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I’m also interested in this…. (and curious why this site doesn’t get used for this more often), eg can you post in the comment below some of your renovations with before and after shots and the name of your builder.
Not my acronym…… :)
But I am starting to wonder as I watch 10 year yields in Europe go negative etc that this is all simply a case of “mis-allocation” and that people piling into negative bond yields (and ever lower property rental yields)….because “that’s what you do”.
I’m starting to wonder if our investment dollars each month (about 10k after personal expenses) wouldn’t be better off going into “startups” (heck possibly even going into actual lottery tickets) as the yields we’re getting in Australian property rentals seem to be getting worse and worse even though we are the ones taking the risks eg banks aren’t taking any risk at all and they are collecting 4.5% (or over 2% profit with .5% operating costs and under 2% cash costs).
But with inflation continuing to eat into cash (eg real inflation and not the bullshit figures the government is giving us)…..what to do….what to do?
Im concerned that people are spending too much on properties and yields for the risk aren’t worth it anymore but at the same time TINA (There Is No Alternative) is forcing me to purchase yet another IP as otherwise I’m going to go cash flow positive on current LVR’s.
This said I think Australians are paying are too much for their mortgages to Australian banks as interest rates elsewhere around the world are far lower and at the end of the day we….not the renters and not the banks are wearing all the risks.
Lol sometimes I think I should just be investing in Australian bank stocks…..
Hi Redwood, looking to fix for as long as possible (eg have 30 years for PPOR) as helps budgeting. I also have seen over the years that Australian banks love fat profits on variable mortgages and make a much higher profit than most around the world and are happy to push up rates asap.
I’m not worried about needing to sell the next investment property in case of lifestyle hiccups as have other assets I’d sell first if something really bad happened.
I only wish there was an Australian bank offering better than 4.49% for 5 year fixed.
The fact that there is a premium between the 3 and 5 tells me that banks in Australia are expecting a rate rise sooner or later and although brexit may have pushed that out a bit I still expect Yellen to raise the fed in Dec 16 (which may help alleviate some RBA pressure) and as such anyone fixing today for the next 5 years will look like a genius in 2019 to 2021 etc.
What are peoples thoughts on a drop of 0.25% by the RBA on Tuesday?
Still looking for a better rate on a 5 year fixed and hoping the RBA might consider Brexit/Election ‘non-decision’ until Tuesday at the earliest a good enough reason to drop rates and this can get me a better than 4.49% fixed 5 year.
Just woke up here in NYC to see all of the mess…..going to be an interesting day.
Lol does this mean Shorten is getting the nod on the 2nd of July and Trump in November….?
Thanks guys, my preference is always going to be for 5 years and understand it may cost for that “comfort level” (I just don’t trust Australian bank variable rates….and the fat dividends that go with Australian bank shares).
I agree though @corey the 0.7% difference on a $500k adds up at $3500pa however I think in 2019….just as rates start to go back up globally….going for the 5 year will be the smart move.
Not so worried about break fees etc as once locked in wont be needing to sell any of these IP properties for at least 5 years, these are all pretty much neutrally geared so even if lost job etc they wont be sold within the next 5 years. To be honest as sitting on over $1m in equity on PPOR we’d probably sell our USA apartment first if anything really “life changing” happened.
I am surprised though that 4.49% on a <70% LVR is the very best rate out there when people are talking about so much competition between lenders at the moment…… :(
Maybe someone will drop me a PM if they see a “special offer” cross their desks in the next month.
There is a way to list on realestate.com.au through propertynow.com.au
Basically they provide a “front end” eg phone/email etc as well as being able to get you onto the listing sites.
My advice is go for it.
Here in NYC a lot of people are doing it through streeteasy, just don’t skimp on preparations eg, declutter/pro photographer/floorplan etc
Be ready with accurate comps for the area, get all your legals setup in place before listing, keep accurate records of who came and confirm contact details after inspections etc.
@corey, do you know if there are any rules within APRA that ownership says the percentages for risk etc have to be “amalgamated” eg it might make a lot of sense for them to continue to be two separate entities.
We’ll just have to agree to disagree that this is/isn’t a problem. :)
I do however have a “right now” particular problem with St George because they’ve cut off expats to the Portfolio Loan product so will need to find a new lender to borrow a <70%LVR IP IO 5 year fixed of around $490,000 (the other $210k coming from cash/variable LOC), that are open to expats with US PAYG income so we’ll see what happens.
