Hi Nan,

Understandably, everyone with a loan wants to limit their interest expenses. I would NOT choose to fix my rate unless I couldn’t afford another interest rate increase. Are you trying to “time” when to fix interest rates because you cannot afford to pay more or because you are hoping to fluke some interest savings? I am thinking that you may just be looking for clever ways to make a saving. I admire that you are thinking of ways to increase your wealth. Your entry hints that you yourself may believe there to be another interest rate cut so your gut may be telling you to ‘pause’.

I know many who have lost a lot of money & options fixing rates (the rate decreased afterwards). Only the ones who fixed for “security” were still happy about it after the rates decreased. They fixed their rates as an insurance policy against their inability to pay out further loan expenses. They crystallized one expense payment by purchasing some peace of mind.
* Yearly interest payment: $25,000.
* Couldn’t possibly afford interest payments to be above $30,000 (annually – for the next 5 years).
* Fixed the rate at a figure below $30,000.

If you are thinking to fix your rate to insure against your inability of paying higher interest expenses, then please look at your overall expenses before you fix the rate. You may find substantial savings in other areas before taking this crucial step.

Cheers, more health & wealth to you.

• This reply was modified 8 years, 4 months ago by  Pimobpi.

Benny wrote:

4. DON’T be in a hurry to “get into SOMETHING!” Spend some time getting educated before buying anything.

Hi,

As usual, I very much agree with Benny’s advice.

There is something worse than being a procrastinator & that is when one becomes a pre-crastinator instead.

A pre-crastinator is a loose term used for people who are afraid of being a procrastinator & therefore jump into situations “too early” just so that they can cross it off their mental list. It mostly ends up being a wasteful decision & sets up a losing situation as they have not given themselves time for education, time to digest the knowledge, not performed idea mental stress testing within different scenarios. They don’t give themselves the chance to take full advantage.

I am not saying to act on important decisions right up to the very last minute of a deadline eg: do nothing, do more of nothing, then decide to buy a property on the same day that it’s being auctioned. What I am saying is, committing to something prematurely will eliminate the chance for the Universe to offer you a more advantageous situation as the act of committing will end that time line for you.

My best example of this is: do not order fries (at a fast food restaurant) until you get to the counter. It allows for a better chance that a freshly cooked batch of fries is made available when your entire order is fulfilled. lol, I hope you got a laugh – I always use silly examples. It makes me laugh when I read back through my entries & feel embarrassed of what I’ve written. :) I hope you get my meaning though.

I am a believer that “inaction” is not “doing nothing”. Inaction is when you’ve educated yourself & feel like it is not the right time now to make a move. I like the expression “Invest as soon as you can”. Most people concentrate on the word “soon” & they think that it means to invest right NOW. I have to disagree. The emphasis of that expression should be on the word “you”. You are the one that has to be ready & once YOU are ready to buy then DO IT!

Keep well & heaps of wealth to you.

• This reply was modified 8 years, 4 months ago by  Pimobpi.

Hi Brett,

I feel that if NG changes are made, it will be a loss for both:
a) the home buyer who became an investor &
b) the future hopeful home buyer.
I feel this way because there is at least one other dimension to this problem that is never discussed………………although its presence is not hidden from view & has always proved prosperous.

Changes to NG without seriously looking into all possible outcomes is very careless & irresponsible.

Policy tweaks may temporarily create a different outcome but tweaks also attract the “game changers” & encourage them to re-organise & snap the system back into its original momentum (which always ends up advantageous for the wealthy). The difference here is that the “wealthy” are not affected if NG changes are made or not. The only 2 affected groups are:
a) home owners, that have since became investors, that are now risking very much to become wealthy &
b) hopeful home buyers, that want a home & then most likely want to be an investor and take risks to hopefully one day become wealthy.

We are really the same group of people at different stages in our lives however there is resentment towards investors. It is an “us or them” mentality designed to give the illusion that only one or the other is to gain. The reality is that it is a closed circuit & both symbiont’s gain off each other. There are circuits everywhere – Renters are valued customers of property owners & those very same property owners are the valued customers of banks and so on.

Eventually the people/organisations that have the power to snap systems back into place which continually put the true wealthy at an advantage will do so accordingly (no matter what policy changes are made) & the ones who suffer the most from this “snap back” are the ones who are least able to bounce back from the initial strain & loss ie: group b) trying to buy their 1st home.

The rich get richer when – group a) is impacted & investing stops & therefore group b) cannot ever promote – the poor get poorer.

Remember, the wealthy are who hire & fire. They are neither good or bad, they are both & they never lose. Changing policy does not change this system for the better, it can only get worse.

