Hi Matt

The concept of a I/O loan with an offset account gets thrown around a lot on this forum as the ideal set up.

And, in most scenarios…  it is !

As others have highlighted the benefits and how the structure works, i won't re-hash that…   what i will say but, is it all falls over is if you are not totally committed and disciplined in your savings…

Eg.  If you have 50K savings in your offset account after 5 years and you figure, 'hey, we are doing ok, let's go on that overseas holiday and blow 10K', you reduce your offset to 40K.   The next year, the offset account gets back to the glass ceiling of 50K and you figure 'hey, we are doing ok, let's upgrade the car to a nice, new, shiny one' once again reducing the offset to 40k. The next year, your back to the glass ceiling of 50K and you figure 'hey, let's spend 10K on a new house furniture package'….    

You can see the trap ?    After X number of years, you still have the same principle owing, and only have 50K in the bank, whereas paying P&I would have forced you to save the money that you'd spent on 'stuff over time'.

Matt

Hello Mate

PM Sent

Hi Matt

Initially, well done on saving such a significant deposit at your age.

I would defiantly recommend going via a broker. Both Richard and Jamie who have commented above would serve you well.

Have you thought about your long term strategy at all ?

Eg. Are you looking to simply buy one house and pay it off as quick as possible, thus living ‘mortgage free’ or are you looking to build a multiple property portfolio ?

My biggest advice to you, is answer the above question as early as possible, as it will define the choices you make going forward.

Matt

Hi Munmun5

From my understanding 95% of agencies will allow their sales agents to sell each other's listings no questions asked.

The commission split is generally 60% for the listing agent and 40% for the selling agent.

Some will argue that the listing agent won't try as hard to get a sale across the line if it's not their buyer because of the above…

From experience (I did do a brief stint as a RE salesman) most agents don't really focus on buyers, they tend to spend the majority of their time chasing new listings and are happy to wait for a buyer to come through an open home etc…  this approach always baffled me as you need both a vender and a buyer to collect your commission check.

So, general advice, is try to find a salesperson who you think will work hard to get the sale across the line once you make an offer (eg. probably not the type of agent you would list your home for sale with , let them know that you have cash ready to go, and then stay in regular contact. Eg. Call them every Thu and ask what new listings they have etc…

In regards to RE.com / domain etc 95% of agents will list on both. A few small agencies or independents may list on Domain only. From memory RE.com was about $800 per month, where as Domain offers a once off fee per listing for about $90 each listing.

Hope this helps….

Hi Ynchai

What are you exactly looking to achieve by paying your house off in full ?

If you are looking to have the house paid off in full so that you can move in to it, put your feet up and relax living life without a mortgage then Dave Ramsey has some really good ideas on debt cancelation etc   (www.daveramsey.com).  

Please note, he is American based so although his ideas for debt cancelation will work in almost any market, his advice around investing etc is very much based on an American tax system.

Having said that, if you are looking to build a multi-property investment portfolio and are comfortable having debt, then read Robert Kiyosaki's 'Rich Dad, Poor Dad' and start to educate yourself about all things related to property investing. Simply put, if you want multiple properties, doing everything you can to pay off the loan related to your current investment property, as already outlined by several people above, isn't the best approach to take….

I'd be asking a few more questions, yeah…

The plumber who did the job – what report / reason for the blockage did he provide ?

Hi icecric

Might be an idea to confirm your intentions with your PM as well.

If your property is either a studio / 1 bedroom you may achieve higher rent.

If the property is a 2 Bedroom +, having it fully furnished can detract from your property.

Eg. If you already own your own furniture, would you pay extra to live in a property where you couldn't use your own furniture ?  To take it one step further, where you then have to pay again to store your own furniture for the duration of your tenancy…

Matt

Hi Dennis

Yeah, there is two sides to every story.

First thing that comes to mind is that although time frames differ in each state, you can’t just ‘put the rent up’ without providing sufficient notice…

In regards to the current PM, in the same way that property values fluctuate, so do does rental values.

As mentioned previously, you can put the rent up by whatever amount you desire but you run the following risks;

1) The tenant moves out and then you have to re-let the property (vacancy period + re-letting fees if applicable)

2) If tenant does move out and your property is in fact ‘above market’ rent, the above mentioned vacancy period can become very long and expensive, and you may end up lowering it to below what you originally had it rented for in order to get a tennant. (Yes, i have seen this happen ! )

3) Tennant takes you to the tribunal and proves that the rental increase is not justified, and tribunal cancels your request and you have effectively destroyed your relationship with both the tenant and your managing agent.

Having said that, if an $80 p/week increase is justified – that's $4K per year your entitled to…  that'll change the numbers a heck of a lot !

One final thing if i can say;

(Sorry, but one of my real bug bears is the number of investors I talk to who either struggle with / or have been completely turned off property investing because of a poor PM experience)

My PM is my advisor, who is at least certified if not licensed in order to act in that position. 

I should not have to follow them up about a rental increase, routine maintenance or be asked the question ‘What do you think / want to do ?’

They should proactively follow me up at all times about all things that relate to the property, and ‘advise me’ on what action I should be taking.

If the lease is coming to an end, they should ‘advise me’ on wether or not a rental increase is applicable, not ask me ‘what do I think ?’

Yes, as an investor I have a responsibility to oversee my investments, and the final decision remains mine to make but there is a very good reason why I pay (above market pricing ) for the PM I have.

Hi Scott

I can keep you updated on what is happening here on the Central Coast as far as off the plan developments go.

Give me a buzz if your interested and we can talk further about specifically what you are after…

If the property is a good purchase (Eg. Cost, Location, Structural Condition, Actual Market Rental Return etc) i would still chase it, but only with the condition of vacant / delayed settlement.

Cheers