And without x-coll you wouldn’t have triggered the break fee, as you would only refi the variable loans. ;)
That’s the big issue with cross collateralisation, it’s not a problem until it is. Then you sit there wondering why you gave up so much fleixibility for nothing.No the break fee is only for the fixed loans, I’ve got one fixed until Dec 2017 and one until Aug 2020.
I could move the variable but would need to keep the overall portfolio to less than 70% eg if I move out one of the properties I then have to reduce the overall portfolio limit by a corresponding amount.
That’s why I was asking terry about even if these were separate loans how do you recognize “increased equity” on a fixed loan.
Unfortunately even though we are under 70% LVR I just don’t feel comfortable with variable, which would make the most sense, eg you could move any time for minimal costs and legals.
However I prefer 5 year fixed and think its worth the premium to set it that way so I can sleep at night and know exactly how much my payments will be for the next 5 years (well 5 – X payments etc).
Same reason I signed up for 30 years for our PPOR here in NYC. Yes im paying 0.75% more for that loan attribute but when you add up over 30 years the difference……awesome insurance.
Hi Terry,Sure….but when the bank that secures your $400,000 loan says….sorry but we aren’t lending you any more money on a property that they already have a mortgage on….? then what?eg you are in the same situation as I am for the St George Portfolio loan…..Surely you aren’t suggesting a secondary mortgage right? eg a bank to take the second mortgage on the additional equity? I didn’t think that they even had those in Australia.
In that case you have 2 options:1. stay put, or2. take your $400k loan and refinance with a lender that will lend.
When cross collateralised you won’t have the second option.Cool, thanks for the clarification, I appreciate you have way more experience in the space than my wife and I do so appreciate the clarification.
I can if I want refinance all of the properties (eg example 2) but would involve paying a break fee for the fixed loans…..and would prefer not to do that.
Our plan is to leave them in place, draw down the variable loan for 30% and then seek a <70%LVR IO 5 year fixed loan from someone else for the difference on the next property. The irony is we are only going to go from about -5k negatively geared to about -12k which is well within our ability to service so apart from St George missing out on profit they are still on the hook for as much risk as before…..
Keep in mind I could understand that if you had a variable loan….you could just pay it out and walk away to another bank and secure the additional equity increase, but for my purposes I feel more comfortable structuring debt over a longer term, particularly in Australia where the banks are fat and happy and secure really wide spreads.
The spread is much lower here in the USA (read competition is higher) eg today usa govt T-bills are only around 1-1.4%% lower than my 30 year fixed.
Hi Terry,
Sure….but when the bank that secures your $400,000 loan says….sorry but we aren’t lending you any more money on a property that they already have a mortgage on….? then what?
eg you are in the same situation as I am for the St George Portfolio loan…..
Surely you aren’t suggesting a secondary mortgage right? eg a bank to take the second mortgage on the additional equity? I didn’t think that they even had those in Australia.
Yes DT but accessing the equity was more important to me, the whole reason why the Portfolio Loan idea works (lol when it works) is that each time you can automatically use the equity from the previous 12 months and buy another property.
So basically your advice is….take out a standalone loan with a vendor that is fixed for the next 5 years…..great but the problem is that I cant use that equity to purchase another property unless I refinance it, that’s plain inefficient and your money ends up siloed between various lenders at low LVR being lazy money.
The problem here is how St George have decided to mange their loans….not the original idea etc. Portfolio loans will always make your money work harder for you.
lol nothing if its a cat…..out to the woodshed for a whooping if its something else :)
good to see you can joke about the situation. good luck with your decision, be sure to circle back and post how it all works out in 6-9 months once the solicitors have finished dueling it all out.
Hi Dean
Downside is you cannot access equity so your portfolio loan becomes restrictive.Yep Richard, that was the whole point of signing up with the Portfolio Loan platform in the first place eg to be able to be able to get the equity recognized and borrow more.
The current plan is to secure through a different lender – 5 year fixed I/O <70%LVR – as a separate standalone loan, the annoying part is will tie up any equity in that property for “5 years” even if we have a change of position due to APRA loosening weightings sometime in the future when we come to borrow for the next property in 12 months from now.
lol time to switch to NYSE/Nasdaq equities for our $10k free cash flow after expenses each month I think?
lol maybe they didn’t like the use of the word “penis” :)
This being said not sure if you saw my post about the issues we are having with St George Bank as of last Thursday…..so proves my advice was worth the paper it was written on as well :)
Hi Ben
At that sort of lvr you should be done sub 4’s.
Being an interest only loan the Bank will probably charge some form of premium but still should be less than what you are currently paying.What about locking in for 5 years Richard? Whats the going rate for <70% LVR on 5 year fixed IO?
Not without a break fee and I’d rather chew nails first :)
