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Discussion in 'Original Property Investor Forum Archive' started by WebBoard, 28th Jun, 2001.

  1. WebBoard

    WebBoard Guest

    From: Mike .


    SHOULD I BUY MORE !!!???
    From: PLL
    Date: 11/11/99
    Time: 8:48:08 PM

    WE HAVE 3 PROPERTIES, ALL ON LINE OF CREDIT LOANS, 1 WE LIVE IN VALUE 415K OWE 290K, 2 INVESTMENTS 1 VALUED 250K OWE 150K AND THE REMAINDER VALUED AT 270K OWE 95K ( ALL OF WHICH ARE CROSS COLATORIZED ) ETC OUR INCOME APPROX 120K INCLUDING INVESTMENTS. SHOULD WE BUY MORE NOW AND TO WHAT VALUE? I UNDERSTAND I/O FOR FIXED 5 YEAR TERM IS A GOOD OPTION UNDER THE CURRENT CLIMATE
     
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  2. WebBoard

    WebBoard Guest

    Les

    Reply: 1
    From: Mike .


    Re: SHOULD I BUY MORE !!!???
    From: Les
    Date: 11/11/99
    Time: 11:53:54 PM
    Remote Name: 205.180.243.66

    G'day PLL,

    They look like a very cheerful set of figures to me. It certainly looks like another property or two is quite a possibility. As for "how much?" - that is harder to gauge - you would need to consider what percentage of the Home Loan is actually for Investment property. What we really need to know is "Are the current properties cashflow positive, or negative?" And, with your income, I would seriously consider bringing them back to negative (I "assume" they may well be positive right now).

    There are too many unknowns to determine your cashflow (based on %age of investment component in your own home loan) so let me simply suggest that your overall LVR% is around 55% - which is very healthy. Your second Inv. property has LVR around 30% which allows (probably) a substantial redraw of funds to purchase one (or two) more. And a "knee jerk" quick and dirty guess would be to say "Borrow that one back up to 70% - giving $100,000 as deposit and costs on another property worth $350 - $400k (75% LVR, so no LMI).

    Even that may not get you back to a negative cashflow (depending on the Investment component in your Home Loan) so you could conceivably borrow/buy another.

    And, of course, negative cashflows are handy when you are on a high income, but so are nights when you sleep well - it's a trade-off, and a very individual thing.

    Re IO loans, you've virtually got that with the Credit Card loans you already have (with a SLIGHTLY higher Interest rate). Re Fixed, I've personally NOT fixed mine ..... Yet! I keep seeing words that say the economy is NOT ready to head for the stratosphere, and neither are Interest Rates, so I'm on 6.35% - but to go Fixed would cost 7.9% (that's a BIG hike, and I believe an unjustifiably big hike).

    But, there are others that say "Fix anyway" and plenty of them - so go the way YOU feel happiest with.

    Come back with a little more info if you wish - it would allow a more detailed answer.

    Regards, Les
     
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  3. WebBoard

    WebBoard Guest

    PLL

    Reply: 1.1
    From: Mike .


    SHOULD I BUY MORE!!!??? PART 2
    From: PLL
    Date: 11/13/99
    Time: 6:39:11 AM

    FURTHER TO OUR PREVIOUS BRIEF DATED 11,1999, I HOPE THE FOLLOWING IS HELPFULL; 1/OUR OWNER OCCUPIER OVERDRAFT LIMIT 321K AVAILABLE CREDIT 45K ( NOTE CREDIT IS INCREASING BUT SHOULD NOT BE USED FOR DEPOSIT FOR ANOTHER PROPERTY) CORRECT???

    2/ INV1 OVERDRAFT LIMIT 280K RENT 240/WK AVAILABLE CREDIT 123K ( NOTE CREDIT IS REDUCEING MONTHLY DUE TO ACCRUEING INTEREST PAYMENTS)

    3/ INV2 OVERDRAFT LIMIT 85K RENT 290/WK AVAILABLE CREDIT $39.49- & DEFINITELY REDUCED

    4/ NOTE : ALL INTEREST ACCRUED ON INVESTMENT LOANS IS PAID FROM WITHIN INVESTMENT LOANS, THUS PAYING OF OWNER OCCUPIER ASAP. CORRECT???

