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As I explained above. I would pay the mortgage insurance to get a 20/80 low doc but the mortgage insurance company wont
touch me because they deem all my appartments to be "Serviced Apartments". I think this is really unfair because they all over 50sqm strat title that I can rent out to whoever I want or live in.
But I cant make them change their minds. So I can only get 60/40 low doc.I quit my job a couple of years ago and instead have my own business from home these days. Less money but no boss so I like it better.
Now I might have to go back to work for an employer just so I can get my 20/80 normal doc loan. It stinks.
The ultimate stratedgy would be to hold a $1000,000 worth of property that was cash flow netural or better and had lots of
depreciation deductions.
Then I could declare a high income each year at tax time and just use deprciation to deduct it down to nothing.Id pay almost no tax and still qualify for full doc loans even though I was self employed. And the property wouldn't really be losing any cash just on paper deprication.
HI Everybody,
Thanks for your comments.
If I sell tax is not really a problem from me for 2 out of the 3 Brisbane properties
If i could find a lender who would do 70/30 with no mortgage insurance I could refinance all three properties and get a small line of credit. That would allow me to add another property to my portfolio.
The problem is there is no more cash flow positive and even if there are still some more capital gains to be made I feel rising interest rates will squeeze out all the margins soon anyway. Remember rental yeilds on the typical Brisbane property are around 4% in my mind that just keeps you roughly even with inflation. So all gains are tied up in capital growth. The property must increase in value by at least the lending rate each year for me to break even. If rates get up towards 10% thats a pretty big ask
Buying properties and sitting on them for years until they become cashflow positive seems like a pretty weak stratedgy to me.
In the mean time somebody else has taken the same money and turned it over a few times by a series of developments or renovations ends up with a bigger stack of cash to invest and gain income from.Im just generally pissed of by the way the whole Australian market has gone. The best oportunities here seem to be in developing as opposed to investing.
Despite my bad experiences with the USA I still believe there is lots of oportunity there.
I went through somebody who was supposed to be trused be other australians and still got screwed. Although things could have been alot worse from what ive heard.If I was prepaired to live there for a few of years and I had good access to credit Im sure I could make a fortune.
Unlike here where markets have become very fair and efficent its still possible to be a proffessional invester there and take advantage of other peoples misfortunes (forclosures etc).Because of the cash flow positive there people can hold huge realestate portfolios and just keep adding to them by borrowing.
I wouldnt really enjoy living there though I like Australia better. And to get access to usable credit I would propably have to do something crazy like marry an American.
All fairly extreme actions.What are other people aiming for at the moment when they invest. Do people just have faith that capital growth will continue to exceed the prevailing interest rates ?
Hi,
Ive been much more successfull with property than shares in the last 10 years but I think its wrong to say that
shares are riskier that property.An investment in shares could be a managed fund, single company, it could be option or a exotic warrant.
It could be highly geared, 100% owned . It could be several shares all hedged with a put options.Likewise property could mean many things. People choose their own level of risk when they invest in anything.
On average and in the long run the worlds share markets have outperformed the worlds property markets.
That being said I still prefer property for one very important reason. Retail property markets are full of huge
ineffciences. In the case of a messy devorce a house might be dumped at a 20% discount to the market
where as the couples bhp shares will go at the days market price.The share market is a much tougher game because everybody has the same objective. Make Money.
People have all sort of reasons to buy and sell property, many are emotional so the competitions not as tough.The biggest ever property bubble in history was in Toko in the late 80s. Property there crashed in the early 90s and even today
is only worth about 10% as much as it was at the height of the boom. Yes thats right 10% .It would be virtually impossible for that to happen here but it just goes to show that property crashes do happen.
Taking on a large mortgage when cash flow is tight is just as risky as buying and holding a few of your favourite companies
Ask all the sub prime mortgage customers who are getting forclosed on right now in the US.The big winners at the end of the day are the people who are sitting around with lots of free cash waiting to buy the forclosed properties for a big discount.
Good luck to people who think they can outperform the share market by trading. Im not saying its not possible but I believe most peoples better than average results are because standard deviation (getting lucky).
Just look at the history of managed funds vs index funds over 20 years almost nobody ever beats the index.
And those funds have rooms full of smart guys with their fingers right on the pulse.
