 Alright you guys, what is going on? It's Jacob here. Welcome back to another video. Today's video is going to be the first time I talk about my investment properties in depth. We're going to be talking about figures. We're going to be talking about why I did things, how I did it, what position I'm in now. I bought my property here in Alice Springs two and a half years ago now at the end of 2015. We're nearly halfway through 2018. I lived in it for a year and a half. It's been rented for a year, so I've definitely experienced all sorts of stuff to do with the property market and we're going to talk about it right now. So in the next video, I'm going to talk about my second property investment, which was over in Queensland, but today we're going to focus on my property here in Alice Springs where I live that's currently rented. So let's roll the intro and get into it. So as I talk about certain figures, I thought, you know, how am I going to do this? How am I going to how am I going to run through this video without a big whiteboard behind me? Because eventually guys, I really want to have a sick like literally two meters by one meter whiteboard stuck on the wall behind me so then I can set this camera up, have a whiteboard marker in my hand and go through things with you guys. I cannot wait to do that. I can't wait, but for now I thought we'd crack into this anyway. Let's go back to 2015. This is the time when I finally started to build my bank balance. I finally started to get enough money where I thought, holy shit, man, I can actually do something here. I may actually be able to invest in property finally. And that was after being in my job for two years. Hustling, working hard, working hours, working long hours, overtime weekends, to pay off my debts first, get my feet on the ground and then start building a deposit. So come halfway through 2015, I had my deposit together and I was ready to do something. I knew that I was going to be living in Alice Springs for at least the next two years. I thought I'm not willing to buy my first investment property in another state. I want it to be here. I want to live in it. You know, it was an amazing, I've got to say guys, it was an amazing feeling to move in to my own place. I just bought it. It was brand new. It was an amazing feeling thinking about it now. But I've moved on. We will move on. And this property is now seen as solely an investment property. I don't feel like I'll ever live back in that property because I've got a great real estate agent. I've got a great tenant. And why would I fix something that's not broke? You know what I mean? With that said, let's talk about what the property is like and what the purchase price was. The property is a two bedroom, well, two bedroom, one study, two bathroom unit over two stories. So it's a two story, two bedroom, two bathroom townhouse, which basically a townhouse means that either one or both walls are connecting to another house. You've got lines of maybe four, six, 10. In my case, there's lines of 10. There's four blocks of 10 units. I've got one on one of the ends. And the way that it works with this complex in particular is that they've got blocks of 10. We've got one block here, one block here, one block here, and one block here basically going around in a square. And you've got a gym and a pool and car parking in the middle. So you drive around very, very similar to the complex that I invested in over in the Gold Coast, but we'll talk about that next video. But this one, it's got blocks of 10. I decided to buy one on the end. It's quite interesting what they did. It used to be a hotel complex. And so at the end of each block, there was a staircase. So what they've done, they've taken out the stairs, but they've kept the walls that encased the staircase. What they did, they basically created an extra room on both the top and the bottom floor for the units on the end. So what I got out of that was an extra study up the top. I got an extra dining room down the bottom. I got a bigger backyard and I got an extra car park. And I paid $30,000 more for all of that, which was an absolute bargain. So I was really lucky that I got one on the end because the ones in the middle, not only do they not have all the extra stuff, but they're actually a little bit skinnier. And so what I want to say is that if you're looking at units off the plan, even just getting that 10, 20, 50 additional square meters worth of floor area for a little bit of a higher premium price could well be worth it. It was definitely worth it for me. So purchase price. This may seem high, but we are in other springs. The reality is that the purchase price is high because the rental return is high. And when you're looking at a prospective investment, I've always said that you want your rental returns to be at least six and a half, if not seven percent or above. Now, what that's going to do is it's going to allow you to pay your mortgage with the rent. It's going to allow you to have a little bit extra to pay additional costs if you've got them. And that is a buy and hold investment property. That's a classic buy and hold investment property. You buy a property that the rent is going to cover your mortgage plus expenses and you basically just sit on it until the value of the property goes up. So that's pretty much what I've done. Now, because it was my first home, I was eligible for the first homeowner's grant. Now, there is a first homeowner's grant in every state in Australia. In the Northern Territory, it's really, really good grant. It's $26,000, but there's a catch. And the