[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

July 5, 2014 - 4:59 pm

Nice work, looks good.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

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July 4, 2014 - 6:34 pm

No worries – don’t feel silly!

You’re correct in what you say about how the equity works – you are increasing your debt.

The trick is to find the right balance – as you purchase new properties you will be renting them out – that rent is then income which in turn increases your serviceability but you want the capital growth too. As you’ve probably discovered easy to say, a little trickier to do. You just need to make sure you buy right – near the bottom of a rising market and hold. If you’re not confident with flipping then maybe look into developing so the small stuff like granny flats or sub dividing and grow from there. You could also get creative with student accom/boarding house, holiday letting for cash flow but each has their own challenges.

You will hit your serviceability limits eventually but hopefully that will be at or close to the stage where you just want capital growth and rental increases to take care of your portfolio. That’s when you play the waiting game.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

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July 4, 2014 - 12:37 pm

Woah hang on…. cash in an offset account? Avoid that like the plague. Set up the $740k as a Line of Credit an draw upon as needed. Gets messy with tax otherwise – seek tax advice on this one.

Sounds like you have a good plan in place – nice work.

*edit* Just re-read your post and by the looks of it, it seems to be a LOC that they have set up for you just not the right terminology being used. I’d confirm just in case.

• This reply was modified 9 years, 10 months ago by  Kinnon Bell.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

July 4, 2014 - 11:17 am

For me it’s photography, cooking, 4WD-ing, fishing, kayaking, hiking and just generally getting lost in nature. And sometimes all at the one time! :D

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

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July 4, 2014 - 9:20 am

To help combat the servicability issue you need to structure your loans correctly from the start which means if you’re looking at buying quite a few properties go to the less generous lenders first (not nab) and then once things start getting tight you then start to go to the lenders with more generous servicability ratios.

What’s your strategy and end goal? What are you working towards? How rural are the rural properties? I assume you’re focusing on rule for the cash flow and not the capital growth?

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

July 4, 2014 - 9:13 am

Also, forgot to add – you should turn your loans to IO – do you currently have an offset account against your PPoR that the $80k is sitting in? As much as possible you should use OPM (other people’s money ie the banks) to fund investment purchases for a few reasons, one including maximising your tax deductibility.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

July 4, 2014 - 9:10 am

Hi Sonya,

You’re pretty much correct in your understanding of equity and how to access it. The most common way is to access it via a Line Of Credit (LOC) which is a separate loan. Using your PPoR as an example if you draw on equity up to 80% of the loan value (you could do higher but you would be entering LMI territory) you would have a LOC of $26k which would be secured against your PPoR but as a separate loan and you would draw upon as needed.

One of the methods you mentioned as well was cross collateralisation which is where the bank accesses equity in your existing property to go towards the purchase of the new property but not via a LOC. You would have two titles secured against the one mortgage which can get messy and is advisable to avoid in most situations.

Hope this helps.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 30, 2014 - 10:45 am

I don’t know the Townsville market as well as I know the Cairns market but in general I think north queensland is recovering and people are starting to notice. Will be interesting to watch during the next couple of years.

What I’m really waiting on is to see whether the Aquis development in Cairns will be going ahead or not. And if I were a betting person my money would be on green.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

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June 20, 2014 - 4:47 pm

Is the property vacant? Are you a first home buyer claiming the grant?

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
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Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

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June 20, 2014 - 2:21 pm

Don’t be embarrassed – we were all there at one stage. You’re doing the right thing by educating yourself and finding the right professionals to help you move forward!

I remember one of my first posts on an investing forum a loooong time ago is what is an Interest Only loan! Glad I’ve a lot since then!

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

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June 20, 2014 - 2:04 pm

As Marty stated – all brokers should be happy to have a preliminary chat so you can get a feel for them. You don’t want to go with someone you don’t trust of doesn’t give you the right gut feeling. You want to make sure they know their stuff too. That’s all part and parcel of the service.

When brokers may get ‘pissed’ is if they after spending a lot of time with you and behind the scenes working out the best structures and loans or if they submit the loan for you and then you go direct to the bank for the loan. But then again, if after all that you’re going direct to the bank, then there’s probably something wrong with the service you’re receiving.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 20, 2014 - 10:01 am

If my understanding is correct, there is no equity as I haven’t paid any principal.

I just wanted to highlight the above that you stated, Appg. Just paying the principal isn’t the only way you can create equity. There is also capital growth which creates equity – either manufactured through renovations or through ‘natural’ CG which is the movement of the property cycle. These 2 are the types of equity creation that you want.

Paying down the principal would be my least favourite way to create equity.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 20, 2014 - 9:46 am

When you lost your business and had health issues did you keep up to date on your financial commitments or did you credit history take a hit? That’s one thing I would want to know first as depending on the outcome it would depend on the course of action.

Not sure what sort of input you’re wanting from the professionals? Are you wanting people to recommend houses for you ie a Buyers Agent, or advice on structures or on loans? You’ve been given some good advice from the posters above. As everyone’s situation is unique it makes it very difficult. If you ask me, the best way to go about things is to educate yourself then seek professional advice where needed. No-one knows your situation like yourself.

