The New Build – Part 7 – Start the countdown!

IMAG3309The visit to the building site in February was the last time that we were able to set foot inside the building. From that point on it was a monthly drive past to see what the progress was from the outside and only being able to guess what things were like inside. In early March, progress had continued on the exterior with some of the finishing touches added to the brickwork and roof, as well as the fencing starting to go up. The concreting for the driveway had also gone in and the leveling of the front yard had been done.

A month later in early April on a dreary and rainy Ballarat day it was time for the next sticky beak and things had really progressed to a stage which was getting so close to completion that I could smell it (or it may have just been the smell of the paint drying). The fencing was finished outside, exterior painting was complete, letter boxes were in and even the lawn had been seeded and had started to grow. And for the next month the emphasis was literally on watching the grass grow.

Again, one month later at the start of May it was time for another visit and as noted, it was all about watching the grass grow…which it had. Aside from that, the landscaping was completed and it was now time to wait for the official subdivision information to be approved and then a settlement date could be set. Fortunately that didn’t take all that long and FINALLY it brings us to the current day! No more posts about things that happened 6 months ago. Tomorrow I’m visiting the site to have my pre-settlement inspection before the keys finally get exchanged next week (all going well). After 3 months since last stepping through the front door I’ll finally set foot inside to see the finished product. Watch this space in a few days to see what the finished product is like!


The evils of Negative Gearing?

article_05082013Barely a day goes by in the media that there isn’t an article published discussing the challenges of the Australian housing market and how much prices have risen over recent years. The long held ‘Great Australian Dream’ of owning your own home is frequently trotted out to tug at the heart strings of TV viewers when trying to find a suitable scapegoat for sky high property prices. Throughout much of 2014, focus was being placed on foreign investors landing on our shores with suitcases full of money and pricing us locals out of the market. Currently the place for blame is on negative gearing. Whilst I’m happy to agree that negative gearing may have had some contribution to price rises, it’s important to take into account the huge amount for factors at play here. Although I’m no economist, it doesn’t take a genius to realise that the combination of negative gearing, foreign investment, historically low interest rates, ease of finance, ongoing agent under-quoting and the sense of urgency portrayed in the media all play a role. Not to mention the fact that almost 70% of Australians choose to live in capital cities and that there is only so much land available in these relatively tiny pockets of our enormous country. Geography and demographics certainly play a role.

Of course I’m biased…but while I do think that negative gearing has an important role to play in supporting investors and in turn the housing market in Australia, I agree with statements made regarding investors only investing in property simply for the tax advantages. To me, purely investing for the benefits of negative gearing is completely the wrong approach (although plenty do it). Following here are two videos worth a watch. The first is a clip from ‘The Project’ on Network 10 which aired last night and fired me up to write about this topic. Pay careful attention to the generalised statements and overall tone of the clip, it’s enough to make you go out and push the nearest property investor under a bus. The second clip by well known Australian property investing wunderkind Nathan Birch is intriguingly entitled Negative Gearing Sucks Balls. Nathan’s explanation about negative gearing and why people get caught out by it is spot on in my view. My thoughts? Negative gearing is a useful bonus for investors but certainly not a reason in itself to invest in property. Check out the clips below and make up your own mind!

Renovation Rescue – Doing the sums $$$

house moneyAlthough I’ve been absent from the blog over the Christmas and New Year period I’ve had the calculator not far away as I’ve done the final figures on the renovation to see if the time and effort put into the project was worth it. Whilst I’m not endorsing sharing all of your finances in a public forum like a blog I think it’s important to delve into this project to show that it’s something manageable by most people and that it won’t break the bank. For that reason, following are the basic figures about the purchase, renovation, financing, valuations and leasing of the property.

The purchase

Purchase Price = $112,000
Deposit = $11200
Mortgage Insurance = $1664
Conveyancing = $1875

Total Purchasing Costs = $14739

Renovation Costs

Materials = $5187
Trades = $791
Utilities = $270

Total Renovation Costs = $6248


Mortgage amount = $102,000
Weekly Mortgage repayment = $121


Rental Amount = $160
Management Fee = $10.56

Weekly net rental = $149.44


#1 = $165k – $175k
#2 = $145k – $155k
#3 = $140k – $150k

So what does this all mean? The total cost to purchase and renovate was just under $21,000 (including the deposit). If I just purchased the property and did nothing to it but rent it out it still would have cost $14739, still would have been worth $112,000 and would be lucky to rent for $130/wk. With the renovations the valuations showed quite a range. While the first one was clearly an overestimate (get me $175k and I’ll sign on the dotted line!) finding a mid-way point and doing the comps with what is for sale at the moment (see this similar unit currently for sale) $150k would not be unrealistic. The rental amount also rose with it being snapped up for $160/wk within a few days of being on the market.

