Many people are under the impression you need millions of dollars to start investing, but this is far from the truth! Some of the most successful investors started with less than $50,000 in savings to build their multi-million dollar property portfolios. So how is this done?
Educate Yourself
There are over 12,000 suburbs across Australia, so if you're only familiar with your own suburb or local area, you could potentially be missing out on some great opportunities. There are many free resources online where you can research the different markets and find out information such as the average annual growth rates, average rental yields, vacancy rates, population growth and so on.
You can also join free group pages on social media such as Facebook, where you can learn from other investors and join in group discussions. Ask questions, lots of questions - this is the best way to learn. People may also share their wins and losses with you and tell you what has worked for them or what hasn't worked for them, and what mistakes they've made along the way. It's not all positive news but it's a learning experience.
Keep An Open Mind
You may read about strategies that you're not familiar with or have heard horror stories about from others, but don't instantly dismiss them. A strategy that didn't work for one person, doesn't mean it won't work for others (or you). Do you know the background story on why they didn't succeed? Perhaps that person didn't do enough due diligence or research, or made errors in their feasibility studies etc.
I know many people who have attempted to 'flip' property (buy, renovate and sell for profit) but ended up making a loss. Does this mean that this strategy will never work? No! There have been many successful property flippers in Australia who have made hundreds of thousands of dollars in a very short period of time.
Understand The Numbers
You don't need to be a mathematician, but it's important to understand all of the numbers when investing. This includes any tax benefits you may be able to claim against your investment properties (speak with an accountant), or what the pros and cons are to the different loan structures available to you (speak with a mortgage broker).
Here's an example. Let's consider a $500k loan with an interest rate of 3.00%, over a 30 year loan term. If you were to choose an Interest Only (IO) loan structure, your repayments will be $289 per week (during the IO period), however if you chose Principal & Interest (P&I) at the same rate and term, your repayments will jump to $487 per week - this can have a huge impact on your cash flow.
So, which loan structure is right for you? There are a so many factors that need to be considered which may include your financial position, goals, age, if you own other properties etc. A mortgage broker will be able to run through all of the loan options with you and explain what the pros and cons are for each of these.
Real-Life Case Studies
I find this to be one of the best ways to learn, as it's based on true results. No predictions, no guessing - just real life stories. This allows you to get good insight into the different strategies out there and the results you can actually achieve.
Here are a couple of our most recent case studies to help you out:
CASE STUDY 1
Positively Geared Investment
Purchase Price: $199,000
How does a 7.7% gross rental yield sound? That's what we achieved with this regional investment, which also has future development potential on the large 975sqm block. Purchased for only $199k, spending $12k on a cosmetic reno (paint & flooring) and returning $315 per week. We also achieved over 40% capital growth in less than 12 months in this hot spot.
CASE STUDY 2
$380k Equity In 18 Months
Purchase Price: $700,000
The strategy with this purchase was focusing on a renovation to manufacture equity, plus hold for capital growth. This was achieved within the first 18 months following a full renovation that cost $120,000. The property was appraised at $1,200,000 resulting in approx. $60,000 capital growth (8.2%) and $320,000 in manufactured equity.
I hope all of this info has been helpful and wish you all the best on your property journey. Please don't hesitate to get in touch if you have any questions.
Disclosure: The information contained in this blog is my personal opinion only and is not to be taken as financial advice. Please speak with your accountant or any other qualified professionals for advice based on your personal circumstances.
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