Forum Replies Created
Hi Dean,
There are plenty of folk on here who could perhaps answer you better than I, but here’s a few thoughts anyway….
1. That equity (if your situation allows you to borrow it – DSR, etc) can be all used on one property, or perhaps provide deposit and costs for more than one. Your borrowing capabilities would be the limit on what you might be able to do.
2. Give some thought too, to whether you would go IO (Interest Only) on the loans or P&I (paying off both Principal and Interest). There are other ways to research that might steer you to “the best way for you” e.g. check out Offset Accounts. Talk to your financier/broker about these “best ways”, or come back here to ask for more.
3. Do you have a goal in mind re your investing? i.e. Do you plan to accumulate several IO’s over time? If so, then take a look at structuring to see which way is best for you (e.g. borrow under a Trust, a Company, or in Personal Name).
4. Really, there is SO much that needs to be answered. Have a read around, check out the Training Centre (see the Home Page) and read up on some of the useful information that is within this site. I’ll be sending you a PM shortly – check out the links within it – especially the “big Picture” topic.
Not too many answers for you – perhaps more questions that might lead you to think from other angles. :)
Benny
A further year has passed, and what a year. Early projections made when Covid first hit were saying that housing values would fall. And I can see why that was said:-
1. With immigration stone dead due to covid, no new housing for them would be required. Also, businesses and jobs were affected massively – the Fed Govt had to shore up the finances re supporting those out of work suddenly. Restrictions re our activities and a massive change re any vacations led to major repercussions in all directions.
2. The above uncertainty fed through to many who simply “battened down the hatches” to wait out this world pandemic rather than to consider moving house.
3. Property viewings with RE agents couldn’t be done en masse – each person wanting to view a property had a private viewing to minimise the spread of Covid. Point 2 perhaps even reduced the number of potential viewers anyway. Values were seen to drop gradually.
4. Many jobs were encouraged to be “done remotely” so folks set up their homes to accommodate this switch. Travel was lessened, fuel prices dropped, schooling was also (often) done from home – this made many consider “staying put” even longer, taking demand for property lower.
Later on though, other factors came into play that have led to values booming once more. Looking at Corelogic’s National Update https://www.corelogic.com.au/housing-update, it shows just five months since July 2019 that were nett loss months for house values. Those were the months of Apr2020 thru to Aug2020.
With Covid19 starting in earnest in early 2020, the winds of optimism were cold at first – but since Sep2020 to current day (Dec21) there have only been upticks in values each month. Each of these were greater than 0.5% per month (6% per year) and have an average above 1% per month (>12% per annum).
Why? I’m sure the rapid printing of money has had a huge effect on the whole world, thus prices of assets has to rise to offset the drop in value of the currencies. Also, with vaccines now allowing more folk to “go about their business”, this has allowed commerce to get working again. Likely too, that the initial fear in 2020 of this “100 year pandemic” had many thinking this could be a repeat of the dreadful Spanish Flu that killed an estimated 50 million people out of a total population of 1.8billion. This fear stopped the world in its tracks until we understood more about the real effects of Covid-19.
As of today, the total deaths from Covid19 have been 5.5 million, from a world population 5 times greater than that of 1918 when 50m were killed. Also, as Covid goes on, the succeeding strains have appeared to be less severe, thus leading to more confidence all round. This confidence can only help the world economy recover.
Could it be too, that Australia’s remoteness relative to much of the world makes our country more desirable for many folks’ futures once the world “opens up again”? Could this be adding to the dollar values of existing properties even now? Certainly hope is now higher than it has been since Covid came along.
I’m sure there are MANY other factors at play…. What would these be? Anything coming that would lead to another crash? I’m not seeing it yet, but another major world event might be what’s required to topple the Aussie market. What do YOU think? Have a go, ;)
Benny
With two more years having passed, I thought it worthwhile updating you all with some hopeful news. Again, as a retiree I don’t travel so much as in the past – typically a tank of petrol will do me for a week or so. Any of you who HAVE to fill more regularly may not see the same benefits. But here’s my summary as of Dec 31 of 2021:-
I live in Greater Brisbane (Logan CIty actually, where we do enjoy lower prices than many other LGA’s in SEQ).
