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May 7, 2007 - 6:46 am

Hi Millions,

Craigie seems to be the cheapest for houses around Hillaries, then Beldon & Kallaroo, Padbury, Woodvale, Mullaloo, Duncraig (mid 400s). Go to realestate.com.au and search 'Hillaries' then click 'search surrounding areas'. The first 15 pages are under 500k. I guess it depends on what size land you're looking for and other particulars. If you love the beach then maybe aim for Mullaloo or Kallaroo. I haven't been to Beldon before, but it looks quite close to the beach too. If you are looking at a unit then your choice of area is quite open. It all depends on what you need as minimum requirements.
Best of luck with it, we are trying to figure out how to get a place in the next few years around Cottesloe – challenging to say the least!

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April 20, 2007 - 6:32 am

In response to LA Aussie

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April 20, 2007 - 6:31 am

May be worth it to see if that anticipated stamp duty relief creates more buying activity temporarily?

[IPSpiritMember@ipspiritJoin Date: 2005Post Count: 84]

April 19, 2007 - 1:37 pm

I worked out my yield on Shoalwater IP (near Rockingham) to be 2.5%! Not to worry though, first of many and I believe I will catch the next wave easily as someone once told me…

[IPSpiritMember@ipspiritJoin Date: 2005Post Count: 84]

April 19, 2007 - 1:27 pm

Don't worry man! I'm paying 8.8%

But I quite like my PM. She does a good job and the paperwork gets sent each month. Unfortunately this rate was comparitable to the general market, but I did choose her over a guy offering 8.6% (the cheapest!!) because I think if you have a good rapport with them, it's a good start to effective communication. I don't mind paying the fee, it isn't worth the hassle (or contact) for me and it is tax deductable. Unless you have more than one in Perth or have been on an agreement for ages, it is hard to negotiate the fee.

Best of luck with the tenant! No doubt the PM can help you get it back on track easier.

Let us know how you go

[IPSpiritMember@ipspiritJoin Date: 2005Post Count: 84]

April 14, 2007 - 11:07 am

I've got a loan with Colonial too. The number I call is: 13 24 07

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April 5, 2007 - 3:40 pm

what is an LPT?

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April 5, 2007 - 3:22 pm

Hi Linda,

You're right, I have been quite confused about the concept of IO for a while. I was chatting with a mate about it tonight. She said that by paying IO payments each month I am keeping the debt the same, but if I was to pay more than the minimum it would reduce the interest payments. I think I have gotten to the point where I can't see the wood for the trees because I feel like it is so easy to realise why IO is of benefit, but it's like I've got a blindfold on!
What she was saying seemed to make some sense and I can also see what you are saying about rising rent & equity growth. I think I need to try and connect the dots now. If I still don't get it, then maybe the accountant can clear it up at tax time.
Thanks for your patience, have a great easter!

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April 4, 2007 - 9:45 am

Property Wizards in Perth are a great bunch, nothing is too much trouble and they keep in touch.

[IPSpiritMember@ipspiritJoin Date: 2005Post Count: 84]

April 4, 2007 - 5:26 am

Thanks for the replies everyone

Yeah we would like to get a PPOR eventually, but not in the forseeable future because our rent is really cheap. My motivation for opening the offset is to use that money to pay down some principle on the current loan with the flexibility of being able to redraw should an emergency crop up.
I'm trying to get us in a position where we are building equity and I just don't see that happening with these massive IO payments. According to the lender we can pay back 10k per year on the IO loan before we start incuring fees (but I'm still not sure this would even be worth it). Here's the summary:

Purchase price: 390k
Closing costs: 15k
Mum's equity: 20% (inc closing costs)
IP Currently worth: approx 415k

Loan
350k IO (fixed for 3 years)
62k P&I (variable)
100% offset will be linked to P&I

Rental income:
$200/week

The idea is we get this loan to a more managable amount (compared to the rental income) after refinancing and giving back the equity we owe (20%). Then buy another IP in about 4 years, possibly a PPOR after that, then more IPs for our self funded retirement, once IP income replaces work. We are 28.