I hope I’m not making people feel like I am referring to a conspiracy or anything weird like that. I just see this as an obvious truth to life that’s not discussed very much.

Cheers.

• This reply was modified 8 years, 6 months ago by  Pimobpi.

Hi PeteJackie,

I loved your question, it’s been a few hours so I wanted to reply.
Pardon me if you wanted a quick reply, I hope mine is of some interest to you.

I am in IT & also in the Property Development business. I make mistakes all the time (in both industries) but I am quite successful in both too. Most of my failures are not disastrous ones because I pay people to do all the critical work in Development that requires strong Maths & English skills etc. I love science (cosmology mainly) so that knowledge/skill has not really been a cross-over skill that I can take advantage of…….until we all live on space stations. :) Most of my mistakes have been from not always figuring out what it takes for people to put my Development Project on their highest priority. I don’t have that issue much any-more, I’m better at looking for what interests people & I try to give them that very thing. (Sometimes it’s not about giving them more money, sometimes it’s genuinely about making them feel valued…….however giving people more money usually does the trick lol).

I consider Developing as “who I am” & it will always be part of my life (even when I can’t develop). Most people look at empty open spaces and see beauty there, I have to pretend that I see beauty in that open space because I’m actually feeling a different type of beauty. My mind is working at full speed thinking about what I would want to create in that location & why I don’t see it there already. I think that Development is mostly about people & the interaction with them. What subjects can your son choose in Yr11 & 12 that helps with that?

Subjects in beauty colleges can help people become good hair-dressers but which subjects teach these same hair-dressers to be great with clients & to listen to their client’s life issues when doing their hair? (maybe hair-dressers share some qualities with therapists). Would a future hair-dressing student pick a subject in year 11 or 12 that will lead them to be a therapist? Probably not. The therapy part of the job is not really the “job” for them at all, it’s about the hair – hairdressers would certainly not have the recognized credentials as “therapists” and yet hairdressers do it daily. This trait may help separates the good from the great hair-dressers. Is it measured & how is it learnt? I guess it’s measured in return business (thus “success” is the measurement & not the trait itself).

It seems that most of my time is taken up by looking/deciding on floor plans, reading through legal documentation etc but in reality (and after I purposely accounted for everything that I did during my day by writing it down & also recording it) it turned out that most of my time was spent discussing & establishing partnerships/networks with people. My mind just didn’t recognize all that time spent with other people as being categorized as “work”.

You, as parents may hate my next sentence: I agree with your son – he is right & he can be a Developer straight from school & I’m glad that he has that approach because it is a different approach to how most others would view it & he needs to think differently to most others. A bit like how Steve thinks differently to most others that are on this site. That difference probably explains why he is the creator, successful & writes the books etc.

Will your son be a Developer that buys, builds, creates, etc from the start of his career? No, he will not, that will come later….but when is a scientist a scientist? A scientist can be a person who, comes up with a theory through experimentation & observation. The Theory can improve over time but scientists are scientists because of their actions of “experimentation and observation” & not because they are experienced or not. A scientist knows what they are because of how they go about doing things. It can be the same for your son as he goes about doing things as a Developer. As you know (being Developers yourself) buying is not the only part to Development. The non experienced scientist has to overcome that they are competing with more experienced ones but that is the way of the world & in any career. Money or experience does not stop a developer being a developer. We all started with our 1st development.

Your son can start from the inside out & find a “fellow” Developer who is willing to mentor him (if cannot attract one then find out what service a Developer desperately needs & he should think about finding a way to provide that service to the developer). Your son can look at empty blocks (that are owned by developers) and figure out any advantages that they can pass on (free) to the developers. As you can see my recommendations are for him to branch out and find other Developers rather than to start Developing with his parents. My reasons are because he would then have the combination of all your skills & knowledge to work with when he is ready to Develop. (A much stronger position to be in for an up and coming Property Developer). Branching out improves many other skills too. Being too safe, can stunt our children’s ability to leap forward & surpass our own limitations. I think that this is because that very safety is usually used as a “net” to catch them when they fall as opposed to it being used as a “sling shot” aimed directly at capturing success. Offence sometimes being the best defense strategy.

The council, accountants, law firms don’t care & they don’t know that your son hasn’t started a development yet – they will give him the same answers as they give everyone. The more he talks with them the better he’ll be at asking the right questions & the more confident he will be at that. Also, he should take note at how he converses with everyone (not just professionals), take note of what works & does not. He should also listen to what he is telling himself. This skill (practiced early) will help him in future figure out what is preventing him from taking action or what’s making him take action without thinking through first. He can work on how to persuade people without manipulating them – that can be done in everyday life. Recognize, that it’s not a one person job.

