[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

October 22, 2010 - 1:48 am

Hi Property Jockey

Might I suggest you simply wander in to your local bank and have a chat about refinancing in order to buy an investment property.

As TerryW has suggested, you may qualify for a few hundred Ks of extra loans.  Borrowing the limit to what the bank may offer is probably not a good idea, but yoinking $50 K or $100 K and using this for a deposit on an IP might be worth exploring.

Do some sums – if you buy an IP, what is the likely rent ?  How far will this rental income go towards paying the interest on the loan you take out to buy it ? 

Are you prepared to pay the difference between the rent and the loan repayment ? (ie negative gearing.)

Are you prepared to not eat takeaway food every week in order to meet this gap ?  Can you give up beer / red wine for a year or two or three while the finances are a little stretched ?  Can you bring lunch to work everyday rather than buying it ?

Can you borrow, say, $50 K more than you need, and slowly use this to drip feed into the other repayments to cover this gap between rental income and loan repayments for a few years while the rents catch up with the repayments ?

If yes, then go for it.

If no, then perhaps Terry W's original comment might be correct…..

It is surprisingly easy to buy an IP with a full time job and some equity as you appear to have !!!

Good luck !!

Thanks,

BDM.

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

October 22, 2010 - 1:34 am

Such fantastic suggestions and constructive opinions by the wonderful community that is here !  Thankyou !.

Wise words from TerryW  (and Ben, Luke, Dean and Doogs too).

(Ben – I agree, the investor in me says "Never Sell", but watching a thumping big TV on a tropical island does have a certain appeal….)

Crunching the individual numbers on each of my IPs has been done.   The idea of selling two and keeping one is a possibility.

Simple arithmetic suggests the possibility of selling one IP now, then maybe another in the next financial year, thus minimising the pain of CGT.

My other plan is to possibly bulldoze our existing PPOR house, and build a new shiny one.  Then I'll contact the bank and suggest that because the original house is gone, so too should the original loan.  I'm sure the bank will see my point of view !!!! 

 

Thanks heaps 

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

October 20, 2010 - 1:03 am

Hi Ben and Dean,

Thanks for your suggestions 

Equity is not a problem.  Servicability, however, is the issue.

Purely from a value of the IPs point of view, yes, I agree that holding them makes perfect sense.  In 10 years they will most likely be worth a heap more than they are now.

Borrowing against them for the "wants" can also be done with some effort.  Brokers, low doc loans (higher interest rates) can all be explored.  This, however, puts pressure on our day to day cash flow.  Not impossible, but certainly unwanted.

I guess I am questioning how hard my wife and I are prepared to work in order to have it all.

Paying off the non tax deductable debt as soon as possible makes loud and clear sense to me.  Selling up the IPs, paying off the PPOR loan and having spare cash left over is a very attractive proposition.

Using this spare cash to fund new investments, and having zero non tax deductable debt, strikes me as a good idea.  The sun would shine, the birds would sing, there would be no pressure on our finances, and we would probably have even more choices than we do now.

I have done it before, and I can do it again.  Buying a few more IPs and waiting for another 10 years or so would be the plan, should we sell the existing IPs.

But…… yes, in 10 or 15 years time, the existing IPs would be worth a lot.….  

"Financial Freedom" is different things to different people.  Having a net worth of a Squillion Dollars now or at some point in the future is not much use, to me anyway, if you are not able to enjoy most of it.

Yes, this is a nice position to be in ! 

I've got my cake, should I eat it ? 

Or, miss out on eating my cake now purely for the sake of having a bigger cake in the future ?

Thanks,

BDM

 

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

April 2, 2008 - 11:17 pm

Hi boshie,

Please take my comments with a BIG grain of salt, this is not financial advice, disclaimer, disclaimer, seek independant professional advice, etc……

Short Answer – yes, but….

Long Answer – be VERY careful.

Yes, you can (probably, depending on many things) refinance and borrow some of the equity you mention – perhaps in a Line of Credit type of account of sorts.  You can use this money to help with the repayments on your other main loan. It is a band-aid and short term solution. 

However – this means that you are paying off debt with debt.  Without careful and frequent financial monitoring this can easily get out of control and suddenly you can find yourself in a big mess.  Long term this can end in tears.

