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

June 12, 2014 - 10:23 am

I’m making a lot of assumptions here but this is how I figure it:

Secured Personal Loan: $49,000 – 4 yrs @ 9.49% and monthly repayments. Total interest paid over 4 years is $9,992.56
$49,000 offsetting HL @ 5.31% over 4 years – interest saved/offset $5449.70
Is the HL an IP or PPoR? As then you would need to take into account tax deductions too as by no longer offsetting you would be increasing the interest accrued on your deductible debt.

So if you pay out you PL now and no longer have the money in your offset you will save approx $4534 – $490 repayment fee. BUT there is a lot of assumptions being made here without knowing the specifics of your situation.

Is the personal loan secured? Is it with CBA – they have risked based pricing so offer you a base rate, and depending on the risk add their risk margin on top of that giving the end rate of 9.49%

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]

June 12, 2014 - 9:58 am

yuley7575 wrote:

Well originally I was thinking of just going Interest only and hopefully pick a great area that is going to grow in capital. Hold for 7-10 years and sell and do it again in another area. Do this with 3-4 properties spread out over 5 years so buy, hold, and sell. Instead of 10+ properties for 30 years paying them off slowly. I don’t work so were only on one salary and I rather not negative gear or lose money even if it might save a tad on the tax breaks. But yeh, tons of things to consider when buying. CRAZY!

Sounds like a good plan. Similar to what I do – buy properties that support themselves (but at 90% LVR) with an IO loan. I then intend to hold until I reach the stage where CG has put my port folio at a ~50% LVR, sell half and live off the rent of the other half. Need to be wary of CGT though. Aiming for this in around 10 years time for me.

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]

June 12, 2014 - 9:43 am

Is the separate loan of $85k a line of credit? Doesn’t sound like you’re crossed from what you’ve presented. You’ve just drawn on equity to pay the deposit – or did the banker (broker?) arrange it all for you?

On face value, by the looks of it, the loans are secured against IP1 and IP2 is stand alone but it’s hard to say. Have a look at your loan contracts or a call to your bank will confirm for sure.

In answer to your questions (or how I would do it):
1) Draw on equity of your existing IP’s and get LOC secured against them. The values you put down – are they bank valuations or what you think they’re valued at? IP1 has an LVR of 76% and IP2 85%. Did you want to enter LMI territory as anything above 80% attracts LMI. With the figures you’ve quoted it sounds like you’d be entering LMI territory so that’s another cost to factor it. Have a chat to a broker who can go through options, scenarios and costings with you.

2) I’m not an account so you should get professional advice but generally they are. But it depends if it comes off the cost base when you sell or a yearly deduction.

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]

June 12, 2014 - 9:15 am

A +1 for a knowledgeable broker. They wont (shouldn’t) show bias towards a particular bank or product and will find a solution to suit your needs now and for in the future.

Generally investors have an interest only mortgage that will allow them to maximise their tax deductions by not reducing the principal of the loan and assist with cash flow to enable them to purchase more properties if they wish.

As far as insurance goes – have a read of the PDS to know what you are and are not covered for. Generally I’ve found insurance policies that the banks offer a not all that favourable for landlords. There’s some specialist LL insurers out there like EBM and Terri Scheer that would be worth looking into as well but they may not cover building so you would have to source that elsewhere.

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]

June 11, 2014 - 10:45 am

Not a problem.

You don’t want to be creating a false economy in a way by pumping too much cash into the deal to make it CF+ either – better if the figures work without bucketloads of cash as it helps you leverage for future purchases without getting into negative territory. If you’d prefer a larger deposit you could do an 80% lend and leave the remaining funds offsetting your PPOR (assuming you have an offset account) thus maximising the tax deductibility of your investment property.

At the end of the day, it’s what you’re most comfortable with but sometimes it helps to challenge your thinking and comfort zone with what works best for the long term.

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]

June 11, 2014 - 10:32 am

I’ve always gone about my PI with my business hat on but there was tenants I had who split up. She left and took the kids and he stayed in the property and gradually got behind in rent – the fixed lease was up in 6 weeks so was not going to renew his lease.

He gave a sob story to the PM about how he was in a bad way from the break up, got fired from his job and had no family he could rely on. He promised to get his act together and had found a new job and said the rent could be taken out of his wage and paid directly to the PM without him seeing it, much like the centrelink arrangements.

Rental vacancies at the time were a little high and he must have caught me at a weak moment because I agreed to it and he seemed genuinely remorseful. So I signed him on to a 6 month lease. All was fine for about 10 weeks then the rent stopped… He had gotten fired from the new job. Long story short, issued the NTV and the coppers had to remove him in the end. Place was a mess, broken windows and door locks. Luckily, had LL insurance in place and made a claim. All worked out OK in the end but was without rent for a good while.

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]

June 9, 2014 - 12:59 pm

It depends on a few things like how aggressive you want to be, also your risk profile and what your goals are.

90% can be a happy medium as any growth (manufactured or ‘natural’) your properties have you can redraw that equity out as 90% is the top-up limit for banks. That way you’re finding the balance between LMI and leveraging for on-going purchases. But, initially you could always go an 80% LVR and top up down the track to 90% and pay LMI then.

If you want to purchase a few IP’s then you want to structure your lending not just with LVR’s in mind but also the serviceability ratios with the banks so you go to the less generous ones first then when affordability starts getting a bit tight you go to the more generous lenders.

There’s a whole plethora of things to consider!

• This reply was modified 9 years, 11 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]

June 8, 2014 - 11:09 pm

I would stay away from Melton too. I built my PPOR and lived there for nearly 5 years. The CG was awesome to begin with as it rode Melbourne’s wave but soon went backwards and is only just staring to recover now. But… Like someone else mentioned there’s too much vacant land and house and land packages being released that are keeping prices down. To add to that all the vacant land between Caroline Springs and Melton which will be built up eventually will keep the prices down in the long term too. The rail line will be electrified eventually which *may* help prices but the electrification has been talked about a long time now. Will believe it when I see it.

Any particular reason you’re wanting to invest in Melbourne? What’s your long term goals? Is it 1 or 10+ IP’s? Do you currently have a PPOR? You have $100k to play with which is a lot more than what some can say. You have a good base to start with and can go a long way with it.

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 1, 2014 - 10:48 am

Have they explained why they’re wanting to go month by month? Are they looking to leave in the near future?

Are you looking to borrow in the near future? Not having a fixed term lease in place *may* impact a loan application.

Also check your insurance policy as some insurers don’t like month by month leases.

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 1, 2014 - 10:38 am

Might be worth seeking tax advice on this as even though it’s at arms length ie via a PM you (your employer?) are essentially renting from yourself.

Also a consideration would be insurance – is the lease through your employer or is it let more as a holiday let type situation? Some insurers don’t like it of there isn’t a set lease in place.

Higher than usual wear and tear would also be a concern to me too with the high traffic through the property.

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.