First investment, scared!

Hi all,

Firstly, what a great forum! There's a wealth of knowledge here!

After reading a lot of property investment magazines, I'm looking to buy my first investment property in Melbourne. Now that (I think) I've understood all the technical jargon and procedures, I want to take the first leap :)

We're a newly married couple (no kids), I'm the sole income, roughly 100K p/year, and have a loan of about $330,000 on our PPOR. Original loan amount was initially 380K, so we're ahead.

Baring in mind I'm a total newbie to all of this (hence some questions may sound stupid):
- How risky is it to invest using the equity on the PPOR?
- If you use equity on your house, does that effect the portion of loan that I've already paid off?
- The golden question:
Any tips on where to buy in Melbourne for a first time investor? I know anything close to the city is good (i.e. Brunswick, Coburg, Moreland), but I don't want to risk it too much yet.
Hence, looking at an entry level property, in the low 300K mark. I was looking around Melton (Brookfield) area, but I'm not sure if there's an oversupply of new housing there. Vacancy rates are at 5% (too high?) and about 960 houses on the market in that area.
Any other areas to look at?

Thanks all,
Oz
 
Hi,

Please make sure borrowing and loan structure are setup correctly.

Melbourne market isn't moving much so if you are looking at CG property, you need to look at something you can Reno/subdivide/develop.

there was a thread on forum about "Berwick, Beaconsfield or Cranbourne areas"

someone on that thread suggested that "you can buy bigger block in cranbourne and build one at back" (So if organic CG doesn't happen, you can manufacture it)

having said above, i am not from melbourne and not too sure about area.
 
How risky is it to invest using the equity on the PPOR
- If you use equity on your house, does that effect the portion of loan that I've already paid off?

Yes. You should setup a LOC to aceess available equity then use this money as a deposit to buy new house with a different bank. DO NOT CROSS COLATERLAISE, there are horror stories ATM of certain banks forclosing on very wealthy customers due to change in policy.

- The golden question:
Any tips on where to buy in Melbourne for a first time investor? I know anything close to the city is good (i.e. Brunswick, Coburg, Moreland), but I don't want to risk it too much yet.

Nope - Do your own research, don't belive the news or well intentioned friends. Many hotspots are mearly created by developers to move property. I would encourage you to look for a neutral or positivly geared property for your first purchase, this will allow you to contiune investing in more houses if you choose to do so.

Don't rush your decesion, there is always another deal.

Also from these questions perhaps you should engage one of the experinced motgage brokers on this site. A good broker / strategist will make huge difference. You need to know what the value of your PPOR is to then be able to calculate available equity at 80% LVR for your deposit. So to purchase a property at 300k @ 80% LVR you will need 60k + stamp duty, bank fees, lawyer etc. Best to get all this figured out even before looking, that way you know how much you can spend
 
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Hi all,

Firstly, what a great forum! There's a wealth of knowledge here!

After reading a lot of property investment magazines, I'm looking to buy my first investment property in Melbourne. Now that (I think) I've understood all the technical jargon and procedures, I want to take the first leap :)

We're a newly married couple (no kids), I'm the sole income, roughly 100K p/year, and have a loan of about $330,000 on our PPOR. Original loan amount was initially 380K, so we're ahead.

Baring in mind I'm a total newbie to all of this (hence some questions may sound stupid):
- How risky is it to invest using the equity on the PPOR?
- If you use equity on your house, does that effect the portion of loan that I've already paid off?
- The golden question:
Any tips on where to buy in Melbourne for a first time investor? I know anything close to the city is good (i.e. Brunswick, Coburg, Moreland), but I don't want to risk it too much yet.
Hence, looking at an entry level property, in the low 300K mark. I was looking around Melton (Brookfield) area, but I'm not sure if there's an oversupply of new housing there. Vacancy rates are at 5% (too high?) and about 960 houses on the market in that area.
Any other areas to look at?

Thanks all,
Oz

Hey Oz,

My advice would be to understand what you want to gain from purchasing an IP
do you want growth, cash-flow, development opportunities. do you want to purchase just 1 IP or do you want to purchase more for an earlier retirement?

once you know the reasons then you can develop a strategy and say for example its cash-flow your after you can look for strong suburbs with good yield potential.

For my first IP it was more or less the first i looked at, and i didn't really know what reasons i was buying it for, other than the fact it was a 'investment property'. luckily it turned out to be what i think is a good purchase but in hindsight now i know how important it is to have a plan in place before you purchase, get advice from experts in the field and also research yourself.

cheers
blair
 
Hence, looking at an entry level property, in the low 300K mark. I was looking around Melton (Brookfield) area, but I'm not sure if there's an oversupply of new housing there. Vacancy rates are at 5% (too high?) and about 960 houses on the market in that area.
Any other areas to look at?

A vacancy rate of 5% is extremely high at this point in time. There's clearly little demand so you're unlikely to get good rental returns and getting rental increases in the future is going to be difficult.

Melton has never had very good growth either. It's regional public transport, plenty of land so almost unlimited supply, the only truely decent school in the area went bankrupt a few years ago. There's essentially nothing to drive up property values in the area.

