Hi
A few newbies have contacted me over the past few months to hear my story. My story from 2008 until the present. Instead of replying by pm I decided to post my answers here so others can read too.
I'm not in my teens or 20's. I'm in my late 30's but i'm more like a 20 something year old! I bought my first property my PPOR at the end of 2008. It is a studio unit in Highgate for approx $250 K at Market Value. Great little unit, great location being just 3 km from Perth’s cbd. 30 Minute walk to the cbd of Perth. Close to Mount Lawley café strip and East Perth. I really enjoy living in Highgate. I walk to and from work and often will walk the long way home alongside the river.
I financed this with help from my parents. They gave me a leg up in life with a 25% deposit. They said they would rather help me now than leave it to me in their inheritance. I have an IO loan (with an offset account) on my PPOR and one day will turn it into an IP.
In 2007 when my rent increased on the place I was living in I decided that it was time to buy my first place. My parents let me move in with them for a year at the end of 2007 so that I could save for a deposit. What I didn’t realise at the time was that I didn’t end up having to use any of my savings for the deposit as my parents put the money up! This gave me a huge head start. I was so very grateful to them. I will repay there generosity in the future and help them financially in retirement. They are going to need the help! I was able to save around 60% of my pay a fortnight as I was living very frugally with few expenses. Whilst living at mum and dads in 2008 I heavily participated on somersoft forums, educated myself online and with books, seminars etc. By the time I bought my ppor in September 2008 I had around $20 ish K in savings. I think it is so important when starting out as an investor to have a good solid buffer. This has been crucial to my SANF and has helped with expenses as well as the money needed to go about buying number 2 property.
After I bought my first one I was itching to buy my 2nd property, my 1st IP. 1 Year later in 2009 I bought my next unit in Dianella. This time a 1 bed unit in a good location close to Morley, Bedford shops, bus and 7 km from Perth’s CBD. Cost $210 K. This is what I could afford at the time. I used that massive deposit mum and dad gave me to buy my first ppor and leveraged into my 1st ip but I also had to chip in $11 K of my own money as ANZ wouldn’t let me go above 80% LVR. I cross-collateralised. My PPOR was valued at $260 K. I wasn’t expecting to have fork out any of my own cash, I nearly had 2nd thoughts about going ahead with the purchase, but something inside me was telling me to go for it!!! I listened to that voice. I was a bit stressed too that I had to pay for stamp duty as well. This is where the stamp duty loan helped with my SANF. I am so glad I have such supportive parents. Mum and dad offered to loan me 5 K to pay for the stamp duty. I will have that loan paid off by December. They have been right behind me from the very start!! Love them. Anyway, my buffer took a hit but because I had saved so hard I still had around $15 K left after it all. So SANF is still good.
I was able to get a tenant after just a few weeks. She has been a really good tenant. Atm my ip is negatively geared by about 2 – 3 K pa. after tax. I will know more after my tax return. So it is not costing much to hold. I am looking to increase the rent by $10 a week in 6 months time and will get $230 per week, with a loan of $199 K on it. I’m thinking when I get $270 per week it will be neutral but im not sure. It’s all a learning curve for me.
I am excited to be visiting my accountant next week. I have prepared all my documents for tax time and look forward to this learning experience that is coming. My first consultation with my accountant about 4 months ago was informative. He suggested that I buy a villa as my next IP. I will have to weigh it up and see if I would be able to afford it and if it would set me back longer in buying my next one because it would be heavily negatively geared. It might be a smarter option for me to go for a 2 bed unit around the 280 K mark than a $320-$350 K villa.
My goal is to buy my 2nd IP in 2012. By then I will have seen some appreciation of both of my properties to provide the deposit I need and my goal is to have saved another $10 K by then. It will be another Perth IP. Perth I believe will positioned nicely for some good CG come 2012.
