IP Now or Later

[apk]

I got to know about this forum from BE forum, started reading most of the posts almost everyday.

Just started learning about IP, yesterday I borrowed Peter Spann's from broke to Multi Millionaire in 7 years.

I bought PPOR in May for 300K, paid 15% deposit to avoid LMI. I have 20K in my offset account. So I have total 65K as equity in my PPOR at the moment. I wish to buy an IP in another 6 months time, sometime also thinking why not now?

I am an IT consultant earning between 80K to 110K (approx, because I am doing contracting) this is our only family income.

Any advice for me, should I buy Now or Later?

Appreciate all your help

-apk

 

[want2bewealthy]

You should buy whenever youre financially able to do so.

 

[yieldmatters]

Hi apk -

Buying an IP for the long term is fine - but you want to time your entry into the market nicely as well if you can. I think you would do very well to wait a year and see what happens. This is why:

• Yields are bad - you will have to hand over a fair amount of cash everyweek to fund an IP. Therefore, as it costs you to take part you don't lose anything by waiting a year.
  
• By waiting a year you of course miss out on any potential capital gains which is the primary concern. But I don't think you are risking much here - in fact I think the balance of probabilities is that there will be more bargains available in a years time so you may even gain by waiting. We are at the back end of one of the largest price booms in history. From 2001 to 2006 there was enormous increases in home prices. Therefore the chances of this happening again from 2007 to 2012 is very slim. Even if there was some structural issue on the supply side that justified another big rise in prices, there simply isn't enough cash on the demand side to make it happen. People are maxed out on credit and it will remain like this for a while yet. Further interest rate rises may tip some of them over the edge over the next year and that is when the bargains will appear.

 

[apk]

Thanks yieldmatters and want2wealthy.

As far as serviceability is concerned I should be ok, but as you said I won't be losing much waiting for another 6 to 12 months. In the meanwhile, I will learn more from this excellant forum about IP and continue to learn from books.

-apk

 

[alexlee]

Just make sure you DO keep buying, eventually. 6-12 months isn't a big deal, but just don't get into the trap of waiting too long.
Alex

 

[apk]

I have 10K borrowed money @ 2.9% interest for 9 months.

Initially I thought of parking this money in my offset account to reduce interest. But now I came up with two options for investing.

1) Using this 10K and 20K savings in offset buy shares (blue chip). Then get a margin lending loan for 60% to 75% of the share value and park that money in offset. After 9 months sell the share and repay the 10K back OR continue with margin lending and use the equity + savings for First IP.

2) Using the 10K buy first IP budgeted 180K to 210K, use 9 months savings to pay off the 10K loan.

Either way I won't disturb most of my 20K savings, which is sitting in my offset account. Also I will benefit from tax.