Forum Replies Created
LVR's are not lower??????? How about a 100% loan + costs………….There is a way around everything.
LVR's are not lower when you on-loan to your SMSF (using an on-loan agreement). This may be done by taking equity from your PPOR, investment property or like. The SMSF is then liable for your interest rate at market rates i..e. personally you will make a small profit from your SMSF due to the market rates of super loans, being higher then the market rates for a typical home loan.
Once you have paid down a mortgage you can never increase they value of the debt unless the property is sold to another party. i.e. you end up with a low tax deductible debt on the investment property and a high non tax deductible debt on your PPOR – This is not ideal.
Structuring yourself from the beginning is very important, I am yet to be convinced of a good reason to have P&I. Big mistake from the outset. i.e. you should always be on I/O with an offset facility.
Three good reasons for I/O:
1. Access to equity for a deposit for future investments
2. A buffer against foreclosure in times of desperation – no employment etc
3. As mentioned above the ability to maintain a good tax deduction.Is the property in one name? . If so, Providing client 2 can service the loan, they may purchase the property from client 1. The refinance will increase the debt for client 2. Property transfer b/w husband and wife attracts nil stamp duty. We now have a large tax deductible debt……..
There are lots of scenarios that may be played out.
It is very difficult to understand your situation from the limited knowledge of your personal circumstances.
Hold on………
So we are now saying that a person who receives a mezzly 9% from your rent can and will look after your property better then you.
I have had the opposite experience, the managed properties where painful and my self managed were fantastic. It's how you manage them……..
I also have a rental property at Quakers Hill.
Have a plan of your own.
Importantly, remember that you have one property. There are a lot of people out there with NIL. As goes for every-one's situation being much better then yours. I see Clients every day, you should here the other side.
Stay strong………..I had a $400k equity release settle two weeks ago….. The process is not a certainty for everyone.
Buy one get your head around it, assess and go again, You should never take yourself to the credit limits. Where is your buffer if the market goes to shit and unemployment sky rockets? (I am not predicting this devastation, but lean on the side of conservative, and you will be able to play this game for a long time). Don't get struck out with one bad innings.
Always buy property, but buy at a steady and calculated pace. If the market travels south and you have money in your pocket, then you can buy again, If the market trends forward then you are still a winner – they call this methodical approach "dollar cost averaging" .
I once spoke to a Dr who pulled all of his money out of the stock market just before the GFC. I asked him, where did he get your foresight? Response: " I am not greedy, Once you have enough money, that is all you need" I am not suggesting anyone is greedy, but we sometimes tend to be to certain of ourself because of something we read or hear.
Property is an opportunity, not a certainty – and that is the way it should be played. Property is not about getting lucky (well, it is for some, but it is more about getting smart).
Conclusion: One property now, One property when the figures look great again!
Welcome to property!
With that amount of income and deposit you sound like a conservative investor. Witrhout knowing your personal circumstances it is very difficult to assess you in a manner that would be just. Many people write on this site thinking they will get the solution to investing in a paragraph. Financial advice for the most basic of my clients takes an initial 3 hour consultation.
The following gives you an idea of the complexities of financial advice (this is on the most basic level).
- Plans in relation to health, income insurance, Trauma, Life/TPD (term or whole of life)?
- Asset protection-general insurance (house, contents, Liability, Indemnity etc)?
- Tax Deductible Debt v Non Tax Deductible Debt
- Fee’s and charges charged by banks and other related industries?
- Your own home and tax benefits- Owner occupied exemption, CGT exemptions
- State and Federal Grants for homeowners.
- Mortgage Broking concerns- interest rates, variable, low doc, LOC, fixed (short v long-15 years), 100% offset, investor loans- tax deductible set up, Records to keep for tax deductions, Consumer credit code, LMI, Capacity
- Purchasing costs of a home- government search, conveyancing, P&B
- What is capitalising interest? Sub accounts?
- Are you in the property business?
- Business structures, Sole trader, Partnership, Company and Trust ( Bare, Discretionary, Unit, and Hybrid).
