investment property is it a good idea

tregs · 08-04-2015, 03:42 PM

Hi guys I'm looking at buying my first investment property so i want to hear from everyone that has investment property's. What are the pro's and con's? unforeseen obstacles? What advice are you willing to part with?

Franco Cozzo · 08-04-2015, 04:00 PM

Quote:

Originally Posted by tregs

Hi guys I'm looking at buying my first investment property so i want to hear from everyone that has investment property's. What are the pro's and con's? unforeseen obstacles? What advice are you willing to part with?

http://en.wikipedia.org/wiki/Austral...ousing2013.JPG

The only question is which argument do you believe, can that line continue to go up or is it going to come down?

Numbers and lines, scary stuff.

xxx000 · 08-04-2015, 04:19 PM

shares perform consistently better than property over the long term plus you can sell portions of shares very quickly and easily if cash is required

cons: tenants that you want to get rid of but can't

tenants that don't look after your property

**Ross 1** · 08-04-2015, 04:19 PM

Quote:

Originally Posted by tregs

Hi guys I'm looking at buying my first investment property so i want to hear from everyone that has investment property's. What are the pro's and con's? unforeseen obstacles? What advice are you willing to part with?

We were lucky and had a smooth run of it, good tenants and the second real estate office were great. First one didn't chase anything up fast enough, maintenance wise, or inspect every 4mths as we had specified in the contract. Insurance and more insurance is my main bit of advice, landlord insurance for the property, we used Terri Scheer as they were the most recommended. Income insurance for you, it would have been touch and go for us without it when I blew my knee out.

Mr Hardware · 08-04-2015, 04:28 PM

Compared to other investment classes? Depends what you're interested in.
Are you in it for the yearly return, or the capital growth?
Positively Geared or Negatively Geared?
All your eggs in one basket?
Would you put 3, 4, 500k in any one other asset class?
Considered commercial real estate?
Is it going to be restricting your current lifestyle for the notion of a more extravagant/relaxed one in the future? Is your health even going to allow that then?
Are you going to have it be managed by an agency or self-let?
If the former, are you happy with dealing with incompetent, arrogant agents who seem to be working for the tenant or just themselves happily skimming your 7%?
If the latter, are you happy to be called in the middle of the night when the hot water system explodes all over the laundry floor?
Are you happy to still repair, paint and pay rates on this asset?
Can you sleep well at night, knowing you've got a half a million dollar asset to take care of? And the liabilities of it all rest on your shoulders only?
Are you happy with knowing all of the ins and outs of residential tenancy agreements, realising that this is knowledge, but not wisdom?
Do you like dealing with banks, mortgage brokers, paperwork, tax agents, unknown tradesmen?
You'd need to have answers to all these questions first imo before proceeding. And i'm sure there are far more things to be considering than the few questions I pose today.

Trevor 57 · 08-04-2015, 04:30 PM

Investment properties are NOT a get rich quick scheme

usernametaken · 08-04-2015, 04:37 PM

Pay off your own house first - then when the bubble pops - you can thank me that you don't own more than the house is worth - you can also put that (albeit reduced) equity into an investment property then allowing you to participate in the ride up from the bottom (as opposed from the fall from the top - which is overdue)

cheap · 08-04-2015, 04:43 PM

Do a ROI on the property, how much you need to finance, how much rent you expect, factor in interest rates rising, factor in demographics, is it within 10km of the city or in the never never, does it have public transport, good schools, good shops, socioeconomic's of the area and most importantly if push came to shove would you be prepared to live there. Use realestate.com for research, I would avoid small concentrated areas with lots and lots of properties for sale - there would be a reason.

We once experienced simultaneously 3 non rented properties for +8 weeks, so be prepared for the no rent situation because it will happen.

IMO, with interest rates so low, the prices of much property is over the top, personally I struggle to see the value with the prices being asked.

Finally I would avoid buying into big developments with +20 apartments, when the poo hits the fan (interest rates rise) people will need to sell, and if you have to sell you'll be stuck in a lowest price bidding war with identical properties with desperate owners being hounded by ruthless banks.

GASWAGON · 08-04-2015, 05:16 PM

What state are you looking at buying in?

If you are trhinking Sydney i would stay clear as the media and the RBA have been talking about its vulnerability to a price bubble because of such low interest rates.

Melbourne has been close to SYdney but I think its finally tapering off which is great as the market needs to cool and let buyers and wages catch up.

Perth is suffering because of massive iron ore price changes.

Other states i'm not that sure about.

Grippy · 08-04-2015, 05:19 PM

Depending on where you are looking to buy, I'd be reluctant in this market. I'm a Real Estate Agent in SE Victoria and I can see the bubble bursting soon, we'll see what happens. I've seen plenty of investors selling up and going backwards in some instances.

