Forum Replies Created
Since I’ve had a few requests to provide a link (it’s NOT intuitively easy to find – but Google came thru) – here it is.
Would those that emailed please accept this as my response to them (saves a lot of typing [biggrin]
“The main benefit, however, is that your serviceability improves and you can then borrow even more funds.”
This sounds like Steve’s “Multiplication by Division” strategy. Must say, I tend to like this idea – on the surface at least. And if being able to buy more (better value) properties by selling one, it has to have merit. But if you don’t have PLANS for the gain, then I’d have to agree with those that say “Why sell an appreciating asset?” Horses for courses.
The other positive with CGT is that it doesn’t fall due until after the end of the current fiscal year (i.e. you won’t be due to pay it for almost 12 months). The key here being “what other investments are you going to make in those months?” THEIR gain could pay off the CGT due on this one and accelerate your gains.
Worth a thought?
You’re not my long-lost flatmate, are you? His name was Maurice – is that you? [biggrin]
Anyway since that is unlikely, I just wanted to add these – homepriceguide.com.au (no rents, but medians and averages on a month to month basis.
Then, there’s the “Aussie” website which has an Aussie Valuer section. This give 5 years worth of median values, and the median rental yield. The only thing I find infuriating about THIS site is that the data is said to be “current as of date of request” but is only updated every 3 months. Nevertheless, I’ve found it’s useful from time to time (and it MUST be due another update soon – the data hasn’t changed for at least 2 months. Oh, and it also includes THREE medians based on property quartiles (the lowest 25%, the middle 50%, and the top 25%). Very useful – if only it were date-stamped !!!!!!!!!
A few back of the envelope calcs, and I think I’m seeing that IP 1 and 2 are not too -ve. So, if you were to change these to IO, you’d save around $150 per week, and push them a lot closer to neutral or +ve geared.
With Int rates as low as they are, the Principle repayment becomes a larger portion of the monthly repayment. Only problem is, you MUST make it, month in, month out if your loans are P&I – but, if they are IO, you choose!!!!
I would suggest looking at:-
1. Revert to IO loans on IP 1 and 2 – this should save you something like $150 per week.
2. If you chose to, this $150 per week could be directed toward paying off your PPOR.
3. I LOVE Offset accounts, so, set up an Offset account against your PPOR into which you chuck every available dollar. This has the advantage of allowing you to “claw back” these extra repayments if the deal of a lifetime were to present itself.
I reckon all of those reading your story would have realised you have LOTS of equity. This can provide you with many opportunities moving forward – and, if push comes to shove, can be turned into an Income Stream too. There are many ways.
But, first off, take a look at how you’d be after following the 3 steps above. To my mind, this is the winning FIRST MOVE. But then, I’m just a beginner too – what does YOUR Excel spreadsheet tell YOU ???
And, you haven’t mentioned Depreciations – are you imbibing?? If not, why not? These could turn this old ship right around IMHO.
If your finance is in place, and you can offer a clean contract (not too many conditions – or none), you can be quite successful with an outrageous price. At times like this, the vendors want to know “it’s sold” and will be more amenable to accept $310k (no conds. 14 day settle) rather than $330k, subject to everything, and 60 day settle
I agree with the others – try it on. Also, “maybe” the vendors don’t want 14 days settle, “maybe” they do. Suit their situation with everything except price, and you negotiate the price Good luck
Not many numbers posted, but I thought it’s worth looking at what can be done. For example:-
Bennido says “I did some quick calcs and I would need to pump about $100K into the investment loan before the apmt becomes +ve geared !”
From that, I assume you are negative around $7k per year (or $140 per week – close enough?) I figure, rather than injecting $100k, look at reducing the holding costs. See if you can do some, or all, of these:-
1) Add some value, and raise the rent
2) If P&I, refinance to IO loans
3) Maximise Tax deductability (if on highest Marginal rate, loss reduces to $3.5k or $70 per week immediately)
4) Buy one or two positive geared IP’s to offset the loss per week on this one.
When it’s boiled down, it sounds like you’re only $70 per week in the hole after Tax deductions. Chew away at this figure, rather than “injecting $100k cash”. Far quicker, and you can hold for the long term growth
One I loved was the “Intrepretations of Murphy’s Law” – it broke down that famous law into MANY “sub-laws”.