- How does A= L+OE apply to a property business?
- Why would you buy a house in a trust? This is often not good contrary to the latest hype.
- Investment property seminar –interstate, are they deductible?
- The benefits of Holiday homes.
- In who’s name for taxation and capital gains purposes?
- Is interest payment tax deductible prior to a house being rented out? What about repairs after the property has been tenanted for income purposes?
- Land tax- name on title, joint tenants, tenants in common, % effect v taxable income v Capital gains tax
- Joint ventures?
- Expected rate of return v inflation (opportunity cost)
- Commercial v Residential v Public Trusts v Syndicates v Trust
- Do you want to retain your present home/ what are your house plans or areyou planning to move within several years?
- Rent v Buy, Shares v Property
- Employment situation and taxable income?
- Non -Tax deductible debt: credit cards, hire purchase and leases of domestic nature. What effect do these have on your mortgage or loans available?
- Depreciating assets v appreciating assets – What are these?
- Free cash flow- How can I improve this situation? How do you structure yourself to afford more property.
- Income Tax Brackets and Capital gains Tax.
- Age profile and the ability or risk that may be taken?
- Should I pay off my home?
- Mortgage repayment calculator? What can I afford to repay?
- How can paying off my home be accelerated?
- Negative v positive geared, The upside and downside to both of these?
- What is OPM, leveraging, equity, and collateral?
- Where to buy, unit/house, rental yield, new/old, price range, pool etc
- Management issues with properties. How to avoid these?
- Can someone house share with me to help pay the mortgage?
- Strategies and tricks?
- Co-owners with friends is this a bad idea?
- Depreciation v Repairs v Capital Improvement
- Loan cost write off
- What is the Cost base for CGT and the trigger date?
- How a line of credit can be so wrong?
- Pre-paid interest and variation to PAYG ( form 1515).
- How Lenders Mortgage Insurance (LMI) is of no financial concern.
Sorry, but this is Why you cannot have such a large open ended question solved on this site. A question such as the above will get a response that may cover only one of the above topics – If you went away to make a decision based on one, two, or even three of the facts above then you are short changing yourself and the ability to make a valid decision for your future.
Have you taken the equity out of your property in case the market trends backwards????
Protect your assets with all the cash that is available and then invest the excess.
Mortgage Insurance is a means to an end. All businesses have expenses – In this event your expense is the LMI.
Borrow the LMI and this expense starts to look like chicken feed. e.g LMI = $3000 (interest charges = $180 p.a @6% – marginal tax rate = 31.5% , after tax cost = $123.30 = $2.37 pw) Now if one cannot afford this money then one should not be buying a property??????
Think and calculate the numbers for what they are……..
You have plenty of options just don't waste them.
Dale,
Sometimes life is about making money and sometimes it is about just living for and with your family.
Although investment properties on paper my slightly outweigh purchasing your own property. You have a family that must come into consideration. I like to look at both sides of any decision – the PPOR (your own house -castle) side of the equation looks like this:
1. No capital gains tax.
2. A real family home to grow and nurture memories.
3. Peace of mind – you cannot be evicted. (stability with schools, friends etc)
4. You are able to make it your castle – gardens, lawns and all the other good reno's.
5. No tenants and pressure of an investment.
6. Your rent reduces over time (i.e. your loan does not go up)
7. There is no place like home…………..Look, we all love to make money, this can be made in your own home.
You can literally create money in your own back yard then leverage of this down the track to purchase investment properties where required.
Why not? But always have a back up plan – "failing to plan is planning to fail" .What is your worst case scenario when property prices go south????? i.e. What happens when the price of your investment drops by $150k. Think not about the money you can make but the money you can lose. Plan your strategy from this point. This does not mean avoid this scenario. But structure yourself well with the right investment advice. http://www.birchcorp.com.au
Debt to service ratio is the common name = Total financial commitments / Gross Income x 100 = Lenders like to see desired max. at 50%. YES you are correct.
