Forum Replies Created
- APerry wrote:Whether or not you use a trust to buy shouldn't have an affect on your servicing.
Hi APerry,
When we went to the bank, they calculated our borrowing ability and said that as we already had a PPOR and guaranteed the trust loan, we were at our limit and so no more money was available. This was because as Directors of the trustee company, we had to show that we could service the trust loan in the event of a default.
Marthamel wrote:I have been tumbling this question over in my head for a while… what drives people to begin property investing? Obviously there is the obvious "increased wealth" … but what does that mean for people? And does anything else come into the equation? Why property? Why now? Do you have any altruistic motives? If you own rental properties, why did you choose this type of investment vehicle? What do you hope to achieve through your property investment?
I am interested to hear your thoughts…
Martha
Got into investing because I wanted to get out of the rat race. Property is a tangible item that we have a greater of control over than say Share investing. We could see the actual results of our labour in the increased rent and capital appreciation. There is no better time to start investing than right now, and I know I want to still have enough energy left in me when the fruits of property investing start to bear.
Regards,
Daniel Lee
It is the freedom or the choice of not working that entices people to seek out 'retirement'.
My aunt, based in Singapore, aged 54 yrs, works roughly 10 hours a day with a global company, has 5 properties under her belt (1 in Melbourne, 1 in Sydney and 3 in Singapore). She is leveraged to about 80% and is focused on paying down the debt, so she can finally call it a day or work part-time. She currently does not have that option.
It is a real life example of managing your investments and not let it manage you.
Regards
Daniel Lee
Hi
RK's Rich Dad Poor Dad did it for me when I was around 18 yrs. Got me started on the investing journey. Years down the road in an heated debate, my best friend accused his books of taking away the old 'me' and that the current one is a fraud.
Regards
Daniel Lee
Hi Darklord
Yes. You can repaint a laminate benchtop. That is exactly what we did with our IP. It has an old wornout benchtop from the 70s and we did not have the budget to relaminate. Suggestions from the forum led me to my local paint shop where I bought a bonding agent and a small can of enamel paint for laminates.
I cannot recall the name of the bonding agent, but it is essential that you use one. The bonding agent allows the enamel paint to stick onto the laminate and gives it additional endurance. With enamal paints for laminates, apply 2 – 3 coats with at least a day break between each coat to allow the previous coat to dry and strengthen.End result is that for us, after 10 months of renting, the paint on the laminate benchtop has not yet chipped from the daily usage of our tenants.
Regards
Daniel Lee
Hi Wonderland,
It might be good that you spend more time learning about property investing, investor concepts and investing psychology. Many of your fears can be answered when you understand more.
Regarding savings, it is good that you are doing so. You also have to remember that not many can save more than the month appreciation in property prices, so on that note, the sooner you buy the better. However, no point rushing out to buy something you do not really understand.
On property prices, there are different parties saying different things. As long as you do not overpay for a property, you should be fine. You will have to consider the economic factors of your local surrounding. Often, there are markets within a city itself. For example, during the FHOB last year, we bough a property for $375K while everything else similar was going for $410K. Even in bubbling markets, it is still possible to find bargains.
There would also be tax structure to consider. Do you purchase in your own names, only to lose part of the negative gearing benefits when you start a family? Do you purchase in a Family Trust and quarantine your negative gearing for future years, only to slow down your buying ability?
Spend a few more months reading intensively, ask yourself and your partner some tough questions, and the answers will come eventually.
Regards,
Daniel Lee
Hi dbliss,
We purchased an old 2BR property also around the same age in May 09. Initial rental appraisal was $301 per week. Did the following on a small $12K budget with much of our own labour.1 – Restumped with new concrete stumps. That sorted out the bedroom doors not being able to close. ($4700)
2 – Got a tradie in to replace the single hung window springs as that they actually work. ($1400)
3 – Used around 20 – 25L of wall and ceiling paint to cover the baby pink and green paint in the property. We did this ourselves and it was lots of work. My wife was also 4 months pregnant when we started this project. ($300)
4 – Replaced the original carpets with near-new commercial grade ones. ($1400) 5 – Got an electrician to replace all old light sockets, switches and single powerpoints to double ones. The property was so old there was no earth wiring inside the unit. ($900)
Total material course comes up to around $8700. $3000 was spent on interest payments.
