you're small minded ok180
Elaborate.
Lower Income investing
- Thread starter BayView
- Start date
Elaborate.
You are putting obstacles in the way, and have a negative belief, when I and others can prove otherwise.
Mind you; the vast majority of folk you describe will prove you right.
Sad.
They are real clever at sussing out the best ciggy deal, the best jet ski deal, the best tatt deal, the best Commodore deal, the best drive thru meal deal, the best doodad deal ad nauseum...but not a financial improvement deal.
You only have to look back a bit through the threads here to find a few...
http://somersoft.com/forums/showthread.php?t=43812
and no doubt the same over at Steve McKnight's forum.
They do exist, but it takes sacrifice, planning, gaining the right knowledge, action and discipline - many folk don't want to do all that....path of least resistance.
The low income won't give the person the millionaire lifestyle, but property investing can and will give them the million in nett worth - from there, changing to the development strategy could provide the lifestyle.
Once the low-income earner changes their mindset, and their money habits...it is definitely doable.
The credit boom of the last 20+ years has served amateur property investors very well, myself iincluded. Those days are gone. I consider myself very lucky to have ridden the wave. Those starting now with the same strategy will see much lower gains.
So I tend to agree with ok180. We've been lucky folks, risky loss making property investment strategies are unlikely to perform so well in the future for low income earners.
So I tend to agree with ok180. We've been lucky folks, risky loss making property investment strategies are unlikely to perform so well in the future for low income earners.
Agreed!
We were never 'normal'. We were always trying 'something' to get ahead. Businesses that failed, etc. Then we bought our first IP. We were making around the same $ as the dole at the time between us. The banks all said 'NO', until we found one that said yes.
We made our children save 50% of their income. They both worked at a very young age, starting in our own Business, both while still in Primary School. They got paid the same wages as for minimum wage, were expected to work to the same capacity as a 14/15 year old (and in most cases were better), and taught the difference between needs & wants.
The eldest, graduated High School with around $30k in the bank. All money that she earnt herself, with no input from us. Younger one had less, but still had a decent chunk of money. The difference was more hours worked by the older child, and her supplementing her savings.
Both of them had seen us through various struggles and witnessed the amount of properties we bought, and were taught to invest. They were also blatantly aware of the area we lived in (not the best), and that they had more money in the bank than many adults that they knew. They also got to witness, though their own savings, that small things add up, especially when you are consistent.
There you go....you personally know one.
The thing is though, that these people are few and far between. There are quite a few out there, they just don't advertise it to the world, and why would they. They also don't have to follow the same path as this fellow.
Us.....we had around 8 properties, from memory, all while on a low income. Most bought off the back of our first IP & PPOR, once they had seen some growth. They were cashflow positive, as they had to be, because we didn't have anything extra to add. You don't, when you aren't earning a lot. They were bought in pockets where we could get a decent return. Some in South West Sydney, some in Tassie, some in Regional Vic, and later on in Western Sydney.
We still have some of those properties & more, although they have grown somewhat in value, and we are now on a higher income. But that does not change what we did in tougher times.
And we haven't paid down debt! Nor lived with our parents! We were latecomers to Western Sydney as well. Our first purchase in Western Sydney was a PPOR with a second house at the rear, and we paid $267k for it, expensive at the time, but the added income from the rear home made it very attractive & served us well.
What a load of bunk!
Firstly those properties are around $300k, not $400k. but they also rent out for a lot more money than when your friend bought, and wages (even low ones) have gone up since then too.
AND unlike your buddy, we were a FAMILY on only one wage, we didn't live with our parents, and we also went through some EXTREMELY tough times during all this.
Don't despair! You probably haven't read our story. In summary, we had a Business go under, were forced either go bankrupt, or stay until the lease ended. Moved into the upstairs of the Business premises, which was DISGUSTING, for around 18 months. Sold our PPOR. Kept back enough money to cover our losses each week (WE WERE NOT GOING BANKRUPT), used the remainder to fund a deposit on another property that would be our PPOR once we could move on. The deposit money meant that it was cashflow positive.
