-I'll tell you the stamp duty one sec, just opening documents on PC that have it listed.
$7,244 paid in Jan 09.
- I geared 95% Cap LMI. (12.5k deposit)
- Legals/B&P was $1818.50.
- 4k repairs (new fencing/full interior repaint)
I can't remember how much of the deal was funded by equity or cash.
For me the important figure has been total return which for the last yr was around 13-15% combine that with the 95% gearing/leverage has made good profit.
"Didn't look at your other properties/investments... not sure why you're negative gearing $14k pa"
Look at it this way, i paid 14k last yr.
If i was to put that 14k into a high interest account and get 7% *which we all know wasn't available it was more like 5-6%* I would have made $980, paid tax on that @ my tax bracket 30% 686 net profit after tax. To further invest. So a 4.9% return
My portfolio increased by 10% avg in value over the same period and because of leverage my $14,000 returned me $100,000 and i can burrow 90% of that to invest further/increase asset base.
So with the savings account i've increased my funds avaliable to invest by 4.9% with gearing and investing in my neg geared resi portfolio i increased my funds to invest by 642%
BTW my loan on that property isn't 225, its like 252.
Edit: With your shares stuff just add what the people on the hotcopper forum do "DYOR" do your own research
Regards,
RH
Analysis
Oh ok, so basically you stumped up around $25.5k yourself and borrowed $252k. Net cash inflow pre-interest = $15k. Interest = $17.5k.
Net cash outflow of -$2.5k.
To earn 5% ROE (ie 1.275k / 25.5k = 5%) you'd need a return of $1,275 pa. Since you're down $2,500 you'd need $3,775 capital gains, which is the same as your property growing around 1.5% pa. Pretty achievable. So over the long run - at 1% cap growth - it's pretty easy to match term deposit rates. The rest is all upside. Not bad. That's how I'd look at it anyway.
Historical Returns
As for historical returns, congratulations. Truth be told though they're not that important to me. What you actually make is just a factor of strong growth in the past. Better to just stress test your holdings against 1% cap growth going forward and seeing if you beat term deposit rates.
Shares
As for shares, quite like SSM. Made a bit of money on that since ALP came to power as in my humble opinion they'll be a major beneficiary in the NBN rollout, as one of the few companies able to effectively lay out the fibre optic network (they already maintain a sizeable amount of Telstra's existing copper network with Siemans and Leightons).
Been doing some 10% runs these past 2 weeks which has prompted the ASX to issue a 'please explain' set of questions to them about why their share price has gone up so much. In the long run if NBN comes off, I think it'll be a good pay.
Have a look at some stocks like MIN. Had some really strong runs with some upside from increased port allocation at Point Utah.
Of course, do your own research because if I knew I'd be retired and wouldn't be talking to you lot!!!!
Oracle
Must say I disagree with some of the points raised.
a) The value of your investments lie in its ability to generate cashflow to fund retirement. Excessive leverage does not provide that and that's too much interest rate risk to bear for someone on marginal salary - I'm assuming you're on a rather low/average salary as you're still in the 30% tax bracket. At $60k not sure how much you take home, but I think it's around $45k? A bit of an interest rate shock as you said and you're $20k out of pocket every year, leaving you with only $25k pa. If interest rates do put you in that position, other people will be in that position too, meaning cap growth will be just that - capped. So no equity to draw out.
b) 95% LVR is high, there's no questions about that. A more reasonable gearing would be 80%, even at this age. I would only take such high gearing if it was set up in such a way that you are protected by limited liability and defined set of collateral, because you don't want to be in a House of Cards situation.
c) As for your own point about 0% LVR, I think that just means you'll have a lazy balance sheet. All successful businesses have net debt. As said, I think 80% is a very reasonable gearing at your age/my age.