Property was rented out for $320 per wk, an increase of 8.2% from initial rental appraisal. A decent effort considering it was our first reno project ever.
We just had the property revalued and are in the process of organising a major renovation as the tenant is moving out in Sept. Hope this info helps.
Regards
Daniel LeeHouse Call wrote:My personal interpretation is that what people mean is that they want to be financially independant by 40…
I would go differently and say that it is better is to
1. have someone to love
2 have something to do
3 have something to plan/dream/look forward to for ( and this is where the whole financial/investing in IPs comes in)
4have memories to cherish…
That is what people generally mean by 'retiring'. Simply not having to work for money but work because one wants to.
Yup. Being financially free is really only worth if one gets those four things above.
Regards
Daniel Lee
danviv1 wrote:Hi dogkangaroo,So both of your IPs are negative geared, plus you have to pay rent for the place you are living. Based on the current tight lending policies, you may have a difficult time getting a loan for a 350k place (even if it is a 80% loan and you use all the 70k as 20% deposit). And you will need extra 10-15k to cover the legal fee,stamp duty and some other fees.
if I were in your position, I would use the cash to increase cashflow in the existing two IPs by doing some value-adding, such as install aircon, do a simple renovation on the bathroom and etc. Then buy a 3rd IP at a budget of 200k-250k and positive gear or neutral gear, that way you will still have some cash left in hand and income position is better than now.
from a strategic point of view, at this stage cashflow is more important to you rather than capital gain, so more negative gear IP will not help your future purchase.
hope it helps!
Hi dogkangaroo,
I agree with danviv1. Use your cash to update your two existing IPs to maximise rental income. Switch your loans to interest-only if you have not done so.
When you are done with your studies and am back into full-time work, then you can start looking for another property and will be in a better position cash-flow wise to do so.
Regards
Daniel Lee
So the next question would be: what is the cheapest way of transfer a property to a trust without incurring stamp duty?
Regards
Daniel Lee
That is most odd… especially if I could get better returns than through a typical financial planner.
Surely there must be another way around this.
Regards
Daniel Lee
I have a question…
Can I simply go to the bank and say I want to take out some equity to invest in the share market? Will my lender be happy to do that, even if the LVR is set at a limit of 80%?
It would seem to make sense for a lender to lend the money, as long as the drawn equity can be serviced.
Any thoughts?
Regards
Daniel Lee
Hi
Sorry I missed the meetup. Have been busy with the baby.
aaabbbccc, I just emailed you.
Cheers
Daniel Lee
Hi Pasha,
Spent more time reading and learning from wealth accumulation and personal improvement books, and also check out this and other property investing forums. Often, there is a direct corelation between your personal abilities / character and the eventual size of your accumulated wealth.
Many successful investors are often not deeply motivated by money itself. For me, perfecting the 'Art of the deal' (researching, analysing, negotiating, closing, renovating and leasing) is more exciting!
All the best in your journey.
Regards
Daniel Lee
Hi Raewyn5,
We purchased our first IP in a Family Trust with a Corporate Trustee. The main reasons for going down the trust route were to run the portfolio like a business even when overseas, and also for income distribution. We intend to have a large portfolio throughout Australia, so income distribution would eventually become a good problem to have in 15-20 yrs time for us.
I have met others who have questioned that approach, citing additional admin cost in compliance and ASIC charges. We did the spreadsheet modelling and realised that the eventual income from our portfolio will become too unyielding under a 'personal name' model.
I suggest more research on the number of properties you intend to purchase, your personal drive for wealth accumulation, future plans with the family, etc.
Cheers
Daniel Lee
Terryw wrote:If you just pulled money out of a LOC the interest wounldn't be deductible. So after many years you would end up with a very large loan with none of the interest deductible.I have been thinking about something slightly different.
very roughly (haven't thought this thru properly yet):
what you could do is pull out some equity and invest in shares with high yielding dividends. Maybe even margin loan with a low LVR and then capitalise the interest while living on the dividends.
eg. you have $1,000,000 in equity in the form of a LOC.
