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February 4, 2014 - 7:29 am

Hi Scott,

The objective is to have a sufficient income stream in your retirement years. So you want your rents to be sufficient to pay the bills and any outstanding mortgage repayment obligations and still have enough left over to support your own living costs. If you had a few properties you had owned for several years and slowly crept the rent up each year, this should be achievable, assuming you had chosen properties wisely. To some degree, you could say you don’t necessarily need the mortgage to be paid off completely before you hit retirement, but you do want the mortgage repayments to be tiny in size compared to the rent you are achieving, such that there is plenty of surplus left over for you to live off. Does that make sense?

Jacqui Middleton | Middleton Buyers Advocates
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VIC Buyers' Agents for investors, home buyers & SMSFs.

February 2, 2014 - 10:57 am

Further to what the boys have already said, it would be a good idea to speak with your intended broker before you commence hunting for the property, and be clear in understanding what name should go on the contract of sale, and what steps need to take place (and in what order). 

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

February 2, 2014 - 8:20 am

Hi Johann

I'm not disclosing where I am presently buying.  Not in my best interest to cause a flood of investor to buy where I am placing clients. 

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

February 2, 2014 - 1:04 am

The few places you're looking at are perhaps the wrong places.  In the right places, the golden equation is certainly there.  I'm finding plenty.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 29, 2014 - 1:22 pm

Hi KSJA,

As has already been said, you're on a high LVR, so it would be best to batten down the hatches and squirrel money into that offset account for a while.  Build yourself a fortress of cash.  The more you have, the less impact bumps in the road can have. 

You'd want an absolute bare minimum of $65k sitting in that offset account before even starting to entertain thoughts of getting a second property.  That would mean two properties with an LVR of 90% with some spare cash in the emergency tin. 

In order to reach such a target, identify areas that will be easy to make budget cuts.  If you are currently buying lunch at work each day, take home-made sandwiches to work for lunch a few days a week instead.  If you are buying coffee in the cafe each morning, borrow a thermos from someone and bring DIY coffee from home instead.  If you are paying entrance or membership fees for a gym, go for a free jog around the block instead. etc etc.

If you haven't done so already, get a depreciation schedule done on the Springfield Lakes property to help reduce your taxable income.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 28, 2014 - 10:06 pm

Nothing like a bit of spam for a Wednesday morning

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 28, 2014 - 10:05 pm

Local tradies and building inspectors are a great resource for this. The ones that have been around a while can identify a proprty’s age by the materials used, or the style of brick used in their local area. Sometimes they can recall when homes in a street were constructed. I had a building inspector reminisce about having been an apprentice on a job when a particular property was originally built! He even remembered what the original subdivision looked like and where the services were underground

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 28, 2014 - 9:50 pm

Not such a great idea unless you are planning to acquire negatively geared property

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 28, 2014 - 1:08 pm

It would cost you a hell of a lot more than $600 to sue.  When you are buying property, it is a good idea to say to yourself "I understand I am buying second-hand property.  Something somewhere will be wrong with it.  I am happy to fix things to the tune of perhaps $2k.".  Keep your eyes peeled for "expensive issues" in the results of the building and pest inspections (by expensive I mean $10k+).  For such things you'd ponder the pros and cons of exercising your right to use your building and pest clause to exit the contract.  But not for small problems.  You'll ever find a "perfect" secondhand property.  Don't sweat the small stuff.  Remember that by the time you find a "small issue", you already have to pay your solicitor, your building and pest guys, and potentially also fees for bailing out of the contract.  So it's not always cost-effective to do so.  This is why it is important to go into it accepting there might be something that needs doing.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 27, 2014 - 12:37 am

As the others have explained, you cannot use SMSF money to pay off your mortgage.

I think the confusion you are experiencing is due to the terminology "beneficial interest".  I'll explain what it means.  I suspect you think that "YOU" are the beneficial interest and thus you get the rent.  This is not the case.

The "legal interest" is the entity set up to "own" the property while it is under mortgage. The easiest way to think of it is that it is a mini company+trust structure set up within the super fund.  Each property under mortgage will have its own little setup.

When the mortgage is paid off, ownership of the property shifts to the "beneficial interest" which is the SMSF itself. 

In the meantime, while the mortgage is getting paid off, the rents are coming into the main SMSF bank account (ie the beneficiary's bank account) anyhow.  Unless the SMSF has its bank accounts set up differently.

The SMSF will only be able to borrow a maximum of 80% of the property purchase price.  Banks will not lend any higher on this for residential property being purchased in super.

You cannot leverage equity growth in a SMSF property.  That is, you cannot keep the SMSF property that has grown in value and use its value growth to fund deposits of further properties. The only way to get at that value growth is to SELL the property, divide the pile of money into two and buy two properties.  I hope that makes sense.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me

VIC Buyers' Agents for investors, home buyers & SMSFs.

