Finding it a tad overwhelming

Hello,

I stumbled across this forum when trying to research investing in property and am very glad I did, the last few weeks of reading have been very helpful to say the least.

I am hoping someone may be able to provide some suggestions/information or point me in the right direction as the more i read the more overwhelmed and confused I think I am becoming. :eek:

My situation is that my partner and I and our three kids (aged 5yrs and under) currently rent in Sydney, a home that is owned by a close family member. The family member plans to use the home as retirement income with no plans to sell for at least 20years or more. We are in a good area where we like to live and the kids will go to school soon etc.

We have no debts and have savings now just over $80,000

After speaking with our accountant at tax time he suggested we look at propert investing as my partner is sole provider (with me a SAHM) and he said it could help reduce tax and build on our financial position.

After some initial reading, we have reached the conclusion that we should definetly buy an IP and despite the book I read indicating that you should always by your PPOR first, i think given our situation above that may not be applicable ??

What I am having some trouble with is that I keep hearing the terms 'research' and 'due diligence' being used regularly (rightly so), but am having trouble working out how to effectively reasearch an area and then how to "do the sum's"

I have managed to find some sites where you can view CG info in a basic form but was hoping someone experienced may be happy to shed some light on what steps you should take to investigate an area and how to work out what the return of investment would be in different scenario's.

Thankyou in advance for any info or advice it would be most appreciated by this self confessed novice:)
 
After some initial reading, we have reached the conclusion that we should definetly buy an IP and despite the book I read indicating that you should always by your PPOR first, i think given our situation above that may not be applicable ??

Did the book actually say to "buy" a PPOR first or pay down the loan on it, if you have one, first?
Big difference.
I don't have a PPOR. Probably never will as I plan to travel OS in the future. I also find renting where I live to be tax effective and allows me to have all my debt totally tax deductable.
If I were you, I'd be looking at various strategies, work out which resonates with you and just go for it.
Houses vs Medium Density dwellings
Inner suburbs vs Outer Suburbs
Build New vs Buy Old
Buy and Renovate vs Buy near new and do nothing ...
The lost of options goes on and on.
There's no right or wrong, only what's right for YOU given your objectives, circumstances, risk profile and lifestyle.
Good luck and enjoy the forum and the journey.
 
What I am having some trouble with is that I keep hearing the terms 'research' and 'due diligence' being used regularly (rightly so), but am having trouble working out how to effectively reasearch an area and then how to "do the sum's"

Hi Cookie :)

For due dilligence, here's a start:
1. Web-sites:
a. www.apm.com.au
b. www.myrpdata.com.au
c. www.realestate.com.au
d. www.residex.com.au / www.findmeahome.com.au
e. www.homepriceguide.com.au
f. www.domain.com.au
g. www.propertyvalue.com.au
h. http://www.lands.nsw.gov.au
i. http://www.eac.com.au
j. http://www.onthehouse.com.au
k. www.htw.com.au
l. www.sqmresearch.com.au
2. REI in the state
3. Lands Titles Office
4. Australian Bureau of Statistics
5. Local council

Analyse the above for data about:
1. Sales history on the individual property (if available)
2. Sales trends – i.e. prices trending up, down or sideways?
3. Days on the market to sale
4. Withdrawn from sale properties
5. Level of discounting from initially advertised selling prices
6. Population demographic:
a. Population size
b. Age stats
c. Family compositions
d. Type of dwelling
e. Nature of occupancy – owned / rented / purchasing
f. Transport to work
7. Covenants / easements / zoning / flood affected? / proposed developments in the area / renovations undertaken
8. Methods of sale – auction or private treaty
9. Clearance rates on auctions
10. Vacancy rates
11. Median rental values
12. Availability of public transport
13. Locations of schools, shops, shopping centres, hospitals, parks & playgrounds, airports, libraries, medical centres, aged care facilities, places of worship
14. Area sewered or unsewered? Natural Gas available? ADSL / wireless or cable internet available?
15. Town water / tank water / bore water available?
16. Heritage Listing

And that's just a start (not a comprehensive list) - you get the idea.
 
