Hi Kay
Selling four legged dogs[
]. Nope, would never do that. In fact, I’m trying to have enough money to buy a farm so I can live there with lots and lots of dogs[]We have not come across any ‘serviceability’ problems as yet. Our main problem with the banks has been we have hit their ‘lending limit’ ie the $1 Mil mark or somewhere close.
Thus far we have and will continue to alleviate this by having several different banks that we have a couple or few loans with, and be able to go see them to ‘play them off’ against each other.
I have also ‘gotten wiser’ and have set up a family trust. My aim here is to have as the Directors some family members who have a payslip, and not much debt. Thus, they ‘qualify’ for the loan, and as any new properties will be cash positive or neutral at worst, there will not be any ‘out of pocket’ expenses for them.
I also have done two joint ventures, one with my Uncle, and one with my brother, where I found, negotiated, and secured the deal, and put up half the deposit, and they used their payslips to get the loan, and are the only ones on title.
As for lending money on an average wage, I’m not sure what average is these days, but mine is around $50K, and my personal liabilities are just over $2 Mil, so there are banks that will lend to you.[
]Cheers
Melwow mel! you are either really rich or really poor- I can’t tell which! :o))
kay henry
Kay, I like the two kids who say
Kid 1 ‘We’re so poor we owe the bank $200,000’
Kid 2 ‘We’re so rich we owe the bank $2,000,000’I am reasonably highly geared, currently at 70%, but no spare cash. So that’s why I’m looking to refinance up to 80% and have the extra funds sitting in an LOC. To have ‘available’ cash increase, but for the meantime to keep the same ‘debt’ levels.
Cheers
Melhi all
sorry Bill i’m going to answer prop16’s question, i reckon i can do it in more than 12 inches.
but first xyzzy what the heck are you talking about “Congragulations to westan …. he’ll have some charles ash! it WILL be king” i have no idea [?]
there that is 2 inches already,
a bit of space to take up some more room.
OK prop16, it is really very simple but worth knowing. say you buy a property for 100k, which you get 100% finance, a few years later it is worth 180k, so you go to the bank and tell them your property has gone up in value, you get the property revalued at 180k, at 100% finance they will give you a loan in total of 180k. that is 80k more than the existing loan. so you get 80k in your hand that is not taxable (but you will be paying interest on it). Now we come to the part where you put the money back on the loan (hold on it gets exciting). its very simple and straight forward really. all you do it put the 80k back on the loan of 180k so you are not paying interest on it. then when a great opportunity presents itself you already have your cash to move quickly, not finance clause for purchasing. the end result is nearly the same as a LOC but way way cheaper.
hope that explains all please ask if it is unclear, (ask anyway just to upset Bill)[]
bye westanwestan- i just realised charles ash = cash
))Cash will be king.
kay henry
kay thanks for that[
]
i hate rhymming slang
xyzzy yes i have more ash than i’ve ever had before in my life. i think i’m set for life now.
westanHi Mel,
Sorry for the late reply. I’m also intertested in the buy and hold aspects of IP’s. I have good serviceability and equity but lack the time to find IP’s except through internet searches and a couple of REA’s that keep me posted. I’m trying to work out a good way to get a few more IP’s before the interest rates go up tooo high and the equity drops as prices go down. With the buy and hold strategy I will just wait until the equity comes back up again in the next cycle. I like Westans example of 100K debt borrow 180K pay back 80K and have 80K available for redraw. My situation would be more like Debt 10K equity 220K. With Westans idea, would it be viable to put some money from the redraw into existing IP’s to increase their +cash flow whilst picking up a few more IP’s?
C2
“Is it true the more you owe the more you grow until the bank steps in?”HI C2
Any extra cash that I get from refinancing I will put in my one LOC (if you haven’t got one, then choose One IP that has a redraw, saves on fees if you need to redraw from one place rather than several). Oh yeah, do it in the highest interest rate loan too.
This way you have all the cash in one place, are still reducing the interest (increasing cash flow), and can redraw to purchase as and when you are ready.
Actually, if you are borrowing the money against a property (is it PPOR?) you would pay interest for it anyway, so you probably wouldn’t save anything by then paying it off the IPs.
