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Getting that first investment property

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rookie | 16 Sep 2013, 04:18 PM Agree 0
Hi everyone,

I'm looking to get started in buying investment properties, with a goal of reaching a number of them. Obviously I'd have to start with one, but I'm not entirely sure how to begin! At the moment I live in an apartment in sydney which I own with no mortgage. I've been told by a friend who's trying his hand in real estate that I'm in a good position based on that, but I don't even know how to leverage that. Borrowing against my apartment sounds good, but I want to stay safe and not risk losing it through some bad decisions.

Any advice on where to begin?
  • Eos Property | 17 Sep 2013, 10:01 AM Agree 0
    Hi Rookie,

    Make sure you get the baby steps in place first. Spend time learning about property. This will serve two purposes, one - provides you with a level of understanding which should reduce the likelihood of you making a mistake and secondly provides you with the necessary knowledge to control your own destiny.

    It doesn't matter which asset class you invest in they all carry a degree of risk. The challenge for you is to work out what is acceptable to you and what isn't. Just because your mate is starting to learn about property - it doesn't mean, by extension, you have to too. The decision to invest (or not) has to be yours and yours alone.

    Releasing equity is a pretty simple process - you just have to make sure you do it right.

    A quick illustration - assume your property is worth $400K. A bank will typically accept 80% of its value as security less any debt. In your case there is no debt so you have available equity of $320K (400 X 80%). You can use some of these funds as a deposit & costs on a second property.

    The remainder of the property is bought with a second loan which is secured by the investment property.

    Grab yourself a decent broker and they'll help you set your loans up. They can also show you how a good loan structure can reduce your risk exposure.
  • Mark Coburn | 18 Sep 2013, 03:43 PM Agree 0
    Hi Rookie,

    I have been a Property Investor for 20 years, investment forums have helped me a lot over the years. I know when I started it, took me a long time to work out what was important information and what was just opinion. I have done well out of the investing. As way to give something back, to share my knowledge with other forum members I have complied this list of do's and dont's, they work for me and I hope they help you.
    Feel free to call me anytime, I am always happy to help!

    This is my list of do's and don'ts for investing:

    Part One: Risk
    1. Always protect your investment (only ever risk your return)
    2. Invest for Income (yield), growth (capital gain) and maximum depreciation (tax credits)
    3. Don't invest in "one employer” towns (like mining towns)
    4. Invest in liquid markets (don't buy where the average days on market to sell are over 90)
    5. Choose one thing and get good at it. (Dabblers always get burned in the end)

    Part Two: Finance
    6. Invest where you can get leverage to work to your advantage (Bank debt on an investment property is what I call good debt)
    7. Always borrow on interest only terms (park all your surplus funds in your mortgage Off-Set account ready for your next purchase)

    Part Three: Strategy
    8. KISS. Success comes from Keeping It Simple Simon (don't try tricky investments that require specialist knowledge)
    9. Invest for the long term (Australian's call 8-10 years long term, Chinese call 50-75 years long term)
    10. Avoid trading and the costs that trading incurs. (Agents fees, Stamp Duty, Marketing can really reduce your wealth over the life of your investing)
    11. Don't build anything unless you’re are a builder and are in the industry on a daily basis (see point 1.)
    12. Reno's often only make you wages and are a lot more risky than you think they will be (see point 11. & point 13.)

    Part Four: Get Advice
    13. You don't know what you don't know (it's is what you don't know that may come back to bite you) so find good advice that's untainted. (see point 14.)
    14. Don't take advice from property marketeers (or anybody else being paid by the seller)


    After 20 years investing in property I now use my knowledge as a specialist buyer's agent. I am happy to talk to you about what you want to achieve and see how we can help. I don't charge to talk.

    Regards
    Mark Coburn
    m: 0405 243 547
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