So for just under 3 weeks work the $112k property rose in value $38,000. Take away the reno costs and purchase costs (excluding the deposit) and it’s a nice profit of $28,000. Looking back now it’s great to think that for each day of work the value rose about $1500. I can imagine most people would be happy earning that!

Noting that I’ve decided not to sell but to lease it out the net rent is $149 with mortgage repayments of $121. The remaining rent totals $1456/year which will go towards rates and maintenance. Factor in the depreciation at tax time and I’m confident that this will be a positively geared property. And with over a 7% return you’ve got to be happy with that! Although there are a lot of numbers to digest, I hope that this demonstrates that investing and renovating doesn’t need to cost the earth and you can still make a tidy profit with a bit of hard work. So now it’s time to focus on the next project which was already in the pipeline whilst the renovation was going on. More on that soon…

Property investor expo

So the home buyer and property investor show has been doing the rounds in Australia this year and heads to Melbourne from August 29-31. Whilst it may not be everyone’s idea of an amazing weekend activity, if you’re eager to learn more about property investment and hear from a range of experts it’s a great opportunity. There are a variety of seminars over the three days that cover topics from mortgages and finance through to depreciation and renovations. And at $18 for an online ticket it just might be some of the best money that you can invest!

Queensland luxury for $25,000,000

It’s been a while since I’ve posted an ‘in your dreams’ property and a lot of those in the past have been from the USA. It’s great to find a good local one and this one hits just the right spot. Located a stone’s throw from the Great Barrier Reef in Airlie Beach you’ll find the amazing Mandalay House and it can be all yours for just $25 million AUD. What do I get for my hard earned millions I hear you say? Well once you fly in to your private heli-pad or sail in to your own personal marina with space for a 24m yacht as well as your 2 jet skis you can casually stroll up you your 2629 sqm (over 28,000 sq feet!) luxury home. Even before you get inside you will have passed your massive pool, huge outdoor entertaining areas, caretakers cottage and personal water desalination plant (some would say the desal plant is excessive but you can’t go washing your diamonds in salt water). Once inside you have the choice of 6 king size bedrooms (the master bedroom covers 144 sqm with lounge room & separate 52 sqm walk in dressing room) , 9 bathrooms, cinema, gymnasium and pool room, a climate controlled cellar with dining space for 12, your own internal elevator and car parking for 6 or your luxury cars if you didn’t get the helicopter here. Top all of this off with breathtaking views out over the Whitsundays and you’ll be rushing off to get your checkbook from the glove box of the Aston Martin. Still not convinced? Just check out the marketing video below…butterflies appear to be included with the price.

2014 property advice from the stars…literally!

zodiac-signsHappy new year everyone! For a lot of us the start of a new year brings us the opportunity to evaluate what we’ve been doing and kick off with a few New Year’s resolutions. For some it’s giving up cigarettes or losing weight, for others it might be to do with family or financial matters. If you’re thinking about taking the first steps to getting onto the property ladder or making further progress from what you have already done then it’s a great time to set some goals and think about how you are going to get there. Whilst I always suggest that you evaluate advice very carefully and make sure there is some good evidence to back it up, I just couldn’t resist re-posting the following that I discovered online today – Your Property Star Guide to 2014! Keep in mind that this is not rigorous evidence-based research…but who knows, if the stars and planets align…

