Lower Income investing

[VCDenton]

I'm on a low income $45,000

In about 6-12 months time I plan to buy my first ip. However I'm not sure whether to buy

1. Inner-City Unit (for less than $250K)
Vic Park, Perth, or Highgate


or


2. Outer Suburb House ($250K-$300K)

30-40 K's from Perth


For those of you on low incomes or were on low incomes at the time of buying your first ip.


What kind of property did you buy first? and why?

Similar to you Kim, but I feel like like worser as I am a new graduate and hence on several part time jobs which means unstable income and finance problem especially with the subprime background which may exerts its influence throughout the years...

My initial goal is to get an IP with a balanced cashflow and capital growth prospect,
well just means easier to hold with my unstable salary and average capital growth(in line with inflation?) In Melbourne I am actually more inclined to well located house/townhouse in the outer suburbs compared to those one bedroom apartment/studio in inner/middle ring suburbs.

Do you guys think I am thinking the right way?

 

[Alex P Keaton]

In Melbourne I am actually more inclined to well located house/townhouse in the outer suburbs compared to those one bedroom apartment/studio in inner/middle ring suburbs.

Do you guys think I am thinking the right way?

It sure is confusing isn't it, there are so many options and strategies!!


I have been researching for the past 6 months and it sure takes a lot of reading to work out whats best for you.


Inner or Outer city. Unit or house. Go for capital growth or rental yield. Try for both.


I have just finished reading Peter Spanns 10 million in 10 years. I think its important to buy and add value by renovating or rejuvanating.


The main point he was making is to buy something you can afford, not to overcommit. Thats why I think for my first ip and on my income this means a unit is the best choice. I know I could get better captial growth from a house but at this stage i know I cant afford it. I can still do well though buying a unit and renovating for my capital growth.


My approach is to buy a unit where I know there is high rental demand. Within 7 Km of inner city Perth. I have been contemplating either Victoria Park, Perth or Highgate due to their great locations. However I think Vic Park will be the best option seeing that this area is going through a redevelopment phase.


I have to decide on 1 or 2 beds. Will there be enough demand for a 1 bed. I'm thinking about buying a unit that can be either renovated or rejuvanated
(painted, new carpets etc) live in it for a year whilst its being upgraded. I can claim the fhog and stamp duty exemption, then at the end of the year have it revalued (thus developing instant equity) and a higher rent.

I would then move out and rent. In 2-3 years later / when I can afford to I will use the newly created equity to buy my 2nd ip.

The other option would be to renovate the unit and then lease it out straight away.

 

[Alex P Keaton]

Similar to you Kim, but I feel like like worser as I am a new graduate and hence on several part time jobs which means unstable income and finance problem especially with the subprime background which may exerts its influence throughout the years...

Do you have much in savings? Its really important to have a good buffer when you buy your first ip.


I plan to keep a $20,000 buffer in my offset account.


I've saved $20,000 so far and hope to save at least another $30,000 before buying.

 

[VCDenton]

in terms of saving, only managed to save just>10K since starting work this year...

I have read that particular book as well but feel like a renovation needs too much from a newbie like me, I could consider adding value probably in my 2nd IP...

In terms of one bed room, I actually think its too risky and hard for finance(just opinion from reading, not from a current MB).

Regards
Vince

 

[RumpledElf]

I bought my first house back in 1999 - a PPoR though - when I was a student, tutoring at uni on $18,000 a year (the house was $40,000). I had about $15k saved as the deposit, and the payments were peanuts when I started full-time work soon after graduating. Ah, hindsight, I wish I'd kept that place now ... it was only 10 mins out of the Adelaide CBD

 

[Alex P Keaton]

In terms of one bed room, I actually think its too risky and hard for finance(just opinion from reading, not from a current MB).

Regards
Vince

Yeah Im starting to think it would be better to buy a 2 bed if I'm buying in Vic Park. I just had a look at the demographics. 51% rent in this suburb and of those 18% are lone dwellings, 35 % are made up of single parents.

