Forum Replies Created
Can you service the interest payments on the Property though;
If you spend $800k, and use $20K as some of the deposit, and finance the rest as Terry mentioned, you will have a debt on that Sydney property of around $780k – say $750k for round figures.
The interest per month, assuming an 8% interest rate will be $5,000.
With the other 2 properties, allow for a NETT rent after all expenses etc of around 80% of the rent back to you.
I would suggest that you move to Sydney and rent for a while first, then after you're established there and you know what your rent patterns will be for your Melb properties, then look at buying somewhere.
My 2c;
I reckon the only advantage of super is that it can be tax effective. Otherwise; it's the "investment" of the poor.
As Elka said; you lock away your money for years, the Govt is always fiddling with it, it's all linked to the shock and scares, and if there is a 1929 style crash, your retirement pocket money is pretty much gone, and you can do nothing about it.
Alternatively, the interest on your PPoR is not tax deductible, and if you use the realestate.com.au loan calculator, you can much around with the different amounts and see what the saving is when you pay more off the loan than your minimum repayments.
For example; on a $250k loan, at 8% over 25 years, if you change your repayments to weekly instead of monthly, and pay even just another $50 per week, the saving in interest is up around the $100k mark.
And you have access to those funds for more investing when you want.
We rent out our PPoR currently.
It is manged by a local agent, they charge 7% and have done a good job so far. They do a condition report onece per year, the lease is yearly, but you may decide to make it a 6 monthly lease. This is better for making more regular rent increases.
Our statements arrive via email, and the rent is directly deposited into our bank account.
They pay any bills for us, other than the insurance, and deduct them from the rent, and send the bills together with the email statements, as well as post us the hard copies.
Make sure you take out LANDLORD'S INSURANCE, this should also include public liability, but if not, take out that as well – $20 mill.
If you are going to do this for a long period, you can rent out the property for up to 6 years before you become liable for cap gains tax should you ever sell.
Also, look at getting a Depreciation Schedule prepared by a Quantity Surveyor for the accountant for helping with the tax returns. It can be worth a considerable amount of money your way.
zbfairlane wrote:LA sounds like from your post you think I have copped out and gone nowhere financially, You couldnt be further from the truth. And I still believe you cant buy happiness.No, sorry if it came across as a direct swipe at you ZB. It wasn't.
The fact that you are on this forum is a great sign; the majority of the population not only don't invest, but they don't even know these forums exist.
I agree that you can't buy happiness, but it certainly is better to be happy with some dollars in your pocket than with none.
It was a general comment about the poor, and how often they adopt a victim mentality, and have lots of back-handed reasons why they haven't/shouldn't/can't get rich.
They often like to make comments like they do to "let themselves off the hook" because they haven't accumulated any wealth. It's an excuse that makes them feel better.
Much the same as an interest only loan, except you don't have to draw down the total limit, and you only pay interest on the amount you actually use.
Most LOC's can be didvided into a number of sub-accounts for easier accounting between the personal use and the investment.
They are usually very flexible in that you can make unlimited draw downs; some have a minimum limit amount that you have to draw down.
You can pay off the principal in any amount and at any time.
Generally, the rate can't be locked, but I've heard that some lenders will allow you to do that now, except you can only lock in the amount you've already used, you can't make extra repayments on that locked amount.
You basically only keep the LOC on the amount left that you haven't used in your limit yet. Not much value unless you still have a lot of unused funds in the account.
I've done both.
About the only difference is the cost (conveyancers are cheaper), but I haven't needed a curly legal ruling so far.
It's a tax deductible expense, so if you feel more protected using the solicitor, then do that.
Given that most r/e agents aren't investors themselves, I think they find us (investors) a bit of a nuisance.
We ask questions that they don't know the answers to, we try to crunch them on price.
A good agent will have some investor knowledge, even if they don't do it themselves, and will treat you as well as any other homebuyer.
All in all, I would say they prefer an emotional owner/occupier that will keep upping their offer to close the gap with the Vendor's asking price.
One trick that you should think about using is if you want to offer low, then be prepared to go unconditional and on a short settlement (30 days) to get your offer accepted.
This will mean you will need to be super organised, have your finance in place and be prepared to pull the trigger.
Agents (and Vendors) do like that!
I've read all Margaret's books (several times) and am a big fan, and a Destiny Finance Client. The organisation is pretty good.
I have the St.G Portfolio LOC loan, and up until now it has been fine. St. G also have a high rental assessment towards servicability which is good (80% from memory). Current interest rate is 7.92% for the product if you are a Gold Client.
You can split it into as many sub-accounts as you need to keep the accounting clear between personal and investment. Each sub-account will incure a monthly fee of $14, or you can pay a lump-sum fee per year, which is cheaper.
As per Margaret's view, which is very pragmatic, she advocates only having 2 sub-accounts: one for everyday personal use, and one for all investment, which you can lump all the properties into together. This will minimise the fees of course.
Her software program allows you to split the interest and allocate it to each property.
This will draw criticism from the anti cross-collateralising camp no doubt. I don't know that there is any real disadvantage or advantage doing it this way, other than the fees.
You can adjust the llimits up and down accordingly when you buy and/or sell a property, which makes the whole loan process easier, and just pay the loan stamp duty difference, or get credited it as the case may be.
The only problem is you will probably run out of servicability at some point, which we are experiencing now, but this was due to a land purchase that has no income.
So, it's time for us to switch banks; again. Pity.
Very dangerous to do that I believe on an open forum.
