Starting out

[mjj]

Hi All,

Long time reader, first time poster...

Looking for a little reassurance that I have my information straight and a little advice from experienced investors.

My wife and I are looking to start an investment portfolio, mainly property (since the negative gearing aspect appeals to me), that will eventually allow us to:

1. Provide a kick start to life for each of our 2 kids (currently 10 & 8) when they come of age
2. Build a portfolio that will eventually allow me to retire early (currently 32, ideally retire before 55)
3. Provide some financial independence whilst still working for a living

Our background
We had kids very young and as such spent most of our 20s setting up a family home and providing an engaging lifestyle for our kids. We did this on a single income, so we were a little late with getting into our own home, but we did have a good life.

Current Situation
Income: $140k (myself - double over next 2-3 years) + $40k (wife - starting shortly)
Assets: $420k (PPOR)
Loans: $260k ($30k of that sitting in redraw)

First investment thoughts
Buy in my name only (tax), look at using equity in our PPOR as deposit (thus limiting purchase price to about $350k at 80%LVR) and aim for entry level house with large land in Melbourne outer South East (Berwick or surroundings).

Questions / Uncertainties
1. Thoughts / advice on the target area (Melb outer SE)
2. Ideas on how to purchase property that can appreciate quickly (reno, extension, sub division, etc...) - my understanding is that I will be limited by deposit rather than ability to service future loans, so want to look at ways at building this deposit / equity as quickly as I can to secure future investments
3. Tips on who and how to build a network with key advisors/agents/etc... (ideally I would like to be in a position where I am approached with deals that make sense - understand this will take time to build and want to start right)
4. Loan structures (thinking of going a simple secured loan for first IP using our PPOR, but taking a separate loan for the deposit which will be secured by our PPOR rather than the IP being secured directly).
5. Any other advice that may prove helpful

Thanks in advance.

 

[Colin Rice]

my understanding is that I will be limited by deposit rather than ability to service future loans, so want to look at ways at building this deposit / equity as quickly as I can to secure future investments

You could purchase two IPs straight away if you went in at 90% LVR.

Speak with one of the Melbourne Brokers that contribute regularly on here. Two that come to mind are Aaron C and PT Bear (Peter Trusteg). They will steer you in the
right direction.

Cant comment on where to buy in Melbourne but everything else about your summary looks sound.

All the best

 

[zmagen]

My own two cents (mind you, I'm biased, as my personal investment philosophy is "strictly cash") - I'd consider negative gearing very carefully before diving head-first into it - I know a great many, wiser and more experienced than myself, who've lost their pants and then some with these sort of schemes - doubly so if you're planning to use your PPOR as security.

All it takes is one unexpected life or market turn, and things can go bad very quickly when you're leveraged to the gills.

 

[marg4000]

I am concerned that your main motivation seems to be negative gearing losses and tax benefits.

Any investment should stand on its own, and tax benefits should simply be icing on the cake.

Negative gearing means your investment is losing money (every year), so you must be very certain of significant capital gain. Past years have shown that is not always easy to achieve.
Marg

 

[MRO]

I am concerned that your main motivation seems to be negative gearing losses and tax benefits.

Any investment should stand on its own, and tax benefits should simply be icing on the cake.

Negative gearing means your investment is losing money (every year), so you must be very certain of significant capital gain. Past years have shown that is not always easy to achieve.
Marg

Listen to this ^^^

Main motivation should be profit - generally CG or ongoing cashflow. Tax is a consideration when calculating holding costs as generally it reduces your losses.

 

[Sesster]

MJJ,

With all due respect IMHO your not ready to buy anything. Yes, you could make a speculative purchase and hope you made the right decision but in my opinion that's gambling.

Im going to make an assumption that you want to create a relatively large portfolio that will achieve your goals, hence your going to be extremely committed to this. In that case,

1st: You need to educate yourself on property investing and learn as much as you can. Read everything you can. Eventually you will gain a perspective which is SO important. NG is only 1 strategy and that alone will not get you to achieve your goal. There is a lot more education/knowledge you need about strategy in order to maximise your chances of success.