There are also potential tax/legal implications as well – "capitalising the interest on a loan" ie, claiming more interest as a deduction this year than you did last year can get complicated if you don't have any more assests.  there have been some high profile court cases in recent times where the Tax Office has taken investors to task who have done similar things to this.

As mentioned, it all can be done, and legally as well, as far as I am aware.  If I am wrong, I'm sure others reading this can point out my errors.  But, as also mentioned, it is a short term band-aid at best.

Another option might be to assess your family budget – you're probably doing this anyway – less takeaway food, fewer trips to the movies, home brand milk from the supermarket rather than a quick trip to the milkbar, etc.  Or even sell a car or similar and use the proceeds from that to fund your shortfall……

You might also find that refinancing and buying another property as an investment may actually improve your financial situation.

As Richard / Qlds007 has suggested, it might be worth taling to a professional or two to find out some options

Good Luck !!

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

April 2, 2008 - 10:50 pm

It might be worth having a chat to a mortgage broker (or two).  As they deal with numerous financial institutions, they are in a good position to find "the best deal" – fees, interest rates, terms, etc.

There are several brokers on this forum who are likely to offer their services…. maybe have a chat with someone here (check their signatures), or wander in to your local Mortgage Choice outlet/office.

Good Luck

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

April 2, 2008 - 10:40 pm

Or perhaps the Million Dollar Question proposed by David here in this post could be re-phrased in Shakespearean form:

 "To Fix or Not to Fix – that is the question".

I am in the process of refinancing a loan or two that is (unfortunately) expiring from the fixing I did three years ago.  At the time, three years seemed like a lifetime.  Now, with the benefit of hindsight, the 10 year deal at the time was a good one.  Never mind…..

So, this time around, should I fix for another 3, or 5 years, or longer ?  Or not ? 

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

March 3, 2008 - 10:09 pm

Hi Annare,

Perhaps this might be an opportunity for you to help educate the Property Manager ?

You mention that Property Management is new to him / his agency.  Ray White have agencies all over the place, so the infrastructure, systems and support for the Property Management side of things is well and truely set up.  It is just a case of your agent using the resources available to him.

Maybe hit the Ray White website, and find all the details about property management in Qld….. I'm sure it will all be there.

Send the link to your agent !!  Suggest that he might like to go and have a look at the place and check out any issues (like cockroaches, damage, broken stuff, dogs, etc).  He might charge for this, but that's not necessarily a bad thing.

Ask him, in his opinion, is the tenant carrying on like a pork chop ?  Or is the tenanant justified in their requests ?

I agree with TerryW – sounds like you have a "complainer".  There will come a point when you may need to say "no".  If they complain again, as long as it's not a vitally important request, tell them they are welcome to move somewhere else at their expense….

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

February 22, 2008 - 5:58 am

Hi MissMolly,

Buying a property – as either an investment or your first home – might be a good idea.   You have a sizeable chunk of cash that could be put to better use than just sitting in a bank account.  Your income is more than likely able to service a reasonable mortgage, even in Sydney. 

If you are worried about interest rate rises – fix the loan.
If you are worried about servicing the debt – buy an Investment property and the tenant and tax man will help you pay the mortgage.  Or buy your first home and get a house-mate to help pay the mortgage.

Cash is nice to have, obviously, but having appreciating assets is going to be far more beneficial !

There are many ways to minimise the risk., and the fear associated with it    Take the step – buy something !!  Ten years from now you will wish that you'd bought something earlier, and probably wish you'd bought more than one !!

I hope this helps,

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

January 9, 2008 - 11:51 pm

Hi Slippy / Sean,

This is certainly not fincancial advice but…… (end disclaimer)…..

Selling the unit to your wife is probably not the best idea – it will trigger capital gains tax, and you'd lose any depreciation / tax deductons that you claim if she does not have an income as such.

Sounds like some budgeting may be necessary – are there any ways to "save" more or "spend" less, so that repayments are not so much of an issue ?  Do you know how much your life actually cost s, so that you can paln accordingly ?

Have you fixed the interest rate (and have an interest only loan) ?

Perhaps it might be another idea to consider moving back to your unit and renting out the house ?  This would effectively reduce your own personal input into repayments – the tennant and the tax man would effectively be paying more.  While this idea is certainly not sexy or glamorous, it will make a big difference in your month to month cash flow. 

