Hi, I asked for some advice last week and people were really helpful, so since I've lurked here for years I thought it might be about time to take a deep breath and contribute a bit. What I enjoy most (both here and in YPI/API) is reading about other people's investment journeys, so here goes:
*Hbd and I somehow wangled a loan in 1995 when I was a full-time Uni student and he had a tenuous, casual job. Bought first property in New Lambton (Newcastle,) for $67,000. Main road. No plumbing to kitchen. Outside toilet - was pregnant and HATED the night time visits! - old copper for laundry, and gas box for hot water in dodgy bathroom. We thought it was the Taj Mahal. I remember being giddy with excitement and hbd and I toasting each other with champagne when he got a massive pay rise to $26,000 (!) making it even more affordable.
*Lived there til our baby was 20 months old, then put tenants in (rent covered mortgage,) and went back-packing around Europe for 6 months...with a toddler in nappies...not sure what we were thinking!
*1988 - Came home and both got jobs. Left tenant in New Lambton and looked for home we could afford on one income. Bought in Mount Hutton for $112,000. Used second income to madly pay it down with the view of time off for me with next baby.
*1999 - Used equity to buy 2 more properties. Went to the bank with a vague notion that you didn't need a cash deposit if you'd paid down your loan a little. Had no clue of jargon such as equity, yield, capital growth, positive, neautral or negative gearing. Just had an idea it would be easier if the rent sort of covered the mortages. Found 2 properties - one in Shortland and one one in Warners Bay - that were homes with grannty flats attached. Warners Bay = nice 4 bedroom home in good street with a two bedroom granny flat for $195,000. Shortland = older 3 bedroom house near Uni with a 2 bedroom very ordinary flat for $175,000. Badly wanted to live at Warners Bay house, but decided we wouldn't until we could easily afford it.
*2000 - 2002 - Property progress derailed by arrivals of 2 more bouncing babies.
*2003 - Sold New Lambton for $165,000 and Mount Hutton for $195,000, cleared the debt on Warners Bay, and moved in. Yay.
*2003 - 3 permanant foster children, aged 1, 2 and 4, joined our family. Luckily Warners Bay had 6 bedrooms (including the flat.)
*2007 - My parents found themselves living solely from a pension, with no money but what was locked up in their home. Decided we'd buy them somewhere to rent to release their equity for their use. Bought a duplex in Mount Hutton for $310,000.
*2008 - It suddenly occured to me to educate myself about property! Began devouring Lomas, Steven McKnight etc. and was releived that we'd basically done things right by instinct. Bought a house in Macquarie Hills for $318,000, then one in Speers Point for $250,000 that we spent 3 months bringing back to life (painted inside and out, new bathroom, carpet coated with 5 solid centimetres of cat poop and vomit ripped up and floorboards polished etc.) We did everything ourselves (with our 6 kids,) and almost got divorced! Deceased estate that allowed us to start work 6 weeks prior to settlement, which helped a lot, even though we probably dodged a thousand potential problems that can occur in that scenario.
*2009 - Valuations on Shortland and Warners Bay (which we'd had for years,) and the increased value of Speers Point, meant we had lots of equity, and because we were now consciously buying as close to neutrally geared as possible, our serviceability was holding up. In quick succession, we bought 2 more at Warners Bay - $277,000 from a couple who were about to lose a place in a Nursing Home if they didn't sell within the week (we weren't ruthless - they brought the price down themselves,) and the other, beacause the agent knew we could go unconditional straight away, that the bank was about to repossess in 3 days, for $303,000. This one is 2 streets from the lake and was re-valued at $365,000 when we painted and put in a second hand kitchen we bought for $900.
*At this point, we bought 2 student units in Sydney. We knew the risk, but the returns (at least on paper) were really good, and our bank's Relationship Manager advised that when they were calculating serviceability they would use the gross rent, not the net. Units were $130,000 and $158,000 and returns were $330 and $460 gross (strata and vacancies brought it way down, but not in the bank's eyes.) It was a gamble, but helped get us across the line on our next purchases - a house at New Lambton for $300,000and our last IP at Mayfield, a three bedroom home we made into a 4 bedder by adding a wall, with a one bedroom flat we made into 2 bedrooms by dividing one of the rooms. We bought it for $400,00 and received $615 rent from day one, although this one tipped us over a threshold and sent our land tax bill sky-rocketing.
*2010 - Spent entire year travelling Oz in a (tiny!) Motorhome home-schooling our 6 children. Bliss. Put tenants in Warners Bay, which, because it was paid off, provided an income of $515.00 per week for the year. Other properties were (are) still neutrally or negatively geared, so we had to cover the excess with savings.
*2011 - Left tenants in Warners Bay, and bought PPOP for $617,000 at Eleebana. Not ideal financially, as Warners Bay now IP and has no debt, whilst still owing around $200,000 on PPOR, but would rather chip away at this than sell Warners Bay.
*2012 - Sold both student units. Profit of $23,000 probably didn't cover losses/expenses but proft/loss difficult to calculate, as later purchases wouldn't have been possible without the 'paper rent.'
Ironic thing is the properties we bought before we had any clue what we were doing have been the best performers by far, while some of our later buys have barely moved! We were just lucky to catch some booms with the earlier ones.
*2012 - Three more foster children, aged 1, 2 and 4, have joined our family. Will know in a few months whether they are with us forever or just for a while. With 9 children between 1 and 16, we may need to start looking for a larger PPOR!!!
So....that's our journey so far. I was raised my a Mum on a single pension, hbd was raised in a Housing Commission home, and our theory is.....you might as well give it a go, because if there's a tonne of love in the home, it's not going to matter much if you lose it all. In Australia, we're always going to be able to feed and educate our children, and put some kind of roof over their head, so why not? So far, it seems to be working out okay.
