Forum Replies Created
Hi SydMan,
I imagine whatever your next moves should be must depend on where you WANT to be. Let me explain:-
You look to be in good shape financially, with several options. Your path could take several different paths – e.g.
1. sell your house and move North and pay cash for your next PPOR, without paying a cent on CGT, and say goodbye to $356K of debt.
2. depending on the numbers, perhaps sell one IP to liberate cash to pay off another, (CGT applies) or
3. borrow to purchase another IP or two, with better Income prospects (i.e. NOT negative geared), or
4. Sell existing neg geared to buy pos geared (CGT would apply though, so do the sums first)
In short, I would be looking to clearing the neg gearing either by selling, or trading, or renovating, or doing a few chunk deals to produce cash to pay down debt. Thinking that way, I imagine Steve would be saying “buy residential to grow your Equity, then later, move to Commercial for a better Income”. So Sydman, is it time for you to make THAT move? Is that something that appeals?
You have lots of options – but what sounds like it might work for you? i.e. what skills do you bring that would have you favour one path or another? I know, questions, questions – but they are yours to answer….. Let’s see who else has some thoughts that may be of benefit. Come back with more info if you wish,
Benny
Hi Jane,
Wow, it is awful when laws change and the results of your earlier decisions become a minefield through no fault of your own. I don’t know the answer for you, Jane, but I wanted to say there are a number of very smart people who are members, and I am hopeful that someone might have an answer that they can share with you. I will leave it there right now, as I can offer no more than a little hope for you, but I do at least that – I hope things work out for you in the best way they can.
Benny
Hi Suri,
“I am being pushed as the builder is saying if I don’t pay up by Monday next week they will start charging interest.”
Don’t be railroaded – work out WHAT that interest cost would be, then decide if it is worth having the “insurance” of a third party’s report. e.g. let’s say you owe $100k to the builder, and they want to charge 5% interest. That is approx $100 a week. If an engineer’s report is going to take 3 weeks, then allow an extra $300 as the cost of your “insurance” (the structural engineer won’t be cheap I’m sure). Once you have some “numbers” things become more clear.
One further thought, if downstairs is level, then it seems unlikely to be a ground subsidence issue to me. Is that right? What do you think? One old trick I’ve heard (works for hard floors) is to take a marble with you !!! ;) See which way it rolls.
Good luck with your decision,
Benny
Hi Jen,
I was told by the agent that the vendor will not look at any pre-auction offers below the $700k mark. Is the agent meant to update the quoted price range to reflect that?
I wouldn’t have thought so. The agent is simply saying that the vendor is hopeful of having a “lively auction” where the price could go above the expected range, and that (for now) they won’t entertain any offers below that $700k number. At auction, it could also be passed in at $640 or so, leaving the door open to other offers then.
For a price though (the uplift to $700k or above) they might be willing to “look at” your offer ahead of time. Otherwise, go to auction and be the highest bidder (hopefully after it gets passed in….). Good luck with it,
Benny
Hi Kiwi,
To me, one of the major questions is this – are you wanting to buy a house in Newcastle to be your own home, or to be an Investment Property? Depending on your answer would change what I would do. Here’s why:-
1. You have some good equity in the Whyalla place – if it is not selling, that could mean you are asking too high a price for the current market. That equity is available to you if you sell, with no CGT to pay either (as it was your own home). And that way works well if you are wanting to buy “your own home” in Newcastle as it provides you with a sizeable deposit.
2. If you want to buy an Investment property in Newcastle, then you might instead borrow against the Whyalla property (use some of that equity that is just “sitting there” right now) to help to buy the new IP – any loans are deductible, thus helping your income stream. But then, this depends on your current Income and how secure it is. If you are employed and quite stable, or you run a successful business, then this way might work out well for you.
Whichever way you go, there will be different angles that you will need to consider. Terryw has already mentioned some, but there will be a host of others depending on your first decision (above). Do come back to ask more….. :)
Do check out the link I sent you in your Welcome PM – the “big picture” link. It has some really worthwhile thoughts (also from Terryw) on the various options when looking to sell or keep a property that has been your own home. Some valuable points in that one – actually, I’ll post it here, so others can find it too:-
Benny
Hi Propdir,
“Does this -22% still apply, and if so, what meaning can we put to it?”
I would think it does apply, and indicates a 22% loss. I don’t know of any more complicated way to view it, but would be interested to hear from others on this too (especially if my answer is wrong, or incomplete).
Benny
we are taxed on the increase of the asset not on the total asset.
That’s a very good point Sinner. Tony Robbins does say to “take out 30% tax at each stage” and I hadn’t questioned it further, as my calcs seemed to meet with his original answer.
Well considered on your part though – that was a good catch.
