Please Advice - Investment Strategy

[sk280]

Hello All,

We are looking to buy our first home (PPOR), build some equity and then hoping to buy our first IP by mid-2011.

Am the only one who earns (decent income) with my partner still looking for work.

After reading all these threads on Investing, I have understood the following:

1. Buy PPOR, build some equity (anywhere from 1 to 2 years at least. More time in these pressing economic times)
2. Get funds ready for 5% deposit + costs (stamp duty, closing costs).
3. Search for Cash flow Positive IPs where possible, alternatively buy an IP that can be negative geared (since it'd be the first IP).
4. Wait for equity to build on 1st IP, then
5. Repeat when possible.
6. Revisit strategies after executing above steps.

I know the above seems overly simplistic, but am testing my understanding as a beginner, planning my way for investing.

Your comments would be appreciated.

Thanks.

 

[stumunro]

Your strategy seems sound, with a large portfolio it's very important to keep your eye on yields. You have to find that happy medium of good cashflow (low holding costs) and good growth. Some people will manufacture this by developing crappy houses in good suburbs, creating the yield and equity without having to wait for it.

 

[Propertunity]

4. Wait for equity to build on 1st IP, then
5. Repeat when possible.

Yep, that's basically it. Although setp 4. is pull equity from PPOR and IP#1. As you get more IPs - you can pull multiple deposits at a time from PPOR and IPs....so it gets to snowball.

And as stu says - you can manufacture equity without waiting for market rises from renos.

Cheers,

 

[The Y-man]

2. Get funds ready for 5% deposit + costs (stamp duty, closing costs).
.

This maybe should read (for clarity at least in my mind!):

2. Access equity in home through refinancing and drawdown/LOC to use as deposit and settlement costs on next property.

Cheers,

The Y-man

 

[sk280]

Excellent, Thanks!

As an aside, our search for our PPOR is proving to be extremly challenging and frustrating. FHB competition for properties under 450K is intense. Most open homes are cancelled in spite of agents refusing to give appointments during the week days. The agents hardly return calls and there seems to be no room for negotiation. I wonder if this extra grant of 7K (for old houses) is worth the hassle with all this competetion when desperate FHBs are slowly pushing prices up. Its crazy out there!

Any advice on at least getting a look at these properties would be really appreciated.

Thanks again.

 

[stumunro]

Excellent, Thanks!

Any advice on at least getting a look at these properties would be really appreciated.

Thanks again.

- Qualify yourself as a purchaser
- Offer decent settlement conditions
- Write up initial deposit cheques on inspections. Nothing works better than a seller getting a call from a real estate agent saying, we have a cheque here, these are the settlement conditions, want to start negotiating?
- Make mid-week inspections 1on1 with REA.

If you do these 4 things you will come on top of most of the FHB's out there.

GOOD LUCK!!!!!

 

[sk280]

Thanks stumunro. Will try these tips this weekend.

 

[awesome wells]

3. Search for Cash flow Positive IPs where possible, alternatively buy an IP that can be negative geared (since it'd be the first IP).

Very hard to find CFP and get good growth. You should be able to find a high growth property that is -ve geared to the tune of 3-4k. I think your thinking should be:

3a. Determine the cycles of the 5 major markets: Sydney, Melbourne, Brisbane, Perth, Adelaide. Pick the one you think is "next to go".
3b. Work out how much you can spend. i) how much you can lend, ii) how much you can pay per year
3c. Knowing your budget from 3b, shortlist a few areas in this price range. You might use Residex reports and general advise from this forum to arrive at that shortlist.
3d. Buy your first IP.

 

[sk280]

Very hard to find CFP and get good growth. You should be able to find a high growth property that is -ve geared to the tune of 3-4k

What is considered good growth? If one buys a CFP and it grows over period of 5 years, is it good growth? What are the parameters? More importantly what defines a high growth property? Am confused.

Thanks.