If you could start investing again?

[lenojd]

If you had the ability to start investing all again with $200k cash to get things started, what would you do?

What would your goals be and what strategy would you use to achieve them?

eg. would you use the cash to buy your PPOR first or would you use it for deposits for an (or most likely multiple) IP's?

etc...

Let assume you're relatively young and have plenty of time to make things happen!

 

[WillG]

Buy average houses in average suburbs primarily for land content. When there is enough equity, purchase more.

Strategy,
... Keep LVR below 80%
... Manage cashflow so you have buffers
... Keep learning
... Stick to capital cities or populations > 20000
... Buy a mixture of CF and good capital growth properties for balance


Nothing new here. All in Jan Somers books

The PPOR question .... mmmm Hard one to answer. That really depends on time, place and your partner's needs & wants

 

[topcropper]

I would buy a PPOR first. It is forced saving, plus a good long term investment.

As for investing, I would continue to invest how I do now, by looking at earnings yield. If houses have crappy yields and shares have great yields like in 2003, it is shares. If houses have great yields and shares have crappy yields like in 2000, then it's property. This also means you are going against the herd.

See ya's.

 

[The Y-man]

I'd budget and adjust like crazy and see if I could live on $1,000 a month (say renting a tiny 1br somewhere).

That means I would neet $12k after tax income to survive.

Invest the $200k in income producing funds, aiming to achieve say 10%pa. That's about $12k pa after tax (give or take).

At this point, after figuring out that working is now an option (can "retire"! ) - can then techincally go and invest every cent earned (well, keep some aside for the odd special occasion) .... lowering the tax figure would probably be next - so use any earned income to prepay interest on a 100% geared cap growth investment?

Cheers,

The Y-man

 

[George]

If you decide to buy property, keep some cash (say 10% or even 20%) in high CMT account for an emergency.

(Unforeseen expenses like rise in interest rates, extended lack of rental income not covered by income insurance, …)

 

[kathryn d]

I'd buy my PPOR, then take out a LOC against it for investing.
Borrow the maximum allowed.
Have lots of credit available in case of emergencies (credit cards)
I'd buy a mixture of rentals like I have now.
Always self manage

 

[grossreal]

hi all
when you say young I take that as 18
so here's mine
I would take the 200k me and a couple of mates (who also have 200k from their dads who are also investors) and would slap it on a commercial (in a company and unit trust structure) giving a 12% return any where on a 5 x 5 with a cpi of 6%(you did say if you new what you were doing).
price 3.5mil
two mates and me 600k
2.9 mil debt
cost of funds 208k @7.2%
rent 420k
spare cash 211,200
this gives cash flow
then I would go to the coat hanger or toaster building macquarie street sydney and I would buy one or two units
211,200 divide by 7.2% = 2.933 debt coverage
plus the rental of 1k per week per unit is debt coverage of another 1.4k worth of property this I would feed into the comm split loan and bring the comm debt down and let the resi 2 toaster units grow
by the time I am 21
for my 21st birth day present.
my rent on the comm has gone to 500k per year so I have a spare 80k
I would join p1 international car club cost 36k per year three memberships (take the difference out of the kitty) each membership is for two and would share the point and me and my mates would use a ferrari one day and the lambo the next and drive these each day the club covers insurance and maintenance.
and this is just on the one deal.
for the 80k cash at 10% lease I could buy the lambo
and this is just my 18 year I would be alot higher up the scale if I just did this one a year.
remember that at 18 there is no fear so the risk profile is out the window.
and part of above is knowing what you are doing and what you are buying but it is very possible and p1 international is a club that at this stage I am not a member of.

 

[luce.rocks]

grossreal, you're fantastic! lol! hey, can i ask what you'd do in the given scenario if your friends' parents didn't have $200K spare to give their kids and you had to go it alone?

