Minimum to save to invest?

[GoldCoastGirl]

As per http://tickers.TickerFactory.com/ezt/t/w3TeANZ/savings.png I'm thinking of trying to save $35,000 initially to get me a good start as a property investor.

I'm always told that the bigger the deposit I can save the better I will be especially if I have 20% saved so I figured $35K was a good figure to aim towards.

Am I aiming too high? I want to get started with property investing as soon as I possibly can do so thus I am asking, what was the minimum you saved before you bought your first IP?

Can I get started with a smaller deposit such as $10-15k instead?

I have no shares and just ING Savings accounts (plus a term deposit I keep rolling over that's where the $1k+ comes from mainly)...

I would love to buy a house as my first IP tho' I realise at the same time units might be the only way for me to go initially.

At 28 years of age (turning 29), do you think as my first IP I should concentrate on something that will grow my assets or provide me with an another source of income or can I do both?

As far as I'm aware I can only do one or the other generally - either increase my net worth as such (equity) or increase my income....

 

[The Y-man]

GCGirl,

How much are you able to put aside per month?
It just gives us an idea of how long you are looking at saving up the $35k...

Cheers,

The Y-man

 

[Crystalleez]

Also, what sort of repayments are you comfortably able to afford? If it is a negitively geared property you choose. Working out this figure may help you determine your limit if your looking at putting down a 20% deposit.

I'm in similar position as you. I'm looking to buy my first IP and I have 35k saved for this. What I've chosen to do is look for a property that I believe has good capital growth prospects, negitively geared to start, with approx $100 out of my pocket each week. I've decided that I'll go to 90% LVR.
I've found that a property around the $195,000 mark suits me best for those reasons.

- (90% LVR) 10% Deposit = 19,500
- 5% Purchase cost = 9750
- 3% LMI = 5850
TOTAL COST = $35,100

If I wanted to go to 80% LVR on a 195k property, then it would look something like this:
- 10% Deposit = 39,000
- 5% Purchase Cost = 9750
TOTAL COST = $48,750
I'm not willing to wait that long to buy my ip, nor do I want to use that much of my money in one place...at this stage.

Hope this helps a little. I think I may have gone off track, sorry

 

[GoldCoastGirl]

I am definately not interested in negatively geared property. I don't need the 'tax relief' it will provide. I already reduce my tax effectively via being self employed (owner of my own business as such). I would want something either neutral with the potential to go positive eventually or something already postively geared.

How much I can save per month goes up and down as I'm self employed. If I don't work (for whatever reason) I don't earn and also time of year has an impact on my earnings (winter is always lowest - spring, summer, early autumn good) so sometimes some months are more lucrative for me than others... plus that's just the way it is at times.

Some months I can save way over a grand (if not unexpectant financial surprises happen)... other times only a couple of hundred.
I'm hoping when I move in the next few months I will be able to be a good enough tenant elsewhere (like I have been currently) that I won't have to worry about moving again for a few years. Even if I have to move again as a renter whilst I save up for my IP, I am in the process of scaling back on my 'lifestyle' as such.

As for loan re-payments: this is why I ask what is the minimum. If I save up over and above the minimum (general consensus minimum) then I will have $$ to be able to help me out with the initial re-payments etc.

Otherwise, this is why I am really interested in positively geared mainly or at least neutral with the potential to go positive.

Crystalleez ... I can afford $100-200 out of pocket each week without having a strain put upon myself.



..............or should I not limit myself? should I be open to negatively geared property with the potential of going positive in a few years time?

 

[The Y-man]

..............or should I not limit myself? should I be open to negatively geared property with the potential of going positive in a few years time?

The choice of cf+ and cf- investments (not necessarily just property) often come down to whether you are after increased income or increased "growth" (aka "net worth" or "wealth").

One of the things to note is that later down the track, it is often easier to convert wealth to income, but not necessarily the other way around.

For income, and starting with relatively low captial, you might consider income oriented managed funds.

Cheers,

The Y-man

 

[Les]

G'day GoldCoastGirl,

Y-man said a mouthful right here:-

One of the things to note is that later down the track, it is often easier to convert wealth to income, but not necessarily the other way around.

In other words (quoting Rolf L - my MB) if you have Equity, DSR is not a problem. So, as I understand it, work on building Equity - if it's at the cost of Income (and you can still afford it) do it anyway. Yes, there's a risk - but if you've thought long and hard about it, and it makes sense, then do it anyway.

I am definately not interested in negatively geared property

Be careful what you ask for (or not ask for) What you don't want might be the medicine you need most..... (my opinion only)

..............or should I not limit myself? should I be open to negatively geared property with the potential of going positive in a few years time?

IMHO, now your talking !! I'm sure there are MANY threads out there that discuss the diffential between +ve and -ve geared properties. Any decision (I think) should swing on what YOU can afford at this point in time, on YOUR journey. But, if you can justify it with your own calcs, then go for it.

For me, I've been a -ve gearer for about 8 years now - and it's working out nicely for me. Will it do the same for you? Hmm - sorry, I don't know.

I do believe in your comment though - "don't limit yourself"

Regards,

 

[GoldCoastGirl]

Well, I'm hoping to invest in purchasing a business (or a franchise business with great growth prospects) in order to produce income as what I do want to eventually be done with what I do for my primary income by the time I'm 35 (hopefully if all goes well). So that will take care of the 'income' side of things hopefully.

Therefore I would be more looking at building wealth with my investment properties. Use one IP to be able to borrow to invest in another and so forth.... i would use the properties to invest in each other. Keep the business separate in a way to the IPs.

As has been said, it is easier to convert wealth into income. Plus there are other ways to earn money that doesn't involve IPs.

 

[tobe]

Sounds like your plan is starting to take shape. I would start as soon as possible, ie, not wait until I had a magic number for a deposit. I would find out exactly what I can buy now, and do thorough research, and then buy, perhaps with a very small deposit to start with. Although this means you pay more LMI etc to the bank, it means your in the game for longer, and you can purchase your second one sooner, either with the increased equity, or increased cashflow plus the deposit your continue to save in the meantime. The most important thing you are doing at the moment is starting to put aside a portion of your income. I strongly advise to make this a set percentage of your income, and to stick to it as your income changes, and portfolio grows.

 

[BenG]

I think a good place to start is to speak to a mortgage broker. I have recently purchased and speaking an MB (someone like Rolf L) was a good place for me to start.

It is also important to start looking at areas you may be interested in that way you will know when a good buy comes up. Areas that receive good capital growth are often difficult to get neutral or postively geared.