You have experienced some good growth on the unit over the last few years, and probably have also in the house over a short space of time.  I'd try to hang on to both properties and try not to sell either at all if possible.

Perhaps the house renovations might need to wait, or perhaps be staggered.  Sounds suspiciously like the whole "delayed gratification" thing may need to be discussed !!

I hope this helps,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

September 20, 2007 - 4:18 am

Hi Panda,

Suggestions:
1.Get an official contract from somewhere – eg REIV, or even the local newsagent / bookstore , or better yet from your solicitor – and make sure both you and your vendor sign it.  Exactly like if a real estate agent was involved.  These are not very expensive, maybe a hundred dollars or so, if that. 
2. As John has suggested above, use either your or your vendors solicitor to hold the deposit money.  Yes, it will cost a couple of hundred of dollars, but it will make it all nice and legal.

Good luck – sounds as if you have found a bargain. 

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

September 19, 2007 - 11:28 pm

Hi Ray,

You should get it as soon after signing the contract as is practical – ie straight away, or at the latest the next day, and do not wait until settlement.  The "settlement period" is kind of a grey area in-so-far-as ownership is concerned.  It's not yours yet, but it will be, and while the vendors still have possession, they have effectively agreed to sell it to you, (and thus have probably lost interest because mentally they no longer have any responsibility and are just killing time until they get their money).

If there was an issue – a fire or what ever – it can get complicated.  For the cost of a couple of months of insurance it is not worth the risk.

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

August 13, 2007 - 3:13 am

Hi Dave,

I agree with LA Aussie – read, read, then read some more.  Hang out on this site, and on the Jan Somers forum site as well.  Read some more.  Sign up for the e-newsletters from here – ie Steve McKnight – and Michael Yardney (metropole.com.au), and Margaret Lomas (destiny.com.au).
Decide on a "strategy" – easier option is certainly "buy and hold", but often this can come with negative gearing, thus affecting your affordability….. not to say this is "bad" or "good" – it just "is".
Read some more – borrow books from the library, or buy them – Steve McKnight, Jan somers, Margaret Lomas and Michael Yardney.  Anita Bell has some good ones too.
Go to auctions, talk to agents, keep track of "advertised price" and the "final sale price" in a specific area for a month or two.  Talk to the bank or a mortgage broker and find out what you can afford.

Above all – BUY SOMETHING !!!  Actions will help you learn much faster, and avoid any potential "analysis paralysis". 

I hope this helps,

Thanks,
BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

July 25, 2007 - 2:19 am

Hi Lukis,

As already mentioned :

"This offer is subject to Finance suitable to the purchaser".
"This offer, unless withdrawn earlier, will lapse at 5pm on -insert date here-"

In the example you have mentioned, I slo would strongly recommend checking out the Body Corp – meeting minutes, planned expenses (such  as fixing the pool), sinking fund status, etc.

I hope this helps,

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

July 25, 2007 - 2:05 am

Hi Vibe,

Books – Rich Dad Poor Dad, by Robert Kiyosaki

Websites and eNewsletters –

Jan Somers / Somersoft – http://www.somersoft.com/forums/

Michael Yardney / Metropole – http://www.propertyupdate.com.au/

Margaret Lomas / Destiny – https://www.destiny.net.au/vipregistration.aspx

Hans Jakobi / Real Estate Secrets – http://www.realestatesecrets.com.au

And of course the Steve McKnight PropertyInvesting.com newsletter as well !!!

Refinance ?  Impossible to answer, given the only info is what you have written.  Depends on heaps of things.  Probably the answer is YES, but……. Things to think about would be – What would be the benefit of doing so ?  What is your risk tolerance ?  What is your servicability like, as far as The Bank is concerned ?  Would you be tempted to spend any newly available funds on beer or huge TVs or holidays, rather than "investments" ?  Can you afford the repayments if you did refinance and used these funds ?

Shares or Property – chicken or egg ?  Many eggs in many baskets, or one basket with lots of carefully guarded eggs ?  Personally, I think both is good, but my wife and my overall investment portfolio, while it contains both, is heavily biased towards property.

