I attended a seminar of Steve's in November and purchased his book. I am very much inspired and want to become financially independent using property to achieve this goal. I was hoping I could get some help in the right direction to start me off, however?
I will be as brief as possible, but this is my situation which I would love your input and advise concerning…..
1) Our current residental home is worth $420,000 and we owe $110,000 (we do not want to stay here long term)
2) We also have an investment property (but it is negatively geared). It is worth $390,000 and we owe $270,000.It looks as though we have some lazy equity, plus a few other problems. I am not sure if we should sell 1 or 2, or both or rent 1 out. Anyone with a few ideas for this newbie that doesn't know where to start?
Marie.
Hi Marie
Welcome! It may well be that you have some equity that could be put to work, but it will also be the case that to get more finance, the bank will want to see that you can manage more debt. It'd be handy if you are able to provide information on what sort of return the IP is generating, and what sort of spare funds you find yourself with each month to put towards reducing debt, or putting towards new investments.
Your IP must be on low rent for it to be neg geared – maybe that is after tax depreciation is taken into account.
I would suggest you make both loans IO with a 100% offset on your home loan.
Also talk to your tax advisor as you can set it up to increase your deductions and pay off your home sooner (or into the offset). You could also buy another IP and speed up the process.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Maree123
On the surface it looks like you have heaps of equity to grow a property portfolio.
I think that most people should have a plan to own 6 properties outright so that they can live off the rental income.
You need to know what you have to do to achieve this.
The amzing thing these days is that knowledge is free.
The best place to start is to choose a strategy that works for you.
Steve MacNight ownes over 100 properties and you have read his book, why not read all the books you can find until you find a strategy that suits you and then follow it.
I buy cheap second hand property in Sydney that rent in good times and in bad.
I usually renovate them to increase theri value, rent them out and then wait until I can get them revalued
I then use the increased equity to help pay for any shortfall and use the balance to buy another.
You already have two properties, if you did the same you could buy 2 more and have money left over as a back-up.
The major problem at the moment for most people is getting finance so you might have to look into this first.
If you can't access the finance yet then keep learning because as sure as day follows night, you can find a way even if it is to wait a little longer.
Imagine if you waited another 5 years what both properties would be worth
Selling property that has plenty of equity will lose the potential you have to create wealth in the future form either or both propertiesThank you fine people for responding. I feel welcome already!!
I see I lacked a bit of detail in my first post. I hope to clarify it further now. Please add any more tips if you can think of them after reading the following.. thanks again.
climbingjac The IP is generating a return of $15600 ($300 per week) however I have recently discovered that next door is renting for $395 and there establishment is on par with ours! (I don't know the return with tax involved, can't say off the top of my head)
Terryw We tried putting our home loan on IO however it didn't work for us. It took us 8 years to realise we were paying off 1k per annum
Boy! Of course if we are to be succesful with property we need to lighten up our spending… and find where it is going. If we were to purchase another IP, how will that help? Ie: how do you find an IP these days that is positive geared?charliewebb You also touched on some important issues. The "strategy" is what I am lacking, and the starting point, DOH! I do like the sound of positive geared and commerial property but that is as far as I have got. I wonder what the bank will say when we apply for more finance, we don't have much debt (other than the above) yet we only have one income. My brother has offered 6k of his money, which is a start. Can I ask you how many properties you own now? Outright?
Looking forward to hearing from you!
My impression was that an IO loan will only work for you if you then go and use the increased cash flow towards another property.
If you are just sitting there spinning your wheels and change the loan to IO, but without doing something with your increased cash flow, then it’s really a trap isn’t it, because you are under the impression that you’re “paying your mortgage down”, but you’re not really, only paying interest..
So if you left your loans as IO, why couldn’t you then buy a third place by drawing upon some equity from the primary place (which has lots of equity) and then put a smidgen of your own cash towards helping that 3rd property break even just for a couple of years until it increases and looks after itself. This would be the benefit in putting your primary place to IO I would have thought.
Apart from that, just leave it as a normal mortgage and try to focus on smashing that remaining 110k down as much as possible. That kind of debt really could be knocked down in a couple of years if you wanted to work really hard and make a couple of sacrifices, even to get it down to 50k as a first goal would be mentally satisfying and you would be virtually out of debt on your primary place then which would be a nice feeling. But even if you did that, really I think all paths are pointing towards you then getting a 3rd property, because you have some great equity to draw upon.
c9806103 Thanks for your reply! Good point regarding nothing doing on IO loans if not using the extra cash flow elsewhere. I just got an email from Steve this morning about the REWARDS program. Have you done the program? Apparently they found 16 positive cashflow IP in 4 days!
Wow sounds like you need to hike the rent up. If the gap was only $20 it wouldn't be worth upsetting your tenants over it. But a gap of $95 is difficult to ignore…
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
HI, Weekly $95 means $4940 per year. I bought a property in Dec 09, it was rented for $225 only. We did some painting and minor repairs and rented for $330 from yesterday.
So your first step would be …………………………….Rent increase notice…………………………..Best Luck.JacM – Yes I will do something about it ASAP. Pity the tentants are so good, they will get a rude shock!
IPInvestor – absolutely, when you put it that way it makes a huge difference. Can I ask you where abouts you bought the property, what state, etc? It seems like we have been missing out on some serious money for a little while now – and we don't even manage our rental!
When they valued our property – as we wanted to sell 18 months ago they over valued by 60k and for over a year they have been undervaluing the rental aspect. Hmfp.Can anyone here tell me whether the above people receive my posts or do they have to go searching to find them??
Cheers!
Hi Marie, (c9806103 here – renamed myself)
I completed the REWARDS program form this morning actually (having spent all day listening to property related podcasts and reading blogs etc). But no I’ve never done the rewards program before. So yes I listened to the 16 CP+ properties in 4 days podcast. The thing that it didn’t tell you was that it was all based in New Zealand. But they still said it could all apply to Australia still etc, but the properties were super cheap over there because of the recession and economic differences etc. But there were some good points that they raised etc.
Nothing super hugely like ‘wow what a cool secret’ and no super specifics to do with areas and the like, but it was a good overview and explained how they think and the logical process they go through etc. They recommended subdivision because it was quite easy to manage remotely compared to say renovation, which would be difficult to manage remotely from overseas. Anyway overseas doesn’t apply to me much, but I would still recommend signing up to listen to the podcasts in any case. The other “5 myths of property investment” one was ok too.
Hi Marie123,
We bought in Perth, Langford 6147. It is not a great suburb to live in but good for IP, i think.
Within one month, the property prices gon up and you can not find any 3BDR house (with 700m2 land) below $300k. I buy old properties, do some repairs, replace carpet, painting and rent it out. This strategy works for me. Yes, there is not much depreciation benefit but it is ok a slong as it gives me good rent and Capital growth.
Thanks.
Boy! Of course if we are to be succesful with property we need to lighten up our spending… and find where it is going. If we were to purchase another IP, how will that help? Ie: how do you find an IP these days that is positive geared?
When they valued our property – as we wanted to sell 18 months ago they over valued by 60k and for over a year they have been undervaluing the rental aspect. Hmfp.You must be logged in to reply to this topic. If you don't have an account, you can register here.
