A Question of Maths

[cheekykoon]

I have a Maths Problem.

I'm going to settle for 2 units 3rd Quarter 2015. I'm able to obtain offshore financing SGD loan. I need someone with better maths to help me. (1 in Melbourne and 1 in Brisbane)

a. 2 units @ 80% but slightly negative cash-flow.
b. 1 unit at 70% loan and have to reject the other unit. Nett Positive cash-flow.

I'm looking at dual currency account which allows me to convert to AUD when AUD goes up in 2016. For risks, there are some considerations which includes valuation for the OTP project which may not come through to match selling price. Rental returns may not match. I'm forecasting 4.5% for both.

Anyone with better maths can help?

 

[D.T.]

Not enough numbers for it to be a maths question

 

[pinkboy]

How do you know AUD will go up in 2016?

pinkboy

 

[cheekykoon]

Here comes the numbers :

unit 1 - AUD$400,000 (melbourne) and house 2 $520,000 (Brisbane)

Scenario 1 - 70% loan for unit 1
- $120,000 down and $280,000 for loan at 2.36% - SGD$1086 / month.
- Rental yield @ 4.2%
- Positive cash-flow $50 / month.
- need 10% buffer in case there is a margin call. - $40,000 in FD.
- total $160,000 total thereabouts

Cons - not enough money for 2nd unit

Scenario 2 - 80% loan for unit 1 and House 2.
Total down - $80,000 and for 2nd house - $104,000
- $184,000 down payment + $20,000 stamp duty.
- Both taking AUD loan - negative cash-flow about $2000 per year.
- Total outlay $204,000.

which would you choose?

 

[LeoT]

too complicated for my simple brain.

Anyway, I would choose the option that has the house in Brisbane. Really depends on your goals though and how these purchases help you get closer to them.

What suburb in Brisbane?

Sounds like its 10-15 km from CBD?

 

[techie]

I'd skip Melbourne and go for the Brissie house.

 

[Paul@PFI]

The exchange rate issue is not a issue for the IP. You acquired it in $A and that's what your deductions will be based on. Any appreciation in value will also be in $A. Any fluctuation in the loan value is a private and non-deductible issue for a resident taxpayer.

Forward exchange rate hedging isn't available so its 100% speculative and a risk not unlike red/black in roulette.

The fact that there is a margin call if you are wrong could force a untimely sale and cost you a lot.

 

[cheekykoon]

too complicated for my simple brain.

Anyway, I would choose the option that has the house in Brisbane. Really depends on your goals though and how these purchases help you get closer to them.

What suburb in Brisbane?

Sounds like its 10-15 km from CBD?

Its at coopers plains - cornerstoneliving estate.

 

[cheekykoon]

too complicated for my simple brain.

Anyway, I would choose the option that has the house in Brisbane. Really depends on your goals though and how these purchases help you get closer to them.

What suburb in Brisbane?

Sounds like its 10-15 km from CBD?

Its at coopers plains - cornerstoneliving estate. A 3 storey villa.

 

[cheekykoon]

The exchange rate issue is not a issue for the IP. You acquired it in $A and that's what your deductions will be based on. Any appreciation in value will also be in $A. Any fluctuation in the loan value is a private and non-deductible issue for a resident taxpayer.

Forward exchange rate hedging isn't available so its 100% speculative and a risk not unlike red/black in roulette.

The fact that there is a margin call if you are wrong could force a untimely sale and cost you a lot.

Thanks pal. The SGD loan would definitely attract margin call should there be any change in the exchange rate plus it is also exposed to the economic performance. It is after all offshore and the banks are more fidgety about exposure.

For AUD loan, there could be margin call I believe but the chance of being called up for it would be quite low I suppose. Any insights for this?

From a simple maths question, it had turned to probability.

 

[Blacky]

I think if you are going to speculate on currency exchanges, you are better off using a vehicle which is more liquid than property, and can provide some level of safety (such as a stop loss).

Even the very experianced traders struggle to make money using FX.

Blacky