Benny
Hi Sinner,
I took a look at your workings and noted a couple of things:-
1. After the second line, you were only removing 15% instead of 30% and
2. You seemed to double the original expected figure (1, 2, 4, 8, 16, 32, etc) instead of doubling WHAT REMAINED after the 30% tax was imposed in each year.
So to clarify, your first 4 years in the Net Asset column showed this :- 1, 1.7, 3.4, 6.8
…while mine showed 1, 1.7, 2.89, 4.91
After 10 years you had $870.40 while I had $201.60
Did that help?
Benny
Hi Philip Green,
Let’s say that 10 years ago, when you first purchased your home, interest rates were 5% on your 30-year fixed-rate mortgage. Now, in 2020, you can get a mortgage at an interest rate of 3.5%. Those one-and-a-half points can potentially knock hundreds of dollars a month off your payment, and even more off the total cost of financing your home over the term of the loan.
That WOULD be a good idea, except that the lender will have break costs on a Fixed Loan that is likely to cost you ALL of what you would save, and then some more. So, before anyone goes “breaking” a Fixed Loan, ask for a payout figure first, then do your sums !!!
Benny
Hi again,
I hear you, and yes, your questions make sense – Steve mentions two phases – accumulation, then consolidation. As I understand it, the accumulation phase is where you go “all out” to gain equity that you can then convert into Income down the track. Steve makes the point that Commercial Properties give a better yield (Income) than residential, so he talks of building your equity with residential properties first. Once you have the equity you need, use it to buy Commercial that then throws off extra cash so you can leave your job.
But beware, those few words are the nutshell – there is far more to it than just that, and of course, you might need to have a high income to be able to grow your equity. So, yes, you might need to buy 50 properties – or just 16 (see a story that comes from the topic called “The big picture” – about a young bloke who wanted to accumulate quickly) :-
One line from that link is this – “He created rental incomes of $200k in 2 to 3 years”. That was gross income, but hey, there was a lot left over for him (to buy more, or simply to live). He posted later to tell us where he is now…..
You’ll be able to access the whole “big picture” topic from there too. Or look for it in the Welcome PM you received. There are a host of other ideas in that link,
Benny
Hi Big Lachie,
From your words, I suspect you’ve got to page 100 or so, but perhaps not much more yet? I see where you read the part about “thirds” – it is between pages 92 and 100 – or thereabouts. Did you spend time on the other two “thirds” though, and what each of them does for you? ‘cos it is all about the whole picture. Steve used the “thirds” to good purpose – but perhaps it might be that things can work better (for you) by utilising ALL of the postive income in just one area rather than three? But to round out Steve’s idea of thirds, let’s take a bit longer look at them:-
One example of what the second third can do is told in later chapters – see p235 for Vendor finance and how that can lead to a lot more income over time, OR indeed a lump sum equity jump instead (depending on how things go for the purchaser). Either way, the investor (you) is covered – via income or equity. Note too though, that Steve’s earliest purchases used that system as it worked well with inexpensive properties. Even then it only worked in a small number of areas – Steve needed to change his focal point once that area (Ballarat) values grew too high to use that system.
Steve talks of “Multiplication by Division” too (see p49) – revisit those pages to see how he was able to recoup “lazy equity” by selling one to enable him to buy two more. That’s another way to increase BOTH your income and your equity (capital).
And then (on page 99) he talks of using shares for capital gains (as one can make money whether share values are rising or falling). In the end then, do you need 50 properties? Maybe – maybe not – it is all about “how you choose to structure your investing”. From what I can see, Steve’s way is a patient, sure way where you walk the path to financial freedom. Not a sprint, but more a marathon.
There is a lot to it, Lachie – do come back with more questions as you go – I hope the above helps in some way, :)
Benny
Hey thanks Terry – appreciated !!
Benny
Hi Amelie,
Sounds like you may have a DSR concern rather than an Equity one. i.e. that the Bank may not let you take on double the loan so you can pay out the other partner. I’d think the way to find if there is any chance is to speak with a reputable Mortgage Broker.
There are several who post on here (their signatures tell their tale), or you might want to talk with Steve’s own recommended broker – follow the bouncing ball to talk with Chris Berry about your situation >>> http://www.PropertyInvestingFinance.com
Benny
Bump – click here for the first post:-
In short, if you are an adviser with a signature, DO include in your sig the details of the cities you service, and log your details in here too so that other members wanting your services can find you (and where you work).
Benny
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Benny.
Hi Alex,
That sounds like a healthy business you have there.
Owning a small bakery business in Vic. My weekly net profit $5000 pw for our whole family after all business and family expenses.
