澳洲Australia property Should you always start low? | Sydney


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


I'm looking at buying my first IP at the age of 26. A lot of people tell me you should always start low in investing, so as to get the hang of it first. However the property im looking at is around $350,000. What are people's experience in buying their first IP? Do you really need to start low, is it too risky to get something mid 300s for first property?
thanks  

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Your current debts, income, stability of income and savings for a deposit would be key factors in deciding what outlay you can afford on an IP. I'm in a similar position to you, same age and budget for a property, 55k income with a 20%+ deposit.  

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$350k is low isnt it :confused:

Your starting budget depends on income, existing equity/cash available to put down, and satisfying a lenders requirements.  

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Thanks for the replies so far, appreciate the info. I guess i was asking because the property im looking at going for is an apartment.. Similar to start-up, im on about $50,000 per year, no debts and have around $40,000 saved for deposit, so i think im going to go for the property in the mid 300's. I probably just needed some words of encouragement from other investors, as ive been hearing from people that i may be going in too high.  

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40k is a good amount to have saved up but unfortunately you may still be looking at costly lenders mortgage insurance as you're under a 20% deposit. If you could use the equity in your parents home as a guarantee you may get around it, otherwise you could apply for a low-doc loan but the higher interest rates may make it a worse deal in the long run.  

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Nick_A said: ↑
I probably just needed some words of encouragement from other investors, as ive been hearing from people that i may be going in too high.Click to expand...
Nick, you've probably heard this before but if you havent always keep this thought in the forefront of your mind when well meaning people are offering advice - is the person offering the advice walking their talk with plenty of runs already on their investment score cards or are they text book theorists, all talk no action.

I hope this helps.  

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nothing wrong with paying mortgage insurance, pay it while u can because eventually u won;t be able to do, borrow high LVR early and drop over time as portfolio increases  

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As others have said, really depends on your ability to service the loan and job security. Provided these are ok, then I think the most important thing to consider is, will it provide you with your goals such as yield and/or capital growth. These people telling you you spent too much for a first investment, will they be saying that if it's worth $450K in a couple of years? :D

I bought my first IP a year ago and I was like you, a little nervous about how much to spend. I could afford it no problems, but I had a PPOR I was paying for, and all the worst case things were going through my head "oh my goodness, what if it all goes wrong and I lose my home" etc. I paid $290K after first considering only low $200K's... do you think I care now about it? I have good tenants, my cashflow is good and the property is now worth $340-$350K as a guess. I'm getting cocky and think I'll spend a bit more on IP2. :)

The most important things are; can you afford it, do you have a plan in place if things get tight for whatever reason (i.e. keep some cash aside for emergencies), and is it a good investment? No point paying $250K for something if it's a bad investment.

And as Rixter said, in this market, I wouldn't say $350K is high anyhow...  

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I have parental guarantee, so LMI is not an issue for me thankfully and i can borrow the 90%. I have mentioned on the other forum that the area im looking at is Seddon/Footscray. I have always thought these are great areas for capital growth, but has the horse already bolted on these 2 areas? It seems everyone worked this out a while ago, do people on here still think they are really good areas for continual capital growth in the future?  

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Nick_A said: ↑
It seems everyone worked this out a while ago, do people on here still think they are really good areas for continual capital growth in the future?Click to expand...
Continual capital growth no, in fact this time next year potentially worth less than u pay now but long term capital growth prospects very very strong!  

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is the person offering the advice walking their talk with plenty of runs already on their investment score cards or are text book theorists, all talk no action.Click to expand...
according to Rixter I'm one of those you should ignore, in spite of the fact I have owned property for a long time. :(

That aside, the sum you mention is not really excessive today and if you are buying a home you can afford where the sums stack up, why not?

The second most smart thing I did was buying my house. It may be dismissed as the "Australian Dream" but I believe it is worthy nonetheless. I only advise against overpaying in a panic "because it will never be this cheap again". The deal of a lifetime comes up pretty regularly, particularly if you have an open mind.  

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Sunfish said: ↑
according to Rixter I'm one of those you should ignore, in spite of the fact I have owned property for a long time. :(Click to expand...
Sunfish, dont you have any property investment runs on your scoreboard?  

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Rixter said: ↑
Sunfish, dont you have any property investment runs on your scoreboard?Click to expand...
I own property of course but if I were relying on my past record I'd carry the drinks.  

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Nick_A said: ↑
I'm looking at buying my first IP at the age of 26. A lot of people tell me you should always start low in investing, so as to get the hang of it first. However the property im looking at is around $350,000. What are people's experience in buying their first IP? Do you really need to start low, is it too risky to get something mid 300s for first property?Click to expand...
The best aspect about starting low is borrowings are less and it's a shorter time until the 2nd & 3rd property purchase.

Don't underestimate this advantage as it keeps you motivated, your mind active and you continually researching.

Whereas if it's 5-10 years (instead of 1-2 years) to the next purchase it can be hard to keep the interest up.

But too low is bad as well.

Eg if $170k will get you a student studio or serviced apartment in a huge complex but $220k will get you a 1-2 br unit in a small suburban block (even if it's an outer suburb), then spending the bit extra will be well worth it and even accelerate subsequent purchases (due to value-adding potential, greater capital growth and willingness of lenders to revalue).  

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Hi Nick,

Kudos for posting. We have always purchased under $300k. Initially it was because I was on a low income so needed to be able to service the debt. We still buy low because generally the yield is neutral to slightly positive and helps with our sleep at night factor.

We have had our share of bad tenants, even a dodgy REA however as we are not heavily negatively geared we continue to grow our property portfolio.

Regards

Andrew  

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Interesting points, i agree with the fact that investing low allows for more hunger in terms of short term. What if lets say a property is bought at $350,000 and 2 years later it is evaluated at $400,000, you would then be able to use that $50,000 towards a deposit for a 2nd IP, is that correct?  

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Yes, you would draw down the money as a deposit on the next purchase without having to sell the first property.  

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Nick_A said: ↑
Interesting points, i agree with the fact that investing low allows for more hunger in terms of short term. What if lets say a property is bought at $350,000 and 2 years later it is evaluated at $400,000, you would then be able to use that $50,000 towards a deposit for a 2nd IP, is that correct?Click to expand...
No! You would be able to draw out 80-90% of the gain, providing you get the right valuation.

One of our last purchases was $150k (valued @ $175k) with rent @ $230pw. We will now be drawing out 80% of the equity without having to wait two years.

You know, you don't have to purchase something in Melbourne either. If everything in your backyard is expensive, and you are on a low income, you can look elsewhere.  

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Bargain Hunter said: ↑
.....and helps with our sleep at night factor...

Regards

Andrew
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Ha ha, love that little phrase Andrew...kinda my way of thinking also...  

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Lets say you bought the 350k property with a LVR of 80%, so your loan on IP1 would roughly be 280k. Now that property, like you said, increases to 400k over the two years (13% increase) and your LVR is reduced to 70%.

If you use your equity to get you back to a LVR of 80% you can draw upon 40k.

If you have a LVR of 90% then your initial loan would be 315k. Again, with the property going up to 400k and you drawing equity up to a LVR of 90%, you would be able to access 45k.

Hope that makes sense?  

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