Hi B2,

I was glad I was able to provide a few thoughts that might work for you.

Now that I know this was a new built house, could it be that this place is in the right location to be desirable as a Corporate rental? I don’t know how many companies move staff into Emerald, but corporate rentals usually want :-
1. Properties in a central location, or near their place of business.
2. Properties need to be well appointed furniture-wise
3. Properties need to be top quality in all aspects

Consider a mine or a company sending a trouble-shooter to Emerald for 6 months to sort out a problem. Or, they might provide accommodation for whomever of their managers goes up there next – one moves out, another moves in. In an ideal situation, the company might take out a lease at a VERY GOOD rental for years at a time.

When moving in these circles though, there can be quite a bit of competition between the landlords, so you would need to know you have a deal before setting it up and spending heaps to “make ready” for whomever it is that wants your place, and perhaps they might even dictate just what fittings they want you to provide.

Why not, if they are locked in on a long-term lease? Give ’em what they want, and you put your price on the rental to cover their requirements, plus ……

Good luck,
Benny

Just one more to have a think about.

Hi Kevin,
The Investment Detective link has been corrected. Admin has also made changes that point any broken links to the “store” instead of coming up with a bad link. This helps, as it guides new readers to “What is available now” – hopefully some newer products might have taken the place of those older ones.

Tammy (@mstamus) found one of the resources you were looking for (Focusboard) in here:-

http://www.propertyinvesting.com/book3

As Admin reminded me, even though some of these resources still exist, they should be taken at face value as they were created for a website that no longer exists. There may still be some value in them, but are not part of any current education module.

Also, some of these old references might direct you further down a path that no longer exists – so take what you can from them, but remember they are no longer supported. Indeed, at some point, they might cease to exist.

Benny

Hi Mike,
Re this :-

I’m looking at an Interest only loan and a 90% LVR. Is this a wise decision with rates likely to rise in the next couple of years or worth going for a 20 deposit or 80% LVR.

Borrowing the maximum you can borrow allows you the maximum flexibility. A smart move would be to set up an Offset account against the Mortgage account – into this, you can CHOOSE to add an amount per month that brings your SANF (Sleep At Night Factor) under control. e.g. you might choose to pay an amount of Interest as though you have a P&I loan at 80%. This might be an extra $400 a month (say) so you “pay” this extra into the Offset.

The act of adding funds to the Offset means that you owe LESS Interest as your funds accumulate in the OFFSET account. Since it is all your own cash, it can be removed from the Offset at any time, and for any purpose.

That purpose could be –
1. To actually PAY DOWN the mortgage you still have on the IP (not what most would choose, but at least you can learn that this IS an option – and THAT can help with SANF too).
2. You might have found another “deal of the century” and you need to lock it up with a Deposit paid immediately.
3. You can take a world trip if you wish.

Go here :-
https://www.propertyinvesting.com/topic/4410491-the-big-picture-for-new-readers-especially/#post-4697973
….. to read a heap more about Offset accounts – learning of these is well worth your time !! ;)

Benny

PS One other option might be to Fix the Rates now. With talk that Interest Rates may be about to drop further, this may work against you, but then you can be CERTAIN that the payments WON’T rise in the next x years.

The WORST time to fix is after they have already risen, and we panic and fix just so our payments can’t rise EVEN MORE. That is a super-bad time to fix, and this kind of action caught many in 2008 after KRudd was made PM, and famously quoted “The inflation genie is out of the bottle” – leading to the RBA increasing rates as the rest of the globe were madly CUTTING their rates. Our rates got to 9% thanks to KRudd – and some homebuyers then FIXED in case the Rates went even HIGHER. They didn’t (and shouldn’t have gone up at all) and these folk were left with Rates fixed at 9% while the rest of us got to see around 5% by year’s end.

So, don’t be in a rush to fix – but, if you wanted to, now is not such a bad time……

Hi Brizza,
There is not enough info posted to come up with an accurate answer, but consider these points :-

If looking to purchase another IP(s) then you need from 15% to 25% of the value as Deposit and Costs. The remaining 75% – 85% will be the mortgage on the new IP.

