Forum Replies Created
What annoys me about your constant negative posts and apparent excitement at Sydney property prices dropping is that you ignore the fact that everyone who already owns property in Sydney is going to lose big time. For every winner, there is a loser!
Just because you are not currently holding property does not mean you should wish a crash on everyone who is holding. Not everyone is as ‘smart’ as you to have gotten out in time.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
If that is not misleading and deceptive conduct, I do not know what is!
Feel free to send me a copy. I would love to see it.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Maybe if you told us the location of the unit, we may be able to help more.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Come on guys… you got the information from the internet so it must be true. What else do you need?
The Mortgage Adviserhttp://www.themortgageadviser.com.au
I opened it to see if it was possible you could post something other than doom and gloom about the economy. I should have known better.
Have fun!!!!
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Richard, that situation is unfortunate and I feel sorry for the girl. It is good to hear she recovered. I just find most situations are the fault of the person declaring bankruptcy yet they try to blame anyone and everyone else – like the banks.
I think a bankrupt should step up and take responsibility for their own mistakes (in most cases) and seek the help they need to remedy the situation instead of taking the easy way out. I also believe those who use it as a tool to escape paying back debt should be severely punished!
The Mortgage Adviserhttp://www.themortgageadviser.com.au
I don’t know if the policy would cover eviction but it is there to be used. Use it if it is viable.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Don’t drink, smoke or take drugs!!! Stay in school!!!
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Hey guys, this is getting to be a hassle posting about ‘living off equity’ in two threads. My responses are in the more appropriately named thread over at https://www.propertyinvesting.com/forum/topic/17535/4.html and I hope all responses stay over there. This is too much typing!
By the way Vicgirl, what is your point?
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Originally posted by wayneL:And there usually is more activity required.Didn’t you read what I wrote? – “There may be less activity than that required with CC’s”
Re-read my response. It was a response to your comment.
So to restate – ACTIVITY MAY BE LESS!!!! – understand?Are you in ‘Wayne’s World’ or something? As I consider this comment and your earlier one to be arrogant and condescending, I will respond in kind.
YOU SAID: “May be less”
I RESPONDED: “Usually is more”English 101 – basic comprehension skills… do YOU understand that????
I am happy to debate topics forever with anyone. Unfortunately, when it gets like this, there is no point continuing the discussion.
You are right, I am wrong. Have a good weekend Wayne.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Originally posted by Michael Whyte:PPOR:
1. Offset rent (5%)
2. Capital growth (5%)He then says you can re-use this dollar by taking an LOC against your equity to leverage at 10% down in to Investment Properties.
Don’t forget the effect of inflation on capital growth.
Can you please explain how you “offset rent†and its effect to generate useable equity or cash flow?
Also, add to the 10% the cost of stamp duty and other closing costs (between 4 and 5% for residential property), the cost of mortgage insurance (between 1 and 2% at 90% LVR) and loan application fees and charges for new loan.
IPs:3. Rental income (5%)
4. Capital growth (5%)You can further re-use this dollar by taking an LOC against your equity in your IPs to leverage at 50% down in to shares.
You only put 10% into the IP so how do you get a LOC here in the short-term especially when you have debt on your PPOR and this loan would be interest only growing at only 5% per annum (if that) less the effect of inflation.
What about the gap between your highly hopeful 5% rental income and the interest on the loan? What about the strata costs, insurance, maintenance, land tax….???
What happens if you achieve this level and the stock market has a negative correction and a margin call occurs?
Shares:5. Dividend yield (5%)
6. Capital growth (5%)So, structured properly your one dollar in your IP can earn you 30% returns pa. Of course, this is a very simplistic representation, but the fundamental message here is maximum leverage.
I would suggest a person who expects figures anywhere near those above year in and year out across all asset classes should regularly attend church.
He also talks about securing a cash bond with your equity LOC. This then serves as income and increases your borrowing power (leverage) even further. So long as the leveraged borrowing performance exceeds your costs for this income stream then you’re well ahead.What do you expect your return on a cash bond to be?
e.g. I use an LOC to buy a $100K cash bond. This cash bond shows as income in my next loan application so I am now able to borrow up to $1M whereas before I had insufficient serviceability but was equity rich. I invest the $1M in IPs making me 10% pa, and due to leverage that $100K return far exceeds my $7K interest charges on my cash bond. He advocates avoiding this if possible if your normal income streams are sufficient to satisfy servicing requirements at your maximum leverage.Are you suggesting that a lender will view a 100K cash bond as an income of 100k per annum?