FIND out what the stars have in store for buyers, renters, sellers and landlords in 2014. You probably noticed the record number of auctions and house prices during 2013. Was it written in the stars? Yes, Jupiter rules expansion, hope, confidence, and optimism, while Cancer rules home, family, real estate and ancestry. Jupiter, in Cancer since June 27, 2013, will remain until July 17, 2014, creating another property market boom. From mid-2013, our property market went gangbusters and peaked around December 12, 2013 when Jupiter trained Saturn in Scorpio, a powerful astrological aspect for maximising your return on investment. Jupiter will be retrograde until March 6, 2014. This typically delays settlements, encourages gazumping, withdraws properties from sale and creates problems with “finance subject to approval” agreements. Jupiter inflates expectations; vendors can get greedy holding out for the highest price. Until 17 July 2014 while Jupiter remains in Cancer, buyers will seek bigger homes, particularly with three or more bedrooms to meet the current baby boom, but also to accommodate older family members. On July 17, 2014, Jupiter enters Leo which rules love, fun, leisure, sports and children. Homes near parks, beaches, sports facilities, entertainment, shopping and coffee precincts will appeal enormously as will nearby childcare centres and schools. Apartments near these areas, with pools, BBQ areas, stately lobbies (mirror and glass), fashionable addresses, impressive views and large balconies or courtyards for entertaining will dominate demand.
You could make a fortune buying, selling, leasing, developing, renovating, or investing in property on April 30, May 6, 24 and June 8. However, an ultimatum from your boss or tough business conditions may force you to move, sell, lease or relocate on July 4, 22 and 28. An impulsive home purchase or DIY project is a bad idea on July 9, 25 and August 1 however on those same days, an older family member may provide your first home deposit, suggest property-related tax offsets or leave you real estate in their will. Your partner may disagree with your property plans on July 19. While Mercury is retrograde from June 8-July 16, you may experience delays or reversals with your paperwork. A property expert may give you a fantastic insider’s tip on house or land yet to be advertised on June 29, July 19 and 24.
Jupiter in your solar fourth house of home and family from July 17, 2014 ushers in a 12-month window for you to expand your property portfolio, your physical home and perhaps your family, too. On July 25, August 19 and September 26, you may find the home of your dreams, finish renovating, or plan a party at home. Saturn in your solar seventh house of relationships suggests your past or present partner may disagree with you about buying, selling, renovating, decorating or investing in property on August 3, 9, and 27. The Full Moon of August 10 points to crunch time around career choices vs. domestic obligations. You will adore spending time with your family, entertaining guests or househunting for the home of your dreams on July 25 and August 19, with a big change due in your domestic environment from the New Moon of July 26.
An extra source of income may dry to a trickle until March 7, 2014 while Jupiter is retrograde in your solar second house of income, putting projects and investment plans on hold. You might want to get your property refinanced, valued, insured or left in a will to a loved one on August 22, September 4 and 15. In other cases, a wealthy family member may help you with your home deposit or mortgage or can introduce you to an architect who can help you maximise your home value with a subdivision, for example. On August 25, 26, September 10 and 22, you may decide to spruce up your home office, look for a house that’s closer to your workplace, do domestic repairs for yourself or tenants, or consider getting a pet for the kids, companionship or daily exercise.
Your and your partner could disagree regarding a home purchase, sale, renovation, extension, repair, or investment on January 1, April 23, June 15, September 10, October 5 and 9. You may upset your landlord, tenants, flatmates, real estate agent, architects, tradies or council official if you’re arrogant on January 8 and April 23. You may have to find new business premises without much warning on April 23, June 25, July 1, September 13, October 8 and 11. Invest in real estate, buy high-end fittings for your renovation or splurge on homewares on September 11, October 11, 14, 17, 18, 21, 23 and November 1. You may move, sell, renovate, decorate, extend, renew your lease, invest or improve your property following the New Moon of September 24. Schedule DIY jobs on October 10, 17 and 20. When Mercury goes retrograde from October 11-26 you could play phone, email, contract and meeting tag with property industry people.
An insider tip could net you a bargain on May 24. Take care you don’t overextend yourself buying a bigger house, apartment, holiday house, investment property, or renovation on August 1, November 10, 14 and 23. You may refinance your home loan, team up to buy real estate, get a house as part of a settlement, receive a tax refund to put towards your home deposit, or be left property in a will on August 7, October 28, and November 12. Undertake domestic chores from DIY repairs to cleaning out the garage on August 15, 26, November 2, 4, 17, 18 and 22. You may find a gorgeous home or decide to redecorate on October 27. Mercury goes retrograde on October 5-November 11 pointing to delays in property matters and unresolved family issues. You could move, sell, renovate, invest in property or revise your household arrangements following the New Moon of October 23.
