Forum Replies Created
Hi Tom,
Long story short, the manager’s behavior is leading to large costs incurred by the owners.
Sorry to hear that, but I quite agree – I never did buy into any property that had a body corporate. I had liked hearing of your success with the older folks and the nice returns available, along with the happiness your move evoked in your tenants.
Shame that others have one hand in your pocket though. Have you explored any “ways” to get around that? Like, could the leases be redrawn or something to limit the power of the Manager? Anyway, good luck with your exit plan – I hope it works out well for you,
Regards, Benny
Well, same same…. The RBA does it yet again. No “wait to see the effect”.
Qualifying Rate – I heard they stepped from 2% to 3% some months ago. And folks couldn’t get a loan unless they could handle a 3% lift in Interest on a mortgage. OK, fair enough, but then what of the FACTS that it hasn’t JUST been mortgage costs that have been increasing lately? Hasn’t petrol increased by something like 50%? Food costs? Energy costs? For the person who WAS able to qualify recently, how much buffer does the 3% qualifying rate really provide when all these other non-discretionary costs are being stretched along with the mortgage Interest Rate?
After today, the RBA cash rate is 2.35% and the average mortgage Interest Rate will soon be 90% higher than it was just 6 months ago.
How many folks are going to be able to handle that? How many were already stretching to buy a property in latter days, then found their new purchase has LOST value, even as their mortgage increases? More importantly, when did the RBA get taken over by forces who are more interested in bringing our citizens to their knees? Will the current RBA ever get back into the mode of “touching the brakes” then sitting back to see its effect before touching them again? Or are we SO out of control that the only way is to keep on applying those brakes. If that was what was happening, surely they would’ve been better to do this in one 2% Chunk rather than pretending that “It’s just a little bit more” five times already.
If I ever had any faith in the RBA before, they’ve lost me now !!!
Benny
Hi Iboorer,
I found spreadsheets were my preference back in the day. The other thing I recommend is to meet up with other investors – on websites like this, look for the meetings that take place from time to time. Brisbane and its Coasts have a regular meeting taking place – other cities are “now and then”. Of course, you can ask on forum for others “in your area” so you can swap stories. And of course there are Facebook pages too, so check them out too.
Main thing is to increase your knowledge so that you know enough to keep YOUR property managers in line !! :)
Welcome aboard,
Benny
And, sure enough, a further 50 basis points (or 0.50%) added just days ago. I do hope the new Govt takes the time to give the RBA a bloody good talking-to !!! They sure can do with it.
We are well on the way to that 150% increase. Where are we right now then? A total 175 basis points (or 70% – see below) so far.
A 0.25% increase against a 2.5% mortgage interest rate is a 10% lift. That is actually correct for anyone with an IO (Interest Only) mortgage. For those with a P&I (paying both Principal and Interest) mortgage, the % uplift will be lower. That is because the uplift is measured against a larger $ amount.
Using that same starting rate of 2.5% interest once more, where are we now, with the RBA having added 1.75% in just 4 months (and the banks dutifully passing it on to all borrowers….) Isn’t that a 70% lift already? Who can handle that, even as petrol, food, transport, and utilities climb into the stratosphere too?
Hey, RBA, stop and smell the roses !!! This is ridiculous – and dangerous.
As this began, the warning signs were already there – check out the first post of this whole topic :-
Don’t all those things still apply today, and since then, mortgage interest has jumped by 60% for many borrowers? Isn’t that alarming? Time for the Govt to step in – with an axe perhaps…..
Benny
Hi Helen,
You had me worried here for a minute:-
I think you are missing the opportunity to gag your own and others’ freedom of speech.
And then I realised this was a response to “What am I missing?” and, realising that, it put a whole different slant on my understanding of your reply.
Thank you for your response – and that last sentence was SO on point !! Well said.
Benny
Hi Daniel,
I checked with Steve – he mentioned that Wealth Guardian is one that he has wanted to update, but he has several other projects on the go and is short on hours. No ETA provided on when a new WG might emerge.
Re other products, STEPS is a classic (imho) for anyone looking to buy a property, as it takes you by the hand and steps through a very complete due diligence procedure, along with calculators and templates to enable you to buy with confidence. Available now, and with a 14day free trial – see the advertisement on the Home Page.
