Forum Replies Created
I think it all depends on your goals. If you want to take a holiday in a few years then terry’s example makes perfect sense. If you want to purchase another IP then paying off some of the principle can’t be a bad thing because then you will have equity to purchase your next property. Whether it’s cash or equity is amounts to the same thing. Having equity means you can borrow 100% plus fees if necessary and claim a tax deduction on the new loan. Having cash means you borrow less fo rthe new property but at the end of the day your total debt will be the same.
Am I wrong?
Further to the comments from Bridge bluff.
My understanding is that whenever LVR is > 80% (the most likely scenario for default) mortgage insurance is necessary. If a property is purchased for $200k, the loan would be more than $160k. If, after a short period of time a mortgagee sale occurs and the sale price is < $160k + cost then the FI gets all the money that is owed to them and the mortgage insurer sues the mortgagor for the rest.
As previously stated – the bank NEVER loses, but it has to accept a reasonable offer.
Hi David,
My wife and I sound similar to yourselves, we built a house in Sheidow Park in 2004 when we were both 24. Lucky for us we’d bought the land 2 years earlier and it had increased in value nicely by the time we moved in. We also now own an IP in Elizabeth, not the best area but we’ve got good tenants and are in the process of sub dividing the land which should enable us to purchase another property later this year.
Which ever way you decide to go, my advice would be not to rush into anything but definitely do something. The longer you wait the higher prices will be and/or affordablility will go down making it harder for you to enter the market IMHO.
My wife and I have just enrolled in the next RESULTs program and can’t wait to learn from our mentor and everyone else who participates. These forums and talking to anyone and everyone you can are a fantastic way to learn and get feedback on your ideas.
Good luck on your journey.
MikeThe lower rent / better tenant theory is definitely something to think about. If you are trying to get more rent or be picky with your tenants you risk losing money in the long term.
Say you advertise at $200 but market rents in the area are $190. If it takes you 10 weeks to get a tenant because all the good ones go for the $190 a week place, then you need to have it rented for 20 weeks in order to get your money back.
IMHO it’s better to have a good tenant paying good rent rather than risk long vacancies and no rent at all.
Cheers
MikeHi All,
Did anyone see the news story earlier this week about the Aussie investor who got seriously burnt in buffalo? He bought a property off eBay, sight unseen, for $11k (or there abouts) which is amazing. Even more amazing (or not as the case may be) it turned out to be in the worst house in one of the worst streets in buffalo and was an absolute dump, the previous owner had just painted the outside.
Previous advice on doing your homework would be well heeded and if you’re going to make the move o/s do it properly and visit your country of choice.
I think the closing comment from the reporter were “If it looks too good to be true, it probably is”
Cheers
MikeHi Didi, tough break with the defaults. I would say that all is not lost but your ex has certainly limited your options in the short term. If you are looking at real estate borrowings and have sufficient deposit then I think most lenders would at least have a look provided the defaults are paid, especially if you explain the situation and can show that you have paid them as soon as you were aware.
If you are looking for a personal loan, credit card or real estate lending with mortgage insurance (ie LVR >80%) then I don’t believe there would be too many institutions out there but depending on what interest rate you are willing to pay you’ll always find someone.
When you say “the bank” do you mean your primary FI? I would have suggested them as your first port of call because they may have another form of good history.
Good Luck
Hi Dave,
it’s not easy starting out but you’re young and eager so there is lots of hope for you. I’m suprised you haven’t been able to find any ads where they quote the sale price and rental amount. 5113 (postcode) is an area north of Adelaide that has a very high percentage of rental properties (opposed to owner occupiers).
It’s not the best place in the world but you will find plenty of ads with the rental yield shown. Trust me when I say they won’t meet the 11 second solution and I’m not saying it’s a good place to invest but you may have suburb or post code near you that also has a high rental market. These areas are the ones that are more likely to advertise the rental yield as well as sale price.
So try searching 5113 or somewhere you know and maybe you’ll have better luck.
Happy searching
MikeI’m glad others found the errors and the courage to ask if the “guru” could be wrong. I agree with the errors found by Gazman and would like to point out something i found in the third solution. the sale proceeds seem to have the sale cost taken out already and the rent has not been calculated at 92% occupancy like the other.
I worked out the CoCR to be 136.94% for this one. Does anyone else agree?
Cheers
MikeHi Andy,
with my FI I don’t have to change products if I want to fix the rate, they just do it. The only time it costs is if more money is required (or you want to from fixed back to variable).
I would think you could get a 3 yr fixed rate (my lender’s is 6.65% at the moment) very close to the variable you are on now so the comparison rate should be the same (unless I’m missing somthing).
As to whether you should do it? As others have said it’s a decision you and your wife need to make, in your circumstance it probably makes some sense but that’s just IMHO.