I ran the Business with the help of a couple of casuals & the kids, while Hubby travelled to Hornsby each day for work (from Wollongong). On weekends, he looked after the Business, while I worked elsewhere.
THEN, later on, Hubby got screwed over by an employer, losing around $30k of income. Long story! Didn't get a cent back.
Still later again, we had a PM embezzle a heap of funds & they were managing, I think, 5 of our properties at the time. Lost around $25k due to that one.
AND to top it off, we had a block of units in a Regional area, that sat empty for some time, again due to being screwed over by the PM. Still got them, but a different PM. They've never been empty since.
AND for the record (for you, OK180).......the first of the bad events happened while we were on a low income. The rest....well....we'd started to earn a bit more by that time, but had also started to invest a huge amount of money each week into sport, as all four of our Family were high level athletes, and Hubby was studying for a MBA, all cash paid up front. We were spending more than an average mortgage each week on that, so we STILL had no money, even though the income was better.
Sacrifice, yes! Lots of that! But with us, the sacrifices didn't come from the properties, as they didn't cost anything to hold. With the exception of the crappy PM stories, that is. The sacrifices came from the life events along the way, and our pigheadedness to not go under, which could very easily have happened.
Again, not everybody wants the millionaire lifestyle either.
We don't live in a McMansion. We live in a normal house. We don't drive new cars. We don't live a lavish lifestyle, and don't plan to. We don't really aspire to be anything other than just above normal. With the means to do what we want, when we want.
Skater, find me a positive cash flow property in liverpool or fairfield. Go on. Those properties he bought are now 400k plus in those areas. You cant do what he did today on a low income. If we assume a low income is 50k those properties are now more than 8 times that wage. Back then they were about 4x times a low wage and you could get them cash flow positive from day dot. I suppose you could go out to Orange or somewhere to find comparable properties now but they would unlikely see the same growth he would have experienced during the early 2000s. No cg, no equity for the next purchase because you dont have the means to save a deposit. If you make one dud investment it can put you back years.
Easier strategy, improve your skills get a better job or take a punt on a business. Make your money outside then go and invest. You can still do the same investing someone on a low income can but you can turbo charge the results with plenty of servicability.
As i said in my first post money makes money. People trying to get ahead in property on low incomes are going to struggle because they are missing part of the equation. They have the right idea about investing but they are missing the supply side....the $$$.
I dont like Robert Kyosaki but he explained this well from what i remember in his cashflow quadrant book.
Easier strategy, improve your skills get a better job or take a punt on a business. Make your money outside then go and invest. You can still do the same investing someone on a low income can but you can turbo charge the results with plenty of servicability.
As i said in my first post money makes money. People trying to get ahead in property on low incomes are going to struggle because they are missing part of the equation. They have the right idea about investing but they are missing the supply side....the $$$.
I dont like Robert Kyosaki but he explained this well from what i remember in his cashflow quadrant book.
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Firstly, I never said it was EASY to get ahead on a low income, but it IS possible.
Secondly, you don't HAVE to buy something in Liverpool or Fairfield. I don't have anything in either suburbs, but do have a substantial portfolio.
Thirdly, the market moves all the time. While it might be a good time to buy in one area at one time, it does not mean that it always will be. You need to be ADAPTABLE, in order to shift and sniff out the deals. That goes regardless of what criteria you are looking for. It could be dev sites, or +cf, or granny flats, or reno's, or whatever else it is you are looking for. And sometimes there are NO good deals to be had & it's wise to just sit on the sidelines watching & waiting.
Fourthly, you don't need to purchase in Sydney to get good capital gain. For all you know, Orange might be just on the upswing, and could be an excellent choice. I don't know the area, so can't really comment on that, only that I have bought in several Regionals and had just as good cap gain as I have had in the cities. Trying to time the market does carry some risks, but can be very profitable.
