Hi all im new to website and forums have just started steve’s kickstart program….very interesting.Just wondering how many investers have done as good or even half as good as steve, and if so what stratergy was used. it seems amazing and even somewhat unbelievable to own 100+ investment homes.I have one IP which is negative geared and it seems to the novice like me a long road to owning just a few propertys, alot longer than 3-4 years anyway. so i thought i would post a topic and hope to get a few replys on how others have performed with there property investing..
Hi Nsellar,
So many people have hopped on board the Cashflow+ property bandwagon now that there is so much demand and so little supply. It is difficult for the novice because the experienced and savvy investors are using clever strategies to get the deals first. You could get what looks like a good deal but if you’re picking from left overs you’ve got to wonder why so many other investors have left it untouched (Unless it’s pure luck).
I was talking to a couple recently who aquired 71 properties since 2001so it shows there are more people than Steve that have achieved that sort of investing success. Don’t be too daunted, even you have managed to get a property portfolio which the majority of Aussies haven’t got. I think you should be proud of yourself having one IP
Cashflow+ isn’t the be all and end all of investing. I have made some great gains with little outlay from slightly negative and neutral properties.
Just wondering if your IP property has had a depreciation schedule done on it because that could be a way of getting a better return on it (depending on its age and a few other issues).
Todd Burns
http://www.freepropertyhelp.com.auI’d be interested to know how people get the banks to finance the acqusition of greater than 10 properties! Myself and my husband are qualified proffessionals, with combined annual gross income in excess of $400k, we have net equity in our properties of around $1 million (7 properties) and the bank still kicks up a fuss every time we put in an application! I also know other proffessionals who are in a similar position to us who have trouble with banks as well! In our experience, once you have more than 5-7 properties they really seem hesitant to lend, despite excellent incomes and equity.
So i’d like to know how these people have have masses of property manage to get the finance for them.Chelley,
You need to share the love around several banks. Using a broker who understands the different serviceability models used by each lender should help an awful lot.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Chelley
Sounds like you have stalled and it could be for a wrong reason. Could be worthwile taking to one of the larger banks relationship managers or a broker.
For what it is worth, we are with a great business banking manager with NAB and she is really part of our team. 15 months ago at the bank Christmas drinks she mentioned we were conservative borrowers so we promptly went out and doubled our property portfolio ($ wise) and her service sensational.
That said we don’t have everything with her as we have a seven figure commercial facility with Bankwest, (great rate being the best thing going for it). She is aware of it so it keeps her keen.
Regards
tonythanks todd,
the one property i have is brand new and was only completed in december 05, tennants moved in around the start of feb, so no i havnt had a depreciation scedule done on my IP, not sure what one is anyway.and also when people talk about positive cash flow properties are they talking about all costs involved eg, maintenance,rates + taxes or is it meant that it covers the principle and interest with a small amount left over, because i would imagine if i got to a stage of owning several IP the other costs as mentioned would be quite alot making it extremely hard to cover financially.The only propertys i seem to be able to find as rentals for investments only just cover the interest on the loan havnt found any that cover principle and interest as yet.hi Chelley
they way around the banks is to purchase in different entities each time and different banks try to get a 90% lend or go for no doc 80% lends which ever as for massing units stevs way is but one way and everyone needs to get a system that works for them.
70 times 100k properties is 7 mil but could be doing a 7% return but 10 x 900k properties doing 20% returns is alot better its not a volume issue its quality that you need to look at don’t worry about the amount of property but the returns and the growth of your porfolio.
with a neg property( usually high growth) you attach a posi(comm) that wipes out the renat loss then you have growth and neutral costs.
As for over 7 properties thats relatively easy get a 10 unit development site work it out at a 21% return.
Get a lender to lend you.
Get a builder to build them on a fixed price.
Then refinance with the company that lent you the money to build and now you have 10 properties with funding and you have 21% equity in the property.
or join a group that does similar, there are lots of groups you just need to find them.here to help
If you want to get involved in some of the projects I’m involved in email to [email protected]Thankyou all for your advise. We have always obtained finance with the one bank so that we could borrow off the equity for future purposes – I was lead to believe banks won’t lend you money using equity on property that is financed by another bank. Also that by having all lending with one bank we get a discounted interest rate.
I am always amazed by articles in API which feature low income individuals or couples who manage to build up $1m portfolio’s, it blows my mind how they get financing for this. In my experience banks seem to take a highly conservative approach with servicability – it is like they make the assumption that all properties will be unrented and your income is half of what it actually is.
