Hi. Me and my husband are about to sell our first home too free up some cash to invest with about $80000 in total. I’m asking advice on what to do with profits do I
a) reinvest the lot useing steve stragaties
b) spend 10%, charity 10%, shares 10%, invest 70%?
c) open for suggestions??????????????
can anybody recommened a worthy cause to donate $8,000 to?
If you are only selling your home to free up the money for investment you may be better off speaking to a broker who can show you how you may be able to keep you home and also free up some of the equity you have available for other investments.
One of the key advantages you currently have is that your PPOR is CGT free and you do not ‘lose’ money paying REA fees, stamp duty etc as you buy and sell.
Ultimately what you do is up to you but for me I would suggest you hold fire, spend some time thinking and planning about what you want to achieve and then take action that is consistent with these plans.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping.
Have you read “How to Build Riches” by Bruce Davis?
Don’t be put off by the cheesy title it really is a good book about how to strategically build wealth with what you have:)P
Originally posted by Derek:If you are only selling your home to free up the money for investment you may be better off speaking to a broker who can show you how you may be able to keep you home and also free up some of the equity you have available for other investments…. Ultimately what you do is up to you but for me I would suggest you hold fire, spend some time thinking and planning about what you want to achieve and then take action that is consistent with these plans. Derek
Hi and CONGRATULATIONS!!
Wow, only 20 years old, and in such a strong position. Fabulous, and I love your focus on giving 10% to a worthy charity.
I’m with Derek. Please don’t sell your IP just to invest. Not yet, anyway. There are far cleverer ways to do this. There may come a time when you choose to cash up, but please read further and ask people who can advise you precisely…
Read Peter Spann’s chapter on “The Endless Deposit” in “How to Build a $10 Million Property Portfolio in 10 Years”.
I assume you’re well read in IP books to be where you are. Look at attending a number of affordable, recommended seminars as part of your ongoing education. Good seminars, when you act positively on the advice offered after undertaking appropriate due diligence, are well worth the money.
Cheers
Gregthanks for your feedback. Here’s a better look at our situation. How did I buy a property 2 1/2 years ago at the age of 17? Our town has a homenorth scheme that helps low income families buy homes in the territory; hence we payed $157,500 for our 3 bedroom home in Alice Springs. Today it is worth $240,000. We have decided to move to Port Lincoln and after talking to some brokers it seems that useing equity we are able to purchase another property to value of $240,000 or if we sell and take profits we can borrow up to $700,000. We are now thinking the more leverage the better. So here are our options
a) sell and take $80,000 profit to re-invest this will allow us to borrow up to $700,000
b) keep, rent out at $290pw (mortage $260pw)use equity to re-invest this will allow us to borrow up to $240,000
I love my home and don’t really want to sell but it would free up allot of money to invest with.
We will be attending Steve’s seminar in Melbourne on March 19th. I have read about 13 books on PI and am ready to take action but don’t want to regret renting/selling this house later. Would love some more feadback!
Thanksg’day – im a bit confused where the 700k amount comes from?
and to be truthfull a 700k debt is the last thing i would want at the moment.
i suggest you keep the place – the returns are good. i cant see how an extra 80k (profit as you say) makes a 500k difference in how much you can borrow??
good luck with it either way as you are in a pretty good position.
Originally posted by aussierogue:
g’day – im a bit confused where the 700k amount comes from? and to be truthfull a 700k debt is the last thing i would want at the moment.
i suggest you keep the place – the returns are good. i cant see how an extra 80k (profit as you say) makes a 500k difference in how much you can borrow?? good luck with it either way as you are in a pretty good position.G’day Aussie Rogue
And you KNOW I defer to your knowledge/expertise in this game. [buz2]
I suspect the extra $500K’s got to do with a 90% – 95% LVR quoted from her broker etc. You and I know she and her hubby’s not YET at a point where the Mortgage Insurers will give them a hard time. We’re so used to applying an 80% LVR in our investments, we’ve probably forgotten what it looks/feels like to not always avoid the Mortgage Insurers /keep looking sideways at them all the time. [biggrin][biggrin][cap][cap][cigar][cigar]
Cheers
Greggreg – how about servicability?? im confused that if you can service such a huge loan then they should lend you much more than the 200 or so k just by using equity…
maybe im missing something
I too asked the question “why such a huge difference?” our broker (Invester Finance) said because they take into account that if we had a loan amount of $700,000 then we would also be recieving $700pw in rent which would add to our income of $54,000 (combined, i’m only 20 and am at home with 2 kids!). So what’s the verdict guys? Sell or Rent?? after reading your comments I’m leaning more towards the renting out at least for a little while as we can always sell later.
Confused!!!
g’day
remember that your broker has something to sell also. the more you borrow the more commission he makes.
but his advise sounds a tad dodgy.
personally i would keep the place and rent it out. you will find that using your equity and buying better returning rentals you will be able to borrow more anyway.
good luck
Hi,
I’d suggest you look in much more detail at the figures to see exactly what it’s going to cost you (post them here if you like).
What you need to look at are specifics like:
– The cost of your new Port Lincoln house.
– Whether you’d buy that outright or borrow (remember, no tax deduction for PPOR loans).
– The actual amount you’d end up with for investing.