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Originally posted by Michael Whyte:In this example, your asset base (which is neutral) has accumulated growth of $200K of which you spent $107K for the year. You’re still ahead by $93K net! This is about a 5% return on capital employed and exceeds inflation.
Firstly, not many people can accumulate a $2,000,000 net position in their lifetime so at least we agree that you need a lot of equity to do this. Do you not see how you would run out of equity with capital growth running at 5% on average and the cost of funds running at 7% annually?
Remember, I’ve already said that you spend that growth in ARREARS so there is little risk of you over spending in a bad growth year.In a bad growth year, do you not need to eat or fund lifestyle? Where does the money come from then?
Of course, the portfolio is spread across asset classes to mitigate exposure to any one class and reduce downside risk.Previous discussions have only focused on property to this point. Can you please explain how you gear at higher and higher levels against shares with no income?
PS At the same time as outstripping inflation with growth, your rents are going up so your gearing is improving. So you’re actually going even further ahead and will soon be better than neutral too.This is a huge assumption and cannot be counted on. Any rental increase from inflation would be offset by the higher interest rate and you could possibly go backwards in some years on rental income – look at the current market.
The main point I’ve added is the neutral gearing to get around Rob’s point suggesting living off rent instead. You’ve got “quality growth” assets neutrally geared to maximise your CG opportunity via leverage. There is no “income” per se from this structure except growth.It certainly provides the requirement to ‘need’ this ‘structure’, but please also explain how someone with a neutrally geared portfolio can borrow money without income from another source?
Are you suggesting another condition of being able to use this ‘structure’ is not only a huge positive net asset position, but a very low gearing level against those assets and then having to lie on applications to access funds?
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Don’t you also need your employer to agree to it?
The Mortgage Adviserhttp://www.themortgageadviser.com.au
There is a ‘wrap’.
Now a ‘sandwich’.
What next???
A ‘kebab’???
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Originally posted by wayneL:It’s not how big it is, it’s how you use it!
I agree with that but it is also what those with smaller ones often say! [baaa]
Huh? More funds? returns less? Do you have a clue what I’m talking about? This strategy is far less capital intensive than CC’s and as someone who trades these as my profession, i can assure you the returns are superior.More funds to actively trade. The majority of funds are invested in long-term holds and not available for such strategies. I did a comparison a while back and found that based on consistency of returns and considering time taken to trade (unless you have some expensive software to help you), the returns worked out less.
Do you not agree that higher potential returns equate to higher risk in most cases?
Not necessarily, There may be less activity than that required with CC’sAnd there usually is more activity required. A covered call only requires placing a single order at your preferred strike price and not worrying about it until the exercise date. Remember, the underlying stock is a long-term hold so decisions should not be affected by short-term fluctuations.
You can collar the stock, but you still end up with poorer risk/reward than a diagonal spread with a nice amount of skew.Which is actually a good point. If ownership of shares is required with a SMSF, You can create a synthetic diagonal with long stock… A diagonal collar.
I should not have mentioned collars!!!
So, how big you say? HAHAHUGE!!!
The Mortgage Adviserhttp://www.themortgageadviser.com.au
Originally posted by wayneL:That is the point of option spreads, to REDUCE risk. CC’s carry more risk than what I’m talking about.
I disagree. More funds are required, there is no certainty of setting the ‘spread option’ and I consider returns to be less. Also, this requires more active trading and I don’t think they would be allowed under SMSF.
Are we going to get into the whole debate thing now over who’s is bigger? When are you going to mention ‘collars’ and other more technical investing?
The Mortgage Adviserhttp://www.themortgageadviser.com.au
As you have not told us the location of the property, I cannot provide you with a link to your State Real Estate Institute. All States are listed towards the bottom of the page at the link below:
http://www.mortgagepackaging.com.au/tma/index_files/essential_links.htm
I am certain they will be able to help you with accurate information and might even take your complaint.
The Mortgage Adviserhttp://www.themortgageadviser.com.au