So, your question needs answers to two things –
1. How much ready cash or equity do you have (for the Deposit/Costs)? and
2. How much spare income do you have to cover the ongoing costs (e.g. mortgage interest, rates, etc and does the rent cover all of these costs or not?)

With a healthy wage, number 2 is probably OK for borrowing a large amount (depending on any other loans outstanding – PPOR, car, personal loans, credit cards, etc). So if you have very few other loans, then the amount the banks will lend will be quite high. Of course, different lenders will allow different amounts based on their “rules”.

Therefore number 2 is not likely to be limiting you – yet.

Now, with the Deposit/Costs, the upfront amount available will vary depending on the ACTUAL numbers.

Lets take a guess at the current IP value – say it is $240k. With an 80% loan (no LMI) they will lend you $192k less the $150k owing, so $42k. Add to that the $20k in Cash, and you have $62k as the answer to 1. Costs on something around $300k will likely be $10k+ so allow only $50k as the 20% Deposit – which means you are buying something up to $250k.

Now, IF you are able to borrow nearer 90%, then you need far less in Deposit/Costs, so this will allow you to borrow much more than $250k. As you can see, the above is not simple to figure out, and you need to KNOW a lot of the actual figures involved.

I would suggest you get a more accurate valuation of your current IP (ask a RE agent for a market appraisal) then take that number, along with a bunch of personal numbers (your other loans) and talk to a Mortgage Broker.

There are several good ones on here – maybe there will be some of them responding to this post of yours. These are the people who can tell you how much you can borrow, with whom, and why, and they (usually) won’t charge you a cent as the lenders pay them for bringing business to the lender.

Benny

Hi Lisa,
Some seriously good learnings there – re keeping a buffer rather than spending it.

But, guess what, I have a couple of comments that might sound like I am advocating the spending of more money… at what could be a bad time. I did want to share the thoughts though – as you say, sharing the bad and the good can help to round out the whole picture.

From your post above, these bits stood out to me :-

1. “two of which are furnished as short term accommodation and do well as we have the Navy on our doorstep as well as others who fly in to do business here.”
Benny>>>> If they are doing well, why would you not furnish a third one, and even a fourth? (Use a no-deposit, no interest credit card to get them on their feet and bringing in more cash…)

2. “On speaking with my agent yesterday we decided to also sell one of the furnished units”
Benny>>>> If they are doing well, why would you sell one?

Of course, YOU know your situation in acute detail, so my thoughts are simply meant as a prompter to perhaps have you re-look at that particular area from a fresh perspective. Could 1. work? Or are you stuck with 2.?

Benny

Hi Lisa,
I took a look at the advert, and had an immediate couple of queries/comments:-

A home ideal for one or 2, even a beach house for the family

If I were looking for a family home, I would be put off by a comment that says “Ideal for 1 or 2” – sounds like a 1 bedder to me.

And then, further down, it almost seems like a linen cupboard is more important than the 3 bedrooms.

I guess the other syntax errors don’t help either …… “strolling distance the the heart of Rockingham” and “cafes and the the essentials” but these two really are minor, and are not the same concern as “ideal for 1 or 2” might be.

Suggest the RE agent do a rethink and a reword,

Benny

I tend to agree with what Terryw said :-

How much would it cost you if they moved out and is it worth considering paying $400 to prevent this?

But first, do clarify for us if the current tenants are “recent additions”, or whether they have been with you for some time.

See, if they are recent, it may be that you might choose to not renew their lease if their requests continue to become silly (TV cuts out when a light is turned on…. REALLY????). Have you seen this? Could it be that the complaint is poorly worded – it may mean that the light being on overpowers a faint picture that really is just a TV issue (not the aerial at all).

Who owns the TV? You, or them? Now and then, a landlord needs to make a judgment call – and swallowing a $400 bill to keep a good tenant happy can be one of those. But don’t be fixing THEIR equipment for them (e.g. if the TV is theirs, and IT is the problem).

But then, you might offer to provide a TV and add $10 a week to the rent… if it makes sense to do so.