– How much you could reasonably expect (and want) to borrow against that.
– The cost of those borrowings.
– The realistic net return from your investments.
– How much it would ultimately cost you out of your current salary, and whether the lenders would be satisfied with your serviceability.Borrowing costs are fairly straight forward: the mortgage rate plus fees.
Investment returns are harder. They depend on what you invest in and (in the case of real estate) where it’s located. Your suggested figure of $700pw from a $700K portfolio is about 5.2% gross. I don’t think you’d be buying in any major metro areas for that sort of return right now, although may well find it and better in other areas. Remember though that you also want to consider capital growth as well as income. You can get a 6% or higher income return at the moment just by putting your money in the bank.
And you also need to look at the current state of the property market, which by all accounts is forecast for slow growth for the next few years at least. Shares, on the other hand, are roaring right now, but many are suggesting they are too hot and due for a correction. If you have sufficient funds, spreading them across different asset classes is probably the best policy, but if you want to directly invest in shares then you’d need to study up on them too (it’s not always easy being an investor!). Managed share funds would be an alternative, but still require some research.
As for a worthy cause to donate $8K to, I’d suggest your future investment would be the best cause for you right now.
GP
What Dolf De Roo would advise, would be to get a current valuation of your existing property, go back to the mortgage brocker and refinance your mortgage. This way you get the rewards of the capital growth that your property has experienced, and you get to keep hold of the property which will continue to provide you with passive income and capital growth.
The first step is always the biggest
Hi femaleage20, I’m also in good old Alice Springs! I have two properties in Alice, one IP and one PPOR that is soon to be my second IP when I leave town in Feb05.
My suggestion to you is keep your property, both my properties have added considerable capital gains over the last few years and I can’t see it stopping. My PPOR has added over $104,0000 in capital this year and it’s just an old housing commission house that I’ve spent $10,000 on for basic improvements (I did purchase the property at a good price mind you).
Keep your house and use your equity to purchase another home in Pt Lincoln. That’s just my suggestion anyway!! [biggrin]
Hi,
I’d like to add my support to WAPrincess’s comment about Bruce Davis
Have you read “How to Build Riches” by Bruce Davis?
Don’t be put off by the cheesy title it really is a good bookI would second that in an instant. For those who might be wanting a well-rounded view of everything in investment, Bruce Davis (Sydney) is a hard act to follow. Check in your local library, or spend the $25 or so at the local book-seller.
Benny
Originally posted by aussierogue:
g’day remember that your broker has something to sell also. the more you borrow the more commission he makes….but his advise sounds a tad dodgy.I’m with Aussie Rogue, GP, Derek and the other posters on this one. Your broker sounds a bit dodgy to me also.
I’m a school teacher/budding land developer, not a Mortgage Broker, and I have no allegiance to anyone here. However, having said that, may I respectfully suggest you link with one of the Mortgage brokers who regularly post on this forum? You need a reputable broker who’s:
1. Recommended
2. Tried and proven
3. +CF savvy!!! and…
4. Happy to GENUINELY mentor you till you become more street smart about financing your investments (where discussing LVR’s, LMI, DSR etc become 2nd nature to you).If you feel you’ve already invested a lot of time/money with your present broker, an easy way out is for you to buy your Port Lincoln place with him, but look elsewhere right after that for your next IP financing deal/deals.
Good luck
Greg
PS
* LVR = Loan to Value Ratio (how much debt they let you carry)* LMI = Lender’s Mortgage Insurance (you’re in a honeymoon period with these guys at the moment, but watch out, they’re coming after you SOON!!)
* DSR = Debt Servicibility Ratio (where the banks apply a formula which ruthlessly asks: “How much of this couple’s income can they REALISTICALLY apply to service this new debt if we lend them more money?”)
Why not use the equity to leverage? Tax, duties, etc are a pain!
Chris Durman
Commercial Capital Finance Pty Ltd
B 07 3853 5221
F 07 3853 5256
M 0427809858
C/- Brisbane Technology Park, 1 Clunies Ross Court, Eight Mile Plains, Queensland 4113
ACN 110 082 347
CAUTION – This message may contain privileged and confidential information intended only for the use of the addressee named above. Any views expressed in this message are those of the individual sender and may not necessarily reflect the views of the Commercial Capital Group.I too would recommend holding off selling. At least until you have done a lot of sums to work out what you want for the long term. Renting it for a year or so and selling then may be the way to go.
You are thinking of options, which is a good start. Here are some other things to consider:
When you say you love you first home, does this mean you would want to move back to Alice Springs in the future? Then renting it out to keep your lovely house should be seriously considered.
If you are not planning on going back to Alice Springs, then the decision should be based on logic, not emotion. Where do you get good rental returns? Will you get a good rental return in Alice Springs? Can you do better elsewhere? Do you have the time to investigate better deals elsewhere? Bear in mind the value of your time and that you already have a property that can generate an income.
High LVR loans are expensive. The interest rate may be the same, but the upfront costs especially mortgage insurance are very expensive. Get a broker that will tell you all the costs, or email me for how each of the costs varies with price and LVR. And for any restrictions there may be in your area. There can be a trade-off here between costs and profit. You need all the facts before you make your decisions.
Margaret Wilson
[email protected]
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