catch is that you can only have that grant from the government if you buy a brand new property or a property that has been completely revamped or refurbished. So this block of units was included in that. It was effectively completely stripped and redone. So it was a brand new block of units, in which case I was eligible for the first homeowner's grant. And so I took it. So I got $26,000 from the government. And the great thing is, is that you can use it for whatever you want. You can use it for your deposit. So if you're buying a property, you know, $250,000 or less here in Alice Springs, it's your first property and it's a brand new unit. With that $26,000 grant, if you can find a bank that's going to give you a loan at a 5% deposit, it's very well possible that you could get into your own property and own it without having spent a cent of your own money. And that is a, that's, it's such a good initiative. It really is. So I took advantage of it. I took my $26,000, but the purchase price of the property was $359,000. So $26,000 is not a huge amount when you're talking about a deposit. So I did have to put some of my own money in. So let's work it out. I needed a 10% deposit of $359,000, which was $35,900. I then needed to pay convincing fees, which is around about $1,500 to $2,000. What I didn't need to pay because it was my first home was stamp duty. So your first home, regardless of whether it's a brand new property or not, is stamp duty exempt. Stamp duty is a 3% charge that you pay as a buyer. When you buy the house, it's a government charge. It's a tax. It goes to the government. It's too much in my opinion. In New Zealand, they don't have stamp duty. In Australia, they do. Man, I don't know. Stamp duty is a killer. It really does. It kills your profit from the get-go. But the reality is that it's just a cost that you're going to have to include. But because it was my first property, I didn't need to pay that. So I had my 10% deposit. I had my conveyancing fees. I didn't have to pay stamp duty. But what I did have to pay because I didn't have a 20% deposit is LMI or Lenders Mortgage Insurance. Now, what that is, it's basically, let's say, you know, the house price was $350,000. My deposit was $35,000. I've taken it off. That's, you know, $315,000 plus this Lenders Mortgage Insurance. So basically, it's a fee that gets added on top of your loan that ensures the bank against you not paying your payments. So if you cannot come up with a 20% deposit, if you've got 10% or 5% like some people do, you can still get a loan. But it's going to be an additional $5,000, $6,000, maybe even $10,000 that you've got to add on to the top of that loan. Now, some of you may say that's absolutely ridiculous. You just pay $10,000 for nothing, but there's something called opportunity cost. And I'm always thinking about opportunity cost, guys, because, you know, yes, you can choose one way. But when you really think about it, maybe the other way is better. So I had to think about it. I thought, is it worth staying at 10% deposit, but adding $6,000 on top of my loan? Or am I going to wait another one, two, three years to save 20% and then not have to have that fee? But in the meantime, the opportunity cost, what you're missing out on is the increase in value of that property. So the way I've seen it, the way I see it, the way I've always seen it is get in, get in there, buy it, you know, do whatever you have to do to get it. And I'm going to talk about what I had to do to get my second property, because I was scraping the barrel, guys, it really was. But I just knew that whatever I had to do, I just needed to acquire that property, get it into my name, and then worry about everything later. Because at the end of the day, once you've got it, once you own it, that profit is all yours. So let's work it out, guys. $359,000 was the purchase price. It was two and a half years ago. I put in $35,000 of my own money as a 10% deposit, plus I put in $26,000 from the government. I had no stamp duty, but I had to pay conveyancing fees, which was $1,500. And I also had to pay their lender's mortgage insurance, which was about $6,000. So when it was all said and done, I'd paid my deposit, the settlement had gone through, the money had been transferred, I was left with a loan of around about $305,500. So I've got a $359,000 property with a $305,000 loan. Effectively, I'm $54,000 in the green. So I've got $54,000 worth of equity. Now, the fun part, once you've acquired the property, what do you do? You sit on it. There's like, I knew, I knew that when I bought this property. I'm not even going to think about selling it for at least 10 years. I knew that. So there is one thing I needed to mention with the first homeowner's grant, you've got to live in the property for the first year and they do check. So that's what I did. I lived in the property for all of 2016. I lived in it for the first half of last year, 2017. And then I rented it in July of 2017. And I did that on purpose because I wanted to line it up with the start of the financial year for tax purposes. So at the end of this financial year, come July 2018, I'll be claiming every single expense for both properties because they're both rented now. All right, let's do this. So two years ago, I was $54,000 in the green. It was worth $359,000. To be honest, to be honest, if I look through the Alice Springs property market right now, I cannot tell exactly what my property is worth. All 40 units were sold two and a half years ago. No one has sold one yet. And that's interesting, isn't it? So, you know, because no one's sold