Hi Kristy

As already mentioned, and just to re-iterate what Redwood said – an accountant is for tax perspective, not investment strategy. It’s a bit confusing knowing who to talk to and who knows what when you’re getting started, but you will eventually find you’ve assembled a team you are comfortable with that are saying things that you are able to understand, and make sense when you sit down and validate the numbers and common-sense element of what they’re saying. When you have that, you’ll feel a great deal more confident in every step you take :)

Hi JM

By the way you appear to have stolen my initials!

What’s best for one person is not what’s best for another.

If all we humans were was a spreadsheet of numbers, then I guess that all our financial strategies would be the same.

However as you’ve pointed out, you have something a little different. Some health issues to cater for (ie pay for and manage stress about). And a personality to cater for. You know your limits. We can all handle a certain amount of stress, debt, etc, but we all have our limits. What happens when you cross that limit line depends on the individual.

You do not need to feel inadequate for feeling like you don’t want to feel “out of your depth financially”. Matie you already have 4 investment properties at a young age, and it sounds like those investments are covering their own costs. I’m not sure you have any concept of how far ahead you actually are. That is AWESOME. You said you are not a very mathematical person. I am (a mathematical person), and if what you need to feel some peace of mind is a bit of a chat on the phone with a mathematical person to look at the facts of just how well you’re doing and what it means, I’m happy to be that person. Feel free to give me a shout, the offer is there.

Nicely said Corey. That’s the part that is normally withheld from the “commercial property is a better gravy train” story. The fact that this would realistically only be true on a cash buy.

Hi Dean

In theory yes.

However imagine you take on an investment property that has a cashflow position that places you $150 out of pocket per week in the first year of ownership. Assume that the rent can generally be increased $10 per week in that area. That’d be a whopping 15 years before that property were covering its own costs, provided none of the bills went up in the meantime (eg council rates, insurance etc), which we know will not be the case. Bills go up.

Thus the importance of being crystal clear on available income to support mortgages, life circumstances, desired outcomes, timelines etc. Otherwise a property can be a serious ball and chain for an investor trying to hang on by the fingernails.

Most folks can afford to support a mortgage by a small amount each week, thereby allowing them to accrue some savings from the leftovers of wages to save for subsequent properties, or contribute towards debt reduction, thereby improving the cashflow of a property due to the debt reduction leading to less interest charged.

So often we see people that thought that “getting themselves some negative gearing, you know, for the tax savings” is what they need to do. And their only plan is to hedge their bets that the property will go up in value and make a killing for them. The lack of the presence of a plan B is scary. There always needs to be a plan B. Plan B could be “I will hold onto the property and its rental yield will provide a portion of my living expenses requirements”. Plan B could be “I will renovate the property to place it into a higher priced market”. But if there is no Plan B things can get messy if Plan A doesn’t work well.

Hi Hoss

The commercial property will require a much higher deposit, since the lenders won’t lend as much against commercial buildings as residential, and commercial interest rates are higher.

Focus on the net rental yield (after costs and mortgage interest are taken out) as opposed to gross rental yield. It might turn out that the lost opportunity cost of having to sink a large deposit into the commercial building negates what otherwise appeared like a good idea.

Hi Pete / Tom

It depends on a few things;

– Whether you are interested in a particular area (because agents tend to specialize in certain areas)
– What job you need the property to do (eg capital growth, cashflow, renovation potential etc)
– Whether you have given consideration to your overall strategy (this has an impact on what role the property will play in the portfolio as a whole)

If you have clear thoughts on some of the points above, it will help you determine if an agent is able to service your objective.

Hi Tiger

You’ve hit on a point that a lot of people struggle to understand. Indeed equity is not defined as your right to a cash donation from the bank just because your house went up in value (that’s right – some folks mistakenly think they get paid by the bank because their property went up in value, and do not understand that accessing equity is a borrowing event which must be repaid). It is also the case that just because you have equity, it doesn’t guarantee the bank will lend against your equity. There is indeed such a thing as “more equity than you can use”. In these situations, the only way to crystalize the equity gain is to sell. However if your objective was to amass a property portfolio, this would be pointless because you would then just need to sink your money back into the property market.

Possibly the only way to utilise more of your equity than you can presently afford is to sell your home and downsize your PPOR to something with a lesser price, and sink the remaining money into deposits on well-yielding investment properties.

Can’t say it sounds enticing, and the “discount” you would be cancelled out by the lost stamp duty money buying into it and paying an agent to sell it if you wanted to offload it…

Ah, yup, Doctor. Highly litigious profession. Asset protection is certainly relevant. Have you looked into a SMSF (Self Managed Super Fund) using a corporate trustee?

Hi Lloyd

I agree and disagree in equal portions. I agree that many folks get obsessed with asset protection when they are folks highly unlikely to “need” to protect their assets anyway. Too often the words asset protection are thrown around to frighten people who don’t understand them into believing they cannot step outside their front door without the advice of a lawyer. However I am not convinced that buying a property in own name with intent to transfer it to another entity is the go, since CGT and stamp duty would apply. It would be an expensive exercise.