Originally posted by Chelley:Thankyou all for your advise. We have always obtained finance with the one bank so that we could borrow off the equity for future purposes – I was lead to believe banks won’t lend you money using equity on property that is financed by another bank. Also that by having all lending with one bank we get a discounted interest rate.
Therein lies your problem Chelley – your bank has hamstrung you for their needs and not yours.
It is really simple to set up a line of credit/equity loan using your existing property (ies) as security. This then provides you with the capacity to go to another lender and say ‘here is the money for the deposit and costs can I have the remaining 80% or 90%’
Now this is a simplistic explanation of the process as different banks have different lending policies and you may find yourself reaching the serviceability limits of more than one bank sooner rather than later.
Therein lies another problem – everytime you make application for a loan and a credit check is made you get another ‘hit’ on your credit reference. Too many hits (particularly if the loan is rejected) sends alarm bells off in the next institution and so on, you are in a vicious cycle.
A good broker, who deals regularly with investors and who fully understands what you are trying to do in the long and short term, will help you set up your loans structures correctly from the beginning.
I am always amazed by articles in API which feature low income individuals or couples who manage to build up $1m portfolio’s, it blows my mind how they get financing for this. In my experience banks seem to take a highly conservative approach with servicability – it is like they make the assumption that all properties will be unrented and your income is half of what it actually is.
This is another instance where a good broker comes into their own.
Banks are limited by their range of products. A broker, on the other hand, has access to a range of lenders and their products and will generally source a loan that suits your needs.
A classic case in point is the availability of no-doc loans which most banks steer clear of. Other lenders have these products which enable people to borrow considerably larger sums of money provided they have sufficient equity.
Sure there is a slight increase in interest rates but it is only slight and if a no-doc loan enables you to increase your portfolio in a manner consistent with your goals and financial and personal capacity then it is well worth it – in my opinion.
Some of the people you refer to as appearing in API have made prudent use of no-doc loans to futher themselves.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113<deleted> – first day on the forum and four posts all saying how wonderful buyers agents are.
Contributions are welcome – trawling for clients isn’t.
derek
Hi Nsellar,
DEPRECIATION SCHEDULES
Simply put, a Depreciation Schedule is a report that is done on your property by a Quanity Surveyor. They go to your property and work out the cost of each item that can be claimed as a tax deduction and prepare it as a written report. You give the schedule to your accountant at tax return assessment time. This is especially beneficial for newer properties and it usually means that you get a lot more of your tax back each year.
Because we have depreciation schedules on our properties we will pay little or no tax this year. I think Deppro charges about $550 to do a schedule but it’s only a one off payment that gives you great tax advantages for years and years (depending on your financial situation of course). It roughly means we get $50 to $70pw more return on each property investment. However, there is usually a limit to the effectivenss of Dep Sch when you have multiple properties because you can’t get any more tax back than you pay out.
CASHFLOW+
Everyone can have a different idea on what CF+ means. I think to be truly CF+ a property needs to give you money in your pocket after ALL expenditure, income and tax deductions are taken into account. You just need to get back more than you put in on average for each year.
P & I LOANS
I don’t use Principal and Interest loans because I would be effectively paying down my tax deduction advantage. Because interest on a IP is tax deductible, if I reduce the principle, I automatically begin to reduce the amount of interest I am paying and I reduce the tax deduction benefit.
The other thing is that paying P & I reduces my cashflow. I only want to pay the minimum and make money (equity) by just holding the property with minimum payments (sustaining the mortgage at the level I bought the property for) and I just wait for the property to rise in value. This of course assumes that I am buying property that will rise in value.
Thanks to the others that have given some great ideas in their posts to this thread
Todd Burns
http://www.freepropertyhelp.com.auHi NSeller,
Definitly get a Depreciation Schedule done!!! Especially with it being a brand new property. We get just as much back in tax from the depreciation of our unit (for the first few years at least) as we do on the interest we pay on the loan!
“The Depreciator” (on this site) – Scott – is very helpful, very fairly priced, and they do a great job. I think their website is http://www.depreciator.com.au
Also, if it’s not already, you may want to change your loan to Interest Only (rather than Principle and Interest), you can free up a lot more cash that way to invest in more property!
Cheers,
Jenmleith,
I’m unsure what you’re saying………are you a buyers agent looking for potential clients? Or warning against people “trawling” the forums for clients?
Mike
Hi Mike,
I deleted the post for the reason I mentiooned in my comments.
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Thanks Derek, now I understand![blush2]
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