The only one I remembered from it was:-
“Any measurement is likely to be presented in the least usable measure – e.g. furlongs per fortnight”
Watch this space! SE QLD has a lot going for it – a rush hour that lasts 30 mins, lower taxes, room to grow, warmer weather, cheaper homes, etc.
And it plays second fiddle to Sydney and Melbourne in the property stakes, but hey – if you want to make money QUICKLY, keep SE QLD in mind in the next boom.
SEQ seems to languish while Syd and Mel are booming – then, almost in an instant, Bne prices go through the roof! The 100% gains made by Syd and Mel happen in 18 months up here (most likely because the investors from the southern states arrive here in droves as their markets peak.
re this comment from MarkPatric – “I don`t pay ANY attention to what daily papers say but today has seen a big turnaround, apparently QLD property will not cool down for 18 months” Yeah, mate, I saw one like that too (approx 6 months back) where it said Bne today is the size Sydney was in 1960. And, according to the article, Bne will be the size of Sydney TODAY by 2020.
Say wha’ ???? If that is even HALF right, Bne has to grow at the rate of Sydney over the last 40 years!
If it is RIGHT, it has to grow at DOUBLE that rate. That is downright scarey!!!
The article I read mentioned growth of 100,000 people per year into SEQ (some from Syd/Mel, and some from O/S) – again, if THAT is right, then that is equal to the other figures I’ve seen recently reflecting ALL of Australia’s immigration. The difference being that, as more come into Syd from o/s, an equal number pack up and move to SEQ.
Can it be right? Hell, I don’t know – but I’m happy with most of what I read, and also happy to continue doing ALL of my property deals in Qld. My Nett Worth has EXPLODED over the last 18 months 
“I would like to make sure that before I put these extra costs into our existing mortgage, that they will all be tax deductable.”
Something that always confused me were the words “deductability of interest depends on the original purpose of the loan” (or words to that effect). It had me thinking that if you ever rented out your PPOR, the interest would NOT be deductible.
I have since found this thinking is incorrect, and that, as soon as your PPOR is rented – or available for rent – interest on any remaining mortgage becomes deductible. (The ATO adds the word “generally”, so there might be some circumstances where this does NOT apply). Therefore, I can’t see having separate mortgages are of any benefit. But DO check it out with the usual suspects  (i.e. Accountant)
Richard did say this – “The profit would enable us to almost eliminate any debt left on out PPOR (which is now rented out)”
That last phrase tells me that his PPOR debt IS deductible! So is it really useful to pay down that debt? No more than paying down any other IP?
Who can tell me? It’s an interesting question
Re the unit, I would guess that it is close to +ve anyway now (from the figures). I agree with those that say “you can go either way”. For me, I’d be looking at WHERE the units are, WHAT is happening around them, is it likely to continue to appreciate in value…..
Reckon I wouldn’t be in a rush to sell, but, if I NEEDED to, NOW is not such a bad time. I’d check on actual CGT costs though, before selling – as CGT is really considered as Income, and added to your (non-existent) Income, then Taxed. So, if you’ve gained more than $60k, you are automatically in the TOP TAX BRACKET – or, do I have it wrong????
Richard, I’m NOT a guru, and only have a passing knowledge of these things – but DO check it out before selling….
Thanks for posting those figures (I was quite shocked to see the P&I repayment – until I realised you were paying off the loan in 10 years).
Assume you have a 200,000 loan, for 10 years at 7%
For interest only…
per month pay 1166
total interest paid = 140,000
total payments = 340,000
P and I….
per month pay 2322
Total interest paid = 78,000
Total payments = 278,000
Well, that certainly helps me to choose my direction. I’ll take the IO thanks, for the price of one. Own two similar IP’s with two similar rents coming in, put any “extra” into an Offset account to effectively reduce the Interest paid – then choose whether to buy a third or not. If not, I can pay down/out the loans using the “extra”.
But, at least, I won’t be having the Bank telling me I MUST pay $2300 per month (with only one rent coming in). It will allow me to choose just how much I pay off the mortgages.
