Hi All
did anyone read about a couple from Perth?(API mag) They accumulated $4,205,000 in property mostly in last 7 years. ($1,226,500 equity)
What was truly amazing is that the only income was $70,000 pa working as electrical instrument fitter.
They pay:
$20,000 pa in rates
$160,000 pa interest (7%) interest only loans
$112,000 in rent & tax income approx $22,000.Last year left a shortfall of about $50,000 they look at which property has increased the most in value and refinance. Last year they borrowed $50,000 however their properties went up $400,000.
M[biggrin]
Talking about living on the edge.
If you can’t afford the repayment then your home is at risk. How many times have we heard this said.
This sounds like a couple who have been rather negligent in their borrowing or maybe their mortgage broker or financier has been negligent.
The are purely reliant on rent and capital gain. What happens when neither of these occur or when tax changes to NG reduce the amount they can claim.
The additional funds they draw on when they refinance are not tax deductible and therefore are merely a borrowing to support their current portfolio. Common sense would say pay down some debt cop some CGT and live within your means.
Remember the suposed equity is only realised once they sell the property.
Cheers Richard
[email protected]
http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Marisa,
They sound like they are having a good crack at it, although I wouldn’t be so conservative, especially if they are young (under 40). [biggrin]
I recall when asked for the biggest regret that the female Qld ex-teacher had looking back on building up her portfolio, she replied “No regrets really, but if I could change one thing, I definitely would have borrowed more and extended ourselves further in the early days.”
Perhaps these folks are living that advice and forging ahead.
Cheer up Richard “They are purely reliant on rent and capital gain.” Oh, I don’t know, what about a bucket load of tenacity, a steely determination to succeed, heaps of research with a power of authority and maybe a couple of weighty friends in the wings just in case a small %age goes pear shaped.
Frankly, their whole numbers scenario looks decidedly pedestrian – but then you’d agree as well wouldn’t you Richard ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
[biggrin][biggrin]Who were they??
Mustn’t have seen the new API, i hear there are great articles from Steve NAVRa and many others inside..[grad]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorQlds007
Wouldn’t the money refinanced be deductable if used to repay interest on a income producing investment?
Regards
Regrow
You are a fool for 5 seconds if you ask a question, but a fool for life if you don’t.
Don’t get me wrong, those two have done well to get where they are (I too also thought they were living on the edge a little, but hey they have $1.2mil in equity!!!!) but with a little determination and a booming property market, this aint hard to do. They should now be cranking it up now (maybe a spot of commercial, small development etc.) Well done to them!
dont get too excited Redwing – all Steve Navra says is that he does a calculation using rent yield to see if a propety is fairly priced (with a few fancy graphs thrown in). Dont we all do this?
I see the couple under discussion have consistently bought property over time – could be a lesson there in not trying to pick the top and the bottom of the market… rather just dollar cost average it.
http://www.megainvestments.com.auJohn Carroll
I was also interested in this couple’s latest acquisition.
Coogee property – purchased 2004 $750,000
valued 2005 – $850,000.Cant really understand why locals worried about Marina development I would be jumping for joy.
Did they mention the additional >$150 per day tax free income earnt whilst O/S for the good of the country?
Don’t get me wrong, they have gone fan-bl00dy-tastically, and made a freakin good go at opportunity, but the figures seem a little rubbery!
Cheers
JHey J
I think your talking about the second profile (four kids, four properties)with the airforce guy. Everyone else is talking about the couple with the 10 or so houses and lack of cashflow.
By the way an extra $150per day and tax free pay is hardly worth 6 months (or more) in Iraq away from your family and friends is hardly worth it. It sounds good but trust me, it bites
I guarantee he earned every cent!!!Regrow
No the interest isn’t tax deducible.
Cheers Richard
[email protected]
http://www.yourstatefinance.comIP funding and US property finance
our specialityRichard Taylor | Australia's leading private lender
Originally posted by Qlds007:Regrow
No the interest isn’t tax deducible.
