How well-informed were you before entering market?

Crystalleez

Crystalleez

Evening everyone,

This is my first post on the site. I must say it's full of useful information and I've found my self logging on every day reading over previous threads.

I'll start the post with my question, as to hopefully keep your attention...
When you purchased you're first IP, be it residential or commercial, how educated were you with you decision? Was ignorance bliss and you got lucky? Or did you spend months studying before taking the plunge?

The reason I ask is this...
I'm another newbie to property investment, yet to purchase my first IP. ("Not another one!" you say :p) I've seriously knuckled down over the past 8 months, spending 90% of my "free time" reading as many books on property investment as I can get my hands onto, listening to audio tapes, trawling through websites such as this, you name it.

I feel like I've hit a brick wall, or should I say, “information overload”. I've learnt soo much over the past few months, just from reading alone. I'm streets ahead of where I was. However it's begun to dawn on (and frustrate) me, that the more I learn, the more I realise I have so much to learn!!

I find learning about investing in property exciting as all hell but at times, also daunting. There is of course (amongst many other's) the following basic but fundamentals to consider..
-where to invest
-what stage Victoria is in the property cycle compared to other states
-individual suburbs current place in the property cycle, (and how to figure this out :S)
-which areas will experience the best CG in the shortest time frame
-the type of loans available etc etc etc! And the list goes on.

With such contrasting views on every issue, it’s doing my head in.
Any who...so again my question is this.... Looking back, how much did you know about property before entering the market?

So sorry if this question has already been asked. I couldn't find a thread to get my answers to I decided to ask myself.

Regards,

Crystal
 
Crystal, welcome to the forum!

I did similar to you. In my case there was a gap of about 4 months between deciding that I could do it and the first purchase. Then 6 months to No 2, another 6 mths to No 3 and then a gap.

Some people say you need a strategy or vision before you start, but one can also just muddle along. You will have read enough motivational stuff to evaluate this for yourself.

As for translating it into action, I'd be examining your own resources (spare time, financial capabilities etc) and aims to work out which investing approach is appropriate.

It sounds as if you've read enough about the 'big picture'. This is often talked about in books and on this forum. On this level you may be overanalysing things.

But I am increasingly seeing a 'small picture' level that is also important.

And this isn't necessarily consistent with the 'big picture' in the books, which are written to be broadly applicable across the nation.

For instance the big picture might be that demographic change is reducing demand for large houses in far-flung suburbs. But if you find a large house in a very handy pocket of an outer suburb and it's priced well below its neighbours (the small picture stuff) and there is known high tenant demand then it could still be a good buy, even if hardly anyone thinks the suburb will be a star performer.

Information about the micro stuff is highly fragmented and often only in peoples heads or their private records. Even this forum gives only an inkling of what is out there.

This micro-level stuff is spacially and temporally specific. It is extremely labour-intensive to gather and could be useless in the next suburb or next month. But it is extremely important for the here, now and the property you're going to buy.

Some examples:

* Travelling around and looking at home opens (including listening in on the small talk you hear around these) could help guage sentiment.

* Can you look at a house and estimate a price that is (a) a bargain (b) reasonable and (c) overpriced?

* When you go past a for sale sign, do you ask questions about the property behind it?

* Whereas the renovating homeowner might ask what can they do for the property (and proceed with all sorts of grand plans), the investor might ask what this property can do for them. They then do some figures and see if their 'crazy scheme' makes money or not. Or, as if often the case, the property may need to be below a certain price for it to work.

Peter
 
If you're financially in a position to invest in Melbourne property now, I wouldn't wait too much longer. From you're reading, you should now know where we are in the property cycle. Spend time now getting your investing structure in place, finding an accountant, mortgage broker, solicitor, and clarifying your investment strategy. Then, buckle up, and get out there.

If on the other hand, you don't have enough equity or cash for a deposit on a property, or don't have a regular income stream to service a loan, then there's no harm in continued study in relevant areas, until your financial situation improves.

GSJ
 
I did not know as much as I do now, after twenty five years plus as a full time investor. In some ways that was a plus because if you know the things that can go wrong sometimes you won't make a start.
Learning is of great benefit, but investing cannot mastered from books any more than you could know about human relationships living by yourself on an island with every book at your disposal.

Two things you could do if you have not already,
1) Join a local property investors group and meet people doing what you wish to do in your area
2) Get out into the market and set yourself a goal to view and analyse 100 properties in the next 6 months. Long before you reach this number you should have a very clear idea of what a bargin will look like when you find it.
When you find the bargin, buy it and standby for some real learning.

It's easy to be an investor on paper, but when it is your own real money emotion as well as facts and figures comes into play. That's when things can get interesting!

