What should we do first?

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From: Caren Temby


Myself and partner have recently began to think seriously about our financial future.
We are on a combined gross income of approx $80K and have saved $12000 in the last 9 months. We have a small managed fund, and no other assets.

Would we be best to put our savings towards a deposit on our first home, pay it off as quickly as possible and then begin with IP?
Or would we be better to start with investment property first? We have no aversion to continue renting.

Thanks
Caren
 
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Reply: 1
From: Mark Laszczuk


Caren,
My partner and I are in the same situation as you currently, except we don't make quite as much money (wish we did though, the extra $ would mean being able to buy IP's faster!). We have decided to continue renting for the time being, for a number of reasons. These being: access to workplaces (she walks, I catch tram: 15 mins door to door), cheaper for us to rent than buy where we live, don't own a car, so buying further out would necessitate purchase, something we can live without at this time (but we have access to wheels if and when we start checking out houses). Currently in 'negotiations with partners mum to move back there to save money (maybe this is could be an option for you guys?). Yeah, so those are our reasons to continue renting for the time being. What you need to do is sit down and discuss these things and then determine what is best for you.

Mark
'no hat, some cattle'
 
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Reply: 2
From: Trina Blum


Hi,

I have recently viewed a video by the Investor's Club (no I'm not associated with them) and in it they suggest that it is better to rent a property as you can usually rent somewhere you want to live for less than what it would cost you to buy in the same place and get the taxman and tenant to help pay off either an IP or what could later be your own home.

Even if you wish to eventually live in a property, you buy it and put a tenant in, rent somewhere else for the same rent or less than your tenant is paying you and with the depreciation and tax benefits on your "IP" it is paid off sooner and your helped with the costs by the taxman and tenant. You can then a little way down the track once you have reduced the mortgage on it move in and live in it yourself. There would be the issue of Capital Gains Tax perhaps if having it as an IP part of the time (you'd have to check that out with an accountant or tax office.)

As I said this was a suggestion by the Investors Club on a video but as they said on it and I agree it is an emotional subject. I have not bought property through the investors club but I thought what they said could possibly have some merit.

Some people, such as myself, prefer to live in and own their own home - reduce the mortgage as fast as possible to increase the equity and then buy an investment property.

I'm sure there are a lot of opinions on the subject. In your case I guess it depends on whether you are happy renting where you are, how much it is costing you compared to paying off a mortgage in the same area (if that is where you want to stay) and whether you want to "own" your own home.

Food for thought.

Regards
Trina
 
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Reply: 2.1
From: Caren Temby


Thankyou guys for such a prompt response.
After reading More Wealth from residential property, I am wondering how much harder it will be to start this process given that we do not have the equity in a "home" which is so often referred to in the book.

And also, would it be preferable perhaps to "help our tenants" pay off our loan, rather than have an interest only loan, so that we do accumulate equity?

I guess this early on in the picture I am not sure of how important equity is? Perhaps we could just go along, saving for deposits to property's and organising interest only loans???

Caren
 
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Reply: 3
From: Steve Piggott


Well i'm sure there are plenty of people who would like to start investing with an 80k salary and 12k cash.
The trick to buying good IP's is about getting instant equity without buying a complete wreck! Market research is essential. Establish contacts with all local agents and let them know what properties you're looking for. Get a 'feel' for the suburb/area where you are going to purchase.
Try not to buy at auction... you'll be competing with emotional buyers so you'll pay more for the deal (unless you're the only buyer... easy to tell no one else is bidding after the first bid which is usually the vendors reserve price bid)
Buy in suburbs where there are low vacancy rates... info from agents/rental managers.
If you buy right... you can get instant equity and leverage that equity for your very next purchase. Remember that as soon as you can get access to the property that you can enhance it for a re-valuation. Do the minimum work for the maximum effect. Look for hot suburbs.... and buy where there is evidence of good capital growth. 10% to 20% is not unachievable.Three things that investors need... Control of asset..Leverage of assets equity and compounding of assets . Self manage if you can....collect rent personally.. it gives you a legal right of access and a good rapor with your tennant and joint venture partner(after all they are the people that make you rich)....(no tennant....no IP).
A final quote..... dont wait to buy real-estate... Buy real-estate and wait!
If you want to know what property will be worth in the next 10 yrs.... look back 10yrs.
Only the next 10 yrs will give a far steeper growth curve.
Happy Investing
Neb :)
 
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Reply: 2.2
From: Joanna K


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My husband and I are also in the same boat.

We are continuing to rent whilst we build our portfolio.

Personally, I would rather buy a property that will make me money, not =cost me money.

There are alot of different opinions on this subject. May I suggest you =read Rich Dad Poor Dad by Robert Kiyosaki.

Kind regards

Joanna Karavasilis
Principal
THE RENTAL SPECIALISTS

PH: 02 9599 3363
FAX: 02 9599 3447
EMAIL: rentals@rentalspecialists.com.au
WEB: www.rentalspecialists.com.au


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My husband and I are also in the same =boat.


We are continuing to rent whilst we =build our
portfolio.

Personally, I would rather buy a =property that will
make me money, not cost me money.

There are alot of different opinions on =this
subject. May I suggest you read Rich Dad Poor Dad by Robert
Kiyosaki.

Kind regards

Joanna Karavasilis
Principal
THE RENTAL SPECIALISTS

PH: 02 9599 3363
FAX: 02 9599 3447
EMAIL: rentals@rentalspecialist=s.com.au
WEB: www.rentalspecialists.com.au=


------=_NextPart_000_009E_01C177F0.03113400--
 
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Reply: 2.3
From: Scott Marshall


If you do decide to rent, you could always rent within walking distance to your IP and future home, collect the rent in the comfort of your own future lounge room.
 
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Reply: 4
From: Terry Mc


Caren,
are you and your partner eligible for the
First Home Owners Grant?
If so, this may affect your strategy.
Perhaps you can buy an IP, rent it out for
11 months, then move in yourself to keep
the FHOG. If you have kept saving you
may then have enough equity to buy the
first of your portfolio of IP's :)
Terry Mc
 
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