*Hbd and I somehow wangled a loan in 1995 when I was a full-time Uni student and he had a tenuous, casual job. Bought first property in New Lambton (Newcastle,) for $67,000. Main road. No plumbing to kitchen. Outside toilet - was pregnant and HATED the night time visits! - old copper for laundry, and gas box for hot water in dodgy bathroom. We thought it was the Taj Mahal. I remember being giddy with excitement and hbd and I toasting each other with champagne when he got a massive pay rise to $26,000 (!) making it even more affordable.
*Lived there til our baby was 20 months old, then put tenants in (rent covered mortgage,) and went back-packing around Europe for 6 months...with a toddler in nappies...not sure what we were thinking!
*1988 - Came home and both got jobs. Left tenant in New Lambton and looked for home we could afford on one income. Bought in Mount Hutton for $112,000. Used second income to madly pay it down with the view of time off for me with next baby.
*1999 - Used equity to buy 2 more properties. Went to the bank with a vague notion that you didn't need a cash deposit if you'd paid down your loan a little. Had no clue of jargon such as equity, yield, capital growth, positive, neautral or negative gearing. Just had an idea it would be easier if the rent sort of covered the mortages. Found 2 properties - one in Shortland and one one in Warners Bay - that were homes with grannty flats attached. Warners Bay = nice 4 bedroom home in good street with a two bedroom granny flat for $195,000. Shortland = older 3 bedroom house near Uni with a 2 bedroom very ordinary flat for $175,000. Badly wanted to live at Warners Bay house, but decided we wouldn't until we could easily afford it.
*2000 - 2002 - Property progress derailed by arrivals of 2 more bouncing babies.
*2003 - Sold New Lambton for $165,000 and Mount Hutton for $195,000, cleared the debt on Warners Bay, and moved in. Yay.
*2003 - 3 permanant foster children, aged 1, 2 and 4, joined our family. Luckily Warners Bay had 6 bedrooms (including the flat.)
*2007 - My parents found themselves living solely from a pension, with no money but what was locked up in their home. Decided we'd buy them somewhere to rent to release their equity for their use. Bought a duplex in Mount Hutton for $310,000.
*2008 - It suddenly occured to me to educate myself about property! Began devouring Lomas, Steven McKnight etc. and was releived that we'd basically done things right by instinct. Bought a house in Macquarie Hills for $318,000, then one in Speers Point for $250,000 that we spent 3 months bringing back to life (painted inside and out, new bathroom, carpet coated with 5 solid centimetres of cat poop and vomit ripped up and floorboards polished etc.) We did everything ourselves (with our 6 kids,) and almost got divorced! Deceased estate that allowed us to start work 6 weeks prior to settlement, which helped a lot, even though we probably dodged a thousand potential problems that can occur in that scenario.
*2009 - Valuations on Shortland and Warners Bay (which we'd had for years,) and the increased value of Speers Point, meant we had lots of equity, and because we were now consciously buying as close to neutrally geared as possible, our serviceability was holding up. In quick succession, we bought 2 more at Warners Bay - $277,000 from a couple who were about to lose a place in a Nursing Home if they didn't sell within the week (we weren't ruthless - they brought the price down themselves,) and the other, beacause the agent knew we could go unconditional straight away, that the bank was about to repossess in 3 days, for $303,000. This one is 2 streets from the lake and was re-valued at $365,000 when we painted and put in a second hand kitchen we bought for $900.
*At this point, we bought 2 student units in Sydney. We knew the risk, but the returns (at least on paper) were really good, and our bank's Relationship Manager advised that when they were calculating serviceability they would use the gross rent, not the net. Units were $130,000 and $158,000 and returns were $330 and $460 gross (strata and vacancies brought it way down, but not in the bank's eyes.) It was a gamble, but helped get us across the line on our next purchases - a house at New Lambton for $300,000and our last IP at Mayfield, a three bedroom home we made into a 4 bedder by adding a wall, with a one bedroom flat we made into 2 bedrooms by dividing one of the rooms. We bought it for $400,00 and received $615 rent from day one, although this one tipped us over a threshold and sent our land tax bill sky-rocketing.
*2010 - Spent entire year travelling Oz in a (tiny!) Motorhome home-schooling our 6 children. Bliss. Put tenants in Warners Bay, which, because it was paid off, provided an income of $515.00 per week for the year. Other properties were (are) still neutrally or negatively geared, so we had to cover the excess with savings.
*2011 - Left tenants in Warners Bay, and bought PPOP for $617,000 at Eleebana. Not ideal financially, as Warners Bay now IP and has no debt, whilst still owing around $200,000 on PPOR, but would rather chip away at this than sell Warners Bay.
*2012 - Sold both student units. Profit of $23,000 probably didn't cover losses/expenses but proft/loss difficult to calculate, as later purchases wouldn't have been possible without the 'paper rent.'
Ironic thing is the properties we bought before we had any clue what we were doing have been the best performers by far, while some of our later buys have barely moved! We were just lucky to catch some booms with the earlier ones.
*2012 - Three more foster children, aged 1, 2 and 4, have joined our family. Will know in a few months whether they are with us forever or just for a while. With 9 children between 1 and 16, we may need to start looking for a larger PPOR!!!
So....that's our journey so far. I was raised my a Mum on a single pension, hbd was raised in a Housing Commission home, and our theory is.....you might as well give it a go, because if there's a tonne of love in the home, it's not going to matter much if you lose it all. In Australia, we're always going to be able to feed and educate our children, and put some kind of roof over their head, so why not? So far, it seems to be working out okay.