I commenced recording my petrol usage in Feb 2018. At that time, petrol prices were $1.17/litre.
Over the next (nearly) four years, we saw prices as high as $2.00/litre and as low as $0.87/litre. Currently, the average price in Brisbane is $1.46
BUT, by using shopper dockets and selecting the lowest priced servos to fill, and minimising any top-up amounts while prices are high, my average petrol cost over that time has been $1.20/litre. Compare that with my Feb 2018 figure, and you’ll see it has been worthwhile.
Sure, it is a little more effort – emptying jerrycans into the car when prices are high, and travelling a little further to get a great price. A cent or two isn’t worth travelling for, but to save 14c I’ll drive a few Km.
What can YOU do? Simply by checking out that website, who knows – you may save 10c/litre quite easily, and regularly !! (Do note that some states don’t work the same as others, but the graph on petrolspy will tell you how your State works.
At last – it seems some common sense might have forced its way to the front. Following days (weeks?) of stupidly long lines of cars as people flock to get PCR tests, yesterday’s National Cabinet meeting seems to have found some common ground. Hallelujah !! Seems most States are now in line, or soon will be, with the new definitions that Omicron has brought about. i.e. Though a far more contagious disease, Omicron is also far less deadly as recent numbers seem to bear out.
Yesterday on radio I was hearing that Omicron variant is akin to a severe “common cold” – i.e. a nuisance, but hardly life-threatening for those who are vaxxed. Based on Qld’s recent numbers (something like 8000 new cases over the last two weeks, but just two people in intensive care) it may be that even the unvaxxed will be far less troubled by this variant.
But the BIG news to me was the re-definition of a close contact, along with the exhortations to NOT get a PCR test unless:-
a. you are a close contact of someone who has Covid (and the new “close contact” means you either live with them, or spend more than four hours daily with them – as a care-giver, or perhaps a workmate?). Or
b. you have definite symptoms of Covid.
So, no more lining up for a PCR test just to get into another State, or because your own State Govt has asked you to “get tested”. It seems the latter has gone away with this recent Cabinet meeting. Maybe now we can stop quarantining so many folk unnecessarily, which has led to shutting down so many small businesses.
I live in hope, but this new Covid approach DOES sound more hopeful than what has been up to now. Perhaps 2022 will be a good year after all !!! :)
Happy New Year to all,
Benny
Hi Steven,
A good thoughtful post – well done. I agree with everything, and readers can add another point that comes into play too – the fact that if a tenant left, with a $2M property, you have lost 100% of your income (likely with a mortgage still to pay). But with 4 x $500k IPs, losing a tenant means a 25% drop in your income instead of 100% drop.
Then again any change in circumstances ( with you, a local council, or one particular area ) might impact the ability to hold that property. (e.g. a local catastrophe might send a suburb’s desirability into a tailspin). If that suburb holds your “one and only” IP, much pain for you. But if you’re holding 4 IPs (likely in several suburbs) your path would hopefully be less rocky.
Despite my recent post that quoted Warren Buffett (“Diversification is protection against ignorance. It makes very little sense for those who know what they’re doing.”), I agree with you that it makes sense to have diversification in some cases. Your post provides a catalyst for discussion around this complex subject.
It would be great to hear from others on this (especially from the opposing side).
Regards,
Benny
I feel & hear civil unrest building which could explode at any time.
Hmm, even our Parliaments have more than their share of “civil unrest” right now. The division we are facing seems to be across the board. Is this how the West finally crumbles? They say “Divide and conquer”, and I haven’t seen such division within our country in decades. Many of those who have been vaccinated are siding with those who choose not to vaccinate, as Govts impose restrictions on the “unvaxxed”.