Cheers
MelHi Mel,
Scenario 1 change a PPOR into an IP, borrow the money against the IP and then decide to move back in and claim it again as your PPOR after say 1 week. What is the ATO view in this area. Especially on B&H properties that are never sold.C2
“Is it true the more you owe the more you grow until the bank steps in?”Hi C2
The ato does not care what the security is – you could borrow against your stamp collection if somebody would lend to you.
The interest is only tax deductible when the purpose is investing. The only thing to be aware of when borrowing against your PPOR is that if there is any other debt at all – KEEP THEM SEPARATE. This will save a whole lot of hassles later on – accounting wise, and taxation wise.
Cheers
Mel
I have a Hypothetical that I would like some input on.Say you bought a 2 bedroom, 1 bath, LUG unit 3 years ago in BNE 6km from the city for $125000
It has been quietly renting and breaking even once all costs are factored inc. body cop & rates (rents for 210p/w).
You have recently had the property revalued at $220k and still owe $115 on current loan.
Do you:
a) Refinance, look for another +ve IP or 2 and Buy
use some of the money for education on how to do this well.b) Use Equity to start share portfolio and to fund financial education i.e. course in share trading and investing.
c) Sell ip, pay CGT and use cash for above
d) use equity to renovate and push rent up
E) choose your own adventure!
your thoughts?!
What the mind of man can conceive and believe, it can achieve.
Mel, i’m getting more and more impressed with each post !! [
]I’m only in the hole for 100k atm, and damn i sleep well at night… [
]While we are talking “hypotheticals” if someone had a lazy 300 – 400k in equity and say 90k a year income (single guy, pet dog only [
] ) just how much would the banks lend such a person ?? []And more importantly, Mel, Bill, Qld007 and westan, exactly how would you divide and spend that amount ??
(Oh yeah, this hypothetical person is quite happy to retire on say $1500 a week in todays terms asap… [
] )Looking forward to your replies…
Cheers,
Paul…“I want to be rich, and stupidly happy – so far i’ve only managed to achieve the stupid part…”
hi fatboy
is that 300k in equity? if so i’d look at turning some of it into cash, obviously it depends on your situation but over the last 4 months i’ve been turning that equity into cash (by selling not refinancing). With some of this cash i’ve been buying properties in NZ because the return has been excellent. i don’t think that the market where i own properties is going to collapse, so i’m keeping about 1.2 million worth of property here (all still mortagaged). with the cash i have left over i’ll sit on mortagages and look for opportunities, both shares and property. over the past few months most of my shares i’ve purchased have been Gold stock. where to put the rest of the money ??? i will take my time and look around. i don’t feel we are at the start of a bull run on the stock market so i’m happy to wait.
what do others think? what about you Fatboy what would you do. if i was a chick i’d probably ask you out 90k income and 400k in equity.[:X][]
westanLOL !! Thanks westan, i did pick your brain via a few emails not so long ago remember ?? [
]
Thanks for the offer too, i guess if you were female i’d consider it… I thought Mel was keen but i’ve just read her life story and sheeesh, i’m a little fish in her pond !! []What what i do ?? Hmmm… well, this is “hypothetical” right ?? [
]
I have a mate from work who resigned only a couple of weeks ago and is moving to NZ (he is a Kiwi, came to Australia at the age of 18 with family that has since gone back) and he’s actually going to do some snooping for me on NZ property and i’m heading over in January for two weeks to have a look for myself – maybe pick up two or three properties if i find a few that are suitable…Not sure on shares – to be brutally honest i’m a complete goose when it comes to the stockmarket. With property i just think i have a feel for it – i know what is a good buy and what isn’t. With shares i honestly wouldn’t have a clue… That’s my major problem on that front… [
]I’m guessing that using 20% deposits on say half a dozen properties up to 150k with a decent (ie positive cashflow) return is a good start…
Buy and hold and provide future income is where i am (hypothetically of course [] ) coming from…
That way i’m reasonably safe from interest rate rises (ok, i have a comfortable buffer) and have a great future income source…Of course, i’m open to options, just checking what ideas others have… thanks for the quick reply too… [
](And i dread to think what Mel would do with my equity !! How much debt would she get me into ?? [
] )Cheers,
Paul…“I want to be rich, and stupidly happy – so far i’ve only managed to achieve the stupid part…”
hi paul
sorry, i remember the email now.[
] its hard to remember i get used to peoples forum names.