After many years I am still learning and enjoying the experience. I will never know it all. I read many business books a year (this is a business) and go to hear speakers.

One other tip. At least at the start I would recommend looking close to home so that you can view many properties without great expence of travel and time. There are always diamonds in your own backyard.
 
G'day Crystalleez,

However it's begun to dawn on (and frustrate) me, that the more I learn, the more I realise I have so much to learn!!
Click to expand...
It seems you have already learned a good amount. Try looking at things this way - are you now BETTER PREPARED than you were a few months ago? (I presume "Yes"... is the answer)

Then perhaps it is time to actively start looking, while still learning "just a bit more" when you have the spare time. It might still be 2 or 3 months before you FIND something that suits. But, you're moving on.

Give it a go. You might not end up with the property you might buy in 20 years time (with more knowledge to draw upon) - but at least you "get on the train". As long as you catch the train, you can always change carriages later.

If the numbers you have show that "it can work" (and you've convinced yourself that you've covered the basics) then - why not give it a go? You may not find "the best deal" straight up - but you could end up with a "good little earner" (and learn a lot in the process). The next one is then easier, then the next, ... and the next ......

Good luck with it. Don't wait until all lights are Green before starting, or you may never start. And welcome aboard the SS SS (Steamship Somersoft :D )

Regards,
 
Didn't know what I din't know- so just went out and purchased a property I liked after looking at a large number with a few REA's over a period of a week....then flew 3,000km back home

Rented it out for a few years until I moved to the City and then lived in it for a while

Still learning now and always...........
 
Fortune Favours the Brave!

Hi Crystaleez

Welcome to the Forum!

'Analysis Paralysis' can stop you in your tracks.

I bought my first deliberate investment property in August 1994 simply because it was there.

Drove past it nearly every day on my usual run, took me a while to realise it had the largest For Sale board that I had ever seen in the front garden (doh!) rang the Agent, stepped inside and said 'Yes, thanks, that's OK'. Took him a few minutes to realise that meant I was buying it!

It's been a little ripper! Never empty, always strong rental returns, lots of neighbourhood improvements over the past 12 years, I get all warm and fuzzy every time I drive past it! Haven't been inside for a few years now and won't be for at least another three as it has just gone out on a three year lease.

Regarding your questions:

-where to invest

The diamonds are usually in your own backyard. Have you had a good look around your own suburb?

-what stage Victoria is in the property cycle compared to other states

Sorry, never taken much notice of cycles, can't help you there. The Mission Brown wonder has gone from $105,000 in 1994 to about $320,000 in 2006, that'll do me

-individual suburbs current place in the property cycle, (and how to figure this out

We tend to buy in clutches, they've all done well. Don't really have an opinion about other areas, I'm sure they've done well, too.

-which areas will experience the best CG in the shortest time frame

Crystaleez, if we knew that we'd be laughing (instead of feeling warm and fuzzy)

-the type of loans available

Types of loans are like models of cars. The car is a means of transport, the loan is a financial tool. No one in their right mind wants a mortgage loan (I have lots, but then again I'm not very bright!), but they are very useful gadgets to lever your way to wealth.


Don't get too hung up on all the technical stuff. You can be an expert but remember that the only property of any benefit to you is the one with your name on it. You will learn as you go along.


My darling No: 1 Son saw a Life Insurance consultant this week, the same gentleman who wrote the policy back in 1984 when Son was but a babe in arms (well, a robust three year old but that's another story). That's good, he had an interesting conversation discussing life policies, investment policies, etc. At the end of the interview, No: 1 Son says 'Well, Fred, what sort of investments do you have?' and Fred replied (with a laugh), 'Well, I like to spend my money' and proceeded to talk about the cars he has bought and the holidays he has taken.

Great, good on him. Meanwhile, No: 1 Son bought his first property at 16 & half (from working at Bi-Lo on weekends) and his second at 21 (before he went to Uni for two years) and is now (at 24 & half) actively looking for his third (working full time and establishing his own business in his spare time).

As Y-man says, just go and do it, saves mulling over things. Redwing says he just went and did it. I walked in the door and said 'Yes, thanks, that's OK'.

I’ll be putting an offer in on another one this weekend – well, one more won’t hurt! Bit of a dog’s box, nothing that 30 litres of paint won’t fix.

Crystaleez, give it a go. Never mind cycles and data and statistics. Pay too much, pay too little, buy a lemon, buy a gold mine. You won’t know for another ten years, anyway, whether you have bought anything worthwhile, so may as well get some practise in now and by the time ten years is up you will have ten of the darn things and get all warm and fuzzy each time you drive past the first one.