Trevor 57 · 08-04-2015, 05:33 PM

if you decide to go ahead, then build DON'T buy, the tax advantages are far greater

Ovakil460 · 08-04-2015, 05:37 PM

I've got one rental property. Had it for 8 years so far.
If you are prepared to hold onto it & ride the so called waves should be ok.
Like said before not a get rich quick.
I would buy a house before a flat or unit, as land value increases more.
Just have a look at your rates bill.
Do lots of home work,pick an area so you get an idea of decent prices.
Good luck.

flightstrike · 08-04-2015, 06:31 PM

Started the process today myself. Lots of homework to do and lots more saving, but it's a nice feeling to get the ball rolling, albeit, very slowly

galaxy xr8 · 08-04-2015, 06:40 PM

Quote:

Originally Posted by xxx000

shares perform consistently better than property over the long term plus you can sell portions of shares very quickly and easily if cash is required

cons: tenants that you want to get rid of but can't

tenants that don't look after your property

This ^^^^.

GTPete · 08-04-2015, 06:44 PM

Bugger all gearing with shares, thats where real estate stands out.
Both have their advantages and drawbacks.

danzvtil · 08-04-2015, 08:50 PM

It will either be the best thing you have ever done or a complete nightmare.
I used to have 2 places rented out for 5 years, with good tenants. I sold them off to finalize my divorce. It was all negative geared, but I still maintain if I had put the amount I topped the mortgages up per week into the bank, then I would have been well and truly in front with none of the risk.
My family are involved with property management and they have some horror stories to tell.
What is your ultimate goal for the properties? The standard answer is to "live off the income in retirement", the problem here is most investors go interest only for at least a decade meaning there will be no equity come retirement time.
Myself, I would love to buy again and add value thru renovations, but I simply don't trust the govt with negative gearing/land tax and increased compliance put on landlords.
All my money is now going to pay off my principle place of residence.

Yellow_Festiva · 08-04-2015, 09:02 PM

Quote:

Originally Posted by usernametaken

Pay off your own house first - then when the bubble pops - you can thank me that you don't own more than the house is worth - you can also put that (albeit reduced) equity into an investment property then allowing you to participate in the ride up from the bottom (as opposed from the fall from the top - which is overdue)

This is the best advice to follow actually.

Take care of number 1, then worry about making money and housing others.

I bought several investment properties before I left home and they were high maintenance but well worth it in the end. I've sold off 2/3rds of my portfolio over the last few years and am now funding the building of our family home.

Once that is paid off, I will be looking into re-entering the PI scene as it's something I enjoy doing.

Remember - get your advice from people in the know. Even if they tell you horror stories of bad tenants or financial loss (and this does happen more often than you think) there is still a lesson to be learnt.

Is it a good idea? Yes - but be prepared for hard work and sleepless nights!

creative · 08-04-2015, 11:02 PM

Hmmm should I say what I do and hope I dont get lynched?

I am a BDM and Property Manager for a real estate office on the central coast. Happy to discuss the ins and outs of renting/processes/pitfalls/the tenancy act/yada yada yada... I wont give financial advice though. so always I recommend having a chat to a broker/finance advisor before you do anything.

**buggerlugs** · 09-04-2015, 07:58 AM

I personally think we are in for an adjustment sooner than later. I have had to drop the rent in one of my places in Mackay just to keep the people in the house, but I have no problems getting rent on the properties in Brisbane. Some cheap houses in the mining towns at the moment. One place in Moranbah sold for $579k in 2012. On the market now for $180k. They don't always go up.............

Mowdit · 09-04-2015, 08:25 AM

Quote:

Originally Posted by danzvtil

the problem here is most investors go interest only for at least a decade meaning there will be no equity come retirement time.
Myself, I would love to buy again and add value thru renovations, but I simply don't trust the govt with negative gearing/land tax and increased compliance put on landlords.

Great points, the first being to stick your hand in your pocket each week and actually pay off the property,
The second, to do capital improvements, you get better tenents and rent, and if the poo hits the fan you have a more saleable property,
Third, negative gearing, we have all heard hpw the gov are talking about getting rid of it, if you have an investment property they can't pull the rug out, (it would be like when they bought in capital gains tax, there were pre and post capital gains investment properties for years until a time was reached)
Start small, with a unit or cheaper house, if it works for your circumstances then use the equity to go bigger/more property.
Lots depends on where you are looking to buy also.

Don't forget, the government is a terribly run business, hence why we are so highly taxed, they will keep wanting some of your proffit, of change the rules to their advantage.

