I have a simple excel spreadsheet for each property and separate ring binder folder (not computer) for all the receipts and other property paperwork to be kept. I simply enter each invoice into the relevant spreadsheet as it comes in and file the paperwork. My spreadsheet for each property has columns differentiating things like Capital costs, Interest payments, Rates and Insurance, Maintenance,etc. The spreadsheet for each property goes to my accountant at tax time and he sorts out the rest.

On Loan Providers

I have recently started using a Mortgage Strategist / Broker for my loans as it was all becoming too complicated for me to handle myself. I had been dealing with different banks and different brokers and the whole process was hampering my progress. I came to the conclusion that if I intended to build up a growing portfolio of some significance then I needed to ensure that I could access funds at the crucial times when I needed them. A competent strategist will provide this service and also guide you to some extent with your financial goals – depending on how experienced they are. A Mortgage Strategist is just one person in the important team of supportive professionals that you need around you to keep things ticking along smoothly. Like everything else, I am sure there are good ones and bad ones out there. It's just fate or karma I guess that some investors are fortunate enough to select efficient and compatible advisers / professionals from the start and others run into inexperienced ones and need to tweak their team every now and then. I think that, at least , it is desirable for your accountant and mortgage strategist to be actively involved in property investment themselves so they understand your needs.

Good luck, Ian  

Swany,

I have a few loans with different funders. However I find it easy to manage by having one main savings account (with the CBA) that I utilise for transferring direct deposits for the interest repayments on all the loans. It also acts as a day to day account with a credit card and cheque book attached. I run a 100% offset account alongside the CBA loan account into which I put any extra income or other funds and only have a smaller amount in the running account – say under $500. I can shuffle funds easily on netbank to ensure this process works efficiently. I can deal with my local branch if any issues arise. I also have online access to the other loans if I wish to make extra repayments or any redraws but I don't use their credit cards, cheque books, etc. as it would become too complicated.

Hope this helps, Ian

Trance wrote:

Coomera

Well that's a good start. Coomera  ( gold coast ) is definitely a great area to invest from what I've heard. I am just south of the qld border and property is growing strongly here.  Did you buy a new dwelling or an older place?

Ian

The Gittens article definitely gives credence to those commentators who are suggesting to purchase property in areas of middle to higher affluence. I think Bernard Salt suggested this in an API magazine article a couple of months ago. I guess that is what is contributing to the current 2 tiered market in places like Sydney.

Interesting reading Trajic,

Ross Gittins poses the point that debt is not such a great problem at the moment?

Check out his article.

I bet you know that the past 15 years or so have seen unprecedented, almost unbelievable, growth in the debts of Australia's households. It's always easy to find figures on how much we owe and the media always give them much publicity. If you're looking for things to worry about, this one's a prime candidate.

But have you ever thought of yourself as having a balance sheet? Every business has one, of course, but so does every household. It shows the assets a family owns on one side and the amount it owes (its liabilities) on the other, with the difference between the two representing the household's "net worth" or net wealth.

These days it's easier to get figures for the combined balance sheets of all households. And the point of a balance sheet is that it puts your debts into context. So if you're a worrier, keep reading.

A recent paper by two economists from the Reserve Bank, Chris Ryan and Chris Thompson, tells the quite remarkable story of the way the balance sheet of Australian households has transformed since the early 1990s. It's not too strong a word.

At the heart of that transformation is the explosion in household debt. Since 1992, the disposable (that is, after-tax) income of Australian households has grown at a rate averaging 6 per cent a year. But the debt of those households has grown at a rate of 14 per cent a year.

As a result, households' total debt has gone from about 50 per cent of their annual disposable income (which was low by international standards) to about 160 per cent (which is among the highest in the world).

I think what frightens people most about that oft-quoted statistic is that it's gone over 100 per cent. But it shouldn't. The questions to ask are why we borrowed all that money – more than $1 trillion – and what we've got to show for it.

If we'd ticked it all up on our credit cards that would be something to worry about. But though we owe more on our cards than ever, the average balance per card is only $3000.

No, the big reason for the growth in debt has been borrowing for housing. Home loans account for 86 per cent of total household debt, with personal loans and credit cards accounting for the rest. And note that about a third of that housing debt has been borrowed for investment properties, not owner-occupied housing. This is high by international standards and is explained by our extraordinarily generous tax breaks for negatively geared rental properties.

This means, of course, that what we have to show for that debt is a lot of expensive – that is, valuable – houses and units.

We shouldn't be so surprised that our debt exceeds 100 per cent of our income. Think about your first home loan – or your latest. Did you borrow more than your annual income? Of course you did. Many times more. Everyone does. So what?