What’s your risk appetite like? Using the $150k you could go 90% LVR’s and be quite aggressive or err on the side of caution and have lower LVR’s. Can you afford to be negatively geared? Do you want to be? Do you want CF+ properties? What’s your end goal? Exit strategy? Will you want a PPOR eventually? When you say healthy portfolio, what is healthy to you? $2m, $5m, $10m? What do you want your portfolio to consist or? Did you want to factor your kids into the equation? A house each for when they’re older? What will happen in the event of divorce, TPD or death?

The above are just a few things off the top of my head – so as you can see, there’s a lot to consider if you have not already.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 18, 2014 - 5:13 pm

Looks like you’re in a good position there Hot Stuff and you goals seem very achievable. When you say ‘cash in bank’ is that in an offset account or available as redraw? Depending on which would have different tax implications.

One thing to consider is holding costs when you drop down to one income when you start a family so this should factor into the positive vs negative gearing. You’ll need a decent buffer in place and make sure everything is manageable on the one income – even with a vacancy or 2. Especially if you plan to develop one of the blocks.

If it were me I would draw on equity on my PPOR and set up a line of credit to fund deposit/s and purchase costs on IP/s – ensure you don’t mix deductible and with non-detectible debt too.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 16, 2014 - 4:21 pm

Are you able to take a week off to be there – do some of the basic work yourself to save some money.

Otherwise, like Jamie suggested – see if your PM can do it or just manage it yourself from afar and get the PM to inspect the work done to ensure it’s up to scratch before paying the final bill.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 16, 2014 - 4:12 pm

Hi Kate, sounds like you’re on the right path! I found the greatest education sources to be forums – better than any books I’ve read or (free) seminars I have attended.

When I was working out my financial and property goals I set my end goal and worked backwards from there to give myself some guidance and direction.

As an example – in 10 years have 5 properties at 60% LVR and a portfolio size of $2.5m.

To do that I needed to buy 5 houses in the first 5 years at $300k each that average 5% growth per year and have at least 6% rental return – please note these are only rough figures and haven’t actually done any calculations. But hopefully you get the idea.

To be a developer you need a lot of capital to start with – do you have this? What size projects are you wanting to take on to begin with? Do you have any other property or savings?

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 16, 2014 - 3:42 pm

nearmap is good – not free but not expensive either.

http://nearmap.com/au

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 16, 2014 - 3:38 pm

How long have you been a contractor for?

One advantage of selling the PPoR that I can think of is it being CGT exempt. But there could be an opportunity cost there if prices continue to rise.

Rent in the area you wish to live in may be a good idea – try before you buy, or just continue to rent and invest in the IP’s as a $2m PPoR wont do any favours for your serviceability if you wish to keep purchasing IPs. Being on a high income (or anyone for that matter) I would assume you would want to give as little to the tax man as possible.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 12, 2014 - 1:07 pm

I usually go for regional centres that fit my criteria although I do have 2 in Melbourne and none are NG or CF-.

I like to buy cheap and in need of some non-structural TLC, reno and rent. They may be CF neutral to begin with but not for long.

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

[Kinnon BellParticipant@kinnonJoin Date: 2014Post Count: 151]

June 12, 2014 - 1:00 pm

The ATO has some good information regarding what can and cannot be claimed and when.

https://www.ato.gov.au/Individuals/Income-and-deductions/In-detail/Investments,-including-rental-properties/Rental-property-expenses/

Rental property expenses
What you can claim

You can claim expenses relating to your rental property but only for the period your property was rented or available for rent; for example, advertised for rent.

Expenses could include:

advertising for tenants
bank charges
body corporate fees and charges
borrowing expenses
capital works
cleaning
council rates
decline in value of depreciating assets
gardening and lawn mowing
insurance
interest expenses
land tax
legal expenses
pest control
phone
property agent fees and commissions
repairs and maintenance
stationery and postage
travel undertaken to inspect or maintain the property or to collect the rent
water charges.

https://www.ato.gov.au/General/Property/In-detail/Rental-properties/Rental-properties—claiming-legal-expenses/

What are capital expenses?

Expenses you incur when purchasing/acquiring or selling/disposing of your rental property are capital expenses.

Capital expenses include:

conveyancing costs paid to a conveyancer or solicitor
title search fees
valuation fees (when it is a private valuation conducted by your solicitor)
stamp duty on the transfer of the property.

You may be able to include capital expenses when calculating the ‘cost base’ of your property. The cost base of a capital gains tax (CGT) asset is generally the cost of the asset when you bought it. However, it also includes certain other costs associated with purchasing/acquiring, holding and selling/disposing of the asset. This can help you reduce the amount of CGT you pay when you sell your property.

https://www.ato.gov.au/uploadedFiles/Content/MEI/downloads/ind00342353n17290613.pdf

• This reply was modified 9 years, 11 months ago by  Kinnon Bell. Reason: Links didn't work

Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone Me

Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.