If the above is overwhelming - why dont you focus on an area not fra from where you live. You could always buy a smaller 2 bed unit nearby.
 
ahhhh hahahaha - a 2 bed unit with 3 kids under 5 ... if they were buying a PPOR then you'd be funny, toony. :cool: although, i would have thought that for a first time IP, looking in your backyard would be better because you know the area better....?

i would avoid those spouting negative gearing as a way to save tax.

if i were in your reasonably envious situation (no debt + $80k in savings) i would be looking for a new(er) property in a solidly performing area with a sole use land component (ie no high rise stuff).

being new(er) will have a higher depreciation value which should offset a lot of of shortfall between rent and outgoings - may only end up costing $50 or so a week after everything is taken into account. your annual CG should cover $50 a week no matter where you are!!!

to me, that's acceptable. those saying $200pw neg geared for the "tax benefits" can go jump.

to be honest - a lot of mega rich folk refuse to own their home. they see it as bad (or non-deductible) debt. i see it as an asset because it grows and provides capital to purchase more.
 
Hi Cookie :)

For due dilligence, here's a start:
1. Web-sites:
a. www.apm.com.au
b. www.myrpdata.com.au
c. www.realestate.com.au
d. www.residex.com.au / www.findmeahome.com.au
e. www.homepriceguide.com.au
f. www.domain.com.au
g. www.propertyvalue.com.au
h. http://www.lands.nsw.gov.au
i. http://www.eac.com.au
j. http://www.onthehouse.com.au
k. www.htw.com.au
l. www.sqmresearch.com.au
2. REI in the state
3. Lands Titles Office
4. Australian Bureau of Statistics
5. Local council

Analyse the above for data about:
1. Sales history on the individual property (if available)
2. Sales trends – i.e. prices trending up, down or sideways?
3. Days on the market to sale
4. Withdrawn from sale properties
5. Level of discounting from initially advertised selling prices
6. Population demographic:
a. Population size
b. Age stats
c. Family compositions
d. Type of dwelling
e. Nature of occupancy – owned / rented / purchasing
f. Transport to work
7. Covenants / easements / zoning / flood affected? / proposed developments in the area / renovations undertaken
8. Methods of sale – auction or private treaty
9. Clearance rates on auctions
10. Vacancy rates
11. Median rental values
12. Availability of public transport
13. Locations of schools, shops, shopping centres, hospitals, parks & playgrounds, airports, libraries, medical centres, aged care facilities, places of worship
14. Area sewered or unsewered? Natural Gas available? ADSL / wireless or cable internet available?
15. Town water / tank water / bore water available?
16. Heritage Listing

And that's just a start (not a comprehensive list) - you get the idea.

Wow, you take this investing bit serious !!! :)
I look at various sites, and a property just kinda jumps at me, and then I try to figure out how to make the most money with it.
Most times I'm not really looking for anything, just wanting to keep current, and sometimes a bit bored.
 
Wow, you take this investing bit serious !!! :)
I do - yes :). I have to bear in mind that I am responsible for spending $M's of my own & clients' money and that this is very often part of a retirement plan or wealth creation plan for them.

I look at various sites, and a property just kinda jumps at me, and then I try to figure out how to make the most money with it.
Most times I'm not really looking for anything, just wanting to keep current, and sometimes a bit bored.
Whatever works for you kathryn is fine by me. You have the runs on the board ;)

Some of my best deals were done over Christmas & Easter holidays when I was a bit bored too. Very little competition from other purchasers, motivated vendors and REAs that did not want to be dragged away from their family time but did it anyway :p
 
Welcome Cookie,

Some people delay buyng their IP and ever getting ahead for absolutely years, even decades because they are so worried about getting it wrong and not finding "the right" property.

