Richard,

I don’t think Rayden was offering finance, my understanding is he’s offering time and skills.

Isn’t that right, Rayden?

Time and skills are what I don’t have.

Angelina

Hi everyone,

The term deposit in St George was not part of the plan. It was actually a result of one of the biggest mistakes I’ve ever done in my life. I hope those reading this would learn from my mistake….

Back in 2009, I fixed three of our loans (my business partner and I) to a 8.40% 5-year fix in a panic. This was the time when there were 6 interest rate raises in a row. We had other loans which were variable so I was well and truly freaked.

This goes to show that one must never make a decision based on panic, and certainly not in a way I did it, which was to fix three loans in excess of $800K.

When we sold one property and I had to pay off the loan, the break-costs amounted to $80,000 — GASP— (fixed terms were to expire in 2013 – GASP!!!!)

You all will not believe how much I sweated and how I just mentally kicked myself. If it were possible to die being kicked mentally, I’d be six feet under now.

Humans can only really effectively do one thing at a time. We’re either listening to our ticking brain or our thumping heart. Age and experience were on my side, I just forced myself to focus: repeatedly telling myself: “Heart, stop thumping, I need to hear myself think.”

My first course of action was to speak to Customer Service and explain our dilemma, “Even if I wanted to pay you the fee of $80,000, I don’t have that money.” I tried to stay calm in spite of my shattered nerves, and told myself not to shout at the customer service staff. No one wants to be the giver of bad news, and she certainly didn’t have to be at the receiving end of my panic.

I asked if the bank would consider locking our money equal to the loan balance, for 5 years, as security to the loan. I didn’t mind paying the loan through to 2013, as long as I will have monthly income from the term deposit anyway. It is God’s mercy that the term deposit for 60 months, paid monthly was paying 7.6%. The term deposits expire in 2015. The rate differential meant that a small portion of the home loan must be paid by rental income. But this is alright, considering tha alternative was to pay the bank $80,000 in break fee.

It is my hope that when the high fixed term home loan expires, it would go down and allow us to recover some “loss.”

Newbies, even experienced investors get it wrong. And, wrong BIG TIME. I hope you learned some lesson from this post.

I want to publicly thank St George for their assistance because to be truthful, even though we were excellent customers, they didn’t have to do what they did.

Thanking you all.

Angel

Hi Q,

The council always keeps a file copy. If they’ve lost it, your conveyancer/solicitor should be able to find a copy when doing their standard searches.

Take care.

Angel

Dear Krissi,

You have a lot on your plate being a wife and mum. The intended move later in the year will cause some teething issues such as adjustments, and kids’ schooling (if they are of school age). So remember to take deep breaths.

Firstly, you are right to pay off the car first. Getting that out of the way means that you will have no bad debt going into the new property.

Secondly, you are also right to keep some cash for emergency. It is never a good idea to live off your credit card, although i know from experience that sometimes this can’t be helped.

Thirdly, I strongly believe that you are also right to move in to your existing IP later in the year while you renovate it I am all for creating value.

Now, your question is this: Are we better off using the equity as deposit on a new PPOR (buying earlier) & then paying the ‘intended savings’ off on the new loan?

Your current IP is $320,000 – current loan is $220,000. This is 69% gearing. To maximum amount you can top up this loan to, without paying lender’s mortgage insurance is $36,000. You said you want a bigger house than your IP, so I’m assuming that you’d need a budget of around $400K.

Your $36,000 is just enough as a 5% deposit for a $400K house. Deposit $20,000; stamp duty: ???. LMI ??? Other costs ???

I will throw the ball back in your court. If you buy your PPoR using your equity, would you be able to sustain repayments on a $220,000 IP loan; $36,000 new loan for deposit: and, $380,000 home loan on $300 per week rental income and $78,000 (salary) and $20K (your non-taxable income).

You did say that husband is due a raise soon. That’s fantastic.

In the end, Krissi, you alone know the answer. I often say to young people, let the math do the talking. Be honest with the budget. When I was a lender, you will not believe the number of people who say they only spend $200 a month on entertainment but when they tracked their expenses, it was closer to $400.

Don’t do what I call mathematical calisthenics. Keep it simple: All in-coming less all out-goings. If the numbers stack up, go to the next step.

