Property - Investing Basics
We thought we would start at the beginning, given it's our first enewsletter… so let’s look at the
“ wHo, wHat, wHen, wHere and wHy of Investing”…
We will cover each of these over the coming issues. But we are going to start with wHy???
Why do we invest in property?
The obvious answer to this question is; to make money, and have a good cash flow. A good cash flow should give you options in life.
The two obvious ways to increase cash flow are:
- Increase income
- Decrease outgoings or debt
Increasing the income for a lot of us it not easy to do, but decreasing the outgoings or debt can be done by using a “Buy and Sell” investing strategy. This applies whether you have a home mortgage or are renting.
Using two examples to demonstrate:
Scenario 1:
- Married couple, 1 child
- Home mortgage $350,000
- Loan repayments - $440 per week
- Combined income - $120,000, gross $60,000 each, net $1,800 per week
- Home value - $500,000
- Invest in properties around $300,000
You could use the equity you have in your home and purchase two investment properties, in the right locations of course. Hold them for 3 – 5 years to allow them to appreciate and then sell.
If purchased in the right areas (covered in wHere edition) you should Net around $60,000 each property. This will reduce your mortgage to $230,000. New loan repayments are $289 per week.
Repeat process but buy 4 properties. Sell in 3-5 years at $60,000 net each. Pay off home loan.
By doing this you have reduced your outgoings or debt to just your living expenses, i.e.; no mortgage in 8-10 years.
Repeat process again but buy 12 properties, you now have options in life?
Scenario 2:
- Married Couple, 1 child
- Rent payments - $500 per week
- Combined income - $120,000, gross $60,000 each, net $1,800 per week
- Savings - $50,000
- Invest in properties around $300,000
To explain in further detail, see below game plan example;
Year.1
Buy first investment property, deposit required $35,000
Put remaining savings of $15,000 onto loan
Contribute $500 per week onto loan on top of usual repayments
Year. 2
Extra repayments of $26,000
Plus $15,000 equals $41,000
Buy second investment property, deposit required $35,000
Put remaining savings of $6,000 onto loan
Continue to contribute $500 per week onto loan
Year. 3
Extra repayments of $26,000 plus $6,000 = $32,000
Buy third property once $35,000 saved
Continue to contribute $500 per week onto loan
Year. 4
Re-value first property
Use equity to buy fourth property
Continue to contribute $500 per week onto loan
Extra repayments of $23,000
Year. 5
Re-value second property
Use equity to buy fifth property
Continue to contribute $500 per week onto loan
Extra repayments of $49,000
Year. 6.
Buy sixth property with cash deposit
Put remaining savings of $14,000 onto loan
Continue to contribute $500 per week onto loan
Year. 7.
Continue to contribute $500 per week onto loan
Year. 8.
Continue to contribute $500 per week onto loan
Year. 9.
Continue to contribute $500 per week onto loan
Year. 10.
Continue to contribute $500 per week onto loan
Sell entire property portfolio
Buy home with cash
Year. 11
Repeat process by using home equity, buy 12 properties
You now have options in life…
And if you are doing this on one income, it can still be done… it will simply take longer to achieve.
There are many variations on the above scenarios, like income, equity, available cash flow so it pays to sit down with us and put a Game Plan together, specific to your circumstances.
We will go more into this next issue…
By keeping these points in mind and sticking to these simple rules, you should feel comfortable with your investment.
The team @ the wHere group live by these rules, plus a few more. To talk more about investing in property and setting up a game plan for you, contact us today.
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