There seems to be a huge gulf between the parties (the “vax or be damned” vs the “I have the choice to not vax”), each with strongly held views – and I’m not sure just how this will all end. There even seems to be a “State Govts vs Fed Govt” war at the moment – like, we need this? Leadership is what is needed. Where is a modern-day King Solomon when we need him?
Benny
Two years on and things keep changing – and also staying the same (with thanks to Jean-Baptiste Karr) around the subject of Climate Change. The “world” is right now meeting for a gabfest in Copenhagen around the subject of CO2 emissions and setting goals to reduce our emissions to zero (if that is even remotely possible).
Meanwhile, some cooler heads around this subject have changed their website layout, so a change was made to their (initial) 12 videos that schooled us on the various subjects that make up “climate change”. They now have 22 videos, so old links became invalid. But don’t worry – click the link below for their latest words of wisdom that offer hope, and much more LIGHT, on the whole subject, rather than the heat that many other sources provide. Happy reading!
https://www.propertyinvesting.com/topic/5050126-the-climate-is-changing-2/#post-5060671
Benny
Hi Travis,
As Terry has pointed out, there are many things to consider in such a move (i.e. keeping the old PPOR as a rental). For sure it can be done, but is it advantageous to do it? Or is it more advantageous to sell with NO CGT to pay, so you can put all (or some?) of that freed-up cash down as a deposit on the new home? Again, there are many things to consider there too (with such low interest as we have today, is it better to own the new one with as little debt as possible, or instead, keep spare cash and take out a larger low-interest loan?). If you kept the other home, then the extra Income might help to pay for the new one, but (as you say) the borrowing against the old PPOR WON’T be tax-deductible unless the borrowing is for another investment (and a new PPOR doesn’t count).
Have you been using an Offset account at all? If not, DO read up on them, as they might help to chart a better path into your future. In short, you can pay down a mortgage, yet still have it all available if required. Certainly, it is good that you are asking while there is time to formulate a plan. Keep asking questions around this subject, read up more, meet with your adviser(s), then come back with more thoughts/questions for us. By putting your back to the wheel now, you can surely find the best way forward FOR YOU !! And welcome aboard, too,
Benny
Hi Tony,
I really like the first two, and the third is an extra lift with the humour. Good stuff.
Benny
After 18 months of pain, it seems several State Govts are getting serious about the economy, small business and family welfare once more – i.e. they are saying “It’s time to open up again”. Sounds good, except for what seems like being a kind of apartheid that may be coming – i.e. that all those who haven’t decided to get vaccinated will belong to a different “class” with fewer privileges than the rest.
Even Qld (with no Covid to speak of over these last 18 months) are talking of “opening up” on Dec 17th 2021 – come hell or high water. That’s quite a change from their previous locking down of the border – not even letting Qlders home in many circumstances. The stories have been vast, sobering, and (in many cases) quite disappointing, as we hear of families kept apart for months, people going interstate to visit a family member who may be sick or dying, then can’t come home to Qld again. But yesterday the Qld Govt message changed markedly – it is Dec 17th at the latest (maybe earlier if an 80% double-vax figure is achieved) and our border will open to ALL !!
Scarey? Well, it will be quite a new thing for Qld. NSW and Vic have fought high Covid numbers and have battled to overcome them. Qld has yet to face that outcome. And, perhaps the scariest thought of all, I wonder just what poor decisions might come once we are “open to the world”. Will things get so bad so quickly that the best thought from the State Govt will be to run to the safety of “what worked before” – i.e. close borders and lockdown? With tourism one of Qld’s largest income producers, such a knee-jerk move would likely be the death knell of many small businesses who have been hanging on by their fingernails.
Sharp lockdowns following on from “opening up” are the worst decision. Think about it – businesses hear of the “opening up”, they rush around spending time and money to prepare for their business to re-open, get staff back on deck, stock up, open up for business, then have everything fall in a heap as they are locked down again two days later. What a massive effect this has had on accommodations, restaurants, flights, the wedding industry, small shops, you-name-it.