I would have more of a field to choose from.

 

[Alex P Keaton]

Well, I'm not aussie, but I am a forumite.
If $1000 a week is average, I guess I'm at the poverty line.I made $32K last year.(that's with overtime too) Rob doesn't have an income.

I voted 5+ IP's

We have 6 properties, but 26 units. either way you count them...I guess it still goes in the same category.

wow

How do you manage to afford it?

 

[kathryn d]

For the first 20 years of my adult life, I didn't have any IP's. I did manage to build up equity in my PPOR, and had a little bit of savings.
All the properties Rob and I buy are CF+ and have been slowly gaining in value.

Our vehicle is 11 years old.
We buy reduced/on sale food.
Live cheap and love to search for bargains.
Only 1 child left at home...other 3 are now on their own.
Haven't had a vacation for a couple of years.

 

[AlmostBob]

Only 1 child left at home...other 3 are now on their own.

Except they're downstairs

can I borrow ....
I need a ride to ....
will you do ....

Just the same as before they went `on their own'

 

[natmarie73]

I'm on a low income $45,000

In about 6-12 months time I plan to buy my first ip. However I'm not sure whether to buy

1. Inner-City Unit (for less than $250K)
Vic Park, Perth, or Highgate


or


2. Outer Suburb House ($250K-$300K)

30-40 K's from Perth


For those of you on low incomes or were on low incomes at the time of buying your first ip.


What kind of property did you buy first? and why?

I was on $43,000 when I bought my first house which I lived in for $83,000 in Logan in 2004. One month later I bought my first IP a townhouse in Rochedale South for $67,000 and the following year I baught a house in Ipswich for $140,000 and a unit in Ayr for $60,000.

All my properties were positive or neutrally geared which was great. I have since sold the first two and purchased a development block in Booval which I hope to develop next year or the year after.

It is definately easier to accumulate more properties when yields are higher, and even though I will be earning a lot of money next year and get subsidised rent, I think I will have trouble adding to the portfolio since house prices have jumped so much and yields are still very low.

 

[Alex P Keaton]

Did anyone start out by buying a regional ip (because they are more affordable) so that you could get into the market sooner? How did it go? Have you been happy overall with your investment. Was it worth it? Did it take you a while to build up enough equity to buy your 2nd ip?

 

[BayView]

Did anyone start out by buying a regional ip (because they are more affordable) so that you could get into the market sooner? How did it go? Have you been happy overall with your investment. Was it worth it? Did it take you a while to build up enough equity to buy your 2nd ip?

Our first IP was a 2 x 1 villa unit in Highett, Vic in 2001. This is "middle-ring".

It was $204k, and we used equity in our PPoR for the deposit and purchase costs.

We had enough to buy another, and did so the next day, but in a different suburb - Mentone, and it was a townhouse.

We don't own either of them now; the cashflow was too neg. There was some cap growth which enabled us to sell at a very slight profit after cap gains tax.

 

[Alex P Keaton]

bump

bump

 

[kum yin lau]

Hi, I didn't vote cos don't really believe in polls but this poll has turned into a tremendously exciting learning forum.

People like Bez & Skye prove the point most property investors make. It can be done & it's financially sensible, no matter WHEN the purchase was made.

The two of you invested at a time when more seasoned investors deemed the market to have peaked and saturated. I thought so too [sold in 2004, at the peak, I may add] and they continued upwards merrily in 07.

I wish to point out to young & new investors that it is also true that 1 0r 2 IPs aren't quite enough. It is the 3rd, 4th, 5th IP that earn the profits.

Take care about cashflow though & have the ability to hold on. Over extending can be too costly in emotional & financial terms.

Been there, done that.

KY

 

[sue78]

Since day 1 we have always been below ave wage. The problem isn't just how much you earn but how much your outgoings are and someone on low wage can still have higher serviceability than someone on a high wage.