One persons due dillegence will differ from anothers version of due dillegence.

You will get lots of advice and some of this may even confuse you more. If you want to keep it simple for the first IP, here is some basic advice.

My basic rules:

1. No main roads.
2. No Rural.
3. No industrial areas. (Residential)
4. Suitable Public Transport and Infrastructure such as choice of schools is a must.


Narrowing down the numbers.


Purchase Price x Interest Rate =A

(A- Rent) + Management Fees + Rates + Insurance + BC Fees= Net Return on Property. (pa)

I have not factored in depreciation or Negative Gearing as too many other details are needed. All you need to know about these two are that they will benefit you in the short term.:)

I hope this helps. The above is a very crude guide to working out your return.

Keep it simple if you find it all too overwhelming.

Regards Jo
 
Thanks so much for the quick replies!

That list is great Propertunity, many thanks for all the links this is definetly the sort of info I was after.

BlueCard, I think trying to work out who's advice to listen to is the hard part at the moment. The accoutant put us in contact with a developer that he bought his own IP through. The worry there is that based on the accountants numbers we could afford the extra weekly payments due to the negative gearing but would use all of the $80k in savings and I just don't feel comfortable with a young family having no cash buffer.

We currently live on the north shore but the end of the line before the coast. So nowhere in our neighbourhood is in the price range unfortunately.

We were initially considering the central coast (due to proximity) but initial research didn't look positive? So were thinking of looking at a regional centre instead....

Was hoping as a first-timer to ease into investing and see how our first goes with a smaller commitment?

The options are driving me a bit nuts to be honest, if you feel out of your depth who's proffessional advice can you rely on? Is the accountant impartial? The financial planner told us to forget property and invest our money (surprise,surprise) just no idea where to start and how to go about things.
 
Thanks so much for the quick replies!

That list is great Propertunity, many thanks for all the links this is definetly the sort of info I was after.

BlueCard, I think trying to work out who's advice to listen to is the hard part at the moment. The accoutant put us in contact with a developer that he bought his own IP through. The worry there is that based on the accountants numbers we could afford the extra weekly payments due to the negative gearing but would use all of the $80k in savings and I just don't feel comfortable with a young family having no cash buffer.

We currently live on the north shore but the end of the line before the coast. So nowhere in our neighbourhood is in the price range unfortunately.

We were initially considering the central coast (due to proximity) but initial research didn't look positive? So were thinking of looking at a regional centre instead....

Was hoping as a first-timer to ease into investing and see how our first goes with a smaller commitment?

The options are driving me a bit nuts to be honest, if you feel out of your depth who's proffessional advice can you rely on? Is the accountant impartial? The financial planner told us to forget property and invest our money (surprise,surprise) just no idea where to start and how to go about things.

The only advice you can rely on is from those that have gone before you.

The accountant may recieve a commission for referring you. You can ask him.

Financial Planner?:eek: Say no more.

One more thing: Why NG when the market is right for something more Neutrally Geared or Positively geared? I think you are right in sticking to an Investment that doesn't use all of your savings. Good for you.

Have you looked at Newcastle? It is not too far from you either.

Regards Jo
 
Hi Cookie,

Please keep posting here and you'll learn much more than just reading from the sidelines. Seriously!

I'm formerly from North Narrabeen so know the area you live in very well. I also love helping new investors out where I can so love to hear from people like you getting started.

Here's my humble thoughts on how you might move forward.

I presume you've already answered the WHEN question:

Given you've made the call to buy now I don't think you need to do much more in this space. I agree its a good time now, but understanding the property clock and market cycles will help ensure your timing is good through future cycles. Some of this will be picked up in your education under the next "why" heading anyway.

So now, start with WHY:

Try reading a good book like Peter Spann's $10M portfolio in 10 years. Also, if you haven't read the basics around investment mindset then definately pick up an old copy of anything by Robert Kiyosaki, they're all the same. Rich Dad, Poor Dad is the obvious starting point.