I read an amazing post recently that goes further into the "shares and property" question.  Have a read of this :
http://www.somersoft.com/forums/showthread.php?t=34047

To cut a long story short, the example in this url above is "buy properties, after some time use equity to diversify into high yielding shares / LPTs, then repeat".

I hope this helps,

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

July 25, 2007 - 1:44 am

Hi Danish83,

"The correct structure" can also be likened to "how long is a piece of string ?"…..

What is correct for you could be very different to someone else, and vice-versa.

However, in my opinion, your suggestions are good ones.  In fact, my structure is similar to what you are proposing.

Separate loan and security for each property as a stand alone concept – good. 
Total LVR under 80% = no Lenders Mortgage Insurance costs – good.

Interest only loans, thus reducing the monthly repayments – in many ways, good.

I know nothing about ratebusters.  Are they a mortgage broking service ?  If they are, then perhaps a suggestion might be to make it clear to them that you plan to use the available equity over time to fund further purchases, and see what they say.

Or, perhaps visit other mortgage brokers, and seek their advice.

Depending on many factors, including the company policy at the time, refinancing as you have suggested can sometimes involve fees / costs / etc.  Understanding this BEFORE you take out a loan will make life so much easier for you if and when you do come to refinance to release equity for another purchase.

Again, in my opinion, I think you are well and truly on the right track.

Go for it !!

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

July 11, 2007 - 12:16 am

Hi Fishman,

It probably all comes down to your own personal strategy.

If you are of the "Positive Cash Flow Only" camp, then perhaps, at this asking price, you should leave it.

Therefore, you could try to negotiate a better price, and if this can't be done then once again you should leave it.

If however it is in an area that is likely to have enormouse capital growth over the next week/month/year, then perhaps you could crunch the numbers and see if you can afford the short term loss for the longer term gain ?

Would buying this property move you closer to your goals ?

I hope this helps,

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

July 11, 2007 - 12:06 am

Hi Hong,

The old "Chicken or the egg" question eh ?

I guess the answer to your question lies in what your plans are for the next few years… where are you going to live, what are you going to do, careers, studies, friends, partners, goals, lifestyle, etc.  At a guess, only you know the answer.

Either way, I reckon you should buy something.

How about buy a 3 or 4 bedroom Principal Place of Residence, you have the main bedroom, and you could rent out the other 2 or 3 in a share house situation ?  That way you get the best of both worlds…

As far as the FHOG is concerned, I could be wrong, but I don't think you would actually forgo the entire grant.  I'm not 100% sure of the exact details, but if you buy an investment property first, yes you loose some of the FHOG, but not all.  I am in Victoria, and I know that if you buy an IP first, you still qualify for the State component of the FHOG, but yes you do lose the Federal component.  I think it is similar in other states as well.

I hope this helps,

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

July 4, 2007 - 2:47 am

Hi Blogs,

I'm with Jon and Elka on this one.

The "leaving" brother needs to decide if he wants to continue to own half or not. 

If yes, then he effectively becomes a landlord, and thus needs to both continue his share of the repayments and charge the "staying" brother rent.

If no, then as Jon and Blueheeler have suggested, then valuations etc and a formal "sale" of his half of the property needs to be completed – ie the "staying" brother buys out the "leaving" brother.

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

June 26, 2007 - 11:26 pm

Hi Somewhereoverthere,

Depending on the relationship you have with your in-laws, it might be easier to go to your local bookshop and get a Do-It-Yourself Real Estate Sales Contract – and fill in the blanks.  They are usually in the same section of the bookshop as those DIY Will Kits….

Or, you can get a Contract of Sale from the Real Estate Institute in your state – eg http://www.reiv.com.au 
There will be a fee of sorts – sorry I have no idea how much…

Thanks,

BDM

[BDMParticipant@bdmJoin Date: 2002Post Count: 93]

June 26, 2007 - 11:16 pm

Hi Tatts,

I subscribe to these email newsletters, and I think they are fantastic…

Michael Yardney / Metropole – http://www.propertyupdate.com.au/

Margaret Lomas / Destiny – https://www.destiny.net.au/vipregistration.aspx

Hans Jakobi / Real Estate Secrets – http://www.realestatesecrets.com.au

And of course the Steve McKnight PropertyInvesting.com newsletter as well !!!

Thanks,

BDM