January 18, 2014 - 9:52 pm

You need to be vary wary of vacancy rates in the Werribee / Tarneit / Hoppers Crossing areas.  There is plenty of property available for rent and sitting empty.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 14, 2014 - 10:08 am

Hi AI

I'm going to assume that not only the building insurance but also the water bills are included in the body corporate fees – because the body corporate fee is very high.  The council rates are also very high (around $500-$600 is what I'd normally expect to see for council rates for a unit).

Remember you will still need landlord insurance, and there is always the odd maintenance bill.  Even buying the property for cash (ie no mortgage), there will not be much left over. 

If you have $45k you can put it to much better use leveraging into a property that performs better.  This one doesn't look so great after you take out all the holding costs.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 14, 2014 - 9:56 am

Hi mattliasiian,

Jamie mentioned going with interest only with offset account, NOT principle and interest.  Instead of "paying off the loan" on a principle and interest, instead just lump all your spare cash in the offset.  In a way it is the same thing as paying off the loan, because the more money in the offset, the less interest you pay.  When the amount in the offset is equal to the original loan amount, you have sort of paid off the loan, because you would no longer be paying any interest.  The difference is that if you decide to move out the house and keep it as an IP, you'd be able to whip the cash out of the offset and go and spend it on another home for yourself to live in.  You would not need to ask anyone's permission to do so, or apply for a loan to do so, or pay a fee to do so – you'd simply withdraw the cash and off you go.  If however you had literally paid off the loan in the true sense, and you wanted to get your money back to go and buy another house, you would have to apply for a loan (fees associated), and the bank might say no!!

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me

VIC Buyers' Agents for investors, home buyers & SMSFs.

January 13, 2014 - 10:54 am

OK let's call your current bank BANK A.  Let's call a different bank BANK B.

Yes you could go to BANK A to release equity.

Or you could go to BANK B who might either take a second mortgage out against your house for the $180k, or alternatively BANK B might pay out the entire loan with BANK A and start the loan all over again. 

Be sure that you don't end up with a loan that has two properties listed as security against the one loan (ie the new IP and also your PPOR).  This is called Cross Colateralizing.  Just imagine what would happen if you had some trouble making your loan repayments.  One bank could seize not one, but both your properties.  Not a good situation.

Hope this has helped explain things a little bit.  The brokers will jump on and give you a more precise explanation shortly, I'm sure.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

January 11, 2014 - 9:42 pm

Don't think of it as swallowing your pride Paul – think of it as making a smart decision to surround yourself with seriously clever people who know their stuff.  Leveraging their abilities will take you far

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me

VIC Buyers' Agents for investors, home buyers & SMSFs.

January 8, 2014 - 9:50 pm

Haha!!  Happy New Year to you Uncle Freckle.

Paul, in all seriousness, Freckle is right.  Have one of the highly-regarded brokers from these forums take care of you.  The difference between having them steer your finances and trying to do it directly with the bank is like being a racehorse compared to a shetland pony.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me

VIC Buyers' Agents for investors, home buyers & SMSFs.

January 4, 2014 - 7:24 am

I don't know … $800 doesn't sound like much of a profit to me

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me

VIC Buyers' Agents for investors, home buyers & SMSFs.

December 31, 2013 - 2:48 am

What name is the property held in?  If it's a SMSF you need to check you're not changing the nature of the dwelling while it is under a mortgage.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me

VIC Buyers' Agents for investors, home buyers & SMSFs.

December 31, 2013 - 2:23 am

A few other issues with renting by the room are things like this:

Someone damages the kitchen or bathroom (the expensive rooms).  You cannot prove who it was, so you cannot really deduct it from anyone's bond.  It will come out of insurance or your pocket.

Someone leaves large items of junk in the backyard, and a big piles of old care tyres too.  You are, after all, running a free garbage collection service, are you not?  Once again, you cannot prove who left it there so you are stuck with the removal and disposal fees (entry to the tip is not cheap these days).

Someone damages the fence.  Again, can't prove who it was.  The same problem will apply to any shared area inside or outside the dwelling.

It is surprising how quickly a high gross yield will get eroded with things like this (and some of the things already highlighted in the post above by god_of_money).

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
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VIC Buyers' Agents for investors, home buyers & SMSFs.

December 30, 2013 - 10:38 pm

As per what Catalyst said, you are obligated to provide both heating and cooling.  But this doesn't mean it has to be that old heater.  So long as it is replaced with a suitable equivalent.  I am not a fan of heaters that are close to the ground as there is the risk of the tenant putting the clothing airer a bit to close to it when trying to dry their clothing.  Also heaters close to ground waste valuable wall space that could otherwise either be covered by furniture, or be a clean piece of wall to walk past.  A split system is up high and out of the way.

Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone Me

VIC Buyers' Agents for investors, home buyers & SMSFs.