I think for serious investors, it's quite useful to learn how the banks work so that you can pre-approve yourself and know what sort of situation you need to be in to get a loan. Mortgage brokers are great for getting loans but so many ppl are clueless about how much they can borrow. It takes mins to work out.

I've never had a full time job since 2000, preferring contracts and part time....more money, not tied to the job and more flexibility for time off to travel. This iswhy I develop properties, to supplement my lifestyle and income. Exclude property, I'm on $20 to $40k a yr then inc property and it's up to anywhere between $100 to $200a yr. My husband is on about $50k a yr now, his highest salary yet.

Just built another house cost about $360k bank valuation on completion was a nice surprise @ $450k so market valuation should be between $470 to $500.

That means our total combined income inc property this year is about $170k inc property but based on bank value. We just had some bank valuations done and surprisingly, there has actually been lil CG on our IPs too within last 6 mths.Though we did lose $50k in stock market. Equity is just as good as income.

 

[our obsession]

Kim5:

Did anyone start out by buying a regional ip (because they are more affordable) so that you could get into the market sooner? How did it go? Have you been happy overall with your investment. Was it worth it? Did it take you a while to build up enough equity to buy your 2nd ip?

Yep, another here below the average wage, pretty much as Kathrynd and Sue78 have described.

Built first IP in a regional, we knew the area well, not so much that it was relatively cheaper entry to metro, just knew the place...very happy with it, had enough equity, (within 12 months), to build another. Then have been buying one or two every year ever since. I tend to lose track of the numbers...6 IP's and land and more land, about to build again...it is over the million dollar mark now, land tax has kicked in, which puts another little skip in my step..(I have put numbers/figures up, so that folk understand you can have a nice sized portfolio in regionals if you buy well).

We find the good deals for us, and our creative and wonderful mortgage broker keeps giving us money

There has been enough equity and/or servicibility, just as Sue has mentioned above, plus we have bought well, handy returns...it all just seems to flow.

Haven't deliberately not bought in metro area, it's just that I seem to be finding sweet deals around my own area.

My mortgage broker calls me shrewd. I'm a shrewd our obsession. I like that.

 

[sue78]

actually equity is better than income...not taxed and can claim negative gearing if it's an investment.

 

[RumpledElf]

Did anyone start out by buying a regional ip (because they are more affordable) so that you could get into the market sooner? How did it go? Have you been happy overall with your investment. Was it worth it? Did it take you a while to build up enough equity to buy your 2nd ip?

Our first IP is regional and very very affordable. We'll have equity coming out of our ears next year (it was one of those 'instant equity' houses) but the catch with being a low income earner is There Will Be No Second IP - you need income to service a second loan! We can't have more than about $100k debt and you'd be pushing to get more than two houses with that much on a low income.

We're selling it as soon as we've held it for a year. No use having untouchable equity that costs us to keep. Might build an IP or PPoR on the land next to it later though but we've got better things to do with the money first.

 

[our obsession]

RumpledElf:

Our first IP is regional and very very affordable. We'll have equity coming out of our ears next year (it was one of those 'instant equity' houses) but the catch with being a low income earner is There Will Be No Second IP - you need income to service a second loan! We can't have more than about $100k debt and you'd be pushing to get more than two houses with that much on a low income.

We're selling it as soon as we've held it for a year. No use having untouchable equity that costs us to keep. Might build an IP or PPoR on the land next to it later though but we've got better things to do with the money first.

Relf, just brainstorming here, have you tried low docs?

Might be the anal retentive in me coming out, but if you have yourselves a good (equity) IP, it's rented? Use the equity to help cover purchase costs of next IP, then it's rented, hopefully you are getting good rental rental returns in the hermit-desert land?

Just wondering.... just wondering....

 

[RumpledElf]

Lo-doc is our problem, the 60% threshold is easy to reach.