The other one Steve is actively working on is a revamp of Deal Detective. Again, no ETA, but I have already seen and used a Beta version, so it is coming….. This is a good one as it seems to interface well with anyone searching online for deals.
I don’t know Wealth Guardian at all, but it appears to have something to do with structure – a good accountant might be the place to start for you. If in Melbourne, I have heard good words of Mark Unwin & Associates in this realm,
Benny
What do you think about THIS comment from PragerU?
“This does not mean that climate change is not an issue – but exaggerating the threat concentrates our resources in the wrong areas.”
See the context of that statement in this link – around 2:20 >
The whole 5 minutes of this video would be time well spent as it also addresses the solar & wind energy outcomes vs their expense (quite a surprise there, as we constantly hear how CHEAP these are, when the reality is quite different (around 3:20 in the video).
As said before, more light is shed in these videos on the subject of climate change, hopefully offsetting a lot of HEAT that comes from other sources.
Benny
I just caught a headline on TV that indicates the RBA is considering a 50 basis points rise for EACH MONTH up to year end.
Please say it isn’t so….
I bloody hope NOT !!! That would be a further 2.5% uplift on the 1.25% already foisted on us. And let’s check the figures from my last post re the likely effects of such a braindead move:-
But let’s take a look at the mortgagor – the poor old Mum and Dad who were on a 2.5% Interest Rate for their mortgage.
That 1.25% lift is a FIFTY percent increase in the Interest cost of their mortgage, with (it seems) more yet to come? Who can handle a 50% increase?
If true, this prospective 2.5% lift by year end will totally cruel the Mums and Dads. Forget a 50% rise in the Interest costs of a mortgage – try 150% !!
Landlords will often have IO loans – in effect, their mortgage costs will be affected in direct proportion to the RBA’s lift. Let’s take a realistic mortgage amount and what would have been their IO payment each month. A mortgage of $400k is not out of the question – if on a 2.5% IO interest rate, that is a cost of $10k pa or $833 pm on that mortgage. So far, the RBA has lifted that rate by 50% (see quote above). So now $15k pa or $1250 pm (about $100 a week extra that needs to come from somewhere).
By year end, that landlord might well be paying $25k pa or $2083.33 pm – from $833 to $2083. What needs to happen to the rents he receives to offset THAT hulking rate increase? That is now a $300 a week increase in his costs !!!!!!!! You think we have a rental crisis now? Just wait till year end !!!!
All I can say is that the new Treasurer’s RBA Review can’t come soon enough. I am hearing little good news re the RBA at all.
Benny
Hi Alexus,
Yes, I think you are missing something. This part says it well I think:-
the flat dollar increase allows BOTH parties to afford an extra cup of coffee per day (i.e. it is equal for all, though the percentages look quite different).
To me, this seems to be the fairest way of all as all parties receive that same “extra cup of coffee”. The other two options are unfair:-
1. A percentage lift for all unfairly penalises those on a lower wage (see the $5 vs $50 increase mentioned earlier), and
2. A minimum wage lift helps ONLY those on the lowest wage – those not on minimum wage get nothing (until they strike…)
So, you see, that flat rate really does make sense. And don’t worry about the wage cut – that was merely a thought (if prices go up when we all get a wage rise, perhaps a wage cut would drop prices more, making us all better off – but it was simply another “out of the square” idea).
Anyway, thanks Alexus for your interest in this. Me, I am a little surprised that others haven’t chimed in with a response as I find this a conversation with some value.
Regards,
Benny
Hi Alexus,
From your answer, I think I haven’t explained things well – there is quite a huge difference between a dollar increase and a percentage increase.
An example. Let’s say the Govt orders a 5 percent lift in wages across the board. Then to the person on $100 a day, he gets now $105. To someone on $1000 a day, he gets $1050. One receives a $5 boost, the other a $50 boost. Quite a difference there.
Taking the other line, a flat $5 increase per day gives the person on $100 a 5% increase, while the person on $1000 only gets a 0.5% increase. So a flat $ increase can assist people on lower wages far more than those on a higher wage from a percent uplift perspective.
