Which startegy is best??

W

Wealth Creator

Hi guys,
Love the forum. First time poster.
I have a question for the more experienced investors.
I understand that many of you have seen many highs and lows throughout your property investment careers. If you were starting out from scratch today which method of investing and structure would you employ to get you from working for somebody to being able to retire if you choose to.
I realise there are no get rich quick schemes and it may take 10-20 years so I am open to all suggestions. Most threads or posts I have read are regarding the methods people have used in the past and may not be as suitable today which is why I am asking this question to be applicable today.

Quick run down of my details.
28 years old
Paying off PPOR worth 270K, debt of 200K
Credit Card debt 10K
Personal loan debt 8K
Income 80K

Thanks guys
 
Hi Wealth Creator,

Firstly, congratulations on what you have achieved so far.

Your question:
'If you were starting out from scratch today which method of investing and structure would you employ to get you from working for somebody to being able to retire if you choose to.'

My Answer:
I would have answered this question a lot differently 5 or 10 years ago than I would answer now because I have more knowledge now then I did then. You have probably heard this before but I would clear all personal and credit card debt ASAP while analysing the areas you want to buy (this advice is in all the books). The key to property investing (IMHO) is knowledge. Knowledge will help you reduce the risks.

You should be able to draw $16k from your PPOR loan to cover the majority of your personal loan and credit card debts.

With an income of $80k you probably take home about $50k pa
Your expenses are probably ...
1. Interest: $13k - $14k pa interest on PPOR loan
2. Living: ($2k - $3k per month) = $24k to $36k pa

leaving you $50k - $13k - $24k = $13k (best case)
or $50k - $14k - $36k = $0 (worst case)

If I were you, I would be trying to save at least $13k per year for the next 5 years to build up $65k (keep this money in a 100% offset account or similar account to offset interest on your PPOR loan). This will give the property market time to bottom out possibly start rising again. When it does rise you will have some funds ready for deposits and some further equity in your PPOR to invest. The banks will look favorably on you for saving the money. You will hopefully have 1 PPOR and 1 IP growing at the end of 2010. This is where you can leverage of the equity in these properties as they are growing to accelerate your portfolio.

Note: I have made a lot of assumptions in the above anaysis but you have to start somewhere. The aproach above is conservative but I am a conservative investor and these techniques have worked for me with minimum risk. This analaysis should NOT be used as financial advice.

Hope this helps
 
Hi WC,

Congrats on your first post, & welcome aboard the good ship SS Somersoft ;) pardon the pun :)

Your question IMHO would be the most asked question one would make both to yourself & of others. Its also the hardest, greyest, & opened ended ones to answer. Not so much in the "How to" knowledge area of a particular wealth vehicle but in the number of the various options or opportunities you have available to you out there. The list is literally endless.

As for which is the best one out there (for someone starting out today) well the best advice I provide for you or anyone else who asks me thats new and/or just starting out is -

The one that you feel is the best for you. Both in terms of, 1/ what best suits your own individual investor profile that you're most psychologically comfortable with, & , 2/ Which wealth vehicle will get you to your goal/s in the time frame/s you have elected to successfully achieving those goal/s.

Your investing 'Mindset" will be where you need to concetrate the most to become successful. Its 80% mindset & 20% wealth vehicle.

Fear! is what stops most people - and because of this its the "Starting" that stops most people from achieving their goals & aspirations.

Everyone is different. Whats right for one person may not sit comfortably with someone else. There is no right or wrong way. Just different ways!

Once again congratulations on your first post here & your decision to start taking action! :)
 
Welcome to SS, WC. :)

I am also relatively new here, and currently in the learning phase. I have read a few books on property investing, as well as a book on shares, and currently a book on options trading.

There is an excellent forum topic which outlines some books recommended by forum members. Here's the link:

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

Rixter said:
Fear! is what stops most people - and because of this its the "Starting" that stops most people from achieving their goals & aspirations.
Click to expand...

I found a recent quote:

"Don't let the noise of others' opinions drown out your own inner voice...Remembering you are going to die is the best way to avoid the fear that you have something to lose". -- Steve Jobs.

Works for me! :)
 
Merovingian

I have found comfort in maintaining a similar attitude. A few years ago when I lived in Sydney and had to travel on the trains every day when there were fears of bombs going off (one had gone off in the toilets of St James Station) and guards were pulling strange people off the trains and we were getting training at work on what to do if a bomb went off in the building and how to deal with bomb threats and similar emergencies, my fear level was so high that I didn't know how I was going to go on. But I read a book "Do Less and Achieve More" (something like that) where it said that you have to get over your fear of death in order to go on. Anyway, I won't say it relieved my fears completely but once I was able to accept death if it came my way, I was able to hold myself together and give me the strength to go on until I could organise myself to sell my house, leave my job, leave Sydney and retire to the country. The thought of death certainly puts other problems in perspective. Crikey ! I hope I haven't depressed everyone.
 