Cheers Richard
[email protected]
http://www.yourstatefinance.comIP funding and US property finance
our specialityI disagree, it is deductable, it is a legitimate cost of doing business.
they are living by the skin of their teeth i reckon
why would want to have a tax bracket @$0
this makes no sense
thy are not earning enough in general to optimise the full tax deductions
i think the strategy to buy when you can negative gear at the top tax bracket would be more reeasonable
i mean they earn only 70K but overall had to refinace to pay out a total of 50K!! in a year imagine doing that every yeareven with refinancing youre still increasing risk and debt
you cant live on fresh air
wonder how these guys sleep at night
anyway i dont know how these guys were featured anyway
what they have done is nothing fantastic, i can easily buy properties with 3.5-4% yield in CBDs
i cant see the point of their story and i think it is actually dangerous to teach people such risky techniquesHi there,
you ignore one important fact – this couple increased their equity by $400,000 last year.
With Perth Market still on the rise who knows it is possible that they could make another $400,000+ in next 12 months.
Whether you agree or disagree with this strategy you can not deny the fact that they have been extremely successful over the last 7 years of investing.
Regards M
Nothing wrong with living by the skin of your teeth.
Provided you win.Losing “ain’t” much fun.
I did the same for years.Borrowed up to the eyeballs!
Didn’t pay tax for years.
Gave it all to my daughters, in the form of trusts.
Three point two million dollars worth of property each.
If you have the BALLS, go for it.But you are gambling on good times continuing.bruham.
3 years worth of the kind of value loss & slowdown currently being experienced in Melbourne would effectively wipe out their equity and make their properties difficult to sell… leaving them with a 4.2 million dollar hangover that they can NEVER AFFORD TO PAY FOR! [blink]
A 1.0% rise in interest rates would see them lose the lot, while half that would at best see them eating gruel once a day and twice on weekends.
Oh to be so rich.[rolleyesanim]F.[cowboy2]
Qlds007, again your conservative attitude darkens the thoughts of others. Look back to May’s API page 48 mate. We have done the same thing and are still signing another contract this week.
Taking calculated risks is how you actually get ahead.
Happy to chat further if you would like but for good ness sake, let others get the resounding well done for coming out of the last property cycle in great shape for the long term.
I have $34k in rates a year etc etc and have a variable income stream from personal effort, but now have $400-500k a year in equity growth.
So who is right and who is wrong……….noone, just different opinions on who is happy with a certain level of risk and those like you that arent.
We now have $2mil equity and $2.1mil debt. So whats the big deal. We sustain it and massage loans through changing lenders and from P&I to IO. We enhance our rental yield by doing renos and we are super happy.
Well done to these guys, its nice to have some happy company.
DD
Buyers Agent (Dip Financial Services(FP)
Don’t sweat the small stuff,and it’s all small stuff!!*massage loans*..I like that..
Guess thats what you’ve gotta do when you hit the serviceability wall, that and maybe realise a profit now and agin to keep the ball rolling..
We had refinance as well to move forward when it looked like we couldn’t.
We are looking for or next IP (4)and have finance sorted, the wife earnt about $15k last year (we have a 9month old baby) and I earnt about $45k (wages)..however we’ve just paid out one of our IP’s in full and get the title back within the next few days.
Things are tight sometimes but you work according to your plan/strategy we enjoy ourselves and we’re not doing it *tough* like some..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI think “good on them”, they took the risk. The risk they have taken is not quite one I’d like to take as it’s too high for me, but then we all have different levels of risk acceptance. They were willing to take that risk and now have the reward for having done so.
I don’t have a problem with relying on the rent for repaymetns as long as you factor in vacancy time. I do have a problem with replying on captial gains in order to pay the mortgage repayments, what happens in a downturn? But they have got further ahead by taking that risk. Good on them, but I’ll keep going my way, I can sleep at ngiht then.
Pk
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