Ever-changing rules drive the hoi polloi nuts !! I only hope that, come Dec 17th, that the Qld Govt has taken a teaspoon of cement and hardened up so that their decisions don’t blow around in the Covid wind.
How is YOUR State Govt travelling? And your constituents?
Good luck to us all,
Benny
Sure thing – google the Office of State Revenue in Qld and all should be revealed. Your accountant should still be a good path too though, in case you don’t read far enough !! ;)
Further to NM95’s comment, do consider that different states may well have different laws.
e.g. for Qld, a trust has a $350k allowance before Land Tax is charged, while (according to nm95 above) NSW seems to have no allowance.
Why not ask that same accountant to spell out for you exactly what applies in your state for your Trust (if you went ahead with it). As you can see, Land Tax can be a significant part of your total costs.
Using nm95’s example of $8000pa, how much is that per week? Scarey huh? Would the tenants stump up the extra do you think? ;)
Benny
PS Steve has made the comment before of “new investors setting up expensive Trusts to protect very little”…. and that is worth some thought. If you are starting out and are not sure whether or not property investing is to be your calling, there are other ways to protect yourself that aren’t as costly.
Of course if you ARE planning on making this a significant business venture, then using Trusts is a very sensible approach imho.
Hi propertyboy,
I have an option of buying another 2-4% yielding investment IP in melb/syd then being capped on borrowing capacity (income cap hit – got lots of equity)
Back in my earlier days (maybe 20 years ago) a Mortgage Broker of the day told me “If you have enough Equity, income (or DSR) is not a problem.” At that time I didn’t have Equity, so I didn’t get to follow up on WHY they said that, or if they did tell me I have since forgotten, but here’s my thought:-
Was that statement ever correct? Even better, if one has a heap of Equity today, is there some way that Equity can circumvent any DSR problems? Or did I dream this?
Perhaps others on here can advise – MB’s especially. Any comments?
Benny
I’m kinda surprised that nobody has needed to reply, to add more info, to disagree, or to have a rant of their own. No worries though – we are all where we are, with decisions to make, and the goalposts seem to keep on changing. Good luck with YOUR operation amongst all of the various Govts’ irrationality going on.
Just a week or so back, I heard one party from politics (I don’t recall just who…) who espoused the idea that ANY person standing for election as a candidate should be tested, and shown to have AT LEAST an IQ of 100 (i.e. to be at least an average member of our community). what do you think of THAT? I know that an IQ test is far from being the bees knees in determining suitability for any role, but hey, it is a start, and perhaps WAY better than what we have right now, yeah? And wouldn’t it be nice to know that whomever we vote for is at least “average or better” in the smarts department?
Or is that too easy? What do YOU think? Is there a better yardstick that is readily available?
Benny
Hi Dutch,
I can assure you it is the same Ben Poulson.
It is a rather uncommon name, so you might be right… but how can you be so sure of that?
It is a little concerning that you are openly questioning our experiences because they may not be the same as yours.
On many sites a first post like yours might simply be deleted – you arrived unannounced, responded to a VERY old post, and flamed some tradesperson. Similar to many spammers when you think of it….. Fair enough that I might have some concerns re you, isn’t it? And yes, since I knew of a person with the same name (some years ago) I took the time to get a bit more truth re your post.
Re your concern, in my own way, I was endeavouring to help (both you and the forum in general). I did pose some searching questions in an attempt to draw out more information on just how bad things really were in your case. Did you spend any time thinking of any responses to my questions Dutch, or did you simply write them all off?
In closing Dutch, I DO agree that poor communication is not on ! But over a whole year? What do you plan to do? Communication can’t be one-way if there are to be meaningful results !! Surely there are “other avenues” you could take here (??) Do reread my questions in a new light, then let’s see what happens eh?
