Where to seek unbiased, quality advice for first timer

[First timer]

Hi all, first time post so I apologise if its in the wrong area.

For background I'm considering my first foray into property investment and unsure where to seek out quality advice that doesn't come from dodgy seminars and people selling get rich quick schemes or books with CAPITAL LETTERS all over them.

About me- I'm female, 29, single, live in Sydney and have no real financial obligations (other than my 11 yr old son and a margin loan currently LVR 50%). Good cashflow with gross salary income of $95K + super + investment income which is all reinvested. 37% tax rate. Nothing stellar in equity given my penchant for skiing more than I can afford- around $50K comprising $40K net equity in share portfolio and $10K in first home saver account (non accessible for 3 years at which point it will be around $30K).

I work in corporate finance so know my way around a spreadsheet and a calculator, part of the reason all my investments are in shares. I 'get' company ownership more than I 'get' property ownership. And the GFC was too good an opportunity to pass up, shovelling in all my limited cash at the time which paid off handsomely. I've spent a lot of time over the last couple of years self educating on investing, but rarely looked into the property aspect, preferring the diversification and liquidity available with shares while I was starting out, as well as general comfort around understanding companies more than bricks and mortar.

The downsides are I have absolutely no financial advisers of any kind or tax specialists, lawyers, or accountants. I have visited a few advisers at banks over the years and always been horrified by the quality of advice, and bias towards products that pay commissions. I stubbornly prefer to manage all my own money even down to wasting a day a year to do my own tax return because I haven't trusted an accountant to do a better job. Logically I know that makes no sense, but we all have our problems.

I steered clear of property up until now mostly because I had nowhere near enough money to get started, even now I hesitate at the thought of holding so much equity in a single super long term asset but also because I was just such a shares fanboy.

But the closer I get to 30 the more I lust over real estate signs. I think it must be like childless women getting clucky for babies, I get clucky over yield calculations and floor plans. There is one key thing about investing in property that really appeals to me and that's manufacturing equity through improvements, something impossible to do owning a tiny portion of a company. This idea has been so appealing I've started reading all the books and magazines I can find and might be ready to start planning some property investment for the future.

But I'm nowhere near an expert in bricks and mortar, so I started trying to find personalised advice and things did not go well. The bank advisers can't advise on property, the mortgage specialists can't give personal advice, they both suggested I speak to my accountant. I didn't know people even had their own accountants? The ads in the property investor magazine make me cringe, I can't stand all this rubbish about secrets and owning 100 properties and free ebooks and dvds.

Does the dream exist? Some sort of giver of personalised financial advice on wealth building through property and shares I can see a few times a year long term and pay by the hour without selling a kidney, who gets no commissions to bias their recommendations and who is just going to provide advice and answer all my questions in that hour or two rather than go away and create a $4,000 written plan I don't want or need.

I suspect it doesn't, so what would the next best thing be? Or what worked for you when you were thinking about starting out in property for the first time?

Any thoughts and advice would be greatly appreciated.

 

[wylie]

Welcome to the forum, and I would suggest this is a perfect place to start asking questions.

Are you lusting after property for you to live in or are you settled somewhere and wanting to buy an investment property.

A bit more information from you about what you like, don't like, areas, long term plans etc would help shape the answers.

There are so many aspects to be thought about but being here is a good start.

 

[Aaron_C]

Yes you better talk to the accountants because they know everything...what a joke. People just say that because it is a cop-out and no one wants to own any decision but push it onto a third party.

However, to answer your original question - getting into property investment isn't that hard but it just depends on your strategy. First thing to do is work out your budget, and then do a lot of research into what type of property you are after:
Can you sustain a negatively geared property? Do you need something with a bit more cashflow? Are you a good renovator to add value? What areas are you comfortable with?

I know people who are doing all sorts of things in all sorts of areas. Some of those things I wouldn't personally do but each to their own - whatever makes money is important in the end.

 

[HiEquity]

Welcome to the forum.

Does the dream exist? Some sort of giver of personalised financial advice on wealth building through property and shares I can see a few times a year long term and pay by the hour without selling a kidney, who gets no commissions to bias their recommendations and who is just going to provide advice and answer all my questions in that hour or two rather than go away and create a $4,000 written plan I don't want or need.

I suspect it doesn't, so what would the next best thing be? Or what worked for you when you were thinking about starting out in property for the first time?

Any thoughts and advice would be greatly appreciated.

All the answers you seek are on this forum. I wish I had it when I was starting... I can only suggest acquainting yourself with the search function and finding your way around the archives. There's gold in there - you just have to pick through a fair bit of dross to find it. Which is just like investing in property actually... good training for when you go property hunting!

 

[First timer]

Thanks Wylie, nice to feel welcomed.