If someone asks about a particular person's service here, and it happens that you've had some experience with that person already and it was negative, then send them a private message.
There's too much negative and personal attack comment on this forum already.
By all means give thumbs ups where warranted of course.
zbfairlane wrote:By the way I totally agree with your comment C2. Happiness is a state of mind and therefore cannot be purchased. Nothing wrong with having lots of stuff or even having nothing, you can still be happy.I hear that all the time from people with no money.
It's a cop-out; they're saying that they have given up trying to get rich.
Having been on both sides of broke, I can tell you that it is MUCH better being happy with money than without.
Being poor sucks.
And it's a myth that rich people "aren't really that happy". They are. This is just another saying invented by poor people who have given up, trying to justify their poverty to themselves.
C2 wrote:Cars can be just as good as an investment as houses if bought and sold the right way.
Tell us more.
I guess you could do the auctions thing; go to the auctions, pay a bit less than the car dealers buy them for and then sell them on ebay or whatever.
Does anyone do/has done that?
Were those vehicles you mentioned appreciating in value each year?
I wouldn't be selling the PPoR. I'd be using it as an IP.
Putting money into even a high interest saving account like say ING Maximiser (7%) will erode your capital through inflation and taxes you will have to pay on the interest you earn. Your money will go backwards.
If you have access to a place to rent for $150 p/w, and you can get around $250 p/w for yours, then this is a good position.
Most people are totally against using their PPoR as an IP because of the emotional attachment.
But the benefits are attractive; to rent, your outgoings are minimal; some contents and pub/liability insurance plus the monthly gas and power bills. No rates or building insurance. That's a couple of grand saving approx no doubt.
On the flip side, you both earn good incomes and no doubt pay a swag of tax. This is money down the drain.
With your PPoR as an IP, all the holding costs are tax deductible; the insurance, rates, loan interest, repairs/maintenance etc.
Also, if the property was built after 1987, then you can depreciate the bulding and the fixtures, and these are on-paper tax deductions. Can be worth a considerable amount of money (thousands) back to you in tax returns.You can also rent out your PPoR for up to 6 years before it becomes liable for capital gains tax (we rent out our PPoR currently).
This would give you an automatic IP, and if you change your loan to an interest only loan to maximise the cashflow, you can still pay down the principal whenever you want.
Novo30 wrote:Hi DucksterI guess I will go with "A low wage earner would look or aim to buy a lower priced house so that the rental income is greater than the holding expenses" thanks for pointing a few things out though
Is the book "From Zero to 130 Properties in 3.5 Years" a good read? I was thinking of purchasing that one
Novo
it's a good read, but keep in mind that the real estate market is totally different now.
You will find it difficult to find sub $100k properties with 10%+ yields in areas of good cap growth.
Talk to Michael Sloan at Destiny Financial Solutions. I've been with him for a number of years.
he's on holidays at the moment, but ring and talk to Steve Richards in the mean time.
ph: 9488 2288That's ggod news!
So what are you going to do now?
islandgirl wrote:I think what you really need to work out is why are you investing. What are your goals and what do you want to achieve. No one will be able to give you any meaningful advise unless you have some expectations/goals you want met. e.g. do you need increased income, do you currently have suffient income for your needs and are investing for long term growth. Where do you want to be in 5 years, 10 years etc.Go to the local library and check out books such as Steve Mcknights, Michael Yardney, Jan Somers, definately Robert Kiyosaki. Visit investment sites such as this one, somersoft.com and invested.com.au All have very helpful forums.
reason to invest; TO MAKE LOTS OF MONEY; PREFERABLY FAST.
Is there another reason?
millions wrote:L.A Aussie wrote:millions wrote:I remember seeing a property on the market for about 2 years. The owners ended up having the bricks, windows, etc painted white and roof and gutters dark grey and then it sold straight away.Did it sell for the asking price?
Could work, but what will probably happen in a town like this is the cost of the changes will not be reflected in the sale price. All it will do is make it more attractive to look at.
Hi Marc, they put the price up $10k and got it. The new owners sub-divided the block and when they put the original house on the market it sold again within weeks. It was a very dull house on a main road in unpopular suburb, close to industrial area but after the paint job it looked quite cute.
Good result, but not a good comparison for Geoff I think, unless his block can be subdivided? That would an attractive feature.
I think with my investor brain far too much I'm afraid.
My thought was to forget about the renos and keep the Darwin property and just plug away at the PPoR loan as best you can.
To sell the IP and use the funds for the renos and better cashflow is not the best financial decision in my opinion. A lot of people do what you're planning, which is a short-term gain, but they are stalling their long-term wealth creation plans and many never buy another IP again.
But, you need to have a lifestyle as well, and there is no shame in taking profits. At least you would be re-investing the profits back into another investment (your PPoR) of sorts.
Maybe sell the Darwin property, put all the funds into the renos and the existing PPoR loan. This will cut down the non-deductible loan to a degree, and you can then re-draw some of the equity towards another IP a little later.
It'll mean you will be using more/all borrowed funds for the next IP rather than a cash deposit, but if you buy well, maximise tax deductions and depreciation, and considering the loan interest is tax deductible you should be able to easily eclipse what you would pay out in non-deductible interest on the PPoR by not using the cash as a deposit.
I wish Aus had no land ownership for non-Australian citizens.
But hey; we would be racists then.
morts wrote:Got a score of 4,320. I see this as a neat, simple tool designed to get you thinking about how you live and how the choices you make today can impact into the future. Also, don't forget that nasty little thing called CGT!Cheers
M.
Only if you sell.