    5/ NOTE : INTEREST ON INV2 HAS EXCEEDED BANKS BURROWED LIMIT & THEREFOR A PENALTY RATE APPLIES AT THIS STAGE APPROX $8/MONTH AND RISING. IS IT CORRECT TO OBSORB THIS PENALTY TO PAY OFF OWNER OCCUPIER ASAP (OR) SHOULD WE TRANSFER AVAIL CREDIT FROM INV1 E.G. 20K FOR NOW TO AVOID PENALTY AND KEEPING IN MIND - THE IMPORTANCE OF AVAILABLE CREDIT TO BUY ANOTHER PROPERTY??? IS IT A REAL CONCERN ABOUT LEAVING AVAIL CREDIT ON INV PROPERTIES

    NOTE : INV 1 - NOT GREATLEY NEG. GEARED INV 2 - DEFINETLY POS. GEARED
     
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  4. WebBoard

    WebBoard Guest

    PLL

    Reply: 1.1.1
    From: Mike .


    BUYING MORE
    From: PLL
    Date: 11/13/99
    Time: 7:28:58 AM

    THE FOLLOWING IS A DETAILED ANALYSIS TO " SHOULD I BUY MORE "

    OWNER OCCUPIER OVERDRAFT 321K AVAILABLE CREDIT 45K & INCREASING

    INV1 OVERDRAFT LIMIT 280K RENT 240/WK AVAILABLE CREDIT 123K

    INV2 OVERDRAFT LIMIT 85K RENT 290/WK AVAILABLE CREDIT $34.49- & REDUCING

    NOTE : ALL INTEREST IS ACCRUEING ON INVESTMENTS TO PAY OFF OWNER OCC. ASAP

    NOTE : INTEREST ON INV2 HAS EXCEEDED BANKS BURROWED LIMIT AND A PENALTY OF APPROX $8/MTH AND INCREASING WILL APPLY. IS IT WORTH MAINTAINING THIS PENALTY WITH REGARDS TO PAYING OWNER OCC. ASAP (OR) SHOULD WE TRANSF. AVAILABLE CREDIT FROM INV 1 E.G. 20K TO AVOID PENALTY BUT ALSO KEEPING IN MIND THAT AVAILABLE CREDIT FROM INV. PROPERTIES IS USEFUL TO REDRAW TO PURCHASE ANOTHER PROPERTY

    NOTE : INV 2 IS POS. GEARED NOTE : INV 1 IS SLIGHTLY NEG. GEARED

    PLEASE EXPAND AND ADVISE ON PREVIOUS ARTICLE SHOULD I BUY MORE DATED 11.1999

    P.S. I BELIEVE I SHOULD NOT BURROW FUNDS FROM AVAILABLE CREDIT ON "OWNER OCCUPIER" AT THIS STAGE BUT WOULD IT BE WISER DOWN THE TRACK AND WHEN???

    THANKS ESPECIALLY TO LES REGARDS PLL
     
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  5. WebBoard

    WebBoard Guest

    Les

    Reply: 1.1.1.1
    From: Mike .



    Re: BUYING MORE
    From: Les
    Date: 11/14/99
    Time: 1:54:04 PM

    In answer to your question "Should I draw on the Equity in my Own Home?"

    SO long as any drawings are kept in a separate account (most lenders will allow you to set up 2 or 3 accounts under the one mortgage) then you shouldn't have a problem. With a separate account, the rental amounts are kept isolated from your home loan, so it is easy to justify your Tax Deductions. The whole thing becomes a nightmare when Home Loan takes on some of your rental monies, and are NOT kept separate - then you could lose out simply because of the problem of identifying what is rental, and what is not.

    From what I've seen, though, you have a BUNDLE of equity available in Inv #2 - so maybe this is the one you should borrow against for your next properties. Run this by your Financial Adviser - I'm sure he'll enjoy this, as there appears to be a number of areas where your GOOD position can become GREAT!!

    One other thing, please turn off Caps Lