I am hoping a seasoned investor could lend some advice.
I am 31 and currently have a 4th floor apartment in Adelaide worth $230,000 (last council valuation) with debt outstanding of $85,000. I bought the apartment for $115,000 in September 2002, 100% capital growth in 7 years. The gearing is currently 36.9%, is this too low?
I actually work overseas for a bank (within property finance, so know property well) and consider myself to be a conservative investor but should I be looking to push gearing up to say 65% via the purchase of another property… any thoughts?
I am married and currently renting but my long term view is to build up a nice investment portfolio by the time I am 60.
thanks in anticipation.
Hi Simmo
I would be gearing at least to 80% to avoid LMI, but if you were super agressive and wanted to expand your portfolio quickly then I would pay LMI and use 95-100% finance, obviously this depends on you situation and your servicablility
I actively leverage highly to increase my Cash on cash return… but it depends on what your overall goal and strategy is as to what risks you take
all the best
Why not increase it by buying another property – if you can find one that you think will perform. Otherwise it may be hard to build up a portfolio.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
thanks for your feedback guys..
so would i be right in saying that in terms of an investment strategy, a gearing level of 36.9% is probably too low to be an effective strategy?
It depends what you are going for Simmo.
If you had a number of properties and were close to retirement, then 37% gearing might be an acceptable level, because you need your income to be a lot more than the loan repayments.
If you are in the early stages of investing, it will be difficult to acquire lots of properties if you only ever borrow 37%
eg: If you buy another 4 properties worth $250k each, you will have to put in $630,000 plus pay for all the stamp duty and fees yourself!
If you have this much money to play with, then come and see me and I will give you some very competitive deposit rates!
thanks YoungInvestor.
I am 31, so I have a long term goal in mind. What age will people of my ilk retire at? 60? 65? 70?!
In the long term, I'd like to build a portfolio comprised of equities and property.
Unfortunately, no – I don't have that sort of cash hanging around but thanks for the offer!
Cheers
Beau
I don't know your full situation simmo, but i'd aim for a more aggressive goal!
I'm 26 and aim to be retired at 40 (I know Richard, I will get bored inside of 12 months ,right?).
My first goal at age 18 was to have $1mil net worth by 28 – I will probably fall about $100-200k short, but if you shoot for the moon and fall short then you still land in the stars, right?What about if you aim for age 50? At least then it would force you to take some more decisive steps to reach your goals.
If you feel like you are overcommitting yourself then just take step back and wait for a while before taking the next step.
I know I don't have a lot of experience to be giving this advice, but hopefully it will inspire you to think a little differently, and more positively!
Best of luck!
thanks YI.
I hope you achieve your goal.
I think you are right about setting decisive goals, new years resolution… and the gym!
All the best.
HI Guys
I really need you help, I would like to purchase a printing business for a 150k, unfortunately I dont have any security but my husband and myself get 165k annual salary, also I got a flat, which is rented and has 30k value. Do you think it is possible to get the 100% loan ?
I hope you can give me some answers.
thank you
Isabel
Little chance to get a loan for a business without using property as security. It is too risky.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You can buy a flat for 30k!? I think I need to spend some time out visiting a few regional areas…
Hi Simmo, If I was you I would sit around 65 to 80% depending on a few things and your situation.
you could probably go and borrow another 500k with that equity you have in the apartment, but you would be sitting at about 80%
Hi Simmo,
I agree with a number of the forumites; that 37% gearing is too low. You should look to gear up to 70% to accelerate your wealth accumulation. Seeing that you work in an overseas bank, the gearing limit tends to be around the 70% (I know the banks in Singapore tend to work with that figure post-GFC).
Also, while you have taken a very long term approach to investing and wealth accumulation, why look to be financially free by 60 yrs if you can achieve the option of not working for money sooner? I am 31 yrs myself having just started a family, and understand that our generation will be working till 75 yrs due to having longer lives. Just because we are expected to work that long, it does not mean we have to!