Don’t let your partner make domestic repairs nor buy property on September 22, November 20, 27 and December 1 as it’ll be Mr Bean-quality without the comedy. Invest in property, apply for your first mortgage, refinance it, or check how you can claim tax expenses on your home/s on October 5, November 27, December 5 and 6. You may get some amazing insider info that helps you snap up a property on October 9, December 5, 12 and 15. From the New Moon of November 22, you’ll be action stations at home, probably getting everything ready for the holiday season with your house ready to receive guests by the Full Moon of December 6. You could be ultra-busy on December 8, phoning, negotiating, emailing or meeting with real estate industry people regarding a house purchase, sale, lease, renovation or investment.
You could decide to buy, sell, lease, invest, renovate, develop, get pregnant, ask your adult child to return or move out and/or to insist your (grand) parent/s need nursing care as soon as New Year’s Day, with more news likely on January 7, 11, November 11, December 21, 22 and 25. You may make long-term financial commitments about your home or an older family member on January 6, 11, February 25, and December 2. Your (grand) parents may need your help on November 2, December 14 and 27. You may have to cut working hours or make your office into their new bedroom to take care of them. You could be very upset about domestic issues on January 16 and March 3, while you and your partner could disagree about your family, housework, or whether to relocate or buy a property together on November 13 and December 21.
You may feel burdened by domestic issues, caring for elderly (grand) parents, or property commitments on 26 January, February 12, 19, March 11 and 30. When Mercury goes retrograde from February 14-March 1, you could experience delays in dealings with tenants, landlords, real estate agents, tradies or council officials. Take a creative approach to balancing work and family commitments on January 16, 29, February 19, March 19 and December 21. After the New Moon of January 30 you may make the leap to freelance or consulting work, launching your own home or property-based business, or joining the family company, especially if you get “an offer you can’t refuse” around the Full Moon of February 14. Listen to your intuition and look for helpful clues regarding a property you’ve got your eye on January 25, February 15, 16, March 15 and 30.
Domestic bliss, from finding the house of your dreams, enjoying a family reunion, moving in with a lover to welcoming a child or puppy, is yours on February 24, March 23 and April 11. You may find, buy, sell, lease, relocate, restore, renovate, decorate or invest in property on March 1, 4, 27, 28, April 18 and May 24. You may receive a no-strings-attached gift of money from a family member, a tax refund, inheritance, divorce settlement or grant then. You may need to make alternative accommodation arrangements for an ageing (grand) parent on March 14, April 3 and 25. When Mercury goes retrograde from February 7, not fully operational until March 21, a building project may suffer delays or you may rethink a particular domestic arrangement. You could also experience further property confusion when Neptune goes retrograde from June 10-November 17.
The New Moon of March 30 suggests you may move, sell, buy, lease, renovate or invest, or involve yourself more heavily with your parents, but your partner seems disenchanted with the idea (or your family) on April 1, 15, and May 19. Don’t give your household members ultimatums on April 3, 15, 22, and May 15 unless you can bear the consequences! A company relocation (whether it’s a longer commute or you have to sell or rent your house) could sour domestic happiness on April 9, 15, 16 and May 11. Great property or family news is likely on April 2 and May 18. You may discover you’re pregnant which could thrill – or shock – your family accordingly. When Uranus goes retrograde from July 22-December 22, your twenty-somethings may boomerang home for a while. Some of you may have to rethink your parents’ home care arrangements.
You may discuss, read, email or sign documents about moving, selling, buying, leasing, renovating or investing in property on April 27, 28, and June 4. Some of you may buy beautiful furniture, homewares or artworks. The New Moon of April 29 suggests a new domestic chapter is likely soon. You may have to take care of an elderly or ill family member while other Aquarians could discover they’re pregnant on April 30, May 4 and June 9. You may start a new job which requires childcare arrangements or organise a cleaner to do regular housework tasks on April 30, May 6 and June 18. Business demands could intrude upon your family or alternatively, your boss may harshly question your dedication if your house purchase, renovation or development is interrupting you at the office too much on May 3, 11, and June 13. Trying to juggle family members and your superiors will requite delicate handling.
Don’t make hard and fast decisions about property transactions on May 11, 29 and June 30 because you won’t be thinking straight. That so-called “renovator’s dream” could end up The Nightmare on Elm Street. You may join the family firm, work (more) from home, set up your office in your house, hire home-based employees, or organise a household roster on May 13, 31 and July 13. You could buy, sell, lease, design, renovate or invest in property on May 15, 18, June 6 and July 7. The New Moon of May 28 suggests you could be moving, changing flatmates or welcoming the pitter-patter of little (furry) feet but you might find your plans get delayed from June 18-July 2 while Mercury is retrograde. You may play email, phone call, text message or meeting tag with vendors, buyers, landlords, tenants, real estate agents, tradies or council officials then.
You can access the original article here