Thank-you all for your insights, much appreciated.
Thanks for the link Merovingian.

Acey Ducey,
If starting today what would you start investing in if not property?

Would you care to share your knowledge?
Thank-you

Regards

Wealth Creator
 
If I was starting now , I'd be investing in Education :)

At the moment I'm about to build a Dual occ, but we bought in 2001 so there is a nice profit locked in because of that.

All my new inveting at the moment is in the share market. ( Alan Hull's approach in Active investing would be the closest to what I'm doing , though I didn't base my system around his . I read his book after I started :eek: )

If I had no property , I'd be looking at investing OS, but that's a big step if you haven't done any property investing.

See Change
 
Hi all,

I would regard your starting point as getting rid of your consumer debt first. If you really want to make it, the only things you hock your tail for are assets and necessities of life.

In my case that would mean a house to live in and a car to get to work.

Everything else gets paid for when the c/card monthly account comes in.

So, in your case, you pay of the credit card in big lumps every month, get rid of it in total this year, next year, get rid of the personal loan.

Credit card will always be paid in full every month, no more personal loans EVER !!

Wow !!! No interest eating away at my income, what to do with all this cash ???

While you work that out , put it in your mortgage offset account, the after tax return is excellent !!

You can then wait for another cycle in Real Estate or you may choose to try the stock market or something BUT you are making your decision from a position of strength with no financial pressures......good feeling
 
Hi Wealth Creator,
I thought I'd share a newspaper report I read about investing in I think 1978or79. The subject of the report was a little old lady who had just passed away at the age of 93 and left an estate consisting in part of 118 freehold houses. She and her husband had bought their first house when they were first married and had worked steadily to pay it off as soon as possible - this on its own was fairly radical thought for those years. As soon as they paid their own place off they purchased an IP and continued to make payments off the principle from their own income plus the rental income.It would have taken some time but with two payments, less time than to pay off their original purchase.They then bought a third and continued to make extra payments and so on. The more they bought the quicker they, and eventually she, paid the new purchases off.This was no get rich quick scheme but in what must have been an ultra conservative financial climate an amazing achievement for couple of "battlers".
So if you've got plenty of time.......

TommyR
 
TommyR said:
Hi Wealth Creator,
I thought I'd share a newspaper report I read about investing in I think 1978or79. The subject of the report was a little old lady who had just passed away at the age of 93 and left an estate consisting in part of 118 freehold houses. She and her husband had bought their first house when they were first married and had worked steadily to pay it off as soon as possible - this on its own was fairly radical thought for those years. As soon as they paid their own place off they purchased an IP and continued to make payments off the principle from their own income plus the rental income.It would have taken some time but with two payments, less time than to pay off their original purchase.They then bought a third and continued to make extra payments and so on. The more they bought the quicker they, and eventually she, paid the new purchases off.This was no get rich quick scheme but in what must have been an ultra conservative financial climate an amazing achievement for couple of "battlers".
So if you've got plenty of time.......

TommyR
Click to expand...
Hi Tommy.

While a good concept, I think it would be extremely hard to do something like that in todays climate.

Regards
Marty
 
kissfan said:
Hi Tommy.

While a good concept, I think it would be extremely hard to do something like that in todays climate.

Regards
Marty
Click to expand...

Marty,
I would have thought it might be easier in today's climate given that if this woman was 93 in 1978 she would have been investing through the 1920s &30s when I believe money was fairly tight and growth would have been a bit slow.
Of course you would need to be fairly young to commence this strategy & obviously a willingness to gear investments makes for quicker wealth creation.
TommyR
 
Hi Tommy & Bill.

The reason I say it would be difficult to do is that most people have difficulty paying off their PPOR these days let alone another 118 properties!!!

It depends on where the properties are located of course but I think for a couple to own outright 118 properties is a massive effort. Even once your PPOR is paid off, how long would it take to PAY OFF another property??
Even if it only took 1 year (very doubtful), how many properties could you accumulate, 118 would be beyond most peoples reach.

As I said, there are a lot of variables and without knowing the value of the properties involved I still say it would be nigh impossible to acquire 118 I/P's and own them outright. To have that many I/P's with mortgages is a different matter.

