Hi Simmo,

I agree with a number of the forumites; that 37% gearing is too low. You should look to gear up to 70% to accelerate your wealth accumulation. Seeing that you work in an overseas bank, the gearing limit tends to be around the 70% (I know the banks in Singapore tend to work with that figure post-GFC).

Also, while you have taken a very long term approach to investing and wealth accumulation, why look to be financially free by 60 yrs if you can achieve the option of not working for money sooner? I am 31 yrs myself having just started a family, and understand that our generation will be working till 75 yrs due to having longer lives. Just because we are expected to work that long, it does not mean we have to!

For my case, I am highly geared to 90.5% as at May 09 with 1 PPOR and IP, but the rise in property values have lowered my gearing to 82%. Looking to keep my gearing to 80% for many years to come as I refinance my way from one IP to the next. My goal is to be financially free by 45 yrs old, and that's only 14 yrs away!

All the best.

Daniel Lee  

Hi Morgan,

My wife and I completed a simple low-budget reno in July 09 on a 2 BR unit we had purchased in May 09. One thing we read and subsequently found to be very true is that we made our profit when we purchased. In the midst of the mad rush that was the First Home Buyer Boost, we bought the unit at $375K, according to council valuation, while similar conditioned units at the time were selling for $390K – $400K.

Based on this conservative estimate, our profit was already $15K.  But the story did not end there.

After spending $10K on the reno, we found out that another similar conditioned unit (equal in standard to our post-reno'ed IP) was sold in Sept 09 for around $420K. So, our IP could now be conservatively valued at $420K; extending our equity gain from $15K to $45K. 

The low-budget reno help to attract good tenants quicker and increase rental yield, but it was buying cheaply in the midst of the mad rush of FHBs that helped with the equity gain. The stage of the property market and spending time in the market were important factors too.

Regards
Daniel Lee

I'm still waiting on the latest update.

Just checked the website as few mins ago and it still said the there ceiling insulation for rental properties will be removed.

http://www.environment.gov.au/energyefficiency/insulation/index.html

And I was thinking of utilising this benefit next yr!

Regards
Daniel

Hi, Michael

We wanted a basic loan for our IP via a DT, so I went with a mortgage broker while looking through Infochoice on my own. Infochoice came up with MyRate as the lowest cost. I then contacted MyRate and found out that they are backed by ING. As there was a difference of 0.06% in interest rate with almost everything else roughly the same, I asked why the difference. MyRate explained that they were like the internet arm of ING, similar to how OneDirect is to ANZ.

Based on our criteria of no application & monthly fees, not needing an offset, borrowing 90% LVR via a DT, and our own investment plans over the next 5-7 yrs, we went with MyRate. We had the time to do the paperwork ourselves, so decided not to go with the broker. He was a lot of help though, and would be happy to approach him again in the future with more complex funding arrangements.

I am not too familiar with the terms Mortgage Originator or Ongoing Rebate Plan (ORP), though I have heard of the first term before. Had to search online on the latter term, but still did not find a good answer for ORP. I understand that by going through my current lender, it is a mortgage originated product. Can you explain what an ORP broker is (is it similar to a normal mortgage broker but with a fancy name?) and how can one provide a even lower rate?
 
Regards
Daniel

Hi

The wife and I went to check out a rental in the lot of units where we had just purchased our first IP. The unit was rented out before official inspection, with potential renters waiting outside told that the unit had been rented by someone who had not even inspected it at the first place.

I think, from a rental point of view, there has been a shortage of well maintained and located properties. There are always many other properties available in further less convenient locations. 

During that inspections, we spoke to a REA who came to inform everyone that the unit, and she said that until recently during the FHB buying rush, even well maintained and located rentals were going slow. However, things have changed now that the initial group of FHBs who could buy had already bought, leaving the remainder of FHBs who are unable to buy going back into renting.

So, there could be a general complain about a lack of well maintained and located rentals.

Could be the same for well built and located properties for purchase?

Regards
Daniel

Hi

I recently took up a 90% LVR IO loan with MyRate via a Family Trust with Corporate Trustee, and they allowed the LMI to be added on top.

Regards
Daniel

Hi, Nick

I like your 'new' kitchen. Am embarking on a small reno ourselves, and going to change the cabinet handles and repaint the cabinet doors.

Very nice.

Regards
Daniel

Hi, Jack

Have you looked at the council valuation that comes with the sec 32 for the property. In the council valuation, it should provide you with the land value, the Capital improved value and the Net Asset Value (NAV).

Land Value – speaks for itself
Capital improved value – value of the the house / unit itself
NAV – Councils typical use this to calculate your rates, etc.

Surely, there would have been a Sec 32. The doc will also inform you of any future roads / rail, compulsory acquisition of land, etc.

Regards
Daniel

Hi,  Chokko

This should help. I went through the same train of thought a while back.

https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4326640?highlight=%22to+trust+or+not+to+trust%22

Regards
Daniel Lee

Hi, Fiona

Here is what I think.

You will have to factor in low capital and rental growth for the Melbourne market for the next few yrs on a worst-case scenario, and also considering if you and your partner can handle a 2% increase in interest rates over 2010 and 2011. While it looks affordable to hold onto a negatively geared property now with interest rates at a 49 yrs low, it will go back up again in by next year for sure.

What sort of investment strategy are you looking at? Any renos involved, or are you buying near new? This will affect depreciation.

Investment vehicle – Trust or personal names? Say if you decide to start a family and you go off work for a while, any negative gearing still has to be split between the two of you. With a lower income, the benefits are less too.

Considering your combined incomes of $160K, your emergency fund of $10K is small. I agree with one of the other forumite in that you need to build up a personal emergency fund to cover 6 months living expenditure. Also, would recommend a reserve investing fund of at least 6 months to cover your IP payments, with this reserve eventually building up to 1 yr. Job loss is always a possibility in this current economy.

Buying 5 IPs in 5 yrs at over $500K each will strain your servicibility. Perhaps you want to consider a slower rate of accumulation. Not to say what you want cannot be achieved, but it is more of a case of how much sacrifice.

Regards

Daniel Lee