Forum Replies Created
Despite what they say banks are not about looking after your interests Their primary responsibility is to their shareholders and to reduce their risk exposure they have.
The more they lock you up AKA cross collateralise loans the more secure THEY are.
Four brokers have responded to your question – you could do damn site worse than with one of them. And if you are worried because they live 'away' from you – that is only an issue in your mind. Modern and effective business people can work across the nation and across the world.
Ha – I didn't differentiate the build and own property previously hint.
Congrats on moving up the salary scale – that will make it easier to service loans.
Do you have any equity in your property? When a bank assesses your borrowing capacity they will look at your income levels and your nett asset base. As I said in my earlier post grab yourself a decent broker and start the 'how much can I borrow?' discussion.
Armed with this information you'll be able to refine your strategy and work forwards from a know position.
I suggest only focussing on the first property. Some people get too overawed when they think about multiples of property. One at a time is enough at this point of time. As your portfolio grows your broker (who'll become your next best friend – if they are any good) will be able to guide your purchases with future borrowings in mind.
While property is the vehicle – finance is equally/more important.
Hope this helps.
Hi Rob,
At 39 you have the potential to be well and truly in the game.
If you plan on retiring at 60 (for example) you have 21 years of investment fund in front of you. This is about the same amount of time you have spent in the workforce (allowing a bit of wriggle room for higher studies etc). This means you have as much of your working life in front of you as you have left behind you – you are at the halfway point.
While 21 years (approx) is a fairly long period of time it can go quickly if you fluff around pretending. That is not to say be foolhardy and make rushed decisions – rather it as a reminder that time can be eroded pretty quickly if you take your eyes off the ball.
But all of this is irrelevant if you don't know what you borrowing position is. Grab yourself a decent broker and start a conversation with him/her. I recommend steering clear of many of those major franchised brokerages but rather look for a broker who owns and runs the store and, importantly, is an investor themselves.
In the meantime start refining how you intend using your property in retirement. The answer to this simple question will help you work out what strategy you need to employ which, in turn, helps to determine which property and where.
Be interested to hear why it has taken so long to build your first home. That is not being disrespectful, rude or condescending – rather it may help you identify roadblocks you and your wife have which has stopped you getting on the property road so far.
Hope this helps.
Hi Sam,
Sounds OK – don't forget to consider the mortgage repayments on your new property when doing your calculations.
sdrake wrote:a total of $345,000 in equity which isn't a small chunk of change and could go a long way to reducing a non-tax deductible primary residence loan.This comment implies you are considering using the equity available in your current properties to reduce the loan required on your new home. Is this correct?
If this is the case then there is no financial advantage to this part of your plan. Because the funds are being used to buy a new home then there is no deductibility of interest allowed. The ATO considers the purpose of the new borrowings to determine deductibility – not the type of security used.
sdrake wrote:At what point is the LVR considered to be "too low" that you should consider selling?Low LVR means lots of equity and proportionally low debt level. Not sure why you would sell.
Gee sounds like I missed a terrific edition of ACA.
Hi SDrake,
While you have looked very carefully at the equity side of your equation have you also considered the cashflow side of your current situation?
What rent are you receiving on your current property?
What rent would you receive on your unit if it was rented? and
Finally does your income sustain additional PPOR borrowings – if so, at what levels?
Need to consider this side too as while everything may be affordable now – what happens when interest rates rise?
Making decisions on the basis of current interest rates, when they are at long term lows, is not a a wise move. Make sure you stress test your cashflow situation too.
Hi Terry,
I used to get the same script error message – haven't seen since a couple of Mozilla upgrades ago.
Like you I have PI Forum on screen for long periods of time.
I must admit my IT knowledge is lacking so can't provide much assistance beyond comment above.
Terryw wrote:Yes, but there is always hope of an annulment if they can conjure up some money.Like this?
No doubt as brokers you guys see things a little differently to the rest of us.
There is no doubt Macquarie did themselves no favours with brokers and clients during the GFC days. No doubt there are some brokers, in particular, still smarting from their Mac experiences last time around. It will be interesting to see what sort of structure the Yellow Brick Road/Macquarie alliance will look like.
