When to start investing

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From: Lake Judy


I have a question for the forum. Everything I've read and been told indicates that its possible to start investing and growing that portfolio with very little at the start. I am quite impatient to start having read that. However, my calculations have suggested I should wait and save for longer and longer to get a substantial deposit before I start. My question is this:

Would starting with a minimal deposit etc. be financially dooming down the track? And should I wait for longer, a larger deposit may mean the difference between positive and negative gearing.

 

[Kristine..]

Reply: 1
From: Kristine .


"Would starting with a minimal deposit etc. be financially dooming down the track? And should I wait for longer, a larger deposit may mean the difference between positive and negative gearing."

Judy,

Just a thought, but what is the difference - apart from the obvious one of committment v optional, between saving for a deposit over a period of time, or contributing to a cash flow shortfall (commonly known as negative gearing) at periodic intervals?

We have been through a cycle of low growth, when it has 'perhaps' been possible to save fast enough to financially catch a property. But if we are about to have a growth spurt/wave/curve, can you save enough to catch a property if the median values rise more than the 14 or so % reported recently?

If you use a low deposit, but commit yourself to the same savings regime as if you were still saving up, within your projected timetable you will be in the same technical position as if you had saved that deposit before buying.

Except, of course, the property will have provisionally risen during that time, with the growth working for, and not against, you.

However, only you know your emotional risk factor, so do your sums but go with what you 'feel' you can cope with.

Good luck,

Kristine

 

[Mike]

Reply: 2
From: Mike .


Hi Judy,

I'm with Kristine on this one. I recently heard of a couple who moved to Brisbane with his employer because they had no chance of saving a deposit in Sydney. Property prices escalating too quickly. Problem with savings is that it is taxed. Makes it difficult to save large deposit.

Better to negative gear and take tax benefits. Try to buy when growth spurt is on to maximize return.

Regards, Mike