I currently have the benefit of free rent so purely looking for an investment property, I don't own any of my own at the moment. I am factoring requiring $500 a week for rent into any cashflow calculations I do for serviceability though should my circumstances change.

My long term plans are to retire before my knees give out and I can't enjoy skiing anymore. I would like to build up considerable equity that I can generate an income from, across property and shares.

I've spent most of my life on the Northern beaches, some in the blue mountains and very recently moved near Hurstville but still don't feel like I know the area at all. I don't think much of DeeWhy which is probably the only place on the Northern Beaches anywhere near my price range and The Blue Mountains doesn't seem to have had any capital growth, at least a house I rented for $200 a week 12 years ago I saw listed recently for $220 a week, with new paint and polished floors. That concerns me somewhat.

My knowledge is limited and no doubt flawed but I am most attracted to the idea of a low purchase price given it's my first foray and I don't have a substantial deposit. The bank calculators seem to think I can borrow around $500K (I punched in an arbitrary $18K gross rental income on top of my salary to come up with that figure). My current deposit could only get me to ~$200K purchase price (unless I pay LMI which I don't like the idea of, although I gather its tax deductible, not sure if you can cap it to the loan and claim it back in year 1).

There is almost nothing in that price bracket so I might need to keep saving so I can buy in at around $250-300K which will likely rule out anything beyond small units and studios. Obviously I'd prefer a house with some land but that's going to have to be a longer term aspirational goal.
I am also hesitant to use my full borrowing capacity as I expect I'll want to start looking at somewhere to own and live in in about 3-5 years and don't want to have to sell down any investments.

I keep coming back to this idea of adding value through cosmetic improvements which really appeals to me. Not interested in major renovations or any structural changes just sprucing a place in a couple of months calling in favours from tradies in the family to extract some more favourable rent. I'm not so attracted to the idea of buying off the plan or an already renovated property. I can't do much myself beyond painting, hitting things with sledgehammers and putting together Ikea flatpack kitchens but have a friendly army of skilled tradies to assist.

I would prefer something in the Sydney district I can visit and work on myself around my existing work commitments. Also since its my first ever property I think I'm going to want to look at it, a lot. Probably drive past it regularly just for the satisfaction. I'm sure from then on in its easier to make arms length decisions about properties you barely see.

I haven't made a decision on positive/neutral or negative geared. I have the cashflow to service a negatively geared property at a lower end price point so all options are open there. I am a fan of negative gearing my share portfolio so comfortable with the concept if the capital growth is likely enough.

Something in the South West or West would be ideal from a location perspective to be able to make cosmetic improvements myself but an awful amount of DD required since I'm not familiar with the area.

Some of the prices on studio units in Rushcutters Bay and Potts Point have surprised me with how low they are, I've assumed there are great reasons for it though.

 

[oracle]

Read some books on property investments to improve your knowledge on various strategies used to make money investing in property. But it is equally important to know what to avoid when investing in property. The forum should come in handy if you choose to spend some time reading.

http://somersoft.com/forums/showthread.php?t=9652

This should get you started.

Cheers,
Oracle.

 

[Rolf Latham]

Some of the prices on studio units in Rushcutters Bay and Potts Point have surprised me with how low they are, I've assumed there are great reasons for it though.

finance isnt simple, but not super hard either

Many lenders wont do them, and many more restrict the loan to value ratios.

The limited resale finance options are one of the reasons the apparent yields are so good

ta
rolf

 

[Shahin_Afarin]

Getting a studio in Potts Point and surrounding areas is not a good long term investment strategy. Capital growth isn't great and they have relatively high strata that virtually kills off your yield. Do a lot of research and let the numbers and facts speak for themselves. This is your first investment so you want to make sure that the IP helps you build a portfolio rather than sink you.

I would personally be looking at something with land content. Sorry for the cliche but land in Sydney metro is becoming less available whereas units are increasing.

What is your budget?

Regards

Shahin

 

[First timer]

Budget is probably $250-300K, I can borrow around $500k but don't have the deposit and don't want to use all my debt capacity first time around. Im planning to speak to a mortgage broker today to refine those numbers.

My late night trawling of domain showed up a lot more than I expected in my price range out in western sydney beyond apartments.

Eg I haven't done any benchmarking to say if this is a good price or quality or not but conceptually its the sort of thing I would like. Moderately quick wins in terms of renovation potential, pluses of being near university, transport and hospital, downside of being a low socio economic area but that's a certainty with my budget. http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2009983032

 

[wylie]

Budget is probably $250-300K, I can borrow around $500k but don't have the deposit and don't want to use all my debt capacity first time around. Im planning to speak to a mortgage broker today to refine those numbers.

I'd like to suggest that if you don't already have a mortgage broker you would do well to choose one that posts here. I've picked mortgage brokers in the past who knew less about strategies and how to get where we wanted to get than we did.

