New to this - advice needed

[josko]

All this advice is great. For the moment we will tell Park Trent that we are not interested and want to learn more about alll this. Buy the reccomended books on here to develop our kowledge and visit this forum. We originally looked into Park because we saw it as a timesaving way to invest in property. But now I've become very interested and want to do this my way and not some one elses. Buy the property that I want and where I want. I'm actually getting excited about this! Looking forward to the highs and lows!

Good on you!

If you find you are not a reader and can't get into books don't forget you can buy the CD's for your car.

You can't really go wrong with your choice of property, as long as you stick to the fundamentals.

boomtown Start - exactly where you have started. Talk to us we like to talk. Gets lots and lots of opinions and find out what works for you.

There is no need to rush - prices aren't going anywhere for awhile.

Some ideas you can think about:

1. Look at areas close to you that you know well. Are there changes that would make more people want to live there?

2. Look at places close to water or close to railway stations (but not too close!).

3. Go into real estate agents and ask for their rental list. Compare the rental prices to the asking prices for houses on their window.

AND in my opinion - don't buy on a main road. Harder to find tenants, harder to sell if you need to. You may end up next to a Franklins, or the Council may widen it....
When you get to know a couple areas really well you will develop a nose for a great deal.

Look at at least 50 places before you buy anything.

Regards JO

 

[bradlou]

So what sort of buying price - rental ratio should I be looking at. For example in Bathurst there is a two bedroom unit available for sale, central Bathurst for $149,500. They say the rental for this is currently $155 a week. Only looking at Bathurst because we have a daughter who we hope will be going to uni there. Or do I need to look more at demand for rental. Not planning on buying this unit but just interested to know what I should be looking for. Yes I know i have to read the book...it's in the mail!

 

[fokas]

My greatest tip is that you work on your mindset. Once you overcome the fear that holds you back, you will find your comfort zone will grow, as will your wealth.

I couldn't resist quoting something that I believe in.

 

[MarkandTina]

So what sort of buying price - rental ratio should I be looking at. For example in Bathurst there is a two bedroom unit available for sale, central Bathurst for $149,500. They say the rental for this is currently $155 a week. Only looking at Bathurst because we have a daughter who we hope will be going to uni there. Or do I need to look more at demand for rental. Not planning on buying this unit but just interested to know what I should be looking for. Yes I know i have to read the book...it's in the mail!

At a real rough level:

Say it cost 160k to buy (incl stamp duty)
Interest per year 9% = $14,400
Add say another $3k for misc costs = $17,400 / year
Rent = 155 * 52 = $8060 / year
Depreciation, assume 5k per year.
8060 - 14,400 - 5000 = loss per year = $11,340 / year
If your marginal tax rate is .34 then tax back = $3855

So: 8060 + 3855 - 17400 = -5485 / year
If (big if) capital growth averages at 5% on the property over the long term:
149,500 *0.05 - 5485 = $1990 profit per year

This is roughly how I have set up my spreadsheet.

The figures here are all very estimated and a lot of assumptions have been made, I'm just showing you how I would work it out.

 

[Somerville]

One thing that is often overlooked is the use of a valuer. If you are unsure if a property is worth what they are asking, spend a few hundred dollars & have a valuer confirm that for you. They can save beginner investors a hell of a lot of money & if they agree with the price, you'll sleep better at night anyway.

It's definitely a comforting feeling when a professional valuer agrees with you.

 

[Zhouse01]

Your welcome to shoot me down if you like, but if a long term prospective is taken I dont think it matters if you pay too much. For instance if you pay $350k instead of $300k but sell at some time in the future for $1.5m who cares about $50k.

But I agree it depends on what you are trying to do and education certainly helps.

Well as much as people preach about long term outlook, there are cases where you have to look at the short term.

If you are paying $50k more it could mean the difference between buying or not buying the place (due to fiance / budget). Also with you paying interest on that extra $50k it will add up and limit funds that could otherwise be used to service another property.

 

[buzzlightyear]

Your welcome to shoot me down if you like, but if a long term prospective is taken I dont think it matters if you pay too much. For instance if you pay $350k instead of $300k but sell at some time in the future for $1.5m who cares about $50k.

But I agree it depends on what you are trying to do and education certainly helps.

Because you have to simultaneously fund the deposit and service the loan, with today's savings, income and expected rents.

This might also impact your financial capability and therefore timing to pursue other investments.

 

[mystery]

My wife and i are in our late forties. Currently paying off a mortgage and can't seem to see an end to it. Have a few shares and a good superannuation but nothing to write home about.

We were in the same position as you. Owned 3 IP's in Perth in 1980's and sold 1992 (ya don't think we regret that decision). We didn't understand what we had as no internet, books or magazines to advise us, but today their is no excuse for people not learning this business before investing.

We started buying IP's again as like you we realised that we didn't have enough super to guarantee a comfortable future. We started again in our mid 40's and now have many IP's and the future is looking very good, but we did learn all we could before we bought to formulate a plan and educate ourselves to ensure we took responsibility for our future.

Congratulations on your decision and as many have said in the posts before this one, .... read, learn and go on a crusade to arm yourself with information to allow you to make an informed decision. By taking responsibility for your IP education you improve the odds of success.

Once you have started buying IP's, .. well that's a whole new thread ....

Good luck

Martin ....