Have come across your website trying to find info on property investing and am very impressed with what I've seen. My husband and I are both in our fifties and are looking at property investing as a way to boost our retirement income and hopefully put us in a financial postion to be able to retire sooner. I thought I'd put forward my plans to achieve this and see if anyone can suggest a better way to go about buying several investment properties or guage whether our plans sound feasible.
We own our own home (value approx $550k) in Brisbane.
We also own a small acreage in a town an hour from Brisbane that we currently have on the market for $290k. We would eventually like to retire to this area.
The bank has given the go ahead for us to borrow 100% on our first investment property interest only to enable us to get into the property market now instead of waiting for our land to sell as we originally intended.
Once the land sells, and after CGT, we intend to put half the proceeds into the offset account against the investment property and use the other half as a deposit on a second investment property.
I haven't yet thought about what the next step would be. Any advice gratefully received.
Thanks.
Hi Sundance
Welcome to the forum.
Sundance wrote:The bank has given the go ahead for us to borrow 100% on our first investment property interest only to enable us to get into the property market now instead of waiting for our land to sell as we originally intended.Terrific – just make sure that they don't cross collaterise your unencumbered home with your investment property. The bank will probably try and use your entire home as collateral for your investment property. This is in their best interest – and not yours. You don't need to use your entire home as collateral for your next purchase.
Sundance wrote:Once the land sells, and after CGT, we intend to put half the proceeds into the offset account against the investment property and use the other half as a deposit on a second investment property.I would consider borrowing the deposit for your second investment rather than using cash – that way, the entire debt is deductible.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thanks for your advice Jamie.
Am still getting my head around a lot of the terminology used with property investing so bear with me. When you say not to "cross collaterise your unencumbered home with your investment property" are you saying not to use our PPOR as security on the loan to buy the investment property? When we got pre-approval from the bank for the investment loan we were told that our home wouldn't be used as security (will check this though).
When we purchased our acreage we borrowed the full amount and our PPOR wasn't used then as security. The loan for our acreage is interest only but we have the same amount as the loan sitting in the offset account so are only paying the $8 monthly fee on that loan.
You also suggested borrowing the deposit for the second investment property rather than using cash, that way the entire debt would be deductible. Would the alternative be to just leave all the proceeds from the sale of the acreage sitting in the offset account on the first investment property? My concern is that as we'd be borrowing approx $300k for each investment property, even taking into account the rent received we would still be quite significantly having to top up the loan repayments.
As you can probably tell I'm stumbling through all this at the moment. My original plan was to purchase two investment properties, try to get them paid down as quick as possible so that when we retired we would possibly own them outright and the rental income would boost our super income stream. But perhaps this isn't the right way to go?????
since much of the real estate investing terminology is still new, then I'd suggest reading some books about investing, as well as continuing reading and participating in forums such as this!
mattsta wrote:since much of the real estate investing terminology is still new, then I'd suggest reading some books about investing, as well as continuing reading and participating in forums such as this!Good advice I would also join a local real estate group . Education is the key and taking your time.Don't jump on the first deal you see or hear about. Lots of good books to read or forums to ask questions.
Good luck
Hi Sundance. Ill start with a quote from an american fund manager struggling to contain the investing anxiety of his clients especially those in ‘our’ age bracket.
My greatest concern as an investment manager is the possibility that some number of our shareholders will grow so exasperated with remaining defensive during these periods that they capitulate and take a significant position in the market at the worst possible point.
Kind of sums it up really. You’re hitting that middle aged bracket and you see problems realising your retirement dreams against the backdrop of a global financial melt down. Shares and retirement funds taking a pasting, relatively neutral fixed interest opportunities, investments not really performing as expected and time simply running out to get to that retirement goal line.
So people like yourself who’ve seen somewhat of a mixed bag of investment returns over the last decade possibly a hit to investment asset values and are now looking to somehow make up ground perhaps. So you’ve become proactive and are looking to take control of the situation personally.
Before I go on let me know if that’s a reasonably accurate synopsis of your current situation. If I’m wrong I’ll head on my merry way and continue to roust up the populace here.
Regards The Freckle
PS: I’m bearish on property and regularly bang heads from time to time with some of the lads here. So feel free to explore some of my postings and people I banter with to get a better picture of any sage advice that may be given. (click on my nick name at the top of this post and two options will appear, click on View all posts by this user
There’s plenty to read if it’s a rainy day.
Hi Sundance
Firstly welcome to the forum and i hope you enjoy your time with us.
