Hi, why not live in one of the IPs?

Or defer living in the targetted PPOR until it's paid off then move into it? Eg, buy the house of your dreams/a tired house with good bones then use it as a rental, putting all savings into an offset acct.

Near the end of the period, [6 years], or in between tenants, do major renos, then when you're ready to move in, clean up , repaint & move in.

KY

PS you can do the same with a newer house & get all the associated depreciation & when you move into it as your home later, you don't have to pay back the depreciation.

Hi sheranj, I hope you know enough to shy away from people who offer get rich quick solutions.

Stick to your guns, you have already done very very well. The HECS debt is not a lot and will get paid quite quickly.

KY

Hi, my sticky beak bit.

You aim to have your wife not working. For that, you have to replace her current 30K p.a. which means you need to have $600000 invested. Have you considered that?

So your idea of buying a $600000 PPOR in Brisbane is going to put you backwards instead of forward.

Basically you will be no worse off but you won't be any better either. You are exchanging one for another, admittedly grading up in value.

From the posts on Queensland, I understand that it's not a bad time to be buying in Brisbane.

However, you really need to differentiate between investing & PPOR. Kiyosaki is right in that a home is NOT a financial investment at all. It is a liability, something that we all pay for to have a roof over our head and a shelter for our family.

Your position allows you to spend 600 thousand, maybe more, on property. Can you find something that gives you both a home & some income?

KY

Hi, my experience with lenders is such that I can probably write a book about how the banks decided that I didn't have the means to repay.

I take whatever loans I can get. Sounds like a broken record. When RESI said I qualified for a 500000 loan in 2000, I asked when do I get it, where do I sign? Remember back then, that was a huge loan.

The loan is less impt than our own knowledge of our ability to manage. I'm now on a 9.5% balloon loan [12 months] I took it cos I was supremely confident I could repay & I could make a return to justify the interest.

When I bought the commercial properties, I used the equity in the houses. The shops were never collaterised. The lender increased the LVR to 75% to give me more borrowing but they were so slow I used my cash savings. I was on high income then.

Back then, I didn't know that there was such a thing called a strategy for property investment. It just seemed the logical thing to do. And the cashflow from the shops was so strong that it was a stressfree thing.

I've skipped blithely from collaterising resi property to buy commercial & when the cashflow was established, I collaterised the shops to buy resi properties to subdivide & used them to get a business loan for the building.

So the most impt question is : is the commercial property worth buying? Then just take the best loan that you can get. Then work on getting to just above cf+ [usually through repayment]

Then sit back & relax until the next step.

Good luck,

KY

Hi, you probably need to form an opinion on how easy/hare it'd be to find another tenant. Often, the existing tenant stays on. The profitability of the existing business is the most impt. If the tenant is making money, he's unlikely to move. Even if he moves, he sells the business to another person.

Hairdressers are probably the most lasting tenants. My experience is this: I'd a couple of tenants who were rather laidback. She was paying rent on the dot but the rent hadn't been increased for ages. We had to put the rent up. She sold . The new tenant wanted a 17 year lease. His business is so good there's not enough parking for his customers.

The rent of the shop vs the neighbours' shops is also very very impt. You need to find out if the neighbours are paying $600 pw.

I'd a shop vacant for 18 months. The other one was leased in 2 months & we didn't have to drop the rent.

You're looking @ a fairly good yield on this one. Might be worth following up.

Good luck,

KY

Hi W4life, you seem very concerned about rate rises. The variable rates are so low it seems laughable to consider fixing & fixing for a year doesn't seem to have much wisdom. You're likely to pay the spread which is around 1.5% for 12 months just to come off the fix when rates go up.

The latest stock mkt jitters make it even more unlikely that rates will be put up soon.

KY

Hi, my variable rate is still 5.09% I'd decided earlier not to fix because I don't know when I'd sell.

My view is that rates will remain low at least to the end of this year. I don't do much until it goes above 8% and then I pay off large chunks of the principal. In absolute amounts, I actually paid less interest when the rates were high. The exception was last year when I had a very large loan.

Ajaydee 73, some of your pronouncements are diametrical to the views held by some very experienced investors. You might want to give that some thought.

KY

Hi, even more cheerful today cos it's been all good news. The cheapie stocks went up by double digits again.

House rented, good tenant. Shops rented, good rents.

To be fair, in my 1st 5 years of landlording, I never had a single default or late payment, across 4 properties in 5 years, only 3 weeks vacant for 1 property & that paid for by the tenant who left. I think it's because of the manager but he upped and away to Victoria.

Also, those properties were in a solid upper middle class suburb where the neighbours not to have front fencing so that they could help with the security!

So, we take the good with the bad. For me, FY09 hasn't been so flash but 10 seems to be stabilising.

Good luck, everyone,
KY

Hi, at least you have landlord insurance. I didn't even have that. And I had 2 tenants do that to me, not counting the one who never paid any rent & left $1500 worth of garbage removal fees.

The house is still vacant – explains why I sold 4 last year and have been buying shares!

I'm cheerful because today the shares are making up for all the tenant heartaches!

KY

Hi, you need to really pay attention to the 2 who suggest the same thing & here is a 3rd suggesting the same.

It seems that you don't know the full benefits of an offset account. What it allows you to do is to deposit whatever excess funds you have in a savings account & it automatically gets the interest at the rate of your mortgage. Your loan amount remains the same. This is very impt to you when you move overseas as the interest on the loan will then become tax deductible, even more so when you take on a low interest foreign currency loan. Your rental income will be taxed from the 1st dollar.

The loan amount is the determining factor in tax deductibility. You want to have as high a loan as you can.

Eg $300000 house renting @$300 pw on a forex loan of 2%, the interest = $6000

That leaves you with a tax bill of about 7-8 thousand on which you'll pay full tax.

I was in the same position once. I decided to take another loan to buy another house so that it zerorised the income from the 1st house. There weren't any offset accounts then. I knew nothing about property investing, just thought it stupid to work my guts out for a house only to have half the rent taken away by tax.

That was the start of it all & today I live on rents.

Do yourself a favour. Check the offset accounts. And if you can, borrow 105%, even if you have the deposit. Put the deposit in the offset account.

KY