Fifthly, I know a young single girl on LESS than $50k who purchased a +cf townhouse in Western Sydney about a year ago. Very happy with the purchase. No, sorry, not Liverpool OR Fairfield, but +cf from day one with 100% finance. Sorry, I'm not going to provide specifics into this person's name or the deal, but suffice to say that I've seen a few others that would be +cf.
Sixth, you mention go into Business & THEN invest. It's easier that way! Well.....NO, it is NOT! Or, let me be more precise. It IS easier IF, you are one of the 5% of Businesses that does not go broke in the first few years. IF you are not them married to the Business that you can't get away & do other stuff, etc.
Reality is that not all people have the skills, the time, the motivation or the drive to thrive in a Business environment. Those same people might do very well by buying something & getting wealthy the slow, lazy way. YES, you need a deposit, or some juicy equity to get going, so it's not going to be something that happens overnight.
For instance, I bought the first property as a single female at about 25 years of age. Used the equity to buy the first IP. Then sat and did NOTHING whatsoever, investment wise for some time. It was only later, when I tapped into the IP equity & later again, after selling the first PPOR that I had the means to do more.
So, yes, you are right, money makes money. BUT it is not impossible for a low income earner to get on the bandwagon and start on the road to financial freedom. You just have to weigh everything up & make sure that you are not purchasing something that is 'tax friendly' and costing you a small fortune to hold onto each year, and this is something that those who have never been on a low income don't understand.
When you are on a low income, you don't go out to diner a couple of times a week. You don't go to the movies. You don't buy expensive food. You don't buy designer clothes. You don't spend a squillion on alcohol. Which means that you don't have to give any of that stuff up when you invest, because you are not looking at investing in anything that is going to cost you money.
In fact, sometimes I think it is easier to start on a lower income, if you have been living within your means, because you understand money better than someone on $200k who is finding it hard to make ends meet. You understand that you HAVE to pay your debts, and live a simple life.
These days, we have a lot more money than we did when the kids were younger, but we don't really spend a lot more (on ourselves, that is). So, it is a lot easier for us to say enough is enough, and put our feet up. Whereas if we had always been high income earners, I could see that we would have wanted a better house, newer cars, etc......and our lifestyle would be more elaborate than it is. Meaning that if we were holding the exact same portfolio as we are today, there is no way that Hubby could retire & live off of it.
Secondly, you don't HAVE to buy something in Liverpool or Fairfield. I don't have anything in either suburbs, but do have a substantial portfolio.
Thirdly, the market moves all the time. While it might be a good time to buy in one area at one time, it does not mean that it always will be. You need to be ADAPTABLE, in order to shift and sniff out the deals. That goes regardless of what criteria you are looking for. It could be dev sites, or +cf, or granny flats, or reno's, or whatever else it is you are looking for. And sometimes there are NO good deals to be had & it's wise to just sit on the sidelines watching & waiting.
Fourthly, you don't need to purchase in Sydney to get good capital gain. For all you know, Orange might be just on the upswing, and could be an excellent choice. I don't know the area, so can't really comment on that, only that I have bought in several Regionals and had just as good cap gain as I have had in the cities. Trying to time the market does carry some risks, but can be very profitable.
Fifthly, I know a young single girl on LESS than $50k who purchased a +cf townhouse in Western Sydney about a year ago. Very happy with the purchase. No, sorry, not Liverpool OR Fairfield, but +cf from day one with 100% finance. Sorry, I'm not going to provide specifics into this person's name or the deal, but suffice to say that I've seen a few others that would be +cf.
Sixth, you mention go into Business & THEN invest. It's easier that way! Well.....NO, it is NOT! Or, let me be more precise. It IS easier IF, you are one of the 5% of Businesses that does not go broke in the first few years. IF you are not them married to the Business that you can't get away & do other stuff, etc.
Reality is that not all people have the skills, the time, the motivation or the drive to thrive in a Business environment. Those same people might do very well by buying something & getting wealthy the slow, lazy way. YES, you need a deposit, or some juicy equity to get going, so it's not going to be something that happens overnight.
