Why is all your money tied up in another IP?  What is the outstanding debt, and current market vallue of that property?  I am wondering if it is worth refinancing that property to pull out some equity you see.

Hi again Simon

I'm a bit of a numbers nerd so I'll clarify if you like.  A $400k property growing at 10% per year over 20 years would give you a total of $1,629,681 more equity after 20 years than a property of the same pricetag growing at 5%.  $1,629,681 divided by 20 is equal to $81,404.  However you must understand that the forecasted growth is not precisely $81,404 each and ever year.  It's not linear.  For instance, In year 1, the "extra growth" would be only $20k.  In year 2 it would be a little more etc, due to the mathematical nature of compounding numbers.  Other thing to remember is a dollar today won't buy the same number of chocolate buddies at the Milk Bar as it will 20 years from now.  A dollar won't even get you a quarter of a chocolate buddie 20 years from now.

Thing is, you need cashflow to buy your groceries.  Equity doesn't pay the bills.  Definitely not saying avoid capital growth.  You absolutely need it.  But you also need cashflow.  I prefer to go for properties that produce both, rather than one property that is just cashflow and a separate property that is just capital growth.  Keep in mind that as you get closer to retirement age (when you will not be working to earn income to pay off mortgages), the bank is unlikely to feel like giving you a loan against your equity so you can buy your groceries, because they will be thinking to themselves um, how is this person going to pay us back?  Oh that's right, they can't.  They are old and not working.  So no, we'll reject that application.

The thing people forget is that whilst waiting for the capital growth (and presuming it happens in the manner you hope) you still have to support the mortgage whilst waiting.  In the case of a negatively geared property that is down by say $200 per week, you essentially have to find $200×52=$10,400 per year out of your own pocket just to hang on to the property.  If you cannot find such volumes of spare cash, then it is not even a strategy you could consider, because you would not be able to hang on.  Make sense?  Also, if you did have a spare $10,400 per year, you might prefer to be putting that towards acquiring additional properties rather than supporting just the one property.

Another thing to be wary of are putting all your eggs in one basket.  Imagine if you had one expensive property and it was vacant for ages.  You would have zero rental income.  Not much good to you when you are retired and counting on the rental income to buy your groceries.  And another thing is land tax.  If you have lots of your chips on the board in one state, you hit that land-tax-free-threshold really fast.  Whereas if you spread your chips around the board a bit more, this is another holding cost you are avoiding or minimizing.

The suburbs of Melbourne offering good rental yields are the non-Melbourne-suburbs

Hi Simon

I'm going to zero in on the thing that stands out to me.  You said "don't have any assets other than super".  Would it be rude to ask how much you have in super between the two of you? 

I am assuming it is still sitting in a normal retail super fund.  Or have you started your own SMSF (Self Managed Super Fund) ?

You can, inside a SMSF, use your superannuation monies on purchasing property (specifically, paying for deposit, stamp duty and buying costs – leaving the bank to fund 80% of the purchase costs, and having tenants pay off the property).  Have you considered having a good hard look at your super to build a fortress around your retirement?

There is no point renting out your mortgage-free home and borrowing to buy something else for you to live in.  Nomatter which way you do it, you will be paying mortgage interest that is not tax-deductible.

Hi Claire

Answering option 1 – you cannot subdivide a property in an SMSF that is under mortgage.  So you'd have to wait till the loan is paid off. 

Answering option 2 – beware of being greedy.  Chasing high yields in a mining town at the risk of your asset being worth nothing if the mine closes is a risky strategy.

Answer option 3 – there is no such thing as guaranteed rent return if you haven't already paid for the guaranteed rent by means of an inflated sale price.

It mentions a lot of important topics in the course content, but nowhere near sufficient time to enable you to actually understand what you would need to know about the topics. 

Hi Elle

Well you have two choices;

1.  Selling your home first, staying somewhere else temporarily, and then purchasing the new place

or

2.  Try to do both at the same time, ensuring that there is a special condition on the purchase of the new place saying that it is subject to sale of your old place.

Either way, first step would be to select a solicitor and discuss your intentions, and find out his/her process for assisting someone selling without an estate agent.

You will of course need to give some thought as to how you will advertise the property to prospective buyers (newspaper/internet etc).  There is a company called "For Sale By Owner" that specializes in this sort of thing – you could look them up and see if their service applies to you.  http://www.forsalebyowner.com.au/

Hope this helps

Joe don't be ringing around – ask for recommendations on the forum.  No need to trial someone.  Just take on a proven accountant based on the recommendations of others.

I really don't think you can save yourself much money DIY-ing the painting if you plan to use paint brushes and rollers.  It is bewildering how long it all takes.  You'll spend what you could have saved on things like:

– petrol money driving to and from the site

– more paint, because you are less efficient at using it than the pros are

– speeding fines, trying to get home quickly after a long tiring day painting

– massages and such, trying to get your poor shoulders to recover from all the painting

– lost rent, because it took you ages doing the painting

Don't let your first DIY painting effort be a big one.  Have a go at something smaller, such as just one room, before taking on a big project.