Just my thoughts anyway and good luck to anyone who can achieve this feat, they are to be admired.

Regards
Marty
 
kissfan said:
The reason I say it would be difficult to do is that most people have difficulty paying off their PPOR these days let alone another 118 properties!!!

It depends on where the properties are located of course but I think for a couple to own outright 118 properties is a massive effort. Even once your PPOR is paid off, how long would it take to PAY OFF another property??
Even if it only took 1 year (very doubtful), how many properties could you accumulate, 118 would be beyond most peoples reach.

As I said, there are a lot of variables and without knowing the value of the properties involved I still say it would be nigh impossible to acquire 118 I/P's and own them outright. To have that many I/P's with mortgages is a different matter.
Click to expand...
Hi Marty,

Things were different then. I got talking to a guy at a woodyard - he used to own whole streets in Redfern about 30-40 yrs ago. A 10% (maybe 20%) deposit was a couple of months rent in those days. So it wouldn't be hard to own 100+. He did have the job of evicting the uncumbent undesirables & doing a quick & dirty reno. The end of the story was divorce, he gave her the lot, because he knew he could repeat his success. Unfortunately, things had changed, yields didn't allow it so he's worked in the woodyard for the last 20 yrs.

KJ
 
Not sure I agree, Marty. Afforadability has been worse that today before now (like when I bought my first home) and in those days there were also no mortgage brokers and non-bank insittions to help you out. Plus she would have paid penalty rates for investment property.

I'll lay odds the last 60 houses or so were bought in the last 10 years of her investing. I'll also lay ods that she lived an extroadinarily frugal lifestyle and that the real beneficiaries will be her children or grandchildren.

Hope they've been well educated.

Back to the main topic - keep working on your education and pay off the consumer debt. If you roll it into your mortgage to get a lower interest rate, use that as an excuse to INCREASE, not decrease, the amount you pay of each fortnight. And congratulations for starting the journey.

Do a search for John Burley's 'debt terminator' - an easy strategy and one that is well set out.
 
Wealth Creator said:
Hi guys,
Love the forum. First time poster.
I have a question for the more experienced investors.
I understand that many of you have seen many highs and lows throughout your property investment careers. If you were starting out from scratch today which method of investing and structure would you employ to get you from working for somebody to being able to retire if you choose to.
I realise there are no get rich quick schemes and it may take 10-20 years so I am open to all suggestions. Most threads or posts I have read are regarding the methods people have used in the past and may not be as suitable today which is why I am asking this question to be applicable today.

Quick run down of my details.
28 years old
Paying off PPOR worth 270K, debt of 200K
Credit Card debt 10K
Personal loan debt 8K
Income 80K

Thanks guys
Click to expand...


Welcome to the forum.

My few cents worth of advice:
1. Get rid of your credit card debt and personal loan debt as fast as possible
2. Educate yourself. Read lots of books. Follow the forum. Give yourself at least a few months before you get started.
3. If you decide to go into the stockmarket, try on a small scale first, or try paper trading.

Cheers,
 
keithj said:
Hi Marty,

Things were different then. I got talking to a guy at a woodyard - he used to own whole streets in Redfern about 30-40 yrs ago. A 10% (maybe 20%) deposit was a couple of months rent in those days. So it wouldn't be hard to own 100+. He did have the job of evicting the uncumbent undesirables & doing a quick & dirty reno. The end of the story was divorce, he gave her the lot, because he knew he could repeat his success. Unfortunately, things had changed, yields didn't allow it so he's worked in the woodyard for the last 20 yrs.

KJ
Click to expand...
Hi Keith

That's my point. I said I think it would harder these days.

Look, I could be totally wrong . Maybe it's my belief about only paying back what is necessary to the banks before going on to the next purchase.

Regards
Marty
 
My 2c. The (latent) economist in me thinks that is is no harder and no easier than it
has ever been.

Sure, there are now non-bank lenders and mortgage brokers who make money more
available, the equal and opposite reaction to this is that prices go up. Making it no
harder and no easier than before.

The FHOG made it easier to buy a home, what happened? Prices rose in response.

It is possible today just as it was yesterday, if you don't believe me ask Peter Spann
or Steve McKnight.

I personally think that there's no free lunch in this world, the only way to get ahead
is through sheer grind, mental, physical or both. People who observe that
"it was easier then" or "they were lucky" are looking for excuses for their own laziness
of mind, body or both.

Disclaimer: generalisation only, not specific personal attack.

andy
 
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