Fantasy - and da reality



From: Synth Boy

I've been reading quite a lot on IP and also watched some video's on the stuff (SPANN), but are quite perplexed when they mention getting inner city properties for $200,000.

Sheeks !
Looking around my home city (Melbourne) - you can try starting from $300,000. Thats if you can get close to that mark !

To borrow like 80% for IP and have a positive cash flow - I gotta charge some abnormal rent !

Da question - What am I missing here?

Many thanks

PS: I apologise to everybody on these sorta posts - I'm learning the trade. :)
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Reply: 1
From: Terry Avery

I suggest you look at the copyright notice in the books and on the video.
What is the date? Things have boomed so what they said back when ain't there
no more.
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Reply: 1.1
From: Sergey Golovin

Synth Boy,

You are right.
You are not missing anything.

As longer as Negative Gearing is allowed in this country it would be always the same - shortage of positively geared properties. And they are very precious.

You have to be really, truly on look out for those - good once. You have to know your market and the rest of it…

But, it is few around…

Serge G.
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Reply: 1.1.1
From: Michael Yardney

You haven't missed anything, its just that the prices have moved up.
In my opinion most of Peter Spann's principles are very sound. While the principal still applies, it's almost impossible borrow 80% on inner city properties and get positive cashflow. People have pushed the prices too high in Melbourne. Everyone is looking for the same thing. There are so many graduates of Spann, Kay etc looking for the same type of property that the demand outstrips the supply
But.. good opportunities do come just have to know your market and take advantages of opportunities. This week alone we did 2 deals in the exact areas you are talking about for our clients. Berkley St Carlton and off Lygon Street Brunswick..and our clients will be neutrally geared because they became co-developers and bought their wholesale.
Michael Yardney
Metropole Properties
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From: Robert Longmore

I always thought Mr Spanns stratagy was, Interest Only loans, in which case, rent return will cover the Interest Only repayments.

the plan i plan on using is similar, but still using Principal + interest loans, just spread them out over longer periods to lower the repayments to achieve your desired rate of gearing, at least in the end you will OWN the propertry, and not pass Massive debt onto you children.
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From: Scott Marshall

Massive debt?? ha ha ha
1. that massive debt now will buy a pack of cigs and a carton of beer in 50 years
2. most loans are insured so when you die it is paid out.

and Michael is right synth, buy off the plan wholesale is cheaper, BUT, rare. Some developers sell there best units/apartments to long time friends and sell the others to you "wholesale".
I spent 2 weeks looking around brunswick and found a 4yo unit in Pascoe Vale which was positive geared albeit $260 a week rent which I believed was jacked up for the sale. 220K asking.

A few thing to remember...negotiate on the interest rate at the bank, Doctors and Lawyers get an automatic 0.5% off, most investers should not accept anything less than 1% off the advertised rate. Apply at the other bank then go to your bank a week later, they will see on the credit-man that you have applied to the other bank. You have plenty of time to shop around..its not like you are dead set on your dream home...and they know it too.
Alway get interest only and even Line of Credit so when the rent is paid in, it can reduce the principle, as it is calculated daily. After a few years, or months even, get it valued, up the rent, get a Line of Credit on equity and buy another IP. Line of credit will avoid anchoring one house to another if I am not mistaken. And don't forget that BIG mistake a lot of investers forget...USE a Quantity Surveyor.
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From: Rolf Latham

Hi Scott

If investors did not accept a rate of no less than 1 % off the advertised rate there would not be many deals being done.

1 % off implies rates like 5.15 % for the most basic loans. You can get 5.25 in a good CMT so why would a bank provide funds for a mortgage in a loss making scenario.

I agree that packaging a loan or portfolio can save a lot, and there is some haggling on full rack price rates even by .75 % on certain premium poducts.



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From: Glenn M

When we talk about interest only loans, are Line of Credit/Redraw facilities packaged with these loans. Or do you at least need some of the interest only loan to be variable to access these additional features i.e. 10% variable interest only and 90% fixed interest only???

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