As I said earlier on, a percentage increase just helps to widen the gap between rich and poor. Whereas the flat dollar increase allows BOTH parties to afford an extra cup of coffee per day (i.e. it is equal for all, though the percentages look quite different).
Benny
Wow !! There must be more to this – is the RBA deaf, dumb, and blind? First, let’s take an early comment from back a few posts:-
For the person with the average mortgage of (say) 2.5%, that is a 10% increase right off the bat. Why so big so quickly? While we have a housing problem, a 10% increase could lead to even more rental anguish. A $400wk rental might now be $440. And what about the “6 rises before year end”?
OK, so since THAT time, there have been two more increases (and what increases!) The second increase was 0.5% as was the third. So suddenly, from a 0.1% cash rate, we are now at a 1.35% cash rate. OK, that affects banks and THEIR transfer of money. But let’s take a look at the mortgagor – the poor old Mum and Dad who were on a 2.5% Interest Rate for their mortgage.
That 1.25% lift is a FIFTY percent increase in the Interest cost of their mortgage, with (it seems) more yet to come? Who can handle a 50% increase?
What ever happened to the RBA of old who would make a couple of changes, then sit back to read the tea leaves and see what effect the changes had rather than slamming down harder on the brakes when property is already becoming shakey as buyers desert the market?
Yeah, I know, that 0.1% Cash Rate always was an “Emergency Setting” – yet there appeared to be no move made last year to increase it as our employment rate dropped to its lowest level in years, and, even today, businesses are still struggling to find workers. Wasn’t that a sign of recovery back then? And didn’t house prices start increasing then too? Wouldn’t it have been smart to tap the brakes back then?
What took the RBA so long to get off that “emergency setting”? Why does it now (as prices of food, petrol, rents, etc all go through the roof) decide to add to the pain with three increases in a row, and maybe yet a fourth to come in early August?
To me, this all sounds a little “too much, but too late” from the RBA. Can we vote in another RBA group please !!
Benny
Hey Alexus,
Thanks for your thoughts. I agree with a lot of what you wrote, and no, I wouldn’t want those on lower wages particularly to be even worse off. But then, what do you think of that “straight dollar uplift” I mentioned, rather than a %age uplift? That would certainly help those on a lower wage, while those living comfortably would be hardly affected (and would still get those same extra dollars though not the same percentage uplift). For those at lower levels, it may well allow them to keep eating, while for those on 6 figure incomes, a few extra dollars (or not) may make little difference.
But yes, you are right – I do look at the numbers principally and they can tell an interesting story. But I don’t think I do so to the total exclusion of values. I just like to garner opposing thoughts to see if there can’t be “a better way to do things”. Like, instead of a wage increase, wouldn’t a wage cut work? So, everyone could cut their prices, their charges, and their payroll bills and we would likely ALL be better off, or is that just too naive? No, not a trick question – just another opposing thought out of left field.
Benny
Hi Mat,
You sound like you two are in good shape – sort of. Having the rentals’ mortgages fully offset sounds like a good position to be in. On the flip side, that sounds like a lot of lazy equity. Now, so you know, I am NOT any kind of professional adviser – I’m just a bloke with an opinion or two to share, so do take the time to test any of the following with your favourite professional adviser.
1. With the mortgages offset, wouldn’t that mean that you can’t claim any interest on these two mortgages? And, as they are rentals, normally the expenses from a rental are deductible. Of course, you might be using a different structure that might change things (e.g. company).
2. From your words, it sounds like your own home (the expenses of which are not deductible) is carrying a mortgage. To me, this would be the one to owe nothing on, as interest on it is NOT deductible.
3. Given the above two points, my earliest thought was to take the dollars in offset to pay down (or off) your own home. BUT, you would need to check on break costs. As I understand things, when you are breaking a Fixed Mortgage from a LOW interest rate, most lenders don’t hit you too hard as they can then lend the freed up dollars out for a higher rate. But if your Fixed Rate was higher than the current rates, I think the break cost could be HUGE. So check it out before doing it.