All school subjects will help him to be a great Developer (English: for reading comprehension, Maths: to understand angles in plans etc, Legal Studies: to assist with contracts etc) but the thing that I think counts the most is to get the support from his friends & from his family. I can already see your support & I applaud you for that. No one can do it on their own – Developing is a business and needs to be run as such but remember that the business is run by humans so it’s going to have pleasure & pain. He needs to surround himself with people who will be successful by him becoming successful. Surrounding himself in this way is the first “networking” skill he should accomplish.

My suggestion is for him to study subjects that he naturally loves because they will not seem like an effort & school was not meant to be torturous. He should use whatever subject skill that he loves learning about to compliment his Development business. If he is good at Maths then he can help his Accountant etc. If he’s better at something else then apply that other skill. Remember, he may be better at Maths now but become interested and better in Design later on. It’s something to be left open so that he can grow into it. Drafting was very different when I first started my career. I had no interest in it back then….but now I enjoy some Drafting work. I’m sure that I may even someday be able to learn how to bake (my pavlovas always sink in the middle)!! My belly successfully develops after eating lots of Pav. *grin*

Lastly, (if you have read this far!) – don’t forget to tell your son to look up the many entries from “Benny” on this site. Everyone here are tremendously helpful but Benny goes even further than that, he is a master at finding tonnes of older replies (that are relevant to people’s situations) & then sends them the links so they are always one click away from their solutions. Priceless. (The benefit is like reading 100’s of books but only really needing to read a chapter or two from each book – how do you easily find what you want? That’s Benny’s skill – he is also the site moderator so I have to be nice to him. lol. My skill is keeping everyone’s mouse scroll wheel well oiled.

Cheers & more wealth to you & to your son.

• This reply was modified 8 years, 6 months ago by  Pimobpi.
• This reply was modified 8 years, 6 months ago by  Pimobpi.

Hi Bla,

It’s great to read that you are putting your money & your mind to good use. I’m pretty sure that I was playing with my Sega Dreamcast video game console at your age.

I tend to agree with you about Sunshine, it has done (and probably will continue to do) extremely well over the years.
There has been a big shift in attitudes regarding its prospects. I don’t think that it was easy to predict how well that property values have risen over there & in other locations.

I think most people thought that “empty nesters” would sell their homes and downsize closer into the CBD (live in cbd apartments), thus leaving their homes for new home buyers – but that did not happen for the most part. The cbd now seems over stocked, empty nesters are subdividing their larger blocks, still living in their dwellings & selling off a smaller parcel of land to other home buyers. Some empty nesters build a dwelling on subdivided land, others sell empty block(s).

Obviously I am generalizing but what it does show is that an investor/developer, that has been involved in the property industry for decades, has a similar chance as “the new comer” of becoming successful through property. But……this is not the case in reality, is it? Investors/developers with the experience & wisdom seem to succeed more often. There are many reasons why but one reason for this discrepancy may be because the empty nester bought their property before its value shot up & they have had an opportunity to capitalize on the back of that fact. They are creating wealth from thin air. They did nothing more than to give themselves that chance to succeed. Some are very smart & wise people – others are not. IQ does not matter very much – wealthy people just think differently, not necessarily smarter.

By your admission, your current place has had a value increase so it’s not something to let go of without being sure that you are going to better it. Are you able to buy in Sunshine & evaluate this 2nd property whilst still owning the currently owned property? If so, you will have a lot more power than always moving all of your eggs from one basket to another. If you cannot afford to own both, ask yourself “why” and work towards giving yourself a better chance to owning both…….& then owning more. I don’t mean for you to over leverage, or to over extend yourself with loans, I am saying that you should hold onto the success in your life. By all means, get rid of non-performing property – however you should accumulate “performing” property because that’s your end game. You are the only one to judge whether you have a “performing” property or not. Does it get you closer to your goals?

I can say that I’ve had properties that went up in value & then seemingly stagnated in value for 5 years & then went back up in value again. In reality these are false conclusions, property is not very liquid (thankfully) so my property could have lost in value (for a time) but I just didn’t know it. If I sold during the 1st “sideways” movement then I would have missed out on the biggest value increases to come afterwards. Like everyone, I love that property values increase but my next comment is going to sound very strange & many readers may raise an eyebrow or two after reading it……..: I also love the “sideways” movement with respect to property.

It is the sideways movement that makes the property affordable to an entirely new group of buyers. Then the property values shoot up after this new group buys & values again go into a sideways movement for another new group to catch-up & afford it.