As a first timer these statistics are a little irrelevant, learn some fundamentals – What you are describing above is called equity release, in principal your thoughts above are correct. (fundamentally you are not using the same deposit but releasing the equity – capital growth). There are many skills and tricks you can learn, get it right and you get to retire young. Get it wrong and pay off your home at 50-60 and retire later like the rest of Australia. http://www.birchcorp.com.au
Although rates and fees influence a decision don't let them direct you into a particular bank. i.e. if you used CBA what is your loan capacity on the next investment property if you choose to use the same bank????? You will find that CBA can quickly cripple you – too conservative v other lenders.
A couple of rules to simplify all above:
1. Interest is calculated daily on the outstanding balance (and billed monthly).
2. You are only as wealthy as your assets. By not using all your deposit as suggested above, you can purchase more appreciating assets. i.e. using 8% growth of $200k is $16k p.a , 2-properties = 8% of $400k = $32k p.a property growth.
3. LMI is simply a fee. If it costs you $3k – who cares, capitalise this charge, you never pay this back so your cost is the interest each year. When you are on $32k pa compounded – above example, then paying $126 pa after tax in interest each year will not effect your bottom line…….. approach the concept of wealth with an open mind. Some people never get the above and many other simple concepts that can shortcut your retirement……… Enjoy your first lesson. http://www.birchcorp.com.auLook for the positives of your situation, can you become a partnershp at general law? Have you created two land tax thresholds with your significant other? Trusts are good – but remember they also have a lot of negatives – loss of negative gearing, loss of land tax thresholds and acccounting and auditing of the structures. Do not get to hung up on someones wealth creation strategies. Make your own with guidance where required………. http://www.birchcorp.com.au
Drop me a line or text at http://www.birchcorp.com.au You are after a Mortgage broker when it comes to loans, and a financial adviser when it comes to (as the title says). An accountant is not licensed for the required information you are after. we could starighten you out with a chat on the phone……. Regards
I require more detail then is possible here, drop me a line or text at http://www.birchcorp.com.au and I will be able to give you some guidance.
Everyone will have a different story to creating wealth depending on their own personal circumstances, my story is also unique, it works and is also not for everyone i.e. what is your career / employment. How much time can you devote to work and family? I can tell you my story but you trying to replicate will not work… I was a teacher for the 12 years to create my wealth….. the questions are what are your own personal circumstances (please do not answer) and what spin can you put on these to create the best possible outcome. Do not copy that plan that is provided one individual but take on board the concepts and straegies to enable yourself….. Use this website and many other sources to equip yourself, and you will find your story will make others listen in years to come…… Keep it simple and take small steps. Serviceability – teaching as is required,
But I have organised / planned (released equity) so I will not work for a long time. http://www.birchcorp.com.auI worked inside a SMSF firm that did this, I am a Financial Planner and a Mortgage Broker. The process is easy, but is a little complicated to explain without pictures etc . The banks are on board with this space so it can all be processed well. The trust deeds and property custodian Trust are also purchased at a resonable price as opposed to early 2008 (infancy stages). It requires a little bit of auditing and accounting, but these prices have also come a long way. This is a long term plan that should be carefully thought out. The banks require a little advice (sign off from a financial planner). I am located at Castle Hill. Organise a chat sometime at my expense, your travel time. http://www.birchcorp.com.au
I am glad we are on the same page. Cheers
How about the fact that that Yardney has buyers agents in specific areas of Sydney?????? You are either restricted to certain suburbs or the agents will be buying a property from an area they no very little knowledge about…. Choose your location first, do a little research as you have done here, then a simple pros and cons table with guidance from people at this site, friends, family and other property investors…… This is all free, after all, you are in this game to make money not to hand over a large slice of your pie on day one. Learn how to spot a deal first hand, then when you have this get yourself a buyers agent to do the running around…. But always work the numbers and the critical thinking yourself…. Buyers agents should be nothing but scouts (used only when you have mastered this property game first hand )…. Not your brains…