Sounds a bit like a Wesuck (Westpac) deal to me so if i am right then not suprised they told you you could borrow 100% of the purchase price without offering your PPOR as security.
Hate to say they are totally incorrect and it cant be done unless you put in cash deposit or cash as collateral securiity.
The days of lenders offering 100% finance have been and gone.What Jamie is referring to is limiting the amount of security you offer and not having the loan over both properties.
The structure you would use and the type of loan / lender you would choice will dependant on your long term goals and objectives.
Further data would be required to assess situation correctly but without one thing for sure is do not cross the loans.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thank you to everyone who has replied to my post. I am taking it all on board and trying to absorb everything.
Firstly, I'll clarify my situation. Yes Freckle, your summing up is pretty accurate. We will have enough in super to retire on if we want to work to age 65 – problem is that we'd like to retire in three years time instead. Am not completely new to investment properties. We bought one some years back by chance. We weren't looking to buy one but it was passed in at a mortgagee sale and the bank only wanted $80k for it, cheap even back then. We rented it out for seven years making an excellent profit when we sold. With the proceeds we were able to pay off the loan remaining on our PPOR and purchase our acreage. We borrowed for it principal and interest because we didn't know any better. When it sold we had just about paid the mortgage on it off anyway. Yes, I now realise we should have been paying the extra off our PPOR.
We also had a share portfolio and lost quite a sum of money in the crash so are not interested in going back down that track. My original plan was to buy two investment properties to rent out, sell our acreage paying half off each IP, then sell our PPOR, pay off both IP loans and downsize to a new PPOR. We then want to rent out all three properties while we go off travelling for awhile.
Come back, access our super but still have the two IP earning rent.Since my first posting I have been to see two financial planners – useless exercise. Both are only interested in getting us into shares, managed funds etc. As previously stated – not interested in going down that path. Have also spoken to our accountant who wasn't much help. Don't know where else to go to get the advice I'm after.
If we don't put our money into IP when we sell our acreage we'll have approx $230k left over. We could roll it into super but I still think that putting it into IP is a better idea.
I'm just looking to find someone who can advise if our plan is do-able and if so how to structure it. I am reading as much as I can on property investing in the meantime and trying to get a grasp on at least some of it.
I do appeciate the input I've been getting on this forum.
Cheers
Alex SC wrote:mattsta wrote:since much of the real estate investing terminology is still new, then I'd suggest reading some books about investing, as well as continuing reading and participating in forums such as this!Good advice I would also join a local real estate group . Education is the key and taking your time.Don't jump on the first deal you see or hear about. Lots of good books to read or forums to ask questions.
Good luck
Local real estate groups are also helpful, but just find out firstly what their agenda is, and whether it's really beneficial for you. There are some helpful ones, but just watch out for groups and clubs that are actually means to sell you their products and services.
Hi Sundance
Understand where you are coming from Sundance. My partner and I are only a year or two away from being fifty and our super has taken a beating in places over the past years, chatted to some finance planning people – got the same advise as you got, so got property investing educated and we went on the investment property purchasing strategy. Most of ours have been purchase (average homes for average tenants), value add (basic renos), increase the rent and wait for a little while then do it again. Some of your thoughts & ideas are logical in your plan.
One question, when you were saying about down sizing (I preassume to move to the town 1 hr out of Brissy), would you have sufficent funds to get what you want without comprimising your "home" lifestyle as well as paying off the rest of the IP loans?
Also have you thought about how you would feel about renting out "your new downsized home" while you travel.Keep reading, asking questions and keep the cogs turning and the plan will come together.
Cheers
DBHi Sundance
Not sure which part of Brissie you are in?
Drop me an email and i can send you a copy of an article the API magazine did on myself and wife and our Brisbane property portfolio which we have built up over the last 14 years.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi DB,
Yes perhaps I'm being a little ambitious when I say I want to sell our PPOR, and have sufficient funds from the sale to pay what's remaining on both IP loans and downsize to a smaller PPOR. Although while we're both still working we intend to focus on getting the IP loans paid down so I don't think this is unachievable. We will also have the proceeds from the sale of our acreage going off the IP loans.
How do I feel about renting out our proposed new downsized home while we travel? I don't have any problems doing this. With a bit of luck we'll find the right people. Also I can't think of any other alternative at the moment. I can't imagine going travelling for a year and just leaving our house sitting vacant. Would love to hear any other suggestions.
Last week we signed the contract on a property an hour from Brisbane. So the first part of our plan is underway.
Cheers,
Sundance
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