Who wants to own them anyway? Isn’t controlling them more important?
For the good of the forum, now might be a good time to overcome your natural reluctance, Admin !!!
Following on from Stuart, what is the likelihood that it could jump another $5k – $10k in the next 6 months? I agree with his summation of CGT saved, but whatever you were buying would need to
a) make up the $6k lost in CGT – plus
b) make up any selling costs – plus
c) grow at least the same amount over the next 6 months as this one would have grown.
Personally, I wouldn’t be “jumping” too quick without having a good crack at answering a thru c.
I’ve got to go with RodC on this one. It is pointless to use the same growth figures for +ve yield vs -ve yield property. Unless the -ve yield is just a “dog”, then the main reason for -ve yield is a corresponding +ve growth curve.
Now, if you were to use 10% yield with 5% growth, and compare it to 5% yield with 10% growth, then I’d say “Yeah, OK” to your results
I assume you are paying P&I on your Home Loan – if so, then this virtually negates any plans of buying property until some other things change.
I have figured that you are paying around $1220 per month – and that is MORE than 30% of your gross wage. BUT, if you were able to borrow another $35k at Interest Only, (and use it to pay off the other loans) then your Monthly outgoings would reduce by around $100 per month.
Still not great, and you are still above 30% of your wage – so, it may not happen.
1. Is your Brisbane property likely to grow in value over the next year or two?
2. Can you rent for cheaper than $265 per week? (Which is the amount you will be paying AFTER the refinance)
3. Can you sell your car, and buy a cheaper one (this could make a large difference to your weekly cashflow).
4. As others have said, can you take another (second) job, or otherwise consolidate.
The main thing is, it appears you are probably too indebted to proceed with other property, so battening down the hatches, and making your current situation better, is probably preferable.
With an alternative lender, I can’t see too many gains for you (especially with the higher interest rates) so do your best to have an ordinary lender say “Yes”.
Just to help put things in perspective, any LOAN you are repaying is limiting what a bank will lend you. They tend to use a simple formula – i.e. you earn $40k – 30% goes in tax, 30% can be used for repaying loans, the other 40% is for LIVING !!!
So, keep in mind that only 30% can be used for loans – you are repaying for a car, HECS, debt consol’n, etc – in a word, you won’t have much chance of borrowing anything until these other loans are GONE !!!
And this is why these other posters are saying “Sell your car”, “reduce the debt”, etc. All of these extra’s will count against you when trying to borrow for property.
I made this mistake when arriving in Brisbane some 20 years back. I bought a car FIRST (then, tried to buy a house…. bzzzzt!!!! Wrong move!)
I should have bought the house FIRST, then a car – but, you know how these things are 
Kill the extra debts, then go for property.
The building manager said they wouldn’t do anything about it because it is in my car space
Any chance you can manouevre it into common area (so it is not in YOUR car space?) Once a few tenants complain to the Body Corp about having to dodge around the wreck, they would have to do something, wouldn’t they?
My thinking here is that you are paying for your car space, so if someone is parked illegally in it, you would have the right to remove it, wouldn’t you?
I have previously used the “move it onto the street” trick before – seemed to work OK
Well done, Diamond Gus – my suggestion would be to consider purchasing properties that could be reno’ed, or are simply at a discount. Anything that could give Capital Growth instantly by throwing cash at it (an LOC is as good as cash isn’t it?)
Use the LOC to fund them completely, reno them, then refinance after they have been spruced up. Or, if buying at a discount, settle them, do “what’s required” (paint, new kitchen, etc) then refinance – without any Bank clauses re 80% of purchase price holding you back. Banks do penalise us in this way, so keeping them out of the settlement loop should give you more room to move.
At this time, you also choose the best finance out there, and refinance to suit your purposes (70%, 80% or even 90%). A lot depends on just what and where the property is. And depends on YOUR requirements too (do you want +ve cashflow, or growth, or both? and in what proportions)
After refinancing, you repay your LOC, then do it all again (in fact, with over $1m to play with, you could be doing several at once)
Just having access to such a huge chunk of cash should ease your way into many different scenario’s. Half your luck …