I guess I am a bit of a 'glass half full' sort of person and would like to think little things passing on full rate reductions might become more common place with competition.
No doubt a bit simplistic but…………………………. my glass is half full.
Lowlife = lower socio-economic areas?
Hi Geddo,
Just reworked my earlier reply for someone who is using cash to fund their deposit and purchasing costs (below)
"I agree LMI should not be used simply because it is a tax deduction. I see it as a 'preservation of cash' tool.
For example – assume I am buying a $500K property.
At 80% LVR I need 20% deposit ($100K) + 5% purchasing costs ($25K) means I require $125K of my available cash to purchase this property.
At 90% LVR I need 10% deposit ($50K) + 5% purchasing costs ($25K) + 2% KMI premium ($10K) means I require $85K of my available cash to purchase this property.
The nett result is that I still have $40K of my cash left in my war chest.
N.B. I am not sure what LMI premiums are at the moment so the $10K LMI premium is only indicative."
Geddo wrote:The $40K does come at a cost though and adds principle to the loan, which may suit some.If you are using cash to fund your deposits then there will be additional borrowings to the tune of $40K but if you are borrowing the lot, the total borrowings only increase by $10K.
Bottom line is individuals need to make sure they do not over extend themselves and should a strategy they are comfortable with. Having said that I would encourage all investors to regularly review their strategy, especially as time elapses.
Hi Geddo,
I agree LMI should not be used simply because it is a tax deduction. I see it as a 'preservation of equity' tool.
For example – assume I am buying a $500K property.
At 80% LVR I need 20% deposit ($100K) + 5% purchasing costs ($25K) means I require $125K of my available equity to purchase this property.
At 90% LVR I need 10% deposit ($50K) + 5% purchasing costs ($25K) + 2% KMI premium ($10K) means I require $$85K of my available equity to purchase this property.
The nett result is that I still have $40K of my equity left in my war chest.
N.B. I am not sure what LMI premiums are at the moment so the $10K LMI premium is only indicative.
Any other self-storage in the area?
If so, speak to the owners see what sort of vacancy rates they have, waiting lists, which sizes are most popular and see what other bits of information you can glean from them.
Jamie M wrote:But I've been wrong before – plenty of times.
There are some things that just shouldn't be put in the public arena Jamie – think of your career reputation.
Methinks – no change.
Had a couple of rate reductions in recent months and the RBA may want to see what effect those reductions have had before taking any more action.
TonyLyn wrote:But, I'm one half of a double act and the other half hasn't been on the same wavelength.That will make it hard – working with your own hand brake is a tough gig.
To be perfectly frank most financial planners would not be suitable for any wealth plans you have. In most cases they do not know property and simply are not qualified to advise in property.
Reading the remainder of your comments it would appear as if you do need some serious financial management strategies. If paying $450 was a bit steep what strategies do you have in place to get the deposit required.
Sorry to be so blunt – but giving false hope doesn't help anyone.
Hopefully you can use my 'bluntness' as motivation.
2 hours in the rest of your life is not a big drive – I would look at attending some proven property seminars in Brissy. You will need to discern between those who want to educate and those who want to flog a product.
But before you do that – do you have a broker? If not grab one and speak to them and find out if you have the financial capacity to do something. No point dreaming of a champagne budget if you can only afford beer.
When choosing your broker make sure they are independent and not one of those 'franchised' operations and they are also property investors themselves. While your focus, up until now, has been getting the property – I my opinion getting finance is more important. This is where a good broker will be invaluable to you.
After chatting to your broker go and get yourself a single property and work from there.
I can assure you there are a lot of good people on this forum who are willing to give their time – keep asking questions and get yourself into a position where you are comfortable with your knowledge level. This will also help you refine what it is you want with a mentor.
Some people disguise themselves as mentors only to flog you something. You need a level of knowledge to detect this.
Smidy wrote:And Derek, yeah my old accountant didn't specialize in property, didn't really have any interest in property and when I mentioned I was moving he told me to let him know the details of my new accountant so he can pass my info on so I took that as a bit of a hint.Cannot understand your 'old' accountants point of view.
From a business point of view it is always cheaper to keep a customer than to advertise for a new one. Some business just don't get it and it seems you found someone like that.
Oh well – his/her loss.
