posts with interest because you are so upfront with what you're going through at the moment. I have recently come to a similar conclusion too re: buffer. (And ages ago, Skater did a really excellent thread on the importance of having a buffer... here - http://www.somersoft.com/forums/showthread.php?t=23497)

I regret having bought all our IPs on 20% deposit. At least the PPOR was bought using 15% deposit with no LMI. Many people on the forum suggested repeatedly that LMI was worth it - cost of doing business, allows you to purchase more IPs, provides more of a buffer etc. From my reasoning, which I realise is now a bit flawed, I stuck to 20% deposits only just to avoid paying the LMI. We now have only $10k as a buffer, but this needs to cover 4 loans (~ $1m... the repayments on this alone are $70 k per year! And rental repayments only cover around $50k) Plus we have a young dependant to look after.

I feel that we may have jumped the gun when we bought the IPs... I'm always a bit over enthusiastic when it comes to property, I spend a lot of time on SS and am inspired by everyone else. 3 years ago I didn't have any debt and now I can't believe how much we have. If I could change anything I would take the "slow and steady approach" rather than jumping in with both feet into the property market. And I think I would have used only 10% deposit so as to have a bigger buffer (we had no idea we would start a family that early, so to have a bigger buffer would be worth it for the sleep at night factor (SANF)!!)

Good luck with everything Alex - physically, mentally and financially!
Click to expand...

Thanks too for sharing! :)

Yeah haha i gettcha! The excitement of SS you just wanna jump right in!

The most important thing for me I've realised is my SANF. Next time I'll take things slower and make sure my golden rules are in place. ie plenty of buffer (at least $30 K before I buy the next one), not too high an LVR (in case I need to draw on a line of credit) and not too NG. I think these rules are so important for someone on my kind of income!

Anyway hope things go ok for you!! Hopefully you can rebuild your buffer back up again. Have you thought about selling one of your ip's? Have any of them gone up? If you were to sell one it could relieve some pressure! I know they say never to sell but if you have just $10 K as buffer with 4 ips and your $20 K ng with a young dependent I reckon it could be a smart move! ?
 
Yep getting over excited and not researching enough to know what your'e doing cause it'll be right property doubles EVERY 7-10 yrs and all that fluffy feel good stuff I read ab out on the net .... know that feeling well...
 
jaycee said:
Yep getting over excited and not researching enough to know what your'e doing cause it'll be right property doubles EVERY 7-10 yrs and all that fluffy feel good stuff I read ab out on the net .... know that feeling well...
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yeah :)

hey we should meet up again some time!

lol you wont recognise me jaycee!! :p When did I see you last... 2008? :D
 
Alex P Keaton said:
yeah :)

hey we should meet up again some time!

lol you wont recognise me jaycee!! :p When did I see you last... 2008? :D
Click to expand...

any time.... I also go to the city for lunch now & then (now working on Stirling St-Nthbridge/East Perth side.... I think it was 08 when we went to the Michael Yardney seminar
 
jaycee said:
Yep getting over excited and not researching enough to know what your'e doing cause it'll be right property doubles EVERY 7-10 yrs and all that fluffy feel good stuff I read ab out on the net .... know that feeling well...
Click to expand...

Glad to know I'm not the only one then!


Also, Nemo30, regarding the house you bought for $182k in 2002, sold for $282k in 2005 and bought again for $385k in Dec 11.... you did really well out of that, it seems :) Great timing!
 
I think when I bought my ip, I did have 2nd thoughts and kind of new it would be a bit of a stretch for the first few years although I didn't realise just how much the impact it would have. Anyway the reason I went ahead was because I knew that if I ever had to that mum and dad were there if I needed a crutch. So unconsciously & consciously I knew that I had that safety net if I truly needed it. I didn't think I would need it though. I reckon I wouldn't have been so gung ho like I was if I knew my parents wern't there as a support and I would have had to be very conseravtive in my approach!

Yep I know i'm taking the easy way out and but hey like I have said in the past, and I have been honest from the get go in this forum. Family helps family and atm my parents are helping me and I'll in the future when they are retired be able to help support them financially when they need it. So its a win win! Atm though I do feel I am depending on them which I am but this will change in the future now that I have learnt from my mistakes! Everyone has to learn dont they.

Also my mental health has not been the best for the past 5 years (of which I haven't disclosed on this forum) so I have been trying to manage that and be stable. That is a large reason why I needed to invest for my future so I can have that SANF. I need to stay stress free. Good news is since I had that bad reaction to this medication I have been so happy in my moods for a month now. I hope I can string some good months together. Also I am 40 years old but just so you can understand I am more like a 20 something year old because I was undiagnosed for so many years. I am kind of just starting out and that is why I am behind in my development from other people because I have not been well. I guess... I have needed that safety and security of my parents. I'm hoping I can be more stable and manage better with my health in the future and not be as co-dependent... to be more independant. I'll get there!

2012 is gonna be a great year for me. A healthy happy year. I can feel it.

lol I never thought I would ever open up like this on this forum. Even though I am anonymous I guess I feel scared someone I know might put 2 and 2 together and realise my identity. But I'm feeling safer on here now and wanted to share.
 
jaycee said:
any time.... I also go to the city for lunch now & then (now working on Stirling St-Nthbridge/East Perth side.... I think it was 08 when we went to the Michael Yardney seminar
Click to expand...

That is just around the corner from me! 1 min by bike! I'm on holidays next week if you'd like to meet for lunch!? I'll pm you. I'm thinking end of next week. :)

lol yeah back in 2008 I was at my heaviest of around 90 - 95 kgs. :eek:
 
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