And no, I am not being flippant. It is important not to make too much of this. It is, after all, buying a property, not getting married. It is bricks and mortar and yes, you will borrow money to do this, but apart from looking after your own best interests and behaving sensibly do not take it too seriously.

Property is the greatest game on earth. It is genuinely lots of fun. It will genuinely make you wealthy provided that you buy something half way decent in a reasonable area where other people want to live, do a reasonable job in maintaining it, and keep it for the long haul.

Actually, forget about the half way decent comment. I have an habitable house in borderline condition shared with three families of possums but it has tenants and has still shown good growth since I bought it due to the land value. When I bought it it was just an old house covered with asbestos, now it is a three townhouse development site.

This hasn’t come up on the forum for a while, but reading John T Reed’s story of his first property is always worth five minutes www.johntreed.com – his first purchase (after months of searching) was the first property he saw – a run down house jammed in between two commercial properties, one of which was a credit union.

After only about two years the credit union offered to buy this property from him for an amazing price, and they promptly knocked the old building down and used the site as access for their drive-through teller.

He had no idea such things could happen! Well, John, they can and they do. But to benefit from this windfall he had to own the dumpy old house to start with!

So, Crystaleez, don’t worry too much and don’t wait too long. The first is a bit of a trial purchase, over time you will buy a bit of everything.

Good luck, and remember, Fortune Favours the Brave!

Cheers

Kristine
 
next to nothing.

I had read Jan Somer's book more wealth in real estate

I had some friends who had just bought their first IP. they lent me the book. I then rang another friend who I know had done it and i asked "who, what, where, when, how" I knew the why.

I then went out and looked at some properties I'd seen on the net and put a contract down! (this is after 2 weeks).

My job was suddenly made very dicey (just as I was about to send the signed contract fax) and I had to pull out of the contract (well, I didn't have to after all but anyway)

4 weeks later, I went to buy the same house, and as I was driving there the RE A rang me - it's sold sorry!

So I went to the complete OTHER end of town and have enjoyed 74% capital growth in 3 years, and 64% rental INCREASES. Now it's yeild is 9.33% Gross on initial purchase price.

I made some mistakes along the way but am refining and doing, refining, learning, doing.

A few things I've been told which you might find useful:

It's hard to steer a parked ship.

It's better to take action, rather than NO action.
Even if you don't make as much as some people, focus on the goal (the WHY) and ask all the who, what, when, where, how on this forum and books etc as you are going.

A synopsis.
Well done on the reading and research! It will help you enormously, if not just to understand the language.
Now: Get amongst it.


Cheers
a/c
 
I am still learning myself and bought the first property because it was a good idea at the time. The only research that I wish I had focused more on at the time was the accounting side. I wish I had gone and sat down with an accountant who was into property and discussed how to structure things and what records to keep etc etc. The $$ you spend v's what you can save by setting things up correctly in the first place are worth the time and effort.
 
Hi Crystalleez & welcome to the forum.

I purchased my first I/P not long after paying off the loan on my PPOR.

At the time, I didn't do a lot of research etc, although I had gone to a couple of seminars.

For me, it was just a case of knowing that over a long period of time, house prices had gone up consistently.

Since the first purchase, I've read heaps, done a few more seminars and learnt heaps from this site which has given me the knowledge and confidence to buy more I/P's.

I think if you waited till you knew it all, you wouldn't buy as there is always new things to learn and your ideas/goals may change in the future anyway.

Once you have researched your area/s to buy in and have everything in place (finance, structure etc), start looking for that property that fits your criteria and go for it.

I wish you well.

Regards
Marty
 
like others - in hindsight i knew nothing when i first bought. i'd read one book on investing (and about 100 since) and it seemed like a logical path to go down.

i must admit we have done well buy (orginally) accidently buying property that could be extensively improved upon - subidivison and major non-structural reno - and have continued down that same path but refining now into small developments.

if you have read dolf de roos you may recall him saying something along the lines of "it takes 8 weeks to learn half of what you need to know about property investing." and that half is all you will ever learn without getting your hands dirty and plunging in.

this weekend, choose an area that you think will have future potential - cafe lifestyle, inner-ish city etc - grab the paper/internet and do some searching. pick out properties and do a brief analysis on them ... what can you buy them for, what will they rent for, what improvements can you make to increase the value/rent. just take 5-10 minutes per property.

perhaps do everything you can find in that area, maybe 50+ of them - on sunday book an agent to go and see the best 10 and then on monday make an offer on the best one!

you can go see your new accountant (dale gatherum goss in melbourne) while the vendor is considering your offer.

alternatively - go see dale this week and do you analysis/offers next weekend.

just do it!!

p.s. this is my opinion only - i am not a professional advisor
 
The Y-man said:
Knew jack**** :) Just went and did it. Saves you having to mull over things.