Good Luck
MikeHi tamtam,
only owning one ip myself (so far) I’m not sure if I’m qualified to answer this but I would suggest that when you come to own 130 ip’s it is not only passive income you are receiving. In one of Steve’s theories/diagrams he discusses using profit to purchase other income producing assets (be that shares, property or other). Steve also says that although he started out aquiring property for +CF he has made much more on capital gains. This being the case, if interest rates went up then selling a few properties becomes an option, or servicing the loans from income derived from seminars, etc comes into play.
The scenario you depict is certainly possible but not overnight and I don’t believe Steve (or anyone with 100+ ip’s) would let his properties get to the stage where they were CF- as a result of interest rate rises.
I guess I’m trying to say there should always be a plan B and you should always be aware of what your protfolio and the market are doing. When we both own a hundred properties we’ll be able to answer this question more easily.[biggrin]
Cheers
MikeHi MM,
I asked that very question on another thread, seems I’m not the only impatient one!
A few people said to expect it on Thursday, but as they say – patience is a virtue.
Cheers
MikeOriginally posted by Terryw:Also, probably best to get loans in one name only. ie not with a partner. This will allow you to go further eventually.
Terry, when you say partner, do you mean a business partner or Wife/Husband. My wife and I have 1 IP and our PPOR and are looking around for another IP at the mo. I don’t think I could get a loan in my name only (or my wife’s) due to income restrictions and existing joint debt. Can you please advise of the benefits, and why you can go further (eventually) when in one name only.
Also, my FI encourages cross collatoral in order to borrow 100% for new property, why is this a bad idea?
Thanks for your input
MikeOriginally posted by Barbara:Could someone please tell me what the Virtual Kick Start is?[blink]
Hi Barbara,
you may have missed the boat on the Virtual Kickstart program (possibly one the admin guys can confirm) but it’s a series of emails with resources provide by Steve. Mainly downloading info of DVD’s of Steve presenting his advice, very valuable stuff. The “homework” people mention is about completing the templates that accompany the DVD’s, in the last instance the viability of a purchase made by Steve and Dave. We’re yet to receive the answers so we’re all keen to see if we were right!
If it’s not too late I definitely recommend signing up, otherwise keep your eye out for the next course..
Cheers
MikeThanks Derek, now I understand![blush2]
Hey Ronald,
a little off the map (my wife’s in Sydney thu work so I have to fill the time!), but my parents live in Agnes Water. Things have just gone crazy there over the last 3 or so years (maybe longer), they run a resort (www.edgeonbeaches1770.com.au if anyone is interested) but bought a block of land in late 2002 which more than doubled in value before they sold it in mid 2005.
I only wish I was in a position 3 years ago to buy in their complex because people are cashing in now by selling their units at more than double what they paid. The frustrating part for my parents is that the new owners don’t complain as much as the ld ones about the returns (go firgure!).
As for Gladstone, I hear it’s nice this time of year………[biggrin]
Cheers
Mikemleith,
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 Matt,
After reading Steve’s books (if you have) I’m not sure how you could be in favour of a negatively geared buy and hold strategy, although we are not here to cast aspersions.
I would tend to agree with the first two post in regards to increasing your equity (or profit) in some way, although Julie makes a good point about using both of your FHOG’s.
We recently bought a house on a corner block in Adelaide’s northern suburbs for $102k which we are in the process of subdividing and hope to sell the resulting block for about $50k (approx $35k profit). I think this was a reasonably rare find and am sure that Melbourne prices are higher than Adelaide but I just want to get you thinking about your options.
Cheers
MikePersonally I have only fully read Steve’s book, and glanced at a few other so I think this is a great thread. Well Done SWEET!
It’s all so useful and motivates me to go to the library. As I read Michael’s post (no offence Michael) I was thinking “Yeah, whatever” but then, what do you know, two other posts come on about his book and how good it is. I might just look into it (the extras when you buy online also look good).
Can I ask a crazy question though..(to either Michael Yardley or Manofaction)…? Why would I buy it from your site and not the other? There’s nothing wrong with a little friendly competeion now is there! After all, if I can save $5 I can put that towards my next property purchase.
I will (guaranteed) buy this book from one source dependent on an answer from each of you, and likely will many others.
Cheers
Mike (perhaps a bit cheeky tonight)[thumbsupanim]Speaking of Steve, I completed and returned the templates last week but am yet to receive another installment. I have in the mean time changed my email so can anyone advise if they have received further communication (other than the reno DVD which I did get)? If others have received further emails then I’ll have to get onto the gang.
Cheers
Mike[exhappy]Righton,
where you start would have to depend on you goals. It’s pretty hard to find a residential property where the rent covers all your expense (depending on the LVR) but when you go out north you can come pretty close. The down side is that there isn’t much capital growth.
When you look at areas like Davoren Park, Elizabeth Downs, etc what you get for $100k can vary quite a bit, both in terms of the actual property and rental returns.
Although many people on this site despise surfing the web for properties in your case it’s probably a good place to start so that you can then narrow down your search area and start contacting agents within that area.
I bought my first property earlier this year out there and the agent was actually based at Brighton so it pays to look all over the place.
Hopefully this info is of some use, let me know if I can assist further.
Cheers
Mike