2nd: Identify your goals. Then work backwards to see what you need to invest in to achieve them.

3rd: Develop your mindset and then constantly work on it to maximise your chances of success.

Good luck mate.

ps, Don't underestimate the value of the 3rd point. Mindset is 80% the battle.

 

[Tim86]

MJJ,

With all due respect IMHO your not ready to buy anything. Yes, you could make a speculative purchase and hope you made the right decision but in my opinion that's gambling.

Im going to make an assumption that you want to create a relatively large portfolio that will achieve your goals, hence your going to be extremely committed to this. In that case,

1st: You need to educate yourself on property investing and learn as much as you can. Read everything you can. Eventually you will gain a perspective which is SO important. NG is only 1 strategy and that alone will not get you to achieve your goal. There is a lot more education/knowledge you need about strategy in order to maximise your chances of success.

2nd: Identify your goals. Then work backwards to see what you need to invest in to achieve them.

3rd: Develop your mindset and then constantly work on it to maximise your chances of success.

Good luck mate.

ps, Don't underestimate the value of the 3rd point. Mindset is 80% the battle.

lol he shouldn't be buying anything....really? His got equity and a large salary and he is researching property and figuring out the best way to go forward...sure sounds like a recipe for disaster right there

Look mate I wouldn't pay much attention to all of these comments. You know your situation better than anyone on here. Find something that is a good price with good potential and within your budget and buy it. But like people have said, negative gearing is a crap goal. Aim for positively geared with good chances of capital growth, that should be your goal, so try and get as close to that as possible. And you can add value doing a reno, that's pretty basic. But you probably won't add much value if you are paying tradies to do everything for you.

As for asking about the area you are interested in looking at. That's a good idea. Hopefully someone on here knows the area and can give you some feedback.

 

[Sesster]

Tim86,

I stand by 100% what I said.

Just having a good income and equity doesn't mean your necessarily ready to purchase an investment property. Its clear from his post he has very little understanding of investing in property. He needs to gain more knowledge first. Wont take him that long ( I agree a lot of people have analysis paralysis) but he's clearly not ready based on his comments and questions he asked in his post.

I think its fantastic hes taking a stand and wants to get started in creating some wealth. IMHO it would serve him best to gain more knowledge first. Read everything he can. Then come on here and ask questions. Then take action.


Sesster

 

[Tim86]

Tim86,

I stand by 100% what I said.

Just having a good income and equity doesn't mean your necessarily ready to purchase an investment property. Its clear from his post he has very little understanding of investing in property. He needs to gain more knowledge first. Wont take him that long ( I agree a lot of people have analysis paralysis) but he's clearly not ready based on his comments and questions he asked in his post.

I think its fantastic hes taking a stand and wants to get started in creating some wealth. IMHO it would serve him best to gain more knowledge first. Read everything he can. Then come on here and ask questions. Then take action.


Sesster

What exactly did he say in his first post that disqualifies him from being ready to purchase a property?

 

[strongy1986]

lol he shouldn't be buying anything....really? His got equity and a large salary and he is researching property and figuring out the best way to go forward...sure sounds like a recipe for disaster right there

Look mate I wouldn't pay much attention to all of these comments. You know your situation better than anyone on here. Find something that is a good price with good potential and within your budget and buy it. But like people have said, negative gearing is a crap goal. Aim for positively geared with good chances of capital growth, that should be your goal, so try and get as close to that as possible. And you can add value doing a reno, that's pretty basic. But you probably won't add much value if you are paying tradies to do everything for you.

As for asking about the area you are interested in looking at. That's a good idea. Hopefully someone on here knows the area and can give you some feedback.

