Getting Started

[WebBoard]

From: Mike .


Article 276
From: Eunice
Date: 1/6/00
Time: 5:45:21 PM

My husband and I are thinking of investing in property to create wealth, albeit very late in our lives. We would appreciate any help from the forum. Please consider the following info.

1. Our ages are 50 and 48 resp. 2. We live in our home valued at $290,000.00 with a balance owing of $70,000.00. 3. My husband is salaried and earns $55K and a car allowance of $9K and I earn approx. $22,000.00( self employed in my case). 4. We would like to continue working for another 12 years. 5. We are considering buying a unit, which was converted from a warehouse, in the Camperdown area, near the University and RPA hospital. The unit has two bedrooms and lounge/dining and undercover secure parking. 6. The cost of the unit is $275,000.00 and the property is presently rented for $295.00

Given the above info. do you think we could create wealth in that time span(12 years) and how should we go about this- buy in both our names or just my husband's. We have no children living with us.

Any help and direction would be highly appreciated.

Thanx in advance. Eunice in Sydney

 

[WebBoard]

Gee Cee

Reply: 1
From: Mike .


Re: Article 276
From: Gee Cee
Date: 1/8/00
Time: 7:24:36 AM

Dear Eunice

I certainly don't think it is to late in life to start investing in property. 40ees & 50ees is certainly not old nowadays. I started with my first property back in 1979 aged 19 so I was able to take larger risks at that age then I would like to take as I grow older & wiser. I would suggest that you educate yourself as much as possible via reading a few of Jan's books, using this Forum and just cruising around with agents checking out the area you want to purchase in. Don't get emotional about any property, there is always another one around the corner.

I would not just rush out and buy the first property I came across. Neither would I buy through a high pressure seminar environment. Also I would only believe half of what Real Estate sales people tell you.

I do not know the Camperdown area that well but know that nearby Newtown has had some amount of price increase over the past couple of years for the right type of property. Some parts are now very YUPPIE.

I own a block of units in Wollongong which is situated close to a large hospital and also the Wollongong university.

The problems that I have found with renting to students is that they usually move in around February and quickly depart around November. This can leave you with a flood of vacant units till the students come back for the next years studies. This may not exist so much in the Sydney area but it is something I would take into consideration. 3 months of no income can ruin cashflow estimates.

Also if the block of units is large and a number of other investors are renting to students you can end up with quite a bit of partying and noise. This can deter other tenants from renting or staying as tenants.

I am certainly not saying all students create noise and problems but it also must be considered. (I was young once also)

As to the converted warehouse. How many units are there and will the property require constant expensive maintenance in the future. I inspected a large similar property in Newtown that a developer had re-furbished. It had a lovely makeover but when you looked closely there were some very large cracks around the foundations.

Just another point to consider.

As well how many units are there for sale in the block and why are people selling.

Have the prices obtained been rising or dropping? How many units in the local area are vacant and To Let at present. Supply/Demand.


I still have not run through the figures yet so I will post another article soon.

Regards, Gee Cee

P.S. I am not trying to be sceptical or scare you off. I am just always very careful and like to cover every angle before committing large sums of money to any property!

 

[WebBoard]

Les

Reply: 1.1
From: Mike .


Re: Article 276
From: Les
Date: 1/10/00
Time: 7:20:22 PM

G'day Eunice,

Welcome to the forum. I agree with Cee Gee - you are certainly not too old, and wealth is still within your reach.

Jan's first book uses a couple's finances to determine when they can afford the "next one". How quickly you can accumulate wealth will depend on many factors:- The money you can afford to invest on a weekly basis, the buys you make, and the economic future of Australia.