For instance, I bought the first property as a single female at about 25 years of age. Used the equity to buy the first IP. Then sat and did NOTHING whatsoever, investment wise for some time. It was only later, when I tapped into the IP equity & later again, after selling the first PPOR that I had the means to do more.
So, yes, you are right, money makes money. BUT it is not impossible for a low income earner to get on the bandwagon and start on the road to financial freedom. You just have to weigh everything up & make sure that you are not purchasing something that is 'tax friendly' and costing you a small fortune to hold onto each year, and this is something that those who have never been on a low income don't understand.
When you are on a low income, you don't go out to diner a couple of times a week. You don't go to the movies. You don't buy expensive food. You don't buy designer clothes. You don't spend a squillion on alcohol. Which means that you don't have to give any of that stuff up when you invest, because you are not looking at investing in anything that is going to cost you money.
In fact, sometimes I think it is easier to start on a lower income, if you have been living within your means, because you understand money better than someone on $200k who is finding it hard to make ends meet. You understand that you HAVE to pay your debts, and live a simple life.
These days, we have a lot more money than we did when the kids were younger, but we don't really spend a lot more (on ourselves, that is). So, it is a lot easier for us to say enough is enough, and put our feet up. Whereas if we had always been high income earners, I could see that we would have wanted a better house, newer cars, etc......and our lifestyle would be more elaborate than it is. Meaning that if we were holding the exact same portfolio as we are today, there is no way that Hubby could retire & live off of it.
I'm finding that with ANZ also. My broker stated they are basing my serviceability on a higher rate for a non-ANZ loan (i.e., P+I) when it just IO. He suggested if I bring that loan over to ANZ, they will be able to assess me on the lower repayment. Is that a good idea to have all loans with ANZ? Also, do you start seeing this more when your rental income surpasses employment income?
- sorry for hijack , thanks guys -
Cashflow is good. But there are also other ways to make money with property.
In every boom cycle people can make 10x their 30k equity for example, conservatively in a few months in say HK. Of course this is high risk speculating in the highest risk property market in the world, but there's more than one way to Kiyosaki's way.
In every boom cycle people can make 10x their 30k equity for example, conservatively in a few months in say HK. Of course this is high risk speculating in the highest risk property market in the world, but there's more than one way to Kiyosaki's way.
How old are you?
There were a lot of folk around the late 80's to early 90's who would disagree....high teens interest rates killed a lot of homeowners at that time, and lots of properties dropped in value as the firesales commenced.
The buyers rejoiced at the cheaper properties, the sellers cried for the end of a boom....then we had another one that couldn't possibly happen again!!
Personally, my first home was bought in 1985 for $75k in a lower income area by an average income buyer - me.
You can still buy there for under $300k there these days. It's still a cheap area, frequented by lower income folks..
http://www.realestate.com.au/property-unit-vic-boronia-115569611
A lower income earner will no doubt do well over 20 years if they buy there now.
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Skater, two brilliant posts - tried to send a kudos from the IPad but it wouldn't play the game.
I remember back to Steve McNight's early days when he was buying in Ballarat for a song, when no one else would look at the place.
Not yer Liverpool or Fairlfield, hey?
So yeah; as you say- the low income earner has to get wider vision and look beyond the normal places everyone looks, and go for cash flow and depreciation first, cap growth second.
It helps if you are handy and can add some value through a reno, and unreservedly the rent too.
I remember back to Steve McNight's early days when he was buying in Ballarat for a song, when no one else would look at the place.
Not yer Liverpool or Fairlfield, hey?
So yeah; as you say- the low income earner has to get wider vision and look beyond the normal places everyone looks, and go for cash flow and depreciation first, cap growth second.
It helps if you are handy and can add some value through a reno, and unreservedly the rent too.
yes great posts skater and bayview! and also thanks to ok180 for getting the the debate going
Also not only do you need good yields along with CG but also strong rental demand and you would have to do your homework on this before buying. You wouldnt want too many vacancies.