Then understand WHERE:

Now you know enough to ensure you don't buckle at the first setback and understand the basics of compounding growth, inflation, leverage and OPM. From here I suggest paying for a few reports on "where to buy". These are available from Terry Ryder, Residex etc. I haven't bought these but get most of my where to buy from SomerSoft or from monthly mags like Australian Property Investor (API).

Then figure out WHAT:

When you've narrowed it down on where you're going to invest, now the rubber has to hit the road. Get out in your new shopping ground and get around all the different agents and attend opens and auctions. Get a feel for the area and understand what is and isn't good buying. For this reason, I suggest buying close to home if you can afford to as this allows you to physically assess the suburb you're going to invest in. I know of some people that do all their "what" research over the web and trawl through sites like realestate.com.au You can do it, but nothing beats boots on the ground hands on knowledge.

It will take quite a bit of time to find the property that meets the required conditions for a good investment. The "where" research should ensure you're on a winner anyway, but the following considerations help make the "what" decision accelerate your growth:

1. Potential to add value: Can you give it a good clean or some minor works and increase its valuation and rental potential. Is it on big land that can be subdivided or redeveloped in the future.
2. Rental yield. Does it rent well for what you're paying? The better the yield, the sooner you can add to your portfolio again.
3. Proximity to desirable aspects. The "where" above should mean the suburb is a good one, but within the suburb there might be good and not so good areas based on things like the beach, shopping centres, public transport, schools, cafe strips, future developments etc. Know where these are and whether they add or detract from your specific house's future value.
4. Motivated seller. Nothing makes for a better deal than a seller who wants to move the property and move it cheaply. As the person on the other side of this emotion, you can get a good property for less than its true market value if you've got someone keen to sell for whatever reason. Part of this is knowing their motivation and involves asking a few pointed questions around time on the market, reason for selling, deceased estate?, mortgagee in posession? etc.

Then seal the deal with the HOW:

Your readings at the top should give this to you. But talk to any one of the good brokers online here around financing it and they should also help with any concerns around the sale process, contract conditions and exchange, conveyancing, settlement and finally letting the property.

Don't overcomplicate it and you'll find its a lot easier than you thought. Keep posting and asking questions and you'll find an enthusiastic crowd here willing to help you along your journey. We love celebrating other people's successes vicariously! :D

Welcome!

Cheers,
Michael
 
Thanks again for all the comments, its great to get some perspective.

Thanks Josko for the breakdown on return of investment sums and also for the suggestion of the Newcastle area, I don't know much about the area or suburbs there at all but will head off shortly to search for info.

I have been leaning towards trying to buy with either neutral or positive cash flow as this may suit us more at the moment. The unexpected costs that crop up with 3 small kids I think I would feel more comfortable with as little weekly outlay as possible.

The other question I have is that I have noticed people talking about employing buyers agents, how does this work? I have no idea what sort of ball park their fees are but can these be claimed as a tax deduction and is it worthwhile when investing in lower cost property or only when more substantial amounts are involved?

MichaelW, thankyou for the warm welcome and for your suggestions and imporatant advice to not overcomplicate things, keeping things in perspective and not getting bogged down in all the info is definetly a challenge! Thankyou for the reading suggestions too, will hit the library with the kids tomorrow:)

Michael you did get me thinking about the WHY invest question. I think for us, living on one wage so I could be a stay at home parent while the kids were young is important to my partner and I. This means we can't afford to buy where we would want to live. I think by continuing as we have been just saving, I fear we won't 'keep up' with the market and when we do return to a double income we will be behind the eight ball before even starting. I am hoping that by investing, even in something small now, it may help us to tread water with the growth or even better to possibly move ahead (its good to be optimistic right?) so that down the track we will have more choices and options available to us.

Thankyou again for taking the time to reply!

Ok back the search function.....
 
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