For my case, I am highly geared to 90.5% as at May 09 with 1 PPOR and IP, but the rise in property values have lowered my gearing to 82%. Looking to keep my gearing to 80% for many years to come as I refinance my way from one IP to the next. My goal is to be financially free by 45 yrs old, and that's only 14 yrs away!
All the best.
Daniel Lee
Hi 5s to Daniel and Young Investor.
I also relatively young, 28, and have 5 properties. at the moment, im on about 65% LVR. ( married no kids yet. planning to soon)
My goal is to be financially free by 35, not retire, but work when i feel like it, choose when to work and when to have a break. my way of thinking is, If i could generate an income of about 6-8000 a month, Passive, after all of my loans and property expenses were paid. I could take it easy, and choose to work or not. that would take care of the bills, a car or two, and maybe a holiday once a year.But yeah, definately, 37% is way too conservative to make big gains.
TCL, if your on about 65% LVR with 5 properties you should be able to have a car or 2 and go on holidays every year unless your properties are at the lower end of the scale.
I am semi retired and I am only 29 am at about 62% LVR sounds similer to you also have no kids but am married, But I do have several cars and always take holidays normaly at the least 2 a year.
Its good to see theres a few younger people popping up on here that are also buying
It is only 2 low if you intend to expand your portolio over the coming years
My current lvr is around 22% but i have no intension of doubling the number of properties i currently own.
Focus is on reducing the LVR and paying down the debt to value ration and picking up a couple of inter state properties either in
my SMSF or DFT for Capital Growth.It is a personal choice but certainly you will be limited in your growth sitting on a conservative lvr.
YI i would say after 6 months you will be bored let alone 12 lol………….
Richard Taylor | Australia's leading private lender
keiko wrote:TCL, if your on about 65% LVR with 5 properties you should be able to have a car or 2 and go on holidays every year unless your properties are at the lower end of the scale.
I am semi retired and I am only 29 am at about 62% LVR sounds similer to you also have no kids but am married, But I do have several cars and always take holidays normaly at the least 2 a year.
Its good to see theres a few younger people popping up on here that are also buying
My properties are worth btw 250-450k. Not too low nothing too high. I am trying to get the rent up on all of these properties.
There is a difference in my mind btw retiring and being financially free. I want to have the choice to go to work. I want the bennefit of going to work becos I like the activity not becos i need the paycheck. That would be a great feeling. Just think of it. Nothing would be able to upset u. Nothing. Not the difficult customer, not the supplier, not the boss. No body. And to prove it. At the end of the week, give the money to charity!!!Try that!!!
thanks all, I value all of your comments.
I currently live in London and rent a place in Fulham. Do any of you guys provide wifi with your rental package? it is very common in London but not sure back in Oz? I lived and rented 2 places in Melbourne for 5 years but had no wifi.
Cheers
Beau
Not up here Beau, but every region is different. I know I wouldn't rent a house in Darwin without a pool. I wouldn't rent a house in a mining town without a shed. I wouldn't rent a house in nth qld without ac.
[/quote] My properties are worth btw 250-450k. Not too low nothing too high. I am trying to get the rent up on all of these properties. There is a difference in my mind btw retiring and being financially free. I want to have the choice to go to work. I want the bennefit of going to work becos I like the activity not becos i need the paycheck. That would be a great feeling. Just think of it. Nothing would be able to upset u. Nothing. Not the difficult customer, not the supplier, not the boss. No body. And to prove it. At the end of the week, give the money to charity!!! Try that!!! [/quote]
nothing really bothers me unless I loose a dollar, other than that just cruise along and take it easy even when I use to work nothing bothered me unless the job was boring but then I wouldn't be on it for long so it didn't matter to much and it was kinda fun working as my brain would be working out what I just made in the last hour and how much I thought I would make by the end of the day and also how I could make an extra few dollars.
hava good weekend
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