2010 has been the year of concentrating on my health, my social life, work and personal development. I suffered from soreness and injuries this year and by around April I had hit rock bottom. I was f**** determined to lose this weight of mine. Since April I have lost 11 Kilos. I have lost 10% of my body weight!! I am so proud of myself! I have been attending weight watchers meetings and exercising and you know what I am applying the same desire and faith that I have with my finances with my weight loss. I can visualise myself thin again out there playing sport and running fast like the others. Not having to drag this weight around anymore, not being sore. I have another 18 kilos to hit goal weight. As an incentive to get to goal weight I decided I would reward myself with a laptop. My computer needs upgrading soon anyhow, its getting slow. I find rewards along the way really help.
I haven’t been saving this year as I have been paying off my stamp duty loan, ip expenses... been basically enjoying life having fun, letting loose for a while. I have also been working hard on my self development. My spiritual side. The last 8 months have been very tough for me. A lot of workplace conflict. I don’t regret any of it as I have learned lots of life lessons. Have grown and become a stronger more positive person. The stuff that has been going on at work has also helped me in my personal life immensely. The timing of these incidents have been amazing. A couple of people have come into my life just at the right time for me. With the way my work and personal life was going. They have been like my guardian angels... to be there to help guide me!
I think though once I have paid off that SD loan I will set myself the goal of saving 20% of my pay a fortnight. I am determined to again have a $20 K buffer before I buy my next ip. I need that SANF. I do not earn that much, just below average salary $50 K pa Gross. and I’m ok with that. I’m happy with my job. It gives me time to concentrate on my investments plus the job is not stressful at all. The important thing for me is to take care of my health and that means not having a stressful job. My goal is to be able to choose to retire in 19 years time. I am aiming big. Determined to buy 20 properties. That’s the magic number!! Then I might sell a few to pay down the loans.
I think it is really important to have a balanced approach with life. Dont get too obsessed with any one thing in your life! Property is our passion but just dont forget to enjoy your life as you live it. Have a balanced life. Dont let every waking 2nd be that of property. In the beginning I think us newbies tend to get very obsessed. I was like that for the first couple of years. Property is still a huge passion and I am still very driven in life and is a dominant thought in my mind but it takes its place in my life. I have other just as important things in my life. My mates, my sport!! my family, my... self! I guess what im saying is dont limit yourself.. enjoy yourself. Dont be too 1 dimensional as some of us have been and as I was for a while there!
Oh I forgot to answer the below questions
a) What's your investment strategy?
My investment strategy at this point in time is to buy what I can afford 3 – 8 Km from Perth’s CBD. Because I’m on $50 K pa I go for properties that are not going to be too much of a strain on my cashflow. Small units that are not too negatively geared. My goal is to buy and hold every couple of years when I can afford to do so. I try to buy below market value if possible or a fair market price in a good location.
b) What type of properties do you own and plan to own in the future?
I own a studio unit, and a 1 bed unit. I plan to own a 2 bed unit or villa as my next ip or a 1 bed unit that is over 50 sqm so that I don’t have to find that 20% deposit and I can have a higher LVR. My properties in the future will always be below the median value for the suburb. FHB properties as these are the properties I can afford to buy and hold onto.
In the distant future perhaps, 15 – 20 years time when I have built up some capital I may buy a CP or develop (renovating or subdivide/build) This might be my hobby when I have retired from work!
c) What are your thoughts on the following: living at home or worst case renting in a nice suburb whilst buying assets elsewhere? From all the options considered, everyone keeps telling me this is the 'best way to get ahead quickly'.
I wont live at home again! Lol If you are young though, I reckon make the most of it whilst you can stay at your parents and save hard whilst you have this great opportunity.
I have thought about renting somewhere whilst buying ip’s. In the position im in though I’m financially better off to live in my PPOR. Currently I’m paying only around $210 a week to live in my ppor. The only reason I would rent something myself would be if I wanted to move closer to my family. Actually I would probably break even if I rented because then I wouldn’t have to pay rates, water, maintenance, fees etc. I wouldn’t buy my PPOR there because it would be more expensive to afford it.