1. You take out $50,000 pa to live on. The interest on $50k would be about $3,000. So you get $47,000 to live on.or
2. you take $500,000 worth of shares. get a 30% margin loan and buy another $200,000. so total shares worth $700,000.
Interest is $30,000 on the LOC and $16,000 on the margin loan (assume 8%) = $46,000. You don't pay this interest, but let both loans capitalise.This interest should be totally deductible.Your $700,000 in shares return 7% = $49,000 (high returns because of high yielding shares with franking credits) .
But your interest is deductible so your taxable income is $3,000 and no taxpayble.Your shares grow at say 5% = $35,000 increase in year 1.
Maybe the figures could be improved by borrowing $700,000 from the LOC initially.
I am trying to get to the point where all interest is deductible and you just live on dividends or maybe even rent or a combination.
Hi,
In another forum that I have visited, there are already a number of investors who have utilised this approach of drawing equity from property to invest in shares / start-up businesses to provide additional cashflow for further investing or lifestyle.
The trick is to spend enough time learning about share trading / investing or starting up businesses to the same high level of proficient as one is already in property investing.
Those who succeeded started out in property to accumulate significant wealth before diversifying into shares / businesses for cashflow, the latter is ultimately is the key to financial freedom. Tightening bank criteria limits the LOE approach to funding lifestyle, and the tax-deduction / non-tax deduction affair gets pretty messy as well.
This is based on what I have read up so far.
Cheers
Daniel Lee
Dan42 wrote:daniellee wrote:HiWas wondering about this article…
http://www.smh.com.au/business/property-prices-on-way-down-warns-bank-20091204-kays.html
1 – There is a general perception that many FHBs have become highly geared in their rush to get into the property market during the low interest months of late 2009
2 – Credit has been restricted by the banks and will likely continue to be so for 2010
3 – Rising interest rates put pressure on FHBs, wannabe investors and those who are too highly leveraged, leading to more forced sales ni 2010 and maybe even 2011, although lowering unemployment may mitigate this factor to an extent
4 – Rising interest rates mean another rush to get into the market before it becomes too expensive to buy, leading to a surge in prices in recent months, which could lead to a correction
What is the analytical thought / gut feeling on this?
Regards
Daniel Lee
Daniel, have a read of this.
Hi Dan,
Yup. Read it. Back to good old demand and supply. Better steady appreciation in dwelling value…
Cheers
Daniel Lee
Hi Briduff,
It's difficult to do things alone. The best way is to visit your local public library and check out the investment section for all the Property investing books available. I found out the best way to learn was to read up on the various techniques, discuss about them on the forums, and then apply them in action. Although this is a slower way and had taken me at least a few months to grasp the basics…
Having someone else take the reins from you means you will not learn as much, and the only person most interested in your finances is yourself.
Cheers
Daniel Lee
Hi Chrissd,
Here is my general advise – Yes. Investment in a property.
With at least $4K left over a month, that is a fantastic amount to be saved. I wished my partner and I was able to save that amount a month.
Your available equity from your home is $129K ((80% of $430K) – $215K). Keeping your gearing to 80% avoids LMI. With this amount, it depends on your own strategy from here on, because with $129K as a 20% deposit, you could get a property worth around $645K.
Alternative, you could use your equity as two 10% deposits of $40K each, purchase 2 bedder units in inner-middle suburbs to seize on the factor that there will be a rising number of single / dual couple / small families into the future. The reminder of your equity ($49K) can be used for stamp duty and / or paying or quick renovations on those properties.
A 3rd idea would be to increase your equity to 90%, and this would give u even more money to renovate your investment properties to a decent standard to attract high-paying tenants.
Just some ideas to get things started.
All the best.
Daniel Lee
Hi,
Happy to participate in a informal discussion with no selling please. There are also other groups in Melbourne, which you can find out in other property forums.
I have a young family though, so my commitment will be limited, but interested none the less.
Live in Oakleigh.
Regards
Daniel Lee