Cheers,

The Y-man
Click to expand...

That about sums it up. Had a mortgage reduction company look at bank statements who said "You could even get an IP". Had never crossed our minds before that (Isn't that what rich people do?).

Dumped the mortgage reduction company, bought an IP & never looked back.

Learnt a lot since & still learning, but 10 years later still have that first IP & am glad that I bought it. Just do it!
 
Depends what you mean by well-informed.

When I bought I had followed the real estate market in that town for a few years, so I had a good idea of value.

You don't need to spend that amount of time. When we bought a PPOR my wife and I found that 100 odd open houses gave us a very good idea of values and we bought in what we considered to be an undervalued area at a good price. Indeed the lender's valuation came in above the agreed price.

Investment property isn't rocket science:
get a good idea of values, demand etc for properties and type of property in your chosen area then

a. look at the cashflow, can you afford it if it's vacant for a few weeks
b. have you got a bit extra to pay for a new stove etc if something goes wrong
c. get a good loan, but don't lose sleep over it. If you're going principal and interest take a longer term. Remember you can always refinance down the track
d. accept that some tenants might not treat the property as you would
e. get a good managing agent who does the inspections, checks references etc
 
I knew heaps.

I had spent about a year on this forum and about 1,000 posts before I finally settled on my first IP. I'd also flown to Brisbane and put a holding deposit on an IP before pulling out of that one. I'd asked a million questions, assessed the state of the property markets nationally, understood the different approaches to property investment in detail, read a dozen books by so-called experts and just about wore out my welcome here before I finally acted! :eek: But I in no way consider this analysis paralysis. I am now very happy with the ultimate strategy I have adopted as well as the specific property I have purchased. I'm a firm believer in due dilligence BEFORE you act.

Having said all that, I figured out early on that time was on my side as I had started looking in 2004 when the eastern seaboard markets had peaked. So, time in due dilligence could be well justified. If you've already read heaps and learnt a lot, then there's a law of diminishing returns for incremental effort. If Melbourne is your intended hunting ground then now, or sometime in H1 2007, is probably a good time to buy.

Good luck,
Michael.
 
Thankyou so much for your contribution's guys! This is fantastic. Very beneficial and I feel more on track already.

First up I just want to mention that I have been saving like crazy to have what I believe will be a sufficient deposit, ready and waiting. So that’s all organised.
The next step I've set myself is too visit a bank and get some more concrete figures in regards to how much I will be eligible to borrow. I have a fair idea but would like that confirmed.
After I know for sure what I can afford, I plan on attending open for inspections and booking in with the RE agents to go through houses every weekend so that I can run through the Due Diligence on them. Calculate the figures; get a feel for the value of places, types of improvement I could do that would increase value etc... Just get out there as you've all said.

So I do have a plan happening :)

I've sort of gotten hung up on the broader picture stuff at the moment as you pointed out Spiderman. When I started my research I kept myself calm and grounded by remembering the simple notion of "property goes up over time". You put it nicely Kristine by saying "It will genuinely make you wealthy provided that you buy something half way decent in a reasonable area where other people want to live, do a reasonable job in maintaining it, and keep it for the long haul." I just have to remember that and not get too carried away.

Thanks heaps for your replies everyone. Marjory appreciated! And I'll keep you all updated (whether you like it or not) lol.

Regards,

Crystal
 
one last hint ... don't go direct to the banks. choose one of the brilliant brokers on this forum and use them. they can get you the setup best suited, best dollars, best interest rate with the best bank for you.
 
I just jumped in without studying anything for my first IP. Did the same for my second as well. But now I've decided to lean more before increase my portfolio in the future.
 
lizzie said:
don't go direct to the banks. choose one of the brilliant brokers on this forum and use them. they can get you the setup best suited, best dollars, best interest rate with the best bank for you.
Click to expand...

Lizzie,

This has not been my experience....perhaps I'm not talking to the right broker or maybe I've latched onto a good banker.

My very, very limited knowledge of brokers is that they fully encourage you to not X-coll, not for your protection, which they constantly put forward, but more for the fact that it allows them the flexibility of shopping around to different banks.

Our experience has been that we are happy to be X-colled up the wazoo, but then this allows us to breach the 80% LVR "limit" commonly referred to, and subsequently allows us to leverage to the max, which accentuates the greatest advantage (IOO) of the property vehicle as an investment. Saving 20% deposit every time for a deposit would be crippling for us, and would of held us back years and several MM.

Perhaps my limited knowledge on the broker system is blinding me to something I'm not quite aware of yet. Dunno what I dunno.

Has everyone else been "happy" ??
 
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