i’ll be living in the South Island in Jan 2004, if you have any time catch up and we can go ckeck out some property together or just grab a cuppa.
westanThanks for the offer… i may just take you up on that !! [
]My friend is looking around the Bay of Plenty area – he just sent me a local real estate magazine and i’ve been pouring over it and doing a few sums… It certainly looks like a nice area – perhaps just on the wrong island in the “value for money” stakes… [
]Cheers,
Paul…“I want to be rich, and stupidly happy – so far i’ve only managed to achieve the stupid part…”
Hi Mel,
The question wasn’t about security. The disadvantages of a PPOR is the interest on the loan isn’t a taxable deduction. You take a PPOR and change it to an IP, then refinance the original loan so it is now a taxable deduction and after 1 week change the IP back to a PPOR to make it free of CGT if you decide to sell later. How would the ATO decide if it is free of CGT and would the loan now be considered a taxable deduction? There have been plenty of discussions about how long you can rent out a PPOR before it is CGT (6Y), but I couldn’t find how to make the loan a taxable deduction.
C2
“Is it true the more you owe the more you grow until the bank steps in?”Hi C2
The ato will decide if the loan is tax deductible purely based on what the money is used for. If you buy a car, or a holiday, not tax deductible. If the loan is to buy a PPOR, not tax deductible.
If the loan is used to purchase investments – shares/property etc. then it is tax deductible. It does not matter that the security IS a PPOR, it’s what the money is used for.
Paul, why are you only a little fish? If we really sat down and compared numbers, we’d probably be at roughly the same equity, and your salary is almost double mine!! I would only be better off if real estate kept rising substantially, as I have more properties to grow.
As for getting you into debt – I think your plan is similar to what I would do, ie 20% deposits. However buying in NZ there isn’t the stamp duty, so you could probably get more properties for the same $ than you could in Aust.
Westan, I thought you said you were moving to Bondi? Or am I just imagining things?
I so wish I had spare cash at the moment, I’d love to buy in NZ – plus I love the place too, only been there once – 1991, but have always wanted to go back. All these people that are buying in NZ are making me even sadder that I’m not able to[
]Cheers
Mel
Paul, why are you only a little fish?Mel, that comment was sort of tongue in cheek – I’m just jealous that you’ve already done what i’m aiming to do !! [
]I honestly think that 20% deposits are a great idea in the current market but i intend to choose very carefully. I’ve done probably 12mths research into various areas Australia wide (wish i had done this 5 years ago – hindsight is a wonderful thing huh ?? [
] ) and i’m pretty confident my target area is going to continue building momentum and not only provide the opportunity for positive cashflow but also a better than average capital gain…NZ i see as a fantastic opportunity as well – but i will limit myself to two or maybe three properties there. I have a sneaking suspicion that Steve’s book has prompted a lot of people who otherwise wouldn’t have bothered to look for positive cashflow properties… NZ may end up like rural Victoria – too many people paying too much for properties where the numbers do stack up – but the tenants may not. Just my gut feeling, i have no facts to back this up… [
]I think i’d prefer to spend a little extra on each place and be secure knowing that it’s “middle ground” rather than the bottom end of the market…
Cheers,
Paul…“I want to be rich, and stupidly happy – so far i’ve only managed to achieve the stupid part…”
b) Use Equity to start share portfolio and to fund financial education i.e. course in share trading and investing.This is the one I’d go with. Simple reason, this is where the activity is and therefore growth.
Finding a +cashflow property will be tough now, and if you’re having to neg gear, you want to maximise your potential for capital growth. The share market is the one with that potential now – real estate growth may continue over the short-term, but I can’t see price growth being particularly generous over the next 1-2 years.
The economy is really charging ahead, everywhere. That means good profits which will (a) deliver solid dividend yield as well as (b) good capital growth.
I suppose my only concern is companies with significant US exposure. The rising AUD has definitely hampered recovery of stocks in such companies (my gf is really annoyed about buying into Billabong).
That said, there are great opportunities to be had now. Some Aust. biotech stocks have looked very good of late… Norwood Abbey, Novogen….
]. Nope, would never do that. In fact, I’m trying to have enough money to buy a farm so I can live there with lots and lots of dogs[
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