You can directly control the first two - the other is a wee bit beyond most of us ;^)

With the unit you mention, I can comment little (I don't know Camperdown) - but consider the following "gem" I picked up from a book I read recently:-

"Buy where property has a 'forced inflation' factor built-in" - what the author (Alan Falkson) was getting at, was to buy something that you could change to produce an immediate capital appreciation e.g. buy a unit that needs TLC, and do what it needs to make it desirable. Also, he mentions as an example, take an unfurnished unit in an area of low vacancy rate, and spend a little to furnish it. As you can imagine, near a hospital, or university, people would PREFER to rent a furnished place, and would pay a premium rent to be able to do that. So you could conceivably purchase a couple of currently unfurnished units, throw in $10,000 worth of furniture, and command an extra rent to compensate.

Gee Cee also mentioned to "read all you can get your hands on" (or words to that effect). Absolutely right. And take heart from my case - I am older than you and hubby, and have just started (last year) on my own wealth-building - and I am flat EXCITED by my possibilities. My goal is to make the BIG M in 6 years !!! The real exciting bit is "It CAN happen!"

You have already grown the Equity in your home that can be your "leg up" to your future.

One other thing, the turning point for me was Robert Kiyosaki's book "Rich Dad, Poor Dad" which I read in 1998. Many things he writes don't apply in Oz, but the under-lying tenets do hold true - you just have to do them differently here. But that book has so much hope and good ideas that it burned right into this thick skull and had me search for other good books - and I found Jan's "Building Wealth" book, and (over 1999) several others that have combined to get me moving.

You and hubby could conceivably be able to buy 2 units right off the bat, or maybe more if prices are right. But take it slow - you have MANY years left to make it happen. Start with a good one, don't be in a rush, read heaps first, and plan your finances before you go house hunting.

Good luck, and let us all know how you go, too.

Regards, Les

 

[WebBoard]

Eunice

Reply: 1.1.1
From: Mike .


Re: Article 276
From: Eunice
Date: 1/11/00
Time: 7:33:17 PM

Thanx for the great info from Gee Cee and Les. This is a great forum; I certainly have learnt a lot.

Kind regards to all on this forum'

Eunice

 

[WebBoard]

Les

Reply: 1.1.1.1
From: Mike .


Re: Article 276
From: Les
Date: 2/20/00
Time: 4:58:32 PM

G'day Eunice,

I thought I'd jump in and add some extra comments that may help you.

What I (personally) did was to figure out how much income I needed to live on in the future. In my case, I needed a figure of $600k (invested to produce at least 5%) in Today's dollars. With inflation low, I have decided on the $1m mark as my goal.

Knowing my goal, the NEXT question was "How do I get there?" and with Jan's "Building Wealth" book, the How To answered itself.

Since then, I have read a bunch of books and attended Seminars to become more familiar with this new world (Real Estate Investing).

My own calculations have determined that the more you can initiate in the early days, the easier it becomes to grow. e.g. If one $200k property appreciates at 5% (or $10,000) then 3 will appreciate at $30,000 per year. That "appreciation" bit becomes important later as it allows you to borrow again to purchase more properties in the years to come.

So, my theory has been to start with 3 properties (I have 2, am looking for #3 now) then just allow time to pass. In one/two years, #4 will come, then #5. And the more you own, the quicker you can purchase more.

Of course, there is more to it - LVR comes into the equation (how much will a lender lend to you). But your figures indicate you could conceivably look at purchasing 2 IP's right off the bat.

Re your question of "who's name" - it really depends on your income. You are self employed, so I have no knowledge of your likely Taxation position. With a salaried worker, it's easy ;^) Anyway, consider that you have several options. One is hubby's name only, (or go 99%/1% as my wife and I have done), or joint (IF you are paying Tax). Remember that if you pay little/no Tax, then it should go mostly into hubby's name.

With that 99%/1% business, there is no reason you can't specify (say) 80%/20% if you wish - but the norms are 99/1 or 50/50 or 100/0.

Re "can we be wealthy" - that really is like "How long is a piece of rope" - but let me say that this path will get you there, but in the early years, it appears S-L-O - W and can have you "ditch" it just when it's starting to work. Example: If you plan to make $1million in 10 years, half of that will grow in the LAST 2 -3 years - so don't get impatient if it takes 7 - 8 years to achieve $half million !!!! It depends on your starting point.

Hope this helps, Les