[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

April 18, 2017 - 8:25 pm

Hi, do you know any good buyers agents in the US who work with clients in AUS?

Also, do you have any other syndication projects planned?

Thanks for all your input. Great that you decided to give back to the community here. This thread was a very interesting read.

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

September 4, 2016 - 6:53 pm

Thanks for all your responses, guys!

@pascoe: Agree, I probably overcomplicated it and in the end we’re probably discussing about max a few $100 difference anyway. But also wanted to get feedback if my thinking is correct. And I don’t think the interest on a savings account is that much lower. I get 3.15% at RAMS right now and the loan was 3.69% in the end (variable would have been 4.17%). And a savings account is not the only option for where to put your money. Definitely, saving tax is no motivating factor. Otherwise, I could just give all my wealth away and quit my job – wouldn’t have to pay any tax then ;-)

@benny: Yes, agree flexibility is a key aspect. But I think it is not limited by not having an offset account. I still don’t have to pay down the mortgage, but I can rather put the money into my savings account. OK, I get less interest on it, but also I don’t have to pay additional interest on the variable portion of the loan (As per the calc above).

@ethan: Good thought, I also played the scenario of continually dropping interest rates through, just didn’t put it my post here. The conclusion I came to is that the interest rate differential is 0.48%, so that is almost two fully passed on rate reductions. Since I only fixed the loan for 2 years and I’m saving money as long as the fixed rate is below the variable rate, keeping it variable would mean that I only break even if there are 4 fully passed on rate reductions in the next 2 years (similarly as above assuming equal intervalls for each reduction). I guess even with an extremely positive outlook (or negative if you think from an economy perspective) that is not very likely to happen.

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

July 30, 2016 - 12:57 pm

Hi Colin,

thanks for your quick reply. I think my last post was maybe not that clear, so now using some numbers as an example. So, assuming the following:
Rental income per year: $10k
Interest paid on the loan plus other cost: $8k
–> Profit from property $2k, so tax has to be paid on $2k income from the property

Now, we also have savings that generate $200 interest in either savings or offset account (should be a different amount of interest, but for simplicity reasons let’s assume it’s the same interest rate).
1.) If we put this money into a savings account, we receive interest from savings of $200 which we have to pay tax on, so in total we pay tax on $2.200 due to the property and our savings
2.) If we put the money into the offset account instead, we save interest of $200 on our loan, so now we only pay $1.800 in interest and other cost and hence our profit from the property is now $10k – $7.8k = $2.200
So in both cases, your interest received (savings account) or your interest saved (offset account) is taxed the same way, no?

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

July 30, 2016 - 12:07 pm

Thanks Colin. But isn’t the saved interest in an offset account not also technically taxed? If your property is positively geared, you pay tax on the surplus, if it’s negatively geared you reduce your taxable income by the amount of the loss. So, if you pay less interest on your loan due to savings, your property gets more positive or less negatively geared and hence you technically pay tax on these interest savings as well, no?

• This reply was modified 7 years, 9 months ago by  Bjoern.

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July 30, 2016 - 10:54 am

Hi Terry, I’ve posted about this here:
https://www.propertyinvesting.com/topic/5028580-is-an-offset-account-worth-it/

If the variable is indeed lower than fixed, then my whole calculation doesn’t make sense anymore. But our mortgage broker suggested Newcastle Permanent and their variable is 4.17% and 2-year-fixed is 3.74%

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July 30, 2016 - 9:30 am

Thanks guys, will definitely have a look at the book. Talking about offset accounts, brings me to another question, but maybe it’s better to post this in a separate thread since it’s a different topic. I am just about to buy my first property and decided to fix the whole loan, i.e. not having any part of it on a variable rate with an offset account. In short the reason was that the gap between fixed and variable was too large and the gap between variable and my savings account too little to justify the extra interest paid on the component of the loan that pays the higher variable rate or I would have to put that much money into the offset account to break even, that it is rather unrealistic.