 

[grossreal]

hi luce.rocks
no problem the values just change.
the 200k gives you a 1 mil comm roughly so you just have to down size but the idea is the thing to grasp.
there are alot of other things that you can do with the spare cash flow but that would take about 9 posts.
so thought this was the easiest.
and you don't need to start large you can start this little venture on 60k as I am doing right now for my 18 year old and my 20 year old.
this little formular is not fiction its fact and does work.

 

[trendsta]

Hmmm ... depends on the time as well.

If your question is at this very moment then I would say i would keep it in cash for now. Re. property my view is there is another IR in the cards (low unemployment, consumer sentiment is returning, oil prices WILL go higher). Shares are quite high (they may go higher), but i wouldn't put money into them at this very moment.

So for now itwould have to be cash, until favourable opportunities arise (CG of more than 20% a year, and yield of 7%). When they do i would minimise downside risk by timing the market (which ever market) and gear.

 

[charttv]

I'd start with simple property strategies on which I would build a foundation and then leave the super complex financial markets trading strategies for later.

 

[silas]

Love the concept Grossreal

Where do you find properties returning 12% with 6% annual rent increase

Silas

 

[Kenster]

If I have 200k, I would use it to Educate myself first and Find a secure place to park the remainder until the time I know what best to do with it.

(1) Educate myself first

As someone has put it "A school smart person will do ok, but he can't go as far as a street smart. A street smart combined with school smart can go ultra far". Getting into an investment is easy, but getting one that works & profitable is hard. Starting straight away is a good habit but there is a limit as to how far the person can go, as he will face problem for things he does not know.

Learning alone will lead to nowhere (money-wise). Knowing too much can also lead to analysis paralysis.

The focus here is to get both school-smart learning (such as Structure, Finance, Tax, Psychology) and street-smart learning (eg. Build a network of like-minded people, Find mentors / heros with track records...). Above all, I'll spend a lot to learn how human minds work and how to master my own fear and greed.

If I'm too busy with work? I'll take a whole year off work

(2) Find a secure place to park the remainder until the time I know what best to do with it

If I'm totally ignorant of investment, then an basic account like ING internet cash account earning 6.5% pa sure will beat a negatively geared IP.

Alternatively, I can spread the money out different asset classes to get the experience until the Learning give me enough experience for a concentrated investment.

 

[grossreal]

hi silas
that one is very simple to answer.
Bought 400k vacant got a tennant within a week at 39k
so a 9% and they pay everything on a 5x5 lease.
then cpi or 6% increase yearly whichever is the highest.
leave for 5 years you now have 51k with a base of 400k
12.75% and still 6% annually plus re lend to the best mortage rate available(currently doing it)
the tennant is into there second 5 of the 5 x 5 and you get them to sign a concurrent 5 X 5 to start in three years if you drop off the perch.
I have a current one that I am looking at
its 400k purchase doing currently a 7.5% but with a 5 x 5 and 5% annual not as good but still better then a poke in the eye with a blunt stick.
thats 9.5% in 5 years and 11.75% in ten
and I have just snagged a lender that will do 85% stand alone lends on comms at 8% so less of my money on the higher % properties after I do the first one I will see how easy there system is and then will let youll know.

 

[Dazz]

a lender that will do 85% stand alone lends on comms at 8%

You better PM me about this one chief....

 

[silas]

Thanks grossreal appreciate the input

Silas

 

[grossreal]

hi dazzling
you are on my list.
I want to see how easy it is to do so am in the middle of going thru it.
just got the application paperwork .
got the offer and all is ok so now doing hte paperwork and seeing how fast it will go thru.
you are not the only one on my list I can think of about 20 people that this product will work for and the company that is offering it has got very deep pockets,
I am thinking of trying to get an agency just for the product and bundling it.
but you do get alot of these types of offers and then they become hard to work with.
they have told me that with this one that is not the case but lets see.
they are not a bank as such here in Australia but are a major lender here,but just like poker you do keep these very close to your shirt.
and silas no problem if I can help I will.