Why You Shouldn’t Listen to Donald Trump – The Barefoot Investor

When it comes to investing in property everyone seems to be an expert and is full of advice, both good and bad. You’ll hear disaster stories by the bucket load and I often suggest that a lot of this information comes from people who have not experienced property investing themselves. You’ll hear “I have a friend that had a terrible experience when…” etc, etc. So going on this philosophy you’d be inclined to think that advice from someone who has done it before would be a lot more useful. Often it is, but you still need to approach it with a critical eye and always ask yourself when receiving advice from someone, what’s in it for them? This, I’d also strongly recommend when attending one of the many property investment workshops or seminars that are frequently marketed to the masses. There are lots to choose from and whilst some are very informative and useful, there are also ones out there that are simply a sales pitch.

When browsing through the blog from Scott Pape at The Barefoot Investor I came across the article below highlighting that even when the advice is coming from one of the most successful real estate tycoons of all time you can still be taken for a ride. Click below and read on…

Why You Shouldn’t Listen to Donald Trump – The Barefoot Investor

Doing the sums #2

I had some great responses to my post on October 13th about doing the sums when looking at investment properties and how important (and sometimes surprising) it is to get an idea of how much it will cost you to start and also to maintain. I’m always keeping an eye out for great examples so will post them when I come across something which shows a simple and affordable approach.


This property is a simple one bedroom unit in a complex of 12 units. It’s in a well established suburban area which is well regarded and in the same city as my first example. The area again demonstrates good infrastructure and is close to necessary facilities (shops, hospitals, schools etc). 

On face value the unit appears to be well maintained but of course you would want to inspect not only the property itself but also look around the complex and the units around it. It is for sale for $142,500 and is returning a healthy $190/week. Let’s say that it ticks the boxes as far as the quality and standard of the complex and we manage to get a realistic offer of $140k accepted. What do the figures look like and is it affordable?

How Much Will It Cost Me?
 Property Price – $140,000 Deposit (10%) – $14000 Mortgage – $126,000
Stamp Duty – $3470 Interest Rate – 4.69%
Conveyancing – $800
Mortgage Insurance – $1800
Total Costs (estimated) $20070

Once again, these are the main costs with a deposit of 10%, if you can get to 20% for a deposit the mortgage insurance disappears and the total estimated cost would then be $32,270. So you could get this property for an initial outlay of between $20,070 and $32,270. This is all great but let’s once again look at how you maintain this. Rather than being overly conservative, this time I’ve gone with one of the better interest rates that I can find at the moment of 4.69%

How Much Will It Cost To Service?
 Loan Amount
– $126,000/$112,000
Council Rates – $900 Rent Income – $190/wk
 Interest Rate – 4.69% Water Rates – $900
 Repayments/Wk (10% deposit)
– $150.50
Body Corp – $800
 Repayments/Wk (20% deposit)
– $134.00
Property Mgmt. – $700
 Yearly Repayments – $7826/6968 Yearly Costs – $3300  Rent/Yr – $9880

For a 1 bedroom unit the rent is very good and in a tight rental market this is becoming increasingly realistic. If you started with the 10% deposit you would find yourself out of pocket $1246 a year (or $24 a week). If you managed to pull together the 20% deposit you would be out of pocket $388 a year or less than $7.50 a week! A dollar a day really is loose change! Come tax time and factoring in some depreciation I’d think it could even be likely to end up being cost neutral.

Again remember this is a ‘one moment in time’ scenario and things can change, but even with some unforeseen expenses and the odd maintenance request a property like this has the potential to be a great starter for an investment portfolio!

REIA response to Renovating Housing Policy

logoFollowing on from my post this week regarding the Grattan Institute Report on housing policy it’s not surprising that the Real Estate Institute of Australia (REIA) has responded quickly to the recommendations in the report. Published this week on the Your Investment Property website is the following article outlining the response from the REIA. Once again it’s always fascinating to see the debate it stirs up in the comments posted after the article. You can access the original article here, or, read below.

Hands Off Negative Gearing, Warns REIA

A report issued earlier this week slamming government housing policies has provoked a strong reaction from the Real Estate Institute of Australia (REIA), which said a recommendation to scrap negative gearing is ‘short-sighted’.

The REIA said it agrees with the Grattan Institute Renovating Housing Policy report in that a major overhaul of housing policy in Australia is needed, but disagreed with what needs to be done.