If my thinking is not logical, I would definately like to know!

Thanks again

[IPSpiritMember@ipspiritJoin Date: 2005Post Count: 84]

April 3, 2007 - 6:41 am

Thanks Rowdy.

The interest payments are only slightly offset by the rental income and although there has been some capital growth, I doubt it is significant. You mention 'redraw', we are just about to open an offset linked to the P&I (which is variable), but I still don't see the point in us paying huge interest payments when it seems like we should be trying to get our equity up.

Have we got the structure wrong if our aim is to build equity through repayments (due to Perth running out of steam recently)? It seems like the IO payments are sucking us dry.

Thanks for your thoughts.

[IPSpiritMember@ipspiritJoin Date: 2005Post Count: 84]

March 31, 2007 - 4:46 am

Hi Simon,

Congratulations on your offer being accepted! I've got an IP in Shoalwater and use a local PM. I compiled a spreadsheet back in October '06 detailing the fees and charges of various PMs in the area. I would be happy to email this to you if you like? It may serve as a guide to get you started.

Regards,
Dee

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March 31, 2007 - 3:48 am

Hi Millions! Yes, I wrote the post with the Shoalwater property in mind – you have a good memory
I definately want to hold on to it long term, even though it is negative right now, because I think it has good potential to grow in value eventually. I was thinking of what we could do for our next purchase though because we need to focus on something less negatively geared if we are to stay afloat. This is what made me wonder about rent cycles. We bought in Shoalwater at the top of the boom, which I don't regret considering we now have our foot in the door at last, but (as you know) it means the rent yield is really low – 2.5%. I get the feeling that the tenant we have currently will be staying long term as it is really close to the primary school for her kids, but if she decides to move on, it is good to know that the builders will need accomodation – I hadn't thought of that.

Hey Petro – thanks for your reply. From what you are saying, it is likely that the yields tip the other way eventually after a boom. I had a bit of trouble locating "real estate cycles and their double-positive impact on property values". Would you be able to tell me which heading it is under on your website?

I've only been studying the Perth market since 2000. Does anyone remember how long it took for the market to recover during the last couple of booms (and hence an increase in rents)? I understand that there are differing outside factors which determine recovery each time, but it would be great to know anyway.

Thanks guys

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March 24, 2007 - 3:24 pm

There was a report on Foreign Correspondent last week which seems relevant to this thread:

http://www.abc.net.au/foreign/content/2007/s1865416.htm

I also watched a thought provoking doco called “Who killed the electric car?” Not sure how old it is, but along the same lines as “An inconvenient truth”. While it is true that documentaries are always biased, I couldn’t help questioning the credibility of the automobile and oil industries who clearly have a vested interest in the continued use of fossile fuels. In my opinion, this potential global issue warrants further investigation. While it could just turn out to be scare mongering (although I doubt it), what if it is a reality and nothing was done about it?

I heard recently that some insurance companies (in the USA?) are refusing to insure some properties that could be threatened by rising sea levels. I can’t base this statement on fact, perhaps someone else knows more about this and could shed some light?

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March 7, 2007 - 3:31 pm

Hi Kelly,

I know you are a secondary teacher, but when I was in year 5 our teacher introduced a great concept called “the class bank”.
We each got a fake bank book with a starting balance of $0. Good behaviour/participation/achievements was rewarded with $5 – $10 and bad behaviour resulted in $5 – $10 fines (a very effective strategy to curb bad behaviour when yelled out in front of the entire class)! The motivation for earning ‘money’ was “the class shop” which was open once a week and contained various trinkets of differing value. The most expensive item was a revolving porceline clown worth $800. I worked all year to get that clown and finally earned the $800 needed to purchase it. It is kind of like saving hard for a deposit to finally get a house. As a 10 year old, the clown appealed and the concept worked (although as previously mentioned, it took a while for the penny – pardon the pun – to finally drop). I would have loved the opportunity to build on this learning experience during high school.

