Forum Replies Created
Hi,
Must confess I have had the same reservations in planning my aspirations of the long liquid lunch lifestyle, however I think Steve has just given us investment tools and it’s up to us to customise them to suit.
One way we’ve come up with is to form a small investing group and there are personalities in the group who aim to excel at landlording while others are aiming to excel at deal finding and analysing, reno’s and developments, finance, etc etc. We figure 6 heads are better than one, plus it gives us lots to discuss over those aforementioned lunches ……. !!
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MelAgree with Wilandel, plus add ‘Subject to building & pest inspection’ as that often gives you leverage to lower the price based on faults found at a time when the vendor is already spending the money in their head and normally eager not to relist on the market.
If it was an auction though, I’d try to get a pre-lim inspection and know top value beforehand because if your bid is accepted, you are unconditional in most states I believe?!
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MelHi Mini & Richmond,
In response yes Richmond is right about what I meant re over-exposure and as a beginner it’s heartening to see that he is being offered solid deals direct from real estate agents he’s met & developed a relationship with, further showing the huge advantages of making the effort to get face-to-face AND follow through as a genuine buyer of good investment properties.
Thanks for all your posts guys, learning a lot.
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MelThank you Steve,
I bought your book online Sunday, got it Tuesday and realised when I finished it Friday that I had learnt more than a $5,000 3-day course had taught me three weeks ago.
As a dreamer & budding property investor your simple but brilliant commonsense approach is a big breath of fresh air and I think like most people who’ve just read your book I can’t recommend it to people I know fast enough! Have no doubt you’ll be top of the charts in no time!! Sincerely thanks for your dedication and advice.
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Cheers,
MelHi folks,
The key reason for spreading your loans around is the ‘safety margin’ lenders apply to their own securities.
Eg Loan 1 with ANZ at 6%, repayments $1000 per month. If you want to take Loan 2 with ANZ as well at 6% for another $1,000 per month, putting down 20% deposit from equity in property one (but not cross-collaterising!), they will assess your repayment commitments to Loan 1 and Loan 2 at 8% (ie 2% safety margin over their securites) making theoretical repayments about $1,250 per month each, and assess your ability to service the loans at this higher interest rate, therefore significantly lowering the amount they will lend you.
However, if you take Loan 2 with Commonwealth Bank for example, they will look at Loan 1 as a $1,000 per month commitment only, thereby increasing the amount you can borrow for Loan 2.
Make sense? [
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MelAgree with rolls and Michael & Kaye,
If you cannot get a better OVERALL deal eg interest savings being higher than break costs and speed & quality of service to actually get you the extra funds then DON’T move to another lender, especially not just to line a brokers pockets – and I’m a broker!
From the broker perspective, generally after 3-4 years in the same loan the break fees are normally minimal, people’s circumstances have changed (earning more, gained lots of equity which they want to invest in IP’s/shares etc) and either are not in the right loan style for their objectives or given the competitive nature of the lending market there are probably lot better options around now.
A good broker will give you all the info to assess what option is right for you, without doing a ‘hard sell’ on any one option, because it’s your decision in the end. So stick to your guns and ask lots & lots of questions until you’re satisfied you are making the right choice.
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Happy investing,
MelHi Richmond,
I agree – as a new property investor it is too easy to fall under the spell of ‘too good to be true’ deals on the internet, and I saw those Rocky ones and tried to drag my partner up there from Brisbane yesterday …. !!
I think it was Michael & Kaye who said the internet was like a colt .45 – it makes everyone equal, and provides a great opportunity for selling truly shonky abodes to unsuspecting investors.
Happy Investing,
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MelHi,
Roy another good source of free demographics data is http://www.realestate.com.au – look under home price guide in the bottom left then use postcode snapshot on the rhs. Doesn’t have rents but has portion lending & loan repayment stats.
Count Redland 3 v Redcliffe 0 ……
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MelHi,
Providing you don’t have to touch it to do repairs/mods etc it’s okay so have it THOROUGHLY checked out by a builder who is experienced with asbestos roofing to ensure it’s intact prior to purchase. It will be a long term liability to consider as well, but a pretty common one for older places.
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MelWhich area gets higher rents? Know both from passerby perpective and from ‘feel’ only would go Redland for both CG and rent return.
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MelAre you the leasor or leasee & is this to borrow against or earn income from? I think development marketers and leasors do, lenders don’t for loan purposes. Could be wrong.
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MelHi curtly,
Basic variable principal & interest is probably the most common loan I come across for non-prop investors. Most property investors want portion fixed or variable with an off-set account to park spare cash that reduces repayments, plus a portion LOC which can be redrawn when needed eg to buy another IP.
Re sale price – location, location, location, but could maybe assume CPI as minimum, double in price every 8 years as maximum I suppose.
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Mel[
] – Hello Newbie’s! Warning – this site is addictive.Re dressing up for banks – with a clean or only slightly tarnished credit record you’ll get good loans, low doc or otherwise. The low/no doc market is fiercely competitive with lots of lenders offering reducing rates so that after 2 years you are on the same as everyone else anyway – eg ING, Macquarie. [
] ANZ only lend to 65% on low doc, lots of others will lend to 80%.Re interest only – the up side is your repayments are lower and your tax claimable portion of expenses is higher, the down side is you can’t stay I/O forever without refinancing and never own the asset. I think I/O is okay for short term holds, fix and flicks etc, rather than accumulating long-term passive income assets.
Happy investing [
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MelHi Darth,
I looked at a one-bedroom serviced apartment in Brisbane CBD with avg 15% return about a month ago but the problem was finance, not feasibility. The apartment was under 45 m2 living area (ie excluding balcony & carport) and hence no one would touch it. The other major hassle is that if you do find one big enough the banks are still v v reluctant as so many things can go wrong – eg owner HAS to replace the furniture, fittings and fixtures (eg carpet) every 3-5 years otherwise they won’t let it out, rooms get trashed and owner and management team have a falling out over who’s responsible and then they just don’t put people into your room, capital growth is often zip because of the lending restrictions hence the buying market is generally those with lots of cash (eg Singapore investor) but even if you have the cash, you’ll have trouble borrowing against the asset to use the equity elsewhere.
Every opportunity is different but this all certainly turned me off despite the whopping potential cash returns. Would be keen to hear others stories. [
]Happy investing,
MelHi Trisha,
It’s a big part of investing that dreamers like me tend to want to brush over so I’m happy to plug Steve’s new book – got it in the mail this week and am basically stunned at the huge amount of methodology he shares on just this topic … good luck and hope you can retire in 3 years, not 10 … !!
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Happy Investing,
MelIt’s 25 deg C in Brisbane [
][], and I’m about to take my mutts for a walk in the park with all the ex-Tasmanians wearing, you guessed it, shorts and T, then come home and prep for novice property investing group meet at our house tonight with Tassie investors I mentioned, might have more tomorrow on their deals … !!Re margins, totally agree after reading about 3/4 of Steve’s book so far today, happily aiming for the stars at 20% on residential and 30% on commercial … now where did I put the keys to the Landcruiser …!
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See ya,
Mel
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