One from this site is going to prove more valuable to you than picking one from the phone book, or possibly even a recommendation from a friend.

 

[Aaron_C]

Budget is probably $250-300K, I can borrow around $500k but don't have the deposit and don't want to use all my debt capacity first time around. Im planning to speak to a mortgage broker today to refine those numbers.

It's not just about borrowing capacity but it's an important question to work out. You'd be surprised how inaccurate those online calculators are actually, particularly for investment property loans.

 

[Shahin_Afarin]

Buying something in Western Sydney or even South West Sydney will give you more bang for your buck than a tiny high strata'ed unit in PP.

Set a few weekends aside and have a look at the properties in the mount druitt and doonside areas. Talk to as many agents as you can and get a feel for rental yields, tenancy market and the local infrastructure. If you are looking at mount druitt area try and buy as close to the Westfields and train station as possible. I would stay away from areas like Willmot , etc. It good to know that renovation is an option for you but I would also think about development as well. Can you subdivide the block? Can you please 2 or 3 dwellings within the land? Can you keep the house in the front, renovate it but also build a house in the back?

 

[omiinvestor]

I have to agree with Shahin. I was initially looking at units in St Leonards and not thinking about the strata which was $1,200 per quarter! We ended up buying a house 3 years ago in Casula for $290k which has had great capital growth but it is now renting for $450 per week.

 

[Macca]

Hi FT,

I sincerely believe that you have found the best source of unbiased advice when you found here

From reading your posts you seem an intelligent person so it is simply a matter of spending time learning the terminology used in the industry.

After you understand what all the common terms mean then start following listings and sales, OFIs etc just generally start looking at houses with the firm intention of not buying anything until you have looked for a few months.

If you still feel a little uncomfortable about making such an important decision you will find some Very capable buyers agents on this forum.

If you spend time reading the old threads about buying in Sydney you will soon identify those know what they are doing.

IMO opinion they main thing is to take the time to become familiar with RE before jumping in.

Good hunting

 

[Jacque]

Hi FT

Macca has summed it up nicely- there is a wealth of information on forums such as this so you have lots of reading to do

I realise that your budget is limited and you obviously prefer houses however keep in mind that units are a good start, and if you buy in an affordable area a little closer to Sydney's CBD you can still improve via a cosmetic reno and increase rental yield. If you go down this path, look for smaller well-managed complexes that have good proximity to transport and other links.

There are many investors who shun 1 bedders however IMHO I'd prefer to buy a superior-located 1 bedder than a 2 bedder any day. You might also be interested to know that there are now more single households living in Australia than ever before, and with affordability, they can be a more attractive proposition to a wider range of tenants. Just some food for thought anyway. Welcome to the forum.

 

[travelbug]

Welcome.
If you are interested there are a few meetups that you could attend just to "have a chat". No sales pitch, just like minded people meeting every couple of months for dinner and a drink. Usually well attended.

Keep an eye out in the Meeting Point section.

Have you thought of using a buyers agent? If you are keen to get started and haven't got time to rersearch many areas a BA can assist in locating a property for you.

 

[First timer]

Thanks so much for all your comments and suggestions so far, I've been very much enjoying the reading and research.

Another broad question- Given I have limited equity but ample cashflow would it be worth considering partnering up with my sister (who has $30K free cash available to invest and earns around $70K pa but always works on one or two year contracts), or saving more aggressively until I can get a better deposit together and go it alone.

Relationship wise I can't foresee any problems, I'm just thinking more from the legal perspective. As well as the obvious difficulty in negotiating now what we think would happen and what we would want to do in 15 years time.

 

[First timer]

I think the concept of a buyers agent is brilliant but my struggle is going to be paying for one as I can't borrow more than say 90% of the purchase price of the property so any additional costs such as stamp duty and legal fees and agents will be coming out of my already small deposit. Which is a shame because I can see the value in having someone negotiate the best possible price.....

Any estimates what one would roughly cost for say a $300K property? Maybe this is something I should factor into the savings plan alongside a bigger deposit.

 

[Shahin_Afarin]

Try and aim for an LVR of 89% where possible. Anything over 90% and the LVR tends to dramatically increase.

Not sure if buying with someone else is a great idea as strategies and circumstances change for both parties in which one needs to sell, build, renovate, subdivide, etc.

 

[Macca]

Hi FT,

While sharing with your sister can be a good idea financially, it can and often does cause extreme tension within families when personal situations change.

Soo.... many sad stories that started with the best of intentions that have lead to siblings no longer talking to each other that I don't think I would be doing it.

Maybe you and your sister can team up for research and moral support, find one for you then find one for her. You may well find that once you are snooping around you end up with different preferences anyway.