4. Again, depending on your actual structuring, if point 3 was able to go ahead, I would think the mortgage interest from both rentals would once again be deductible after using the Offset dollars to pay down your own home. This would (or should) help you with your year-end Tax numbers into the future. And, if your own home was not yet fully paid off, it would be a good one to pay right down.
5. Once paid off, your own home would be mortgage free. At that time, if you were to take another mortgage for investment purposes, then any mortgage expenses would likely become deductible too. Then again, having a paid-off home is a treasure in its own right, and a welcome oasis in a world becoming more and more financially fragile.
Once again, Mat – have a think on these, but DO NOT action any without checking first with your own advisers. Laws and rules have a habit of changing from time to time and, though these worked some years back, will they work today? Still perhaps some thoughts were useful
Benny
Hi Gurpreetc,
The link posted here might provide some thoughts around the subject:-
This takes you to the “Big Picture” thread, then click on the next link seen in that post. You may wish to check out more of “The Big Picture” too, so scroll through it (further up that page is the Index that tells you what other posts are in the thread.
You mention having a 5% deposit, but for what price house? See, a 5% deposit for a $1m house might allow you to buy TWO $500k houses. But then the deposit you have is just one small part of the whole buying process. First off, check out the above link, to see if that way suits you. As stated, though buying an investment first is ideal from a financial point of view, it may not be preferential from an emotional or family point of view.
Benny
RBA: Here they go again. A 0.50% increase this time, after a 0.25% first up. So, double what I said last time.
But hey there are a few schools of thought here. The RBA have been jawboning for months about “needing to have 6 rises of cash rate by end of year” or some similar rhetoric. Now, by going hard right off the bat, some analysts say they may not have to go so hard in future as these two increases are likely to take the heat out of the average family’s spending and having them tend to save more (to cover future house payments?) rather than buying stuff.
Then again, if the RBA did continue to go hard, I can just see tens of thousands of Aussie families in mortgage distress in a time where inflation is hammering them for food, utilities and petrol – and the increased mortgage interest is one extra increase they DON’T need right now.
Hopefully that idea of “6 rate rises” will turn out to be the threatened stick that doesn’t have to be used after all. Time will tell….
Benny
Hi Tony,
Since we are no longer on Daylight Saving time, some of these times are incorrect (e.g. Qld for sure, and perhaps NT and WA?):-
That’s Wednesday at 7pm in NSW, ACT, VIC and TAS | 6:30pm in SA | 6pm in QLD | 5:30pm in NT | and 4pm in WA.
Benny
Hi Runnyman,
Found this just today on ATO website:-
https://www.ato.gov.au/individuals/capital-gains-tax/cgt-events/
if you sell a house, the CGT event happens on the date of the contract, not when you settle.
i.e. it sounds like you have it right, except I didn’t see anything about BUYING and its CGT date.
That ATO page has a chat function – perhaps check them out re the “Buy date” to be sure that 10June was when the BUYING of the asset was deemed to have occurred. If so, then a selling contract date after 10June should put you in the clear for the discount. (Note, I am NOT a professional adviser – it is just my opinion).
Benny
For anyone else reading, check out this topic for info re STEPS
https://www.propertyinvesting.com/topic/5082846-training/
Note too, the Deal Club mentioned is already in train, but those who sign up can access recordings of previous lessons to “catch up”,
Benny
Hi Bel,
Sounds like you are ready to move on – and it is great that you are checking out options ahead of jumping in. Right off, there’d be more info required before being able to offer sensible options. so, if you would, have a crack at answering the following questions.
1. What are your long-term goals? i.e. are you considering further investments in property, even perhaps to make a career of property investing? As you have high income, is more income your focus right now, or would a growth property suit you better?
2. Is there something about a trust that has you wanting to utilise one? They can soak up a fair amount of time and dollars, so beware of that.
3. Positive-geared sounds like a sensible way to go if wanting to add more to a portfolio – would these be regional areas or suburbia? Each has its own areas to consider (i.e. traps).
4. Separating personal monies from investing monies is for sure a good way to go, but (to my knowledge) that can be done without using a Trust. Separate bank accounts can do that. Read up on Offset Accounts too.
Do come back with whatever extra info you don’t mind sharing, and let’s see what can be done,
Benny