Benny
Hi Dutch,
Your post piqued my interest. First off, I wonder if you refer to the same Ben Poulson as I was. It might be – I only knew him as a Building and Pest Inspector, but a quick search tells me that someone of that name is also a builder (who also does B&P Inspections). The man I knew did some B&P inspections for me some years ago.
But then you said you are living on a building site for almost a year. It has been 18 months of Covid so far – has that impacted his operation as much as it has other small businesses? Does he still have staff, etc. and can they work onsite?
See, it also seemed strange that you happened upon an 8 year-old post to post your grievances. That also had me wonder re your own “bona fides”. Why did you do that? And what have you done to “kick your builder into gear”? If this is such a small project why have you let it go on for this long? How small is it really? A bathroom reno? Adding a bedroom? What?
And don’t you have a more satisfactory recourse to provide some action other than to post on a forum about your displeasure? What else have you done re this? Have you contacted any authorities to have them chase your case? Interested to hear more,
Benny
Hi Wan,
A quick note from me (since I note you are posting here for the first time) is to reread all of this topic – in particular, do take note of my comments in this link (an earlier reply in here) – https://www.propertyinvesting.com/topic/5068817-home-loan-borrowing-using-trust/#post-5069869
For me, the Chapter 9 from Steve’s book gives a VERY well-rounded description of how he works things. I’m sure a thorough read of it will vastly improve your background knowledge of this very detailed subject.
Once you have done that, do come back and read all of this topic once again, based on your new learnings from the book, and you might find many of your questions are answered. If not, then put your further questions here again and let’s see what we can do.
Benny
That’s a rather nice summation Jeremy !! A very sage collection of important points. Kudos !!
Benny
Wow – check THIS out !!
https://www.afr.com/policy/health-and-education/swallow-hard-reality-pill-on-virus-deaths-20210804-p58fxc – (later) it is now a Subscriber only article of the Fin Review. But you’ll still see the headline and a paragraph or two…..
Someone in Govt (a Senator) is finally taking a hard-nosed look at the “numbers” re how much we are spending/losing while endeavouring to save Covid lives. I’d previously thought Govts should be considering all sides to an economy, not just the “Covid cost”. i.e. lockdowns produce very serious health risks to so many people – especially to those businesses who are trying to keep their head above water. Lockdown after lockdown is beating many of them senseless.
And now (in the link above) a dollar value has been ascribed to the saving of a life – and it is $330 million per person !!!!!!!!
Can we really afford this? The Senator makes the statement that we as a nation “can’t afford the same healthcare facilities in the bush as in a big city – it is a fact of life”. As per the start of this paragraph, can we really afford to pay $330m to save each Covid life? And meanwhile, what other lives suffer, and how dreadfully? How about the single mum who is having to sleep with her family in their car because her work stopped and they can’t afford now to rent a house? How about the business owner who might be “going down for the third time” with yet ANOTHER lockdown that siphons income away from his business. Anxiety and depression must be having a field day in the midst of all this. What cost to those held in the grasp of THOSE “pandemics”? Is anyone counting? We focus on Covid to the exclusion of all else at our peril.
I know we don’t like to put a $ figure on “the value of a human life”, but do read the article to see how it sits with you.
Then, let me leave you with this small truthful extract from the link above:-
The hard reality is that we have become obsessed with the daily COVID-19 case numbers. But there are no press conferences announcing how many small businesses went under the night before, how many marriages broke up, or how many people lost their job.
Benny
Hi Tommy,
Some of our Mortgage Brokers onboard could likely come up with a more complete scenario for you. I would think you will be able to find a way that works best for you. Meantime, do have a look at this post :-
https://www.propertyinvesting.com/topic/5037642-investment-property-finance-tax/#post-5037653
It was written for those who are contemplating moving out of their PPOR and making it into a rental. Terryw mentions 11 separate strategies that may (or may not) apply to you. Check out some of his later ideas (in particular, Strategies 7 thru 11) as there are some VERY useful thoughts right there.
Benny
