My strategy - what do you think?

[IFBB]

Hi guys.

Have been doing a lot of thinking lately, mainly about how i want to invest in property, and not just "becoming a property investor".

Im 23, and still at home, so expenses are currently purely my own (phone, car (petrol,rego,insurance), gym, girlfriend ). Im in no rush as i dont have complete faith currently in the market, but am not wishing to sit and wait until something happens - which may not.

I believe the best way for me currently is to buy <8km cbd (Adelaide), and especially in fringe suburbs surround blue chip suburbs. Id be aiming for run down, or units still in original condition, in which i can do some cosmetic renovations to give a quick equity boost & bring rent closer to neutral / positive.

I have an old friend which ive just learnt is passionate about PI, so possible joint ventures i would not rule out (if he is keen that is).

Is this a strategy which any of you have employed? Have you been successful, has it backfired? What other strategies do you suggest?

I plan on a buy & hold strategy when purchasing alone, which might change if down the track i get into joint ventures, which would involve also some houses / minor development in the near future.

Thanks again SS!

 

[alexlee]

It's not much of a strategy so far, you know. All you've said is you plan to buy with a vague idea of what you want to buy.

You need the specifics to see if the plan is realistic. How much can you borrow? How much deposit do you have? What are the prices in your target areas, and after buying, how are you going to fund the renovations? Do you have the skills and time to renovate? If you just do it on the weekends (I'm assuming you're working full time), how long can you handle the payments without rent coming in? Does the improved cashflow and increase in value justify the losses when it's empty?

Your friend might be passionate, but does he have skills and resources?

Focus on the first one for now. Do the basics. Check your borrowing capacity. Analyse your own cashflow. Go out and look at properties.

 

[IFBB]

I already own 1 IP which im renovating once the lease is over in Sept 11 or March 12. With this, i have the resources to fund the renovation & costs whilst im renovating.

I work nights, so will have a majority of my day free to meet with tradies / do my own work where needed, and can take time off if i have to. My family is full of builders & tradies, so contacts should be no problem.

This is mainly about a strategy i wish to employ in regards to property investing, not about how im going to employ it trying to purchase my first IP. When the time comes for future purchases, i will look at how much i can borrow, and what i can afford to buy.

 

[alexlee]

This is mainly about a strategy i wish to employ in regards to property investing

not about how im going to employ it trying to purchase my first IP.

What's the point of a strategy that you can't implement? What's the point of having a strategy that involves buying <8km of Adelaide CBD if you don't know whether you can borrow enough to buy there?

Strategy without execution is just words.

 

[IFBB]

I know i can borrow within 8km of the city, i did in Dec 09, and if i wanted to tomorrow, i could.

If i cant borrow enough at one period, i can wait 6 months, boost my offset / deposit and go from there, or i could look for cheaper options.

If my budget is 250K, why would i bother looking at something worth 300K, thus making it inexecutable?

And just because i may not be able to implement a strategy at one point in time, doesnt mean i will never be able to implement it. Im sure many others have had goals they would like to acheive, and had strategies to implement to reach those goals.

 

[Ed Barton]

Hi guys.

Have been doing a lot of thinking lately, mainly about how i want to invest in property, and not just "becoming a property investor".

Im 23, and still at home, so expenses are currently purely my own (phone, car (petrol,rego,insurance), gym, girlfriend ). Im in no rush as i dont have complete faith currently in the market, but am not wishing to sit and wait until something happens - which may not.

I believe the best way for me currently is to buy <8km cbd (Adelaide), and especially in fringe suburbs surround blue chip suburbs. Id be aiming for run down, or units still in original condition, in which i can do some cosmetic renovations to give a quick equity boost & bring rent closer to neutral / positive.

I have an old friend which ive just learnt is passionate about PI, so possible joint ventures i would not rule out (if he is keen that is).

Is this a strategy which any of you have employed? Have you been successful, has it backfired? What other strategies do you suggest?

I plan on a buy & hold strategy when purchasing alone, which might change if down the track i get into joint ventures, which would involve also some houses / minor development in the near future.

Thanks again SS!

at 23 you could easily become 'a property investor', compound that over your 40 years of working life and you will do ok.

how much have you got saved? how much can you save? if you're at home and bludging off your parents then you should be easily able to save half your income.

at your age i would be putting half my capital into risky/high return assets.

 

[Ridin-High]

What i think is very important is firstly you set a goal that you want to achieve from your investing, it's usually to replace or supplement your income.

Example: Mine is replace work income after tax, income to be indexed with inflation (growth assets, Resi property and diversifed share basket), passive (besides lite managing resi property) and be sustainable (not drawing down on capital to achieve income target) and in 12 yrs from now.

I have a rough road map of how to get their as well.

Thankfully goal setting and planning is something i learned from this forum and understand its importance.

Regards,

RH

 

[IFBB]

My "goal" i have set so far, is by roughly 40 i would like to have the opportunity to pick how hard i work. For example, part time, or be able to buy into an income producing business from the get-go, and after a little while have managers etc in place to do most of the work (like the business i work in now).

Currently saving $500-600 p/w into my offset, and $100 p/w into another account which is tied into my loan for my IP. The $100 p/w covers short falls, and all holding costs, with roughly $20-30 p/w left over.

Ed, what exactly do you mean by Risky/High Return assets? Could you give an example?

I considered maybe putting $10 000 into some BHP shares (dont know much about shares, so id go with a blue-chipper if i did), but held off until after i completed my small reno once my tenant moves out.

In terms of saving, i have currently about $45 000 in my offset, with an IO loan of $170 000. Id estimate my unit currently being valued around $205-210 000.

 

[Ed Barton]

My "goal" i have set so far, is by roughly 40 i would like to have the opportunity to pick how hard i work. For example, part time, or be able to buy into an income producing business from the get-go, and after a little while have managers etc in place to do most of the work (like the business i work in now).

