NEWBIE - Need Help...with Property Investment

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xQuIz8

Hi ALL !!

First of all, I must say that this is a very impressive site!
The people here are very knowledgable and helpful ~
Let me introduce myself.
I am a fresh chemical engineer graduate and I am currently working in
an engineering firm. Dad from overseas would like to make an investment
in Melbourne. Our budget is $450-$500k for an apartment.

My questions are :

What would be the best location ?
I was thinking of Melb CBD or anywhere within 5 kms.
If its in the city centre, I would be paying about $450 for a 50m2 apartment.
Is it worth it ? I guess thats a trade off due to the strategic location.

How should I finance it ?
With my current starting income, I could borrow about $315k according to my financial broker. Dad plans to borrow the remanining $185k or so from overseas. Is this a good idea?

Who should I go to ?
Would going to a financial broker be a good idea ? He was recommended by a property agent that I met.

Should I invest in a property worth $500k or two properties worth $200k ?

Since I am really foreign in this property investment thing, would you guys kindly advice me
on the proper procedure on the whole transaction of purchasing a property and the necessary details that I would need to know?

I really hope you guys who are the experts around here would help me out in this. I am looking to purchase a property by June 2008.
Thank you so much and I really really appreciate it !!
 
I can't really answer your questions because I don't know enough about your situation but I don't believe buying an investment because 'your dad thinks it is a good idea' is a good enough reason.

Is this property for you to live in or a pure investment ?

Where did you come up with a budget of $450-$500k for an apartment ?

Are you willing to stand on your own two feet or do you need your dad to hold your hand ?

Do you think it is a good idea to invest ? Why ?
 
I can't really answer your questions because I don't know enough about your situation but I don't believe buying an investment because 'your dad thinks it is a good idea' is a good enough reason.
No its not. It is for future investment. I am currently living on Lygon St paying $780 a month. I was thinking since I am paying that amount, I might as well own a place myself.
I plan to stay here for 3 years then return to my home country.

Is this property for you to live in or a pure investment ?
I plan to live in and rent the extra room out. Would going with interest-only payments be a good idea?

Where did you come up with a budget of $450-$500k for an apartment ?
I have saved up a downpayment of approx $50k. for deposit and by financing with the bank, I think that would be realistic.

Are you willing to stand on your own two feet or do you need your dad to hold your hand ?
Well, its more like we're both holding each other's hand. Haha..
He has money to invest as well therefore he is asking me to do some research here in Australia. This also explains why I have a budget of $500k. Without his help, I think I would only be able to manage just under $400k.
Further more, he is really keen on investing in Australia as well.
Recently, his business is going really well..and have the extra cash to spend.
I plan to 75% of the repayment every month and he'll help with the other 25%. Estimate total repayment for a $450k loan with 8% interest would be approx. $2.8k.



Do you think it is a good idea to invest ? Why ?
I think of the future. Since we're having the extra cash, it would be wise to invest it. Property Investment in my opinion would be the most stable and safe option especially for a newbie like myself. Besides that, I also believe that residential rental property is the best way for building more wealth because half the debt or most of it is paid by the tenant itself - or so to speak.
And obviously at the end of the day, its all about money and achieving financial independence when I grow old. I would like to be able to provide my mum and dad with a more than comfortable living when they retire/grow old. Thats the least I could do as the son considering all the time,love and money they have spent on me bringing me up.

My main plan is to be able to generate wealth and produce an income stream from somewhere other than my OWN LABOUR.

So WillG, will you share some knowledge with me please?
 
Honestly, 3 years isn't a long time for property. Holding for the long term means you ride through the property cycle: only holding for 3 years is a crap shoot.

I'm going to guess if you buy the place you live in, the repayments (even if interest only) will be higher than your rent.
Alex
 
Oh no, I plan to have it for years..

not just 3 years
Even when I leave the country next time, I will still be keeping the place..
 
xQuIz8 said:
I am currently living on Lygon St paying $780 a month. I was thinking since I am paying that amount, I might as well own a place myself.