I guess the point is to get kids thinking while they’re young. Perhaps there is a creative strategy out there for teenagers to get them thinking before they blow their cash on expensive cars and become walking billboards for designer labels?

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February 25, 2007 - 12:16 pm

Thanks for your point of view Richard. Back in July last year when the house stuff was happening I visited with 2 mortgage brokers. They both came up with the same lenders for recommendation, Westpac & Colonial. Having never ventured into the world of IPs before, I figured I was doing myself a favour by getting someone more experienced to find me the best lender. The MB I went with suggested that with the Colonial package, I could refinance/restructure? the loans without incurring hefty fees for future investing, so basically for flexibility. I am still at the early stages learning, considering that I know I cannot navigate the world of lending institutions with ease at this point. Perhaps this comes with experience?
What I’m trying to do at this point is figure out ways to reduce the debt smartly so that we don’t drag our heels as much in the future due to bad decisions made earlier on. I was thinking an offset account may be the way to go, which is why I would appreciate the opinions of others (like yourself) who are far more experienced than me.

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February 25, 2007 - 12:00 pm

Great topic!

I was chatting with my husband last night about our imaginary children. I told him that I am really looking forward to educating them about money when they are young so that they understand how to build wealth. He screwed up his nose and said “Nah, just make em get a job and they’ll soon learn the value of money”…not good enough as far as I’m concerned. We are 28 and have pretty much pissed away our early adulthood because it wasn’t until I started reading investment books that I began to understand the difference between good and bad debt.
Kids don’t learn this stuff at school! It is up to us to prepare them for life. I would rather give them the tools before adulthood and let them make up their own minds with a sound knowledge base.
I think it is great to want to give your kids a new house for their 21st, but I would only do it if they understood the value of money and showed me signs of being proactive with their financial future. I live in the posh western suburbs of Perth (courtesy of the defence force) and often hear of mummy & daddy buying ‘little presh’ a brand new place to live in once they graduate from high school. I can appreciate how parents want to give thier kids the things they never had, but I for one will need to see some evidence of financial smarts before I go down that road.
I think the biggest lesson I’ve learnt so far is that you don’t solve money problems with money. I want to teach my kids to have the correct mindset and attitude towards cultivating money. Otherwise it seems to make perfect sense that if all wealth was distributed evenly amongst the population, it would soon end up back in the hands of the savvy few who have the knowledge to invest wisely.
We have a great advantage on this forum to learn from each other and pass on our knowledge, surely we can do it in an age appropriate way with our kids too [exhappy]

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February 25, 2007 - 8:44 am

I meant to say the loan is with Colonial.

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February 25, 2007 - 8:17 am

Hi duckster & Terry,

Yes, the IO is fixed for 3 years and the P&I is variable:

350k IO
62k P&I

This is for a negatively geared IP that we purchased last year in Perth (hence the unfortunate -ve situation). Our loan is with the Commonwealth, mortgage advantage package.
So it seems that my mortgage broker was right with his advice based on the scenario you gave duckster? If I am understanding this correctly, it is better for me to link the offset to the P&I to reduce the overall debt (provided I don’t put in more than 62k) because the IO is fixed. As mathmatically challenged as I am, I will try to do the figures:

62k x 8% = $4960. Would that work out that an extra $400.00 per month would be paid off the loan?

I guess the other forum posts I read were all based on variable IO loans, but the rules are different for me due to the way the loan is structured?

We don’t have any other debts like cars, credit cards, PPOR etc. I do have a HECS debt which I’m accruing for the next 18 months though.

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February 17, 2007 - 10:57 am

Sorry to hear that you are in the wars mate. Must be very frustrating being all tractioned up like that with your # Acetabulum. I just did a stint on the orthopedic ward @ Sir Charles Gardiner Hospital in Perth as a nursing student so I can empathise with your plight. Certainly doesn’t help when your family is so far away. I would definately recommend paying for the t.v. if you are in a public hospital – a good prescription to help avoid insanity! Would come and say g’day if I was in your part of the country. I hope you get yourself back on track soon.

Wishing you all the best for a speedy recovery,
Dee [medieval]