Since this produces so much active Income, what if you made it Passive by employing others to run it? I don’t know how many wages you’d need to pay, but I’m guessing it would still leave a very healthy passive income. And you can then spend your time creating other assets, knowing that (if necessary) you could always go back to the active role if things got tight (either personally, or economy-wise). Could that work for you?
It’s an interesting scenario – thanks for posting it. I’m interested to hear more….
Benny
It has been a while since last comments, but a chance comment on TV re Switzerland and its success with Covid19 has led me to share this info.
As the whole world waits with bated breath for a vaccine for Covid19, the Swiss seem to have stumbled onto something that is worth a second look, and maybe a third and fourth too. You likely all know the name – the link below shows how a Lancet article led to the Swiss STOPPING the use of this drug, only to have their Covid mortality rate increase by nearly 5 times the previous results. That rate then fell back again once HCQ use was re-commenced by the Swiss. QED? Sounds pretty good to me.
But don’t listen to me – take a look here:-
“According to the critics of hydroxychloroquine, these 15 days of prohibition should have had no impact on patient survival, but this is not the case”
http://www.francesoir.fr/societe-sante/covid-19-hydroxychloroquine-works-irrefutable-proof
So, what are we waiting for? Sounds like good news to me…..
Other words I have heard from various sources also add extra comments re HCQ:-
1. That it is most effective in the EARLY days of a person’s Covid positive testing, AND
2. That zinc is a further important ingredient that should be included along with HCQ. i.e. those tests that show HCQ is NOT effective often were testing at the wrong time of a person’s Covid disease, or without a sufficient addition of zinc along with the HCQ.
Yeah, I know – that bit’s hearsay – but look it up for yourself. Or reply with further knowledge if you can add more. If we are all in this together, then it is together that we will beat it. Feel free to do your bit too with a response. ;)
Benny
In answer to your question about “something bigger”, I guess that remains in the lap of the gods – any major world event will always impact on Aussie. But for me, I think the home situation (above) is far more relevant right now.
Well, another year has flown by, and what a year. And how’s the Covid19 pandemic for a “major world event”? Didn’t see that one coming, but now it’s here, and the whole world is staggering right now. Again, it is too soon for predictions about our housing market. On one hand, the current Govt stimulus is providing extra $$ while many businesses are forced to shut. For now though, many recipients are sitting on their hands and not spending the extra. With borders between States shut, the usual trading that happens inter-state is being hamstrung – not stopped completely, but certainly nowhere near as “free” as it was.
Thanks to Steve for his direction recently (see his webinar called “What’s your Pandemic Plan?” dated 8 Aug 2020). Sobering words in there, but also so much wisdom and even hope. Well worth a look for those who haven’t seen it (the Facebook page is here – https://www.facebook.com/pg/properinvesting/posts/ )
I don’t have much more to add right now. Could this pandemic thing be the catalyst that finally topples the housing market? I’m not so sure – yes, there are pricing falls here and there right now, but these are after huge gains in the last few years. With International borders pretty much closed, we aren’t inviting immigrants so no extra housing needed, meanwhile those building starts from the last 3 years are about to complete with a dearth of buyers. That HAS to have a negative impact on prices – but just how much? Too early to tell, and also with the pandemic, we’ve yet to see just how rampant it will be. Worldwide deaths are growing – as yet these are nowhere near the Spanish flu deaths from 100 years ago, but then this thing could go on for years. Who knows right now?
Not me. Borrowing words of hope though, “This too shall pass !!”
Hi Alan,
As Steve has shown there are many options – even too many to mention right here perhaps, but do spend some time familiarising yourself with this site, and some good books on the subject. Also did you check the link in the welcome message I sent you (the “Big Picture” one)? It shares a host of different thoughts on the “How to” and “What to watch out for” in property investing. Also on this forum website’s Home Page there is the Training Centre. Spend a month or two just looking and learning of the many options you have open to you.
Here’s an extra thought that I had on reading your first post:- Depending on your borrowing capability, is it worth considering financing some/all of these purchases? You see, if 5 houses can return you $400 each, what if you bought 10 instead using finance? That could work better in a higher capital growth area as you’d have twice the number of properties gaining equity even as the income pays down the mortgages. Of course, that decision would need to be tempered with your lack of knowledge – i.e. don’t jump too soon, but spend some time educating yourself to all possibilities, then go with the one that makes the most sense to you.
Welcome Alan – do come back with more questions if you wish,
Benny
Thanks Principal,
Good to hear that is an option that does work – appreciate you taking the time to let us know this,
Regards,
Hi Terry,
>>> Not sure how you get that idea from my posts.
Maybe this one confused somewhat? Worked for me…. :p
If I take the 800k and put in the redraw then take it out to buy a new property, will the full 800k be deductible?
= No
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