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From: Mike .


How to invest in property with one wage
From: Helen
Date: 4/29/00
Time: 9:57:34 PM

Hi. This is somewhat a self-centred question but I'm impressed by your feel of community. I'm the sole wage-earner in my family, with my husband being the "stay-at-home-dad" to our one year old son. Since some good fortune enabled us to buy one investment property (worth $190,000 but equity close to $100,000) I have become addicted to property investment as a whole.

The weekly repayments on our existing mortgage are far less than the rent we receive per week from the property, so we have a positive cash flow thus far. However, our savings are somewhat minimum at this point ($1000 if we're lucky!) My question is....should we seriously consider leveraging, etc and purchasing another investment property so soon (we only settled on this one two months ago)or should we bide our time and wait another twelve months...2 years....until my husband and I are both working (another 4-5 years at this point!)?

I'm keen but confused and don't want to over-capitalise too soon. Any advice would be greatly appreciated.

Warm Regards, Helen.
 
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Helen

Reply: 1
From: Mike .


How to invest on one wage...clarification added
From: Helen
Date: 4/29/00
Time: 10:14:30 PM

I have just read a few other messages posted previously and realised that clarification of details helps to get a more thorough response (Les, you are a very thorough advisor!)

Between my wage and the rent we receive from our one investment property, we collectively earn $56,000. Also, our equity is $93,000 to be exact-ish!
 
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Gee Cee

Reply: 1.1
From: Mike .


Re: How to invest on one wage...clarification added
From: Gee Cee
Date: 5/9/00
Time: 9:15:33 PM

Dear Helen

I have been investing in property for over twenty years so I have a very high respect for what happens in the market and what seems to repeat itself over the property cycle.

As the main breadwinner for your family you really need to look at the What Ifs.

It is great to have a lot of equity in a property but it is the cashflow that keeps you from sinking low enough below the waterline to have to have a firesale. Always consider what would happen if you lost your job, were pregnant or had a long vacancy in your properties.

Any cash aside would be soon eaten up by loans, rates, repairs and other expenses.

Re-negotiating loans can be almost impossible and you can soon be in real trouble.

I know what it is like. When interest rates rose in the eighties I had many sleepless nights because I had just gone a bit big to quick.

Luckily I pulled through it all and went on. Very much wiser and educated in property/ interest rate cycles.

I now have young twin boys and my wife is off work at present so although we are very comfortable now I hate to think what it would have been like 10 years ago.

I don't want to seem pessimistic but it is really important to be very comfortable with what is happening and not get yourself in to deep.

You and the family still need to eat. And at the end of the day we all want to have the enjoyment of our families whilst they are young and not be that constricted in spending that we can do nothing for the next 10 to 15 years.

All the best, Gee Cee
 
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Bob

Reply: 1.1.1
From: Mike .


Re: How to invest on one wage...clarification added
From: Bob
Date: 5/1/00
Time: 7:52:38 PM

This is a somewhat simplistic reply, but I'm getting a bit nervous. I'm a novice but the amount of ignorance about IPs out there is astounding, so if this answer is too basic, I apologise. In three words "Do your sums." If the property is cashflow positive, you should be OK, especially if you fix the interest rate at a rate that ensure it. You may get a lower return if interest rates decline again, but it'll be safe for the next 5 years.

Second piece of advice, since you sound like a wary type: Come up with an exit strategy - look at the cashflow and see what selling price will ensure that you dropped a bundle. That will reduce as time goes by and your positive cashflow has paid 'dividends'.

Final piece of advice, straight from Jan Somers "The deal of a lifetime comes around about once a month." There'll be a property meeting your requirements if you look for it.

Bob
 
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Les

Reply: 1.1.1.1
From: Mike .


Re: How to invest on one wage...clarification added
From: Les
Date: 5/2/00
Time: 12:19:11 AM

G'day Helen,

Good for you - 2 months into the game and you're wanting to go again!! First reaction from me is "Find another one like the last one!!" (but you did say a bit of luck was involved ...)

I would love to buy a property worth $190k and only need a $97k mortgage. Anyway, you're on the train, and have moved into the top 6% of Australians (those that own 1 Investment Property). You mention "no savings" but the Equity of $93k counts!!! And it's probably the safest "savings" to have (you can't just draw it out and buy a bigger car, jet-ski, or what-have-you ;^)

On to your situation. Bob "nailed it" - do the sums. You pretty much have, or wouldn't be thinking of #2, would you. And Yes, in making a few assumptions, and calculating your DSR, you are all ready for #2 any time you want.

Find another one with positive cash flow, with a discount price built in, and go do it!!! I can't see any problems in the figures you have given. But there are gaps in my knowledge of your situation, so do the figures for yourself to confirm this. That HUGE Equity puts you in a great position in going for number 2 (putting you in the top 1.5%!!!) and, who knows, with a good purchase, positive cash flow, and a little more luck, #3 might be just over the horizon.

A few points that may help:-

1. As principal "breadwinner", seek advice re the right name to go on the title.

2. DON'T go as Joint tenants - go Tenants in Common so you can apportion the expenses other than 50/50.

3. Get yourself Insurance Cover (property, and you) to keep things ticking if the worst happens.

4. Consider 221D to maximise your cashflow.

Check these with your favourite adviser - and go find a "bargain" for yourself. And good luck to you and family - you're on an exciting journey now - don't you love it?? (I do ..... ;^)

Regards, Les
 
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