“We strongly agree with the report’s recommendations to eliminate stamp duties, however it’s essential negative gearing be retained in its current form for the purpose of property investment,” said REIA president Peter Bushby

“REIA has always supported negative gearing because it helps in the provision of rental accommodation. Negative gearing for property investment is complementary to the goals of the Government’s Housing Affordability Fund (HAF) in addressing the supply of rental accommodation.”

Bushby said removing negative gearing would show that Australians ‘haven’t learnt anything from history’.

“When negative gearing was abolished in 1985 it had disastrous consequences for the property market and for people trying to rent. Rents rose 37% across Australia and by 57% in Sydney.

“Thankfully, negative gearing was reinstated in 1987. It is far too short-sighted to link investor interest in housing to negative gearing alone. Negative gearing is only one of a range of factors that contribute to the level of investment in property. Other factors include interest rates, availability and accessibility of finance, share market performance, the unemployment rate, housing supply and consumer confidence.”

Bushby said the ‘myth’ that negative gearing is a plaything of the well-heeled also needs to be dispelled. He claims the majority of taxpayers with negatively geared property earn less than $80,000 per annum.

“Findings in the Renovating Housing Policy report are important and let’s hope they assist in kick-starting a debate on housing policy. With the new government, expectations that industry will be involved in finding workable solutions to these old issues are high.”

Taking your first step – Doing the sums!

I was reading recently that less than 8% of the Australian population are property investors which equates to about 1.8 million people. Of these, the Australian Tax Office reported that 72% of these investors (or around 1.3 million) own just one property. There is a steep drop to less than 100,000 people that own more than 3 properties and less than 1% of Australian property investors (about 15,000 people in the entire country) own more than 6 properties. This information not only shows how few people manage to develop a large property portfolio but also that there is a huge proportion of people that never even get their foot on the ladder. Of course property investing is not everyone’s cup of tea but I have spoken with many people just wanting to make a start but possibly not feeling prepared to take the leap of faith. Today I was speaking with a family member who was interested in learning more about the steps to take to get on the investment ladder. I mapped out a basic example of what I would consider a great ‘starter’, something quite similar to what I started with on my first investment and also an investment which won’t break the bank to get you started. Let’s take a look.

mainThe property I chose to demonstrate with was a one bedroom unit currently for sale in a regional city of around 100,000 people. It is serviced well with good infrastructure and is close to necessary facilities (shops, hospitals, schools etc). The location is highly desirable and the unit itself appears to be in excellent condition. It is for sale for $145k – $155k. Let’s say that we manage to get an offer of $145k accepted, what do the figures look like and is it affordable?

How Much Will It Cost Me?
 Property Price – $145,000 Deposit (10%) – $14500 Mortgage – $130500
Stamp Duty – $3700 Interest Rate – 5.5%
Conveyancing – $800
Mortgage Insurance – $1800
Total Costs (estimated) $20800

These are the main costs with a deposit of 10%, if you can get to 20% for a deposit the mortgage insurance disappears and the total estimated cost would then be $33,500. So you could get the property for an initial outlay of between $20,800 and $33,500 but what then? How are you going to service the loan and how much is it going to cost out of your own pocket?

How Much Will It Cost To Service?
 Loan Amount – $130,500 Council Rates – $900 Rent Income – $200/wk
 Interest Rate – 5.5% Water Rates – $900
 Weekly Repayments – $171 Body Corp – $800
  Property Mgmt. – $728
Yearly Repayments – $8892 Yearly Costs – $3328  Rent/Yr – $10400

The rent on this property is very healthy and over the course of the year you would be out of pocket $1820 (or $35 a week). Remember that this is a ‘one moment in time’ scenario and things can change in both positive and negative ways. The interest rate above is fairly conservative currently, I could locate a deal at 4.69% which would reduce your weekly repayments to $156 meaning you’re now only out of pocket $20 a week! If you managed the initial 20% deposit at that interest rate then your repayments drop to $139/week which means you would have to dig between the couch cushions once a week to find the spare $3 to fund your investment property!

On the flip side you also need to be aware that tenants can move out, things can break that need repairing and the cost of rates, insurance and property management can (and usually do) go up. It would be great to only have to pay $3 a week but in reality it will sometimes be more than that. Can I afford $20, $50 or even $100 a week if it came to that? These are all questions that you need to ask yourself and factor into your own budget. Overall though, what I’m hoping is that this example shows that you don’t need to be a millionaire to start on the investment ladder. Yes it takes some saving but it’s property and you don’t get it for free. When you do the sums though it can often work out to be a lot less than you may have initially thought!