I’ve just finished reading both of Steve’s books and am ready to get a start, but rather than running around like a headless chook I wanted a bit of a guide as to which strategy would be best suited to our current situation. I’m IT contracting to a company in the UK which means I’m bringing in a lot each week and working from home in the evenings, and my wife doesn’t work so we’ve both got a lot of free time during the day to do what’s required, and at night to surf the net. We’ve got about $70k in the bank and no debt of any kind (we’re renting), but the catch is that my current contract will probably run out mid 2005 and we want to have a baby by then or soon after, and our goal is to have neither of us needing to leave Baby and go to a 9-5, ie. have enough property income to survive, and continue to build it together during the days after my contract finishes. Obviously our biggest challenge is my unconventional employment situation and therefore our unsuitability for finance in a lot of lenders’ eyes. Does anyone have any tips for us? We live in Brisbane.
If that’s too much of a stretch, I have a couple of other questions –
– if house prices are set to go down, even a little, but rents I’ve noticed rarely if ever go down, doesn’t that mean there’ll be potential for more for +ve cashflow properties?
– if we’re all afraid of an interest rate rise compromising our properties’ +ve cashflow position, does it make sense to take a slightly higher but fixed interest rate at the outset, if it can be done and still end up with +ve cashflow?
– I’ve noticed a lot of the examples in Steve’s books refer to interest only loans. What are the benefits of those?Anyone’s help with any of this would be greatly appreciated.
Thanks,
Anthony
Anthony,
Firstly you’re unconventional emplyment doens’t stop you getting fiance nowadays, it just might not be a conventional loan. COnsidering popping this question under the finance heading and you’ll probably find some of the mortgage brokers on this site will then read it and have some ideas for you.
As for your otehr questions, many of them come done to your risk tolerance, or perhpas you ability to take risk.
IF house prices go down and rents reamin the same, then yes there will probably be potential for more +ve cashflow properties. The main thing that you stated though was the IF. If you wait and then they don’t go down, have you then wasted time waiting? There’s a lot of if’s and only you can weigh up what you think will happen against posssible gians or losses if the market does or doens’t go down.
Interst rates are another IF, yes they may go up, on the other hand a lot of banks have recnetly dropped their 5 year fixed rates, does this mean they don’t predict a long term hike in rates? Again it’s IF. I have some of my loans fixed (usually the larger ones that are interest only) to give me the peace of mind of knowing that they can’t go up and I know what I need to pay, however, the smaller ones that are paying themselves down, I haven’t fixed as firstly we know we the rent will still cover the difference if the rates go up and secondly if they went up a long way we could refinance it now as the amount we owe is less and therefore that would bring the repayments back to the level we’re now on. I don’t envisage we;d need to do that, that is jsut our back up plan if it went spiralling beyond our means, but hopefully as we’ve allowed a margin for increases we shouldn’t have this problem.
Interest Only loans – the benfit is that the repayments are less as you are paying interest only and not some of the princilpe as well. The disadvantage is that you aren’t going to own the property that way. However, as we are still paying our own home off, we have osme as interest only so that any extra repayment s are made off our PPOR as the repayment on this isn’t tax deductible. So in short the loan on the IP’s are staying the same but we can claim the whole amount as a deduciton (because the whole amount is interest).
Well, that’s my thoughts on the issues, hope it helps a bit.
Regards
PKand brilliant thoughts they are too PK
joy to the world
Yes these are indeed brilliant thoughts, this answers my questions. I will post the finance question under the finance heading and see how we go.
Thanks a lot,
Anthony
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