There's no such thing as a good positively geared investment in Melbourne. That's why I look in your home town, Brisbane

 

[Sesster]

Tim,

If it was me, I wouldn't want to invest in anything until I had a better understanding of:

Goal setting (#1 thing to do, in as much detail as possible)
Market cycles (state cycles, city cycles and suburbs)
Key growth indicators (to maximise chances of CG coming sooner, and how to make some sense of the KGI)
Various strategies to manufacture equity ( buying under intrinsic value, reno etc)
How to develop a team of experts
Who needs to be on that team
Finance and structuring (don't waste your time, leverage off the experts)
etc etc.

It wont take long to have a better understanding of all this, but if you don't do the reading and just rely on a forum, that's not the way to go. This forum is a great place to ask questions, but IMHO you really need to know the stuff mentioned above, in order to maximise your chances of success. And I cant stress enough how important mindset is. Its definitely worth reading up on this and developing a winners mindset. Its vital IMO if you want long term success.

Sesster

 

[Noknee]

Hi All,

Long time reader, first time poster...

Looking for a little reassurance that I have my information straight and a little advice from experienced investors.

My wife and I are looking to start an investment portfolio, mainly property (since the negative gearing aspect appeals to me), that will eventually allow us to:

1. Provide a kick start to life for each of our 2 kids (currently 10 & 8) when they come of age
2. Build a portfolio that will eventually allow me to retire early (currently 32, ideally retire before 55)
3. Provide some financial independence whilst still working for a living

Our background
We had kids very young and as such spent most of our 20s setting up a family home and providing an engaging lifestyle for our kids. We did this on a single income, so we were a little late with getting into our own home, but we did have a good life.

Current Situation
Income: $140k (myself - double over next 2-3 years) + $40k (wife - starting shortly)
Assets: $420k (PPOR)
Loans: $260k ($30k of that sitting in redraw)

First investment thoughts
Buy in my name only (tax), look at using equity in our PPOR as deposit (thus limiting purchase price to about $350k at 80%LVR) and aim for entry level house with large land in Melbourne outer South East (Berwick or surroundings).

Questions / Uncertainties
1. Thoughts / advice on the target area (Melb outer SE)
2. Ideas on how to purchase property that can appreciate quickly (reno, extension, sub division, etc...) - my understanding is that I will be limited by deposit rather than ability to service future loans, so want to look at ways at building this deposit / equity as quickly as I can to secure future investments
3. Tips on who and how to build a network with key advisors/agents/etc... (ideally I would like to be in a position where I am approached with deals that make sense - understand this will take time to build and want to start right)
4. Loan structures (thinking of going a simple secured loan for first IP using our PPOR, but taking a separate loan for the deposit which will be secured by our PPOR rather than the IP being secured directly).
5. Any other advice that may prove helpful

Thanks in advance.

My only advice is to get in to it!! U can toss and turn all you want something will pop up and jump at u that is what has happened to me.

My first investment just popped up and I bought it looking back I should have researched more or maybe tried to get a bigger bargain but it was my first ip and it is still positively geared and from taking that plunge I have been able to invest a lot more and more ips.

Forget the negative gearing neautral or positive and get a good accountant!!!

Good luck and agree go two at 90%

I know nothing of melb but my next one will be syd or brissy

 

[Tim86]

Tim,

If it was me, I wouldn't want to invest in anything until I had a better understanding of:

Goal setting (#1 thing to do, in as much detail as possible)
Market cycles (state cycles, city cycles and suburbs)
Key growth indicators (to maximise chances of CG coming sooner, and how to make some sense of the KGI)
Various strategies to manufacture equity ( buying under intrinsic value, reno etc)
How to develop a team of experts
Who needs to be on that team
Finance and structuring (don't waste your time, leverage off the experts)
etc etc.

It wont take long to have a better understanding of all this, but if you don't do the reading and just rely on a forum, that's not the way to go. This forum is a great place to ask questions, but IMHO you really need to know the stuff mentioned above, in order to maximise your chances of success. And I cant stress enough how important mindset is. Its definitely worth reading up on this and developing a winners mindset. Its vital IMO if you want long term success.

Sesster

According to your requirements I wasn't ready to buy my first 4 properties...