Will property prices remain flat? If yes, save some more, there is no hurry. Will prices sky-rocket? If yes, buy now, don’t wait. Is the property market sliding down? Keep saving, and wait.

Again, only you can answer that because you are on the ground, hopefully, using your time wisely by tracking the market.

I hope this has given you some clarity.

Take Care

Angel

George,

I’ve sent you an email.

Angel

Hi George,

You are a Sydney-sider, that’s great. If you ever need grandmotherly advice come see me.

I believe in PRACTICAL education, so I reckon for what you intend to be, a TAFE course in building would be much better suited. It is hands-on learning and will get you into the workplace quicker. You will also get to know people in the industry as you do your apprenticeship.

There are many people, as James will agree, who have wall-papered their house with various degrees and who are still nowhere near where he is.

By the way James, at 22, I was not anywhere near a $350,000 property. Well done. Give yourself a pat on the back. Sharing this information will inspire many people in this forum.

Angel

Hi Free@last,

Your question: Is x-security with PPoR a bad thing? Not necessarily. But it would be nice to keep it apart. I think it is less messy and it doesn’t get tangled with the rest of the “spaghetti noddle” x-collaterialised becomes. Especially as your portfolio grows.

If you do it as suggested to you, all you’d end up with are Properties A and B. You juggled everything about, incurred more costs, just to re-jig loan size. It didn’t give anything else.

I am, of course, assuming that you can borrow $470k for the family home and at the same time borrow $550K (just as an example) for a 2nd IP. If your servicibility does not allow you to get another IP, then yes, it makes sense to do as suggested.

That’s just my opinion.

Take care.

angel

Hi George,

Oh my goodness, can they get any younger? Makes me regret all the wasted energy I spent

How do you start? My simple answer is S W I M. This has been my philosophy from day one. Save. Work. Invest. Manage. This is the simple formula for success.

If you are working, even if that’s flipping hamburgers at McDonald’s, save your money. There aren’t a lot of people with trust funds or parents with money to throw at their kids. Maybe you’re one of them, but my point is, there aren’t many.

Save. Save. Save. There is no short- cuts. Well… there are …. some have parents who deposit their hard-earned on their kid’s first purchase. Other than that, and winning lotto, it is save, save, save.

You have to, in most cases, start small. A little cheapie, cheapie. Fixer-upper. One who can buy with $7,000 deposit + $7,000 FHOG (assuming you can borrow the rest from the bank).

Invest wisely, repeat the successful formula and before you know it, it’s multiplied.

Once you’ve invested, manage it and manage it well. A portfolio needs balancing. Whether it is shares or property. Lots of people are against selling. They just want to hold. But I tell you now, sometimes, you have to sell in order to balance your portfolio and to increase it.

You only have two hands, if they are clenched holding peanuts, you can’t grab the coconut. Makes sense? Sometimes you will have to let go in order to get a bigger one. Taking one step back and two forward, that’s a proven philosophy, too.

Take care.

Angel

Dear Nathan,

All these information can be a little daunting and overwhelming. There are to many twists and turns, each time you make a turn, there is a twist.

Don’t worry, there are plenty here to hold your hand. Don’t be daunted by it.

In a sense, it is almost a necessity to start small. This is not to say that if a big opportunity comes along you shouldn’t take it.

It makes me go down memory lane … I was so scared I choose a defense housing investment for my first. It is NOT the high earning asset, in both capital growth and income, but it gave me peace of mind. I was so peaceful, I could have been asleep. I’m not saying this is the way forward for you.

You’re so much more cluey than you think. Back then, I just wanted to make sure I have a good tenant and a regular rent coming in. Young people these days are braver. You can conquer the world.

Take care.

Angel

Hi Haratio,

Based on the information you supplied, it doesn’t make sense for your mum to rent out the property. The fortnightly bank repayment you said is $676; but the realistic net fortnightly income would be just $468.00 ($260 x 2 less 10% agent’s fee). Where would she find the shortfall?

The shortfall gets worse when you also consider all other out-goings like repairs. On top of finding a rental for herself, unless she can move in with someone for free.

Unless you can find a creative solution, I’m afraid the idea of selling, if she finds it hard to hold on to it, is a much better option. This is just a thought, please don’t take this as advice. I don’t really know enough about your circumstances to offer any suggestions.

Take care.

Angel