Hello and welcome to another edition of Client for Life.
People often ask me how I got started and how do I manage so many properties. I think the most important aspect of investing is to understand your own risk profile and your appetite for investing. I believe I have a high appetite and a medium risk profile. What does that mean? I am always hungry for new opportunities. With this, I am then challenged with benchmarking opportunities against my current situation and my perceived ability to integrate another investment into my life.
With interest rates under 5 percent, it has never been a better time to invest. A handy tip to remember is a negatively gearing property at 6.5% interest rates is approximately $111.00 per week out of pocket. A negatively geared property at 5.0 % is only $18.00 per week out of pocket. This makes investing when the interest rates are lower, a dream. *
As many of you know, the first 5 – 7 years are the formative years for your investment. This is the time when the building has the least amount of repairs and maintenance, and your rents are at the base line. The general trend is that your rental income will grow over the years, and your debt remains the same.
That is true, except when the interest rate goes up and down, that alters the ‘out of pocket’ top-up component to our investments. So if you have the appetite and you can digest the risk, you can essentially launch your investment during this period while interest rates are this low and get a head start of $4,784 per annum before tax.
That is quite an uplift to get started. If you apply that to two or three properties, getting started can be much more satisfying and rewarding both financially and personally in the medium to long term because of the ability to hold in the short term.
You can imagine that many of my negatively geared properties went from negatively geared to positively geared with the down turn in interest rates.
Many years ago, I read a book called “feel the fear and do it anyway”. Sometimes it is okay to be a bit nervous. I think that is a good sign that you are aware of the risks.
Be sure, and book a free appointment with me at anytime to further discuss progressing your second property purchase. They say that we only regret the things that we haven’t done in life. Not the things that we have done.
* The property scenario above is based on a two-bedroom apartment in Mink, Essendon for $490,000 that will rent for $430.00 per week.