GT0132 · 09-04-2015, 09:25 AM

I have 2 IP's, first one, a townhouse bought in 2010, the other a villa in 2012 . Both in southern suburbs of Sydney and financed at 80% of value at purchase. The first one has increased in value by 30% over the last 2 yrs, the other by around 20%. Pretty happy with that.

Had others over the past 20-25 years that are now sold but made good returns

The areas of risk I see are.

1. You pay too much for the property. Do sufficient research in the area you're looking to buy and remember it’s a long term investment and gains won't happen overnight.

2. Interest rates go up. I have just locked all my loans in for another 3 years to give some certainly . If rates go up to such an extent after that time that I can longer afford the properties I'll just sell one to pay the other off.

3. You lose (or can't find) a tenant . Hasn't been a problem for me so far but you need to have enough "other income" to service outgoings in the event of a disruption to your income stream.

4. Tenant does damage that the bond won't cover. Get landlord insurance. This won't cover everything but is worth having.

5. The bottom falls out of the market…It can happen but honestly will it? History has shown that, in most cities in Australia, residential property has always come back well from any downturn . You just need to be able to fund the holding costs and ride it out until things improve.

Other points

I can't speak highly enough of using a good property manager. I can't be bothered with managing the places myself and the only time I'm reminded I have the properties is when the rent gets deposited to my bank account each month. They take care of everything for a cost of 5% of the rent.

If the property will be negatively geared, and you are married, I think that "generally" it is best to have the title deed in the name of the person who is on the highest tax bracket. The opposite if positively geared. The loans can still be joint.

You must keep the property at least 12 months to get the 50% capital gains tax concession.

If you buy too many IP's in one state you will be up for Land Tax if the land value of all properties in that state goes over a certain threshold . I learnt the hard way on that 2 yrs ago when my home was rented out and I lived in one of the IP's

Get a depreciation report for your IP from a mob that specialises in these. You can then use that as a basis for claiming tax deductions on fixtures, fittings and capital works depending on when the place was built,

Good luck

Dash_XR · 09-04-2015, 11:28 AM

Positive gear, get ahead while the rates are low then when they go back up you'll have a nice buffer. Share market is investing real money in things that may or may not exist next week, just as much effort/research needed as property if you want to be good at it so don't think it's easy money either.
Companies come and go but people will always need somewhere to live.

tregs · 10-04-2015, 09:53 AM

Thanks for all the advice guys. I am paying off my own house. I have also been paying an extra $350 a week off my loan and now I no longer have a car loan I thought it was a good time to buy an investment property. I'm looking to buy in the town I live S/W Vic I've looked at a few houses and will be looking at more. I've found a couple that have tenants in them 1 has been there 10yrs and both paying enough to cover the loan I need.

Trevor 57 · 10-04-2015, 10:37 AM

think about building, you won't be taking on others issues (building wise) and the tax benefits are greater

usernametaken · 10-04-2015, 10:58 AM

Have a read of this mate..

http://blog.australiaboomtobust.com/

Well respect Author.

Mr Hardware · 10-04-2015, 02:33 PM

Wasn't there a massive, massive thread about 4 or 5 years ago about investments and we had all these people from the fringe come around and go on about how a 30% drop in house values was imminent? And how that never happened? (Disregarding outliers).
/edit: just did a search, couldn't find it, must have been deleted

tregs · 10-04-2015, 02:59 PM

I'm thinking about building to rent. I had a look around today and there are some house and land packages. I will need to do a bit more research. Can you knock the price down on house and land packages?

GT0132 · 10-04-2015, 03:33 PM

Quote:

Originally Posted by tregs

I'm thinking about building to rent. I had a look around today and there are some house and land packages. I will need to do a bit more research. Can you knock the price down on house and land packages?

One thing I've also learned about picking the right property is that townhouses and villas in close proximity to transport (pref trains), shops and amenities tend to provide the best growth and command better rent returns.

Large houses in outlying areas where you need a car to get from A to B are typically the worst in my opinion.

xxx000 · 10-04-2015, 05:41 PM

location, location, location

as above post states proximity to transport, shops etc is best to buy

HULK_I6T · 10-04-2015, 06:33 PM

A mate of mine bought an unfinished house for $900k 2 years ago..

Spend $400k to finish with top quality inclusions.

He sold it 3 weeks ago at auction with a few weeks on the market.. $2.150m

Profit $800k+ yes interest was steep but he also lived in it as he finished it

Try save that much money in 2 years

Population is increasing and putting pressure on property prices, absolutely going gangbusters at the moment.

Prices have not gone down since 1922, it's not about if there is money to be made, it's about affordability... Many who have procrastinated missed the boat.