Also not only do you need good yields along with CG but also strong rental demand and you would have to do your homework on this before buying. You wouldnt want too many vacancies.
I, too, remember Steve McNight & his 11 second solution. It was exactly what we were doing, before he started sprouting it everywhere. Difference was that he had a lot of money behind him, so could buy up vast amounts of these properties, and of course, wrap many of them too. We, on the otherhand, could only buy the odd one here or there.
I still have a property in Traralgon that I bought for $67k, which promptly went up in value to $140k. - Of course, you don't get CG in Traralgon, do you ?
- Cashflow positive from day one. It's still chugging along, not costing me anything in maintenance, with a long term tenant who could have bought the place with the money he's paying me, but I'm not complaining. There's also a couple of properties in Tassie that we bought & sold for over double what they cost. ......Nope, Tassie doesn't get CG either.
There was also a little house in Moree that we bought sight unseen for $25k with a new kitchen. We had no trouble renting it out for $140pw. We did have problems with the neighbours with that one, but sold if for around $75k, so still came out ahead.
And yes, Deltaberry, there ARE better ways to make money, but when you don't have a lot, you are not going to risk it by investing in another country. All these little gains add up, and might be chicken feed if you have a high income, but when you don't, they mean a lot and it can mean the deposit for the next, better deal, or money off the PPOR, or to pay down non-deductable debt, freeing up more cashflow., etc.
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But it is not futile if you do it right. If you look for deals that don't cost you anything! And don't forget, that many people don't have the means to increase their income.
Telling people to go increase their income is a slap in the face. It says, "you're not as good as me, because I'm a big-wig earning twice what you make. Unless you can rise to my level, you are just not good enough". Well, I'll tell you what, I've seen many very high earners living pay cheque to paycheque. Just scraping by, by the seat of their pants, because they are so focussed on 'looking good', or buying toys, or trying to impress others, or just basically poor money management skills. I've also seen the reverse, with someone on a low income doing well for themselves, by living within their means and investing what they can.
It doesn't matter what you earn. It only matters what you do with it. Of course, the more you earn, the easier it SHOULD be, but that isn't always the case.
At the end of the day, if you do have a high income & are focussed on investment & don't do anything silly or have bad luck along the way, yes, you will be streets ahead of a low income earner doing the same, but a low income earner, doing the same can quite easily end up ahead of a high income earner with poor money skills, so it is definitely NOT futile.
I, too, remember Steve McNight & his 11 second solution. It was exactly what we were doing, before he started sprouting it everywhere. Difference was that he had a lot of money behind him, so could buy up vast amounts of these properties, and of course, wrap many of them too. We, on the otherhand, could only buy the odd one here or there.
I still have a property in Traralgon that I bought for $67k, which promptly went up in value to $140k. - Of course, you don't get CG in Traralgon, do you ?
There's also a couple of properties in Tassie that we bought & sold for over double what they cost. ......Nope, Tassie doesn't get CG either.
There was also a little house in Moree that we bought sight unseen for $25k with a new kitchen. We had no trouble renting it out for $140pw. We did have problems with the neighbours with that one, but sold if for around $75k, so still came out ahead.
And yes, Deltaberry, there ARE better ways to make money, but when you don't have a lot, you are not going to risk it by investing in another country. All these little gains add up, and might be chicken feed if you have a high income, but when you don't, they mean a lot and it can mean the deposit for the next, better deal, or money off the PPOR, or to pay down non-deductable debt, freeing up more cashflow., etc.
Well said
I am doing exactly that, once I have enough equity behind me I will be doing reno/flips and developments on top of buy and holds.
These regional deals are excellent ways to start and force equity through renos if bought well
That statement gets chucked around here far too often from my experience.
If it was that easy to increase your income, everyone would be doing that.
Not saying it's impossible, more futile than anything...for many folks - especially in a reasonably short time frame.
Doing extra courses, extra hours etc is an option, but when families are involved in one's life - as is the case with many, then problems with your simple answer to the problem occur.
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