one, no one really knows what the standard is for the price. We don't even know if it's gone up. It may have gone down, but it hasn't. It hasn't gone down. So hopefully, you know what, I'm hoping that at the moment, you know, could reach $400,000. I'm thinking, if I put it on the market, I would put it on the market for $399,000. That's what I'd do and try and get as close to it as possible. So let's say $400,000. My mortgage started at $305,000. Unfortunately, as you guys know, in the first year or two, or five years of a 30-year mortgage, you're not going to pay off a lot. It's going to be mostly interest and a little bit of principle. So at the moment, my mortgage is sitting around about that $300,000 mark, in which case, if the property is worth $400,000, we're $100,000 in the green. We started at $54,000. Now we're at $100,000. But that is not all profit, because the reality is, is that when you own a home, the mortgage is just the start. That is just one expense. There are so many other expenses that for you to actually have a positively geared investment property in the first couple of years of owning it, you're doing bloody well. So what I will say is that this property in Alice Springs since ownership, it's been slightly negatively geared each year. So I've lost a little bit of money each year, but that is because, yes, the rental return covers the mortgage, but it doesn't cover the body corporate fees. It doesn't cover the rates. It doesn't cover the water bill. It doesn't cover the real estate agent fees. It doesn't cover maintenance. You know, anything like that happens comes out of the profit. So with that being said, I would assume I've spent approximately $5,000 to $7,000 out of pocket on this property per year of ownership. So let's take all the numbers into account and see exactly where I'm at. I had my deposit. I had my first homeowner's grant. And what that allowed me to do was to buy the property with a 10% deposit and have $54,000 worth of equity. Right now, effectively, I've got $100,000 worth of equity, less the costs that I've had to pay to maintain the property each year of ownership so far, which is probably about $5,000 to $7,000 per year. So with that said, I'm not $100,000 in the green. I'm most probably about $82,000. So through me just owning the property, not doing anything, paying what I need to pay, making my payments, receiving my rental income, I have increased my equity in two and a half years from $54,000 to $82,000, which is an increase of $28,000 for basically doing nothing. And that is the beauty of making your money work for you. So let's talk about growth. You know, growth in Alice Springs has been stagnant the last five years. It really has. But I was in a position where I didn't care about growth. I needed a property to live in. I fell in love with this property and I wanted it. And I loved living in it. But right now, obviously with the family and how things are going in my life right now, it's too small. I needed a bigger place. So I rented it out. And I actually managed to get a two year lease. So it's not coming up for renewal until halfway through 2019. And that's great. You know, that just puts my mind at ease. I don't need to worry about it. When I put it for rent, I interviewed all four of the major real estate agents here in Alice Springs. And I chose my favorite. So I'm very, very confident with the people I went through. And so it's basically just an investment that's looking after itself at the moment. And if I do need to put money into it, I know that eventually, at the end of the day, I'm going to get it back plus some. So that is my story about my first investment property. Those are some numbers. So let's say it's gone up $15,000 a year, 15,000 into 359. So let's say it's gone up approximately $15,000 per year. And that tells me it's gone up around about four to four and a half percent per year. So that is, you know, it's relatively good growth, I suppose. I'm not expecting anything crazy. And even before I bought it, I had a figure in mind. I thought, all right, in 10 years, I know I'm not going to be selling it for 10 years. So let's think 10 years down the track. In 10 years, if it's worth $500,000, then I'll be happy. And that's not a huge amount of growth. It's really not. As you guys know, I'm sure. But in 10 years, if this property can go from 359,000 up to 500, my mortgage will go from 305 down to, I don't know, maybe 230. That gap between what you own and what you owe is going to increase. In 10 years time, you've got a $500,000 property, you've got a $230,000 mortgage, and that $35,000 initial investment has now transformed into over $250,000. Yes, there's been expenses each year that I've had to pay, as I said, $5,000 to $7,000. But that is only going to decrease as my rental income goes up. So yes, my rental income is at $450 right now. In 10 years, it might be at 600, it might be at 700. And in which case, I'll be making profit each week, as well as building that equity. So its property investment is an exciting vehicle to use to build your wealth. And that is the vehicle that I'll continue to use. I've got very, very clear financial goals right now. And one of them is to buy another house. So we will cover that in a future video. But before that, I'm going to talk a little bit less in depth about my next property investment, because this video has gone way too long. But I hope you've enjoyed. If you have, hit that like button. If you haven't subscribed yet, please subscribe. We talk about all sorts of stuff on this channel. And I'll see you guys in the next one.