When you think about it, it doesn't make a lot of sense to compare housing debt with your income. If you suddenly had to pay off all your debt, you wouldn't do it out of your income, you'd sell the house. Not that it's likely to come to that.

No, what you have to pay out of your income is the interest on your debt. Total household interest costs now account for 12 per cent of income, up from an average of 7 per cent in the 1990s. Add a couple of percentage points on top for the repayment of principal.

The sensible thing to compare your debts with is your assets. That's the point of having a balance sheet. While we were doing all that borrowing – which we did mainly because interest rates were suddenly so low – we were pushing up the price and value of homes. The average house price went from more than three times average annual disposable income to more than six times.

Since the early '90s, the value of the total assets held by households has grown by about 10 per cent a year. So whereas they used to be worth the equivalent of 500 per cent of annual household disposable income, now they're equivalent to 800 per cent.

As a consequence, the household "gearing ratio" – the ratio of household debt to the value of household assets – has merely doubled to 17 per cent, which isn't especially high by international standards.

Did you get that? All that humungous debt is equal to only 17 per cent of the value of our assets.

(Note that housing accounts for only about 60 per cent of total household assets. Most of the rest is financial assets, including shares and cash in the bank, but mainly the value of people's savings through superannuation. The value of our financial assets has grown strongly over the years, partly because of the booming sharemarket.)

If you subtract our debt from our assets, you find our net worth is equivalent to more than six times annual household disposable income, up from more than four times in the early '90s.

But let's get back to all that debt. Who owes it? Well, a third of households have no debt at all, while two-thirds of households have no owner-occupier housing debt, either because they've paid off their mortgage or because they rent.

Even so, the share of households with an owner-occupier mortgage has increased from 28 per cent to 35 per cent, meaning the debt is spread over a larger base of payers.

The increase has been greatest among middle-aged households (people trading up to a better house) and the increased share of households with investment property debt is also concentrated among the middle-aged.

The bulk of property debt has been taken on by higher-income households, who have low gearing ratios, low debt-servicing requirements and hold significant financial assets.

"In short," Ryan and Thompson conclude, "the households that have done the bulk of the borrowing appear to be well placed to repay it.

"This is not to say that there aren't some indebted households in vulnerable positions, but their number is relatively low and they account for a relatively small share of outstanding debt."

Food for thought,

 Ian 

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Do you have any thoughts or pointers for a newbie like us?

cheers.
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I rekon that market timing and property selection would be pretty crucial for you. I have had good success by buying duplex size blocks and creating instant equity by doing the small development project. This takes time and energy to complete a successful project and might be difficult if you are moving around but something to consider in the future if you are ready to take the next step.

Keep researching and talking to people in the industry and grow a positive yet realistic outlook.

Where are you living now?

Ian

Noodles and rice would be an ok diet as long as you add plenty of veges and maybe some fruit here and there!

Sounds like your broker is probably correct and you need to build up equity as well as trying to save for your next deposit. Don't make it too stressful. Even though I respect your enthusiasm you gotta walk before you can run.

BTW have you got your principle place of residence as well as an IP?

All the best, Ian

Hi Glen,

I think that if you have the time to do your own research and have the will to do the legwork then you may not need a club or buyers agent. It depends on how much participation you wish to have in building your portfolio. You will ultimately need a team of experts to guide you if you wish to have a growing portfolio – eg: Mortgage broker/strategist, Accountant, Solicitor, Mentor, etc. These organizations can be great if you can't give the time or energy to do a lot of the work or research yourself and just wish to continue concentrating on your day to day job. I am sure there are people in these groups with a wealth of information although I know there are some with excellent marketing tools but not necessarily the experience to back it up. I guess they would indirectly be profiting from buyers agent fees and commission on the mortgages you will take out. This won't be an extra fee to what you would normally pay by going it alone.

So, like everything, there are pros and cons and it really depends on your own situation if it suits you or not.

I would be getting on the phone and talking to someone in the organisation so you can get a better feel for who they are and what they're offering. Better still go and see them if they are in your area.

Hope this helps,
Ian

Bardon wrote
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Yes your right here but the risk is that some naive person might conversley do something silly based on that small element of incorrect information.

[/quote]

Yep I guess that's what naivety is though – acting on some pieces of advice given on a forum by someone not so experienced like me!
Oh well I hope that maybe someone will be assisted by my ramblings on! In the meantime there is some great reading on the site but I expect we may soon be hit with   for this thread.

All the best, Ian

Sorry

 "Some of the information on these forums is worth as much as you paid for it."

In my short membership period I have read some excellent advice from people who have obviously had  plenty of  real life experience. These folks help to maintain a forum of high standards and I hope they continue to contribute for everyones sake.

Ian