Forum Replies Created
hahaha – I've re-read my post and am surprised that you were able to catch anything from it! Thanks a lot, good thinking. I'll do the numbers but what you're saying makes sense …
Thanks Michael, funny you should mention not buying a 500K lemon … we just signed up for a 429K 1 bedroom unit in Canberra (on Glebe Park). I'll write a new topic about it asking opinions … its a lot of money but I tihnk it is worth it.
Thanks for your advice
Cheers
Michael4 wrote:i think you any very good position as marc stated earlier.you both aern good incomes, you are young, your properties appreciated and you got less debt owing.
Don't worry too much about steves formula as his decision was to go positively geared and as he done it in the right time cheap buys were everywhere in early 90's!
As a result he was able to get quite a few properties before the boom happened which helped him even more to purchase more +ge properties!
In your case you have 2 ip that are worth 600k+ and you owe only 400k. there is no problems with your 2ip and what you should concentrate on is paying of your home that you live in so that you will be able to breathe easier and buy more ip so they can work for you in the short and long term to bring you god income.
Be careful not to be greedy and purchase an investment that is a lemon which you might pay 500k as this will bring you backwards few years and you will miss the opportunities that will exist in the meantime!
if you keep on going the way you are so far you will be in a very good shape in 5-10 years time!
good luck
Thanks a lot Marc, I appreciate the time you took to reply. Its comforting to hear from other investors, the only people I have really spoken to are other 'beginners' like myself and real estate agents who obviously have an agenda. Yes I had forgotten to factor in the rental income! We have also just signed up for a 1 bedroom unit in the middle of the city in Canberra. My initial plan was to buy it now and onsell prior to settlement just top make the capital gain, but I can reassess that later. It cost 429K (yes I know it is a LOT of money for a 1 bedroom place and yes I am nervous about it) but I think the market in Canberra is quite unique. Actually I might put the details in a new topic and broaden the topic a little cos I have a few questions about it …
Thanks for the advice, feeling much better!
Cheers
ChrisL.A Aussie wrote:2 things;
1. I did the wealth score and came up with +140 I think, but it didn't factor in rent income, so I wouldn't put too much weight on it. I think you are better off than you realise.
2. The 1-100 in 3.5 years was written a long time ago (early 90's from memory). The target area was Ballarat, where there were loads of sub-$100k properties with work needed, and rent returns of 10% and more. Different world.The good news is that over time rents and vales do go up; it's just a LOT harder to buy "off the shelf" cashflow positive properties these days.
So let me do a quick number crunch for you;
Income:
You: $100,000
Partner: $ 65,000
Rent: $ 31,460
Total Income: $196,460Assets:
PPoR: $ 560,000
IP#1 + 2: $ 615,000
Total Assets: $1,175,000
Liabilities:
Loans: $740,000
Total Liabilities: $740,000Your LVR (Loan to Value Ratio) is a reasonably healthy 62%. (Banks get nervous when you hit 80%). You could actually borrow more to invest again, but you would want to have a very good cashflow (rent, tax deductions and depreciation) to not put too much pressure on yourselves, and without increasing your LVR too much more. keep it within safe levels is my view.
Assume repayments on the Loans at 7.72% – $4,760.66 p/m interest only.
Allow for 20% of the rent to be eaten by holding costs (other than loans). nett rent is $2097.33 p/mWithout adding tax deductions and depreciation (you do have Depreciation Schedules for the I.P's?), your shortfall on the total loan repayments is -$2663.32 p/m.
Based on the "traditional" formula of $35% of gross income for payments towards loans (as set by Banks ; actually, I think it might even have been 30%), you are well within that percentage. 35% would put you at $4,125 p/m repayments.
I don't know what other debts you have such as credit cards and cars etc.
Bottom line though is you want to clear any personal debt and your home loan as fast as you can as this debt is non-tax deductible.
Investment debt is tax deductible, so you would just maintain the minimum repayments on this part of the debt.
You both earn good incomes, and have no kids, so I would go hard for a couple more years on that plan, then you will be in a very good position.