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

July 17, 2016 - 7:40 pm

Yes, I wouldn’t plan to finance the deposit using this approach. We got our loan approval with our genuine savings already. I was just thinking of using these savings to put into the offset account instead in order to reduce the interest payment rather than for the down payment. So when there are issues with that approach you can still use that money to repay the credit card debt. But I see you will substantially damage your borrowing ability.

Is there any other way to make use of credit cards with regards to property investment? I went to a property seminar a few months ago and they talked a lot about how important credit cards are, to finance renovations and down payments, etc. But somehow I keep hearing that it actually doesn’t work. So, really wondering if they were just plain wrong or if there is an important role of credit cards in the property investment game after all.

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

July 17, 2016 - 5:41 pm

Thanks, storybuilder. Makes sense. So you can’t do that forever, but maybe once or twice? Would still save a lot of money.

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July 17, 2016 - 5:38 pm

Thanks Richard, but it would be possible to pay using normal transfer / bpay from the credit card account. Then it is like a cash advance and the regular, huge credit card interest rate applies. But that can be avoided by transferring the balance to another credit card on the same day and have this money interest free for the 0% balance transfer period. Doesn’t this work?

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

April 17, 2016 - 8:25 pm

Definitely not an expert myself, so just thinking out loud ;-) But wouldn’t it still make sense to spend the $10k assuming you can find something that really adds value? After all, it’s not like you pay the $10k and don’t get anything back, the property will be higher in value (ideally even more than $10k higher) and – as a bonus – you will also have something to depreciate. You said, they are old houses, so surely there must be some way value can be added?

• This reply was modified 8 years ago by  Bjoern.

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April 14, 2016 - 11:39 pm

Thanks guys!

Terry, their fee structure is a bit “different”. They ask you to become a member and if you are you have access to their deals and you can do as many as you want. Not sure exactly about the fees anymore, but I think it was 3k for one year, 5k for 3 years or 7k for 5 years. I didn’t ask for the exact commission they get, was enough for me to know that they get a commission ;)

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

April 12, 2016 - 11:02 pm

Haven’t heard from anybody else, but I decided not to go ahead with them. First, I heard from so many sides that you shouldn’t invest in new developments and they solely propose new developments. Second, I asked them if, on top of the fee that I would pay them, they get commission from the developers and they do, so I didn’t like that they are not entirely working in my interest. And lastly, my last experience when I was in touch with them ultimately convinced me not to go ahead with them. When I questioned the above, they got rather aggressive saying things like “I am trying to be patient but you don’t seem to be getting who we are and what we do” and “I can’t work with people that are not motivated”. Not the way you would expect, I think.
But that’s only my opinion, might be wrong in the end, but I feel more comfortable going other, more conventional ways.

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December 31, 2015 - 11:28 am

Thanks Benny

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December 31, 2015 - 11:24 am

Jamie Moore wrote:

what works well for some won’t for others.

Just wondering about this. Since I’ve started to look into properties I have probably read this or similar comments hundreds of times, but I never really understood it. If you find a property that gives you a nice cash flow or one with a high probability to increase in value, what kind of people would that not work for? Sure, some people might have their mind set more strongly on CF, others on CG, but in the end doesn’t everybody want to earn money and generate passive income and hence wouldn’t any kind of good property work for anybody? In particular for someone who is just buying their first investment property as they don’t even have to think about diversifying yet.

[BjoernParticipant@suoksaJoin Date: 2015Post Count: 23]

December 31, 2015 - 11:11 am

Thanks for your answers guys.

What would you say are the risks with OTP compared to established? Is it mainly the risk whether it will be a popular place to live in since no one has lived there before? On the other hand you would expect to have less cost for repairs with OTP, I think.

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December 20, 2015 - 4:05 pm

Thanks Benny, guess I underestimate the effect of deductions a bit ;)

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December 20, 2015 - 3:38 pm

Thanks for your answer TheNewGuy.

So in order to have a positively geared property, what return would you typically need on top of the interest rate? Is 1% really enough to cover all the cost?