Currently saving $500-600 p/w into my offset, and $100 p/w into another account which is tied into my loan for my IP. The $100 p/w covers short falls, and all holding costs, with roughly $20-30 p/w left over.

Ed, what exactly do you mean by Risky/High Return assets? Could you give an example?

I considered maybe putting $10 000 into some BHP shares (dont know much about shares, so id go with a blue-chipper if i did), but held off until after i completed my small reno once my tenant moves out.

In terms of saving, i have currently about $45 000 in my offset, with an IO loan of $170 000. Id estimate my unit currently being valued around $205-210 000.

yes i meant shares and 10k would seem a reasonable amount for you. a little more risky than bhp though, therefore more potential for growth (and for negative growth). at your age and saving potential if the 10k disappeared completely it wouldn't matter in scheme of things.

 

[Corey Batt]

Um yeah, I wouldn't be putting any money into the share market unless you're willing to do serious research before, otherwise you might end up buying at the top!

 

[investor2009]

Hi IFBB

Good for you.

Is this a strategy which any of you have employed?
I'm a buy and hold kinda guy, and have performed some small renovations (complete bathroom reno's, kitchens to paint jobs, this needs to be done every few years so I believe every buy and hold investor gets their hands dirty at some stage)

Have you been successful, has it backfired?
I've been very successful so far, nothing has backfired in the longer term. Or short term come to think of it. Maybe apart from rents going backward now on a few properties whereas the rest of Oz seem to be clkimbing, only short term though.

What other strategies do you suggest?
Only you can tell. I've seen flipping strategies fail hard, and won't do one unless the timing is right and I need to sell for after tax money. My long term plan is basically the same as Rixter's and many others who LOE. I see this as the wisest strategy because there are no selling costs or income taxes. I may reassess once my assett base is very large and I get older. I figure that financial freedom will only take 5 years but I wish to remain in the workforce for longer because the level of freedom isn't as high as I'd like it to be.

Hi guys.

Have been doing a lot of thinking lately, mainly about how i want to invest in property, and not just "becoming a property investor".

Im 23, and still at home, so expenses are currently purely my own (phone, car (petrol,rego,insurance), gym, girlfriend ). Im in no rush as i dont have complete faith currently in the market, but am not wishing to sit and wait until something happens - which may not.

I believe the best way for me currently is to buy <8km cbd (Adelaide), and especially in fringe suburbs surround blue chip suburbs. Id be aiming for run down, or units still in original condition, in which i can do some cosmetic renovations to give a quick equity boost & bring rent closer to neutral / positive.

I have an old friend which ive just learnt is passionate about PI, so possible joint ventures i would not rule out (if he is keen that is).

Is this a strategy which any of you have employed? Have you been successful, has it backfired? What other strategies do you suggest?

I plan on a buy & hold strategy when purchasing alone, which might change if down the track i get into joint ventures, which would involve also some houses / minor development in the near future.

Thanks again SS!

 

[Aaron Sice]

i've done both.

if i had my time again, i would rent and buy IPs. if someone else is going to be stupid enough to subsidise my living standards without me asking, then i should take advantage of that.

you're still exposed to the property market, but the extra cashflow will get you there prob a year or two sooner.

 

[IFBB]

My intention is to mostly buy and hold, maybe flip or develop something down the track, maybe not.

Like you said Aaron, if someone is going to pay the repayments for me, why not .

Thanks for you input guys! Im a little stuck atm, have found what i believe is a good buy in a solid location (165% growth over the past 10 yrs i read) which isnt too bad at all. I know it means nothing now, but its a good indicator that shows demand for the area is/has been recently high.

Enough dribble, what i dont know is, if i should jump at it or wait it out. It will need a reno, and i dont want to get myself in too deep too early... bahhh doing my head in haha.

 

[Ed Barton]

Thanks for you input guys! Im a little stuck atm, have found what i believe is a good buy in a solid location (165% growth over the past 10 yrs i read) which isnt too bad at all. I know it means nothing now, but its a good indicator that shows demand for the area is/has been recently high.

Enough dribble, what i dont know is, if i should jump at it or wait it out. It will need a reno, and i dont want to get myself in too deep too early... bahhh doing my head in haha.

you said you were planning to do a reno on your first IP. why don't you do that first before buying a second that needs a reno. it could help you identify what you would keep clear of when buying the second.

 

[Blacky]

Dejavu

IFBB

I like your idea, unfortunately, at this point I wouldn't call what you have a 'strategy' its just an idea.

I am only 28, and will give you my thoughts, as I wish someone had said to me 8 years ago when I started.

The first thing you need to do is write out your plan. You say that by 40 you want to choose how you work? which is a grand idea. But really - what does that look like? Does it mean income of $10,000/year? or $1mil/month? Write it down. Thats what you need to get to. Now how do you get there?
You either have 1 house returning x/month or you have 50houses retuning x-49/month.
How many houses do you need, with how much debt, at what level of income.
Now trust me - in 2 or three years, you will modify this, but thats not the point. The end goal wont vary by much.
Do this first and you will be well ahead of 99% of the population.
So, you now have a goal, and a strategy of how to reach that goal.

How you do it will come.

Doesnt really answer your original question I know - but your question might become irrelevant once you have a proper strategy in place.

I wish you the best.

Blacky

 

[IFBB]

Appreciate all the feedback in here, thank you!

You are all much more experienced than me, hence why im asking for advice... i will take on board anything, and willing to try anything suggested in here.

Blacky, great post. Will sit down with a pen and paper next time i have a few hours and will start on planning how i wish to acheive this "strategy". All good plans change over time, so i know not to tie myself down by concreting my future plans.