It's probably out of your price range, but I'd be looking to suburbs within 20km of the CBD but I'd avoid the West (unless you're going closer to the CBD) and some parts of the north. Other than this, perhaps look interstate or regionally.

Unforutnately the hardest part about investing is often figuring out where.


There is certainly risk in using the equity in your PPOR to invest, but with proper loan structuring this can be easily mitigated. I'll repeat underdev's waring, DO NOT CROSS COLATERLAISE. It's not going to be of any benefit to you at this piont in time and will potentially get in your way in the future.
 
Thanks Blair! Yeah, an early retirement is what we all dream of I think, but to be honest, I would love to do this as a job once I get my head around where to start, and a good time to leap into it! I just read an article 2 minutes ago saying Melbourne's at it's worst:
http://www.yourinvestmentpropertymag.com.au/article/melbourne-delivers-worst-city-yields-174859.aspx

Yip but this article refers to Melbourne city, there are some regional areas in Victoria that offer great yields and have low entry prices. Melbourne does have a lot of market on stock at the moment goes hand in hand with lower yields and higher vacancies but this means aswell that buyers have more bargaining power to find the right property at the right price.

cheers
blair
 
but to be honest, I would love to do this as a job once I get my head around where to start, and a good time to leap into it!

Based on what? You've never done it before, and you don't know what it involves. Right now you're just looking at the TV thinking 'must be cool to be an ice road trucker' or something.

Slow down. Learn the basics. You might find that a lot of investors might just work their day job while building up investment income. It doesn't have to be quit your job to actively invest full time.
 
When markets are at their worst can sometimes be the best time to buy. You want a market that is desperate, willing to negotiate and open to flexible settlement terms.

I think number one you need to see/talk to one of the brokers here to work out your options and your serviceability. That will help determine your budget then you can decide how much of that to spend and what those buying options are.
 
Hi all,

Firstly, what a great forum! There's a wealth of knowledge here!

After reading a lot of property investment magazines, I'm looking to buy my first investment property in Melbourne. Now that (I think) I've understood all the technical jargon and procedures, I want to take the first leap :)

We're a newly married couple (no kids), I'm the sole income, roughly 100K p/year, and have a loan of about $330,000 on our PPOR. Original loan amount was initially 380K, so we're ahead.

Baring in mind I'm a total newbie to all of this (hence some questions may sound stupid):
- How risky is it to invest using the equity on the PPOR?
- If you use equity on your house, does that effect the portion of loan that I've already paid off?
- The golden question:
Any tips on where to buy in Melbourne for a first time investor? I know anything close to the city is good (i.e. Brunswick, Coburg, Moreland), but I don't want to risk it too much yet.
Hence, looking at an entry level property, in the low 300K mark. I was looking around Melton (Brookfield) area, but I'm not sure if there's an oversupply of new housing there. Vacancy rates are at 5% (too high?) and about 960 houses on the market in that area.
Any other areas to look at?

Thanks all,
Oz

Oz, what and where to buy is dependent upon your chosen investment strategy.

You see property is merely the vehicle. The strategy is how you intend driving that vehicle.

Unfortunately the mistake I see newbies and sometimes not so newbies is that they are property focused instead of strategy focused which is like putting the cart before the horse.

Property investing is not about property rather about the strategy and the way you intend to use the vehicle to get to where you are wanting to go. No good buying a small shopping car if you intend taking it interstate on a family holiday.

Which strategy/s are best for you is determined by where you are wanting to go, the time frame you want to get there in and how hands on you want to be along the journey - all based around your personal risk profile.

I hope this provides some food for thought.

What is your chosen investment strategy?
 
I was very scared with my first IP but in retrospect it was very low risk. So my advice is to find a 2 bedroom unit in small block near public transport. Do you r research and find out where the low vacancy rates are. Capital gains may be slower in Melbourne but will be easier for you as you would know the areas. Check all the body corporate minutes and finances to make sure there are funds in the maintenance kitty and no major works about to be undertaken. Purchase a unit which requires some tidying up, maybe new carpet, curtains and painting but is structurally good.

I have a small house 30K from Melbourne DBC which has never been vacant as it is close to transport and in good area but not close to CBD obviously but for a First IP, I would go for a unit close to CBD as you can't go wrong with this even if you no great capital growth for a while. If you are serious about investing, then you are in for the long haul. Definitely get your equity from your PPOR and have it designated as investment Line of Credit, then you have your deposit and get pre-approval for the rest of loan (from different bank) and then you will have bargaining power when putting in offers.
Happy hunting.
 
Just as an update for all of those people saying Melbourne isn't moving:

According to the latest Westpac MI release on Monday and then by Commsec as well CPI indicates that Australian housing has grown by 1.7% in the last quarter with Victoria leading the way at 4.7%.

With that said I can't stand generalized statistics as markets are made up of micro markets.

may i just ask if people are giving advice about growth, yield or otherwise can they at least source their info :)
 
lol! The ever familiar Rixster post to budding newbies in investment property :cool:

The ever familiar 7smurfs reply miss spelling Rixter lol :cool:

Seriously though, you will be amazed how many times I see people putting the cart before the horse. There is a higher purpose to property investing. Its the biggest misconception I see.
 
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