I also believe that residential rental property is the best way for building more wealth because half the debt or most of it is paid by the tenant itself - or so to speak.
[/B]
Click to expand...

It will be quite a jump in your expenses from $780pm to 75% of a $450k mortgage, and you won't be getting as much rent to help you along only renting a room rather than the whole place. Not saying don't do it, just be aware of what you'll be up for. Do you have to move into it?
 
Thats a good point steveadl.

I guess it would a better option for me to rent it out fully at say
$480 pw , meaning $2080 per month and I will continue renting the place at
Lygon St for $780 per month ??
 
xQuIz8 said:
Thats a good point steveadl.

I guess it would a better option for me to rent it out fully at say
$480 pw , meaning $2080 per month and I will continue renting the place at
Lygon St for $780 per month ??
Click to expand...

Personal preference, but financially - yes.
 
Have you investigated the tax implications to you when you move out of Oz? Will the country you go to, for example, have world wide taxation? How would it treat income from an Australian property and will it give you tax credits, for example?
Alex
 
Thanks for being up front with your answers.

sharing knowledge ...

----------------------------
General Comments:
----------------------------
- Well done on saving your $50k deposit
- The answers will come to you as you read more about investment and form your own opinions
- I would be looking at townhouses up to 10km from the CBD with good access to public transport
- Your investment goals are very general. I suggest thinking more about your goals and understanding the different options
- I suggest you attend many open houses in your search for a property. You will quickly learn what is good value and what is not good value.

----------------------------
Location:
----------------------------
- Close to the CBD is good but look for areas with low traffic noise
- Look for property close to public transport - preferably walking distance (trains & trams)
- Look for property in 'good areas' - low crime, leafy suburbs etc

----------------------------
Type of property:
----------------------------
- Avoid large unit complex's because of high body corp costs and lack of control
- Look for units that have something unique
- Look for units with a garage or at least off street parking
- Avoid 1 bedroom units - will reduce rentability in the future
- Try to buy an existing property with maintenance issues sorted out


NOTE: The information above is very general and can propbably be found in many property investment books available.


Good luck
 
Thanks AlexLee and WillG for your kind advices..

I am actually looking for a 2bedroom apartment in CBD.

Well, since its for investment purposes, I guess it doesnt really matter

if its new or old.

hmm... any recommendations ?

Theres so many things to consider arghH!
 
xQuIz8 said:
I guess it doesnt really matter

if its new or old.

hmm... any recommendations ?
Click to expand...

You need to look for the best property for the money in terms of ...

* Capital Growth (some properties will have better prospects for capital growth )
* Cashflow
* Flexibility (off street parking, renovation potential to increase cashflow ...)
* Known costs (new properties may have costs you don't know about yet. It is generally easier to get accurate info on established properties such as rental appraisal, neighborhood demographics)
 
Melbourne CBD traditionally doesn't have quite as good capital gains as much of the rest of melbourne so make sure you do your DD in this area
 
I was also wondering..

If I were to purchase a property which is due to completion at the end of 2009, wouldnt it be not-so-feasible considering I am actually paying $780 p/m now on rent.

Further more, one of my main intentions of buying a place is also to half live in and half rent out. Would it still be a good idea to pay interest-only ?
 
Just wondering,
how are you actually planning on making any gains by buying a poor yielding property without major improvement potential at/near the top of the cycle?

BTW, don't forget to factor in BC costs, rates, PM fees, maintenence etc.

:confused:
 
xQuIz8 said:
Units in Melbourne CBD, Prahran, St.Kilda, Richmond are poor yielding ?????

:eek::eek:
Click to expand...

There is a huge difference between the market in the CBD and the other suburbs you have mentioned. For a start, CBD properties are often not zoned residential, and will be closer in characteristic to commercial properties.

Prahran, StK, Richmond are generally (in my experience) more suited to CG type investments than for yield.

Cheers,

The Y-man
 
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