Good luck,

Benny

Hi Nan,

When Kevin Rudd was PM, I had heard of people “fixing” at 9% after rates had screamed up (erroneously while the rest of the world were madly CUTTING their rates – this was the GFC timeframe). Many of them regretted the move as Interest rates then fell to their LOWEST rates since the 60’s in less than a year from when they hit 9%. Some had fixed for FIVE YEARS and were “overpaying” until 2013.

Right now though, I can understand someone considering “Fixing” their loans. The rates are WAY lower today, and, though they might drop more, there are very few who CAN’T pay their mortgages at these rates. If it gives you peace of mind that they won’t go up again during the Fixed Rate period, why NOT lock them in??

Well, that latter is a very good question. Here are a few thoughts re “Why not fixed?”

1. Once you fix them, if your situation changes, you might be in a world of pain if you need to “unfix” them.
2. If you plan to sell a house at all in (say) the next five years, be very wary of “fixing” its rates for the full five years as you may need to sell sooner than you expected.
3. There might be a need (suddenly) to re-appraise ALL of your portfolio, and even re-finance some/all.
4. Apart from cost, once the rates are fixed the other thing lost is flexibility.

The problem comes when you need to BREAK a fixed loan term (e.g. you set the term at 5 years, but after 2 years you find you must “break the fixed term contract”). The cost to break can be HORRENDOUS !!

Note that a Bank will allow you to change a Variable Loan to Fixed at minimal cost – but, try to go from Fixed to Variable? “Now, just wait a minute while we tot up the bill!”

You might need another mortgage to PAY the Break Cost.

Nan, I would suggest you consider fixing ONLY if you are very secure in your employment (or continuation of the Income that you receive now, wherever it is from), AND confident that you will have no need to sell or refinance this loan for the total contracted period.

If you have any doubts at all, don’t !! And, of course, DO talk with your finance person in depth BEFORE doing it. I’m sure I have only scratched the surface, and there is much more to learn/consider re these.

Benny

Hi Nigel,

If the political parties are serious about helping first home buyers perhaps they could allow negative gearing say for the first 5 or 10 years. That way the interest at least would be tax deductible.

Hmm, that could make sense !! And might be far less damaging than turning the neg gearing applecart upside down. Of course, this INCREASES the cost to Govt that Labor were trying to cut.

And another thought struck me too – they talk of “negative gearing” as the big bad bogey !! But hey, have they considered that negative gearing is not the only way to save Tax !! e.g. anyone owning rentals, even if positive geared, are able to utilise the depreciation and other “non-cash” deductions to save on the Tax they pay. Like, if their property is positive geared by $50 a week, then they would be looking at paying Tax at their Marginal Rate on $2600 a year. But then, they CAN use the depreciation schedule to reduce those profits, thus paying less (or no) tax – just like negative gearers can….

So it is positive geared as well as negative geared investors who will lose out, thus markedly affecting the rental market.

Grand-fathering will save any EXISTING investors from harm, but a change that affets BOTH negative and positive geared investing will have far bigger consequences than Labor have considered. Labor had better take a cold shower and think again.

C’mon the Coalition !! ;)
Benny

Hi thefox,

Hmm, bad news – sorry to hear that. I don’t know the Canberra market, but I would think you don’t HAVE to buy at auction do you? It is far easier and less emotive to go to a Real Estate agent and write up a contract.

I’m from Brisbane and most of our sales are done through private treaty (i.e. via a contract, not an auction). It would probably be much like how things were done in the UK, but of course, I am guessing….

Auctions can be scarey from many levels – e.g. did you know that you could be in serious trouble if you weren’t able to get finance after winning the final bid? See, by private treaty, you can take things slow and careful, add clauses that protect YOU (like “subject to finance being available suitable to purchaser”, and “subject to satisfactory building inspection”).

At auction, these are not part of the game, though I think you can arrange some things AHEAD of the auction. e.g. It is common for a 10% deposit to be made by the winning bidder as they go to contract (but this can be arranged to be different if done AHEAD of the auction).

In short, it is what you don’t know that can cause problems, so do school up on the whole auction process if you want to continue with them. Or, stick to private treaty, and check each step with your solicitor before you take it.

Good luck, and welcome to pi.com :)

Benny