Buying in suburbs that have already increased in value makes you one of the “new groups” that I am referring to. It just means that the most time has to pass for this new group to wait out for another value increase. If the “new group” buys & then sells before the property has a chance to increase in value then they could be setting up another identical situation of perpetually “missing out”.

Anyway, I think that I write too much & go way off topic with my replies but the members on this forum are super polite & have not kicked me off it yet. Apologies to everyone that prefer the simple / logical replies, they’ll have to skip my entries lol.

Keep well & good luck.

Hey Benny, thanks for assisting & for providing the useful link.

I must be giving out incorrect vibes. The “available equity” LVR subject was clear to me from the beginning. That is not where I wanted further assistance but I appreciate your reply about that topic. I understand that many property owners have equity but only 80% to 90% of that equity can be made available to the owners. Banks like/need to retain 10% – 20% of equity for their own protection purposes in case of defaults or whatever reason. Corey was alerting Liz to the fact that her equity may not necessarily be available for her to extract & to make sure it was available equity. All good there.

The clarification I seek is “could there be future tax problems if the extracted equity is deposited into her Offset account? (considering that her Offset account may be used for a mix of investment & for personal uses)”. My opinion is that tax issues can arise if Liz plans to deposit the funds into her offset account instead of using a LOC. I came to this understanding from the info below:

I have separate tax advice & there is also similar tax advice on this forum:
“it is possible for investors to borrow extra & to have the cash deposited into an Offset account but………better not to do this as investors will run into tax problems………Use a LOC instead”. And, “equity is better accessed through a LOC”.

Now, if LOC is a better way to access the equity……that is what prompted me to ask whether Liz should access her available equity by depositing money into her Offset account (using Offset is how she is planning to do it & she is asking whether that makes sense) or whether Liz should have be given advice to setup a LOC instead?

Liz asked whether it makes sense to increase her investment property loan & to leave that money in her Offset account. This is not my question, it is her question.

From the info & advice I provided above, I believe that Liz should have been advised not to place the extracted equity into her Offset account (unless she could prevent running into those future “tax problems”). She didn’t get that advice from Corey & I wanted to know why. He is obviously a specialist in his field & everything that I read from him is helpful, I respect him a lot. I just wanted to know if Liz should access her equity a better way.

Lastly, I appreciate your comment about it being good for me to ask questions whenever I need clarification. I would also like to say that I don’t mean to annoy any of the members with my questions. I’ll try to do more reading on the topics before I write entries.

Cheers & thanks.

Hi Corey,

Liz does not indicate how she uses her Offset account. Perhaps she only uses it for investment purposes. If so, I don’t see issues.

Are there issues if she used her Offset account for personal purposes? (Considering that the equity released funds are also located in that Offset account).

If Offset is used for personal, wouldn’t it be prudent for her to setup a LOC instead & not put the equity into the Offset? She could then use LOC whenever the purpose is for investment & use Offset whenever the purpose is personal. It will still release her equity (subject to LVR requirements that you have given).

I understand that accountants can work out the apportion calculations etc whenever there are mixed withdrawals however that takes time & money to complete. I also understand that LOC interest % are usually slightly higher than other investment loan interest %.

I apologize if I was again unable to clear up what I am getting at. It must be my current level (or lack of) understanding.

Cheers mate.

Hi Dwayne, welcome – I’m sure that this site will impress you.

I know that you are only asking for our ideas on best property types to start with etc. I want you to look at answering some different types of questions because our responses are what’s right for us and maybe not what’s right for you….although I like the first response that you received from “TheNewGuy” to look at the numbers because that is a great way to sift through potential investments…….or not to buy.

You say that you currently have limited savings & equity. Ask yourself why that is & what you can do to increase your savings / equity? There is no need for you to answer that question on this site, you’ll know the truth to that question & it could be for many reasons. (If you are a new starter & good with money then save & give yourself more time. If you are an over spender then live within your means & become wealthy forever rather than act wealthy temporarily). Once you identify why you don’t have savings yet, work on getting the savings & work on educating yourself on the advantages & disadvantages of owning a 1-2 bedroom unit compared to a standalone house (in context of you owning it).

Neither is better or worse, it depends on your situation and what you are looking for. They both have good & bad things. You can make a profit or lose money using either strategy. You need to discover yourself to know which investment is right for you. By the way, this learning never stops because you will always be changing & increasing your skills.

I know this reply is more about sole searching rather than opinions & I am sorry about that. I hope this info helps you.

Cheers & more wealth to you.

Thanks Benny, much appreciated.

It’s always a pleasure reading your posts – lots of respect for your experience & for your opinions.
You are a very wise person.

Well done for going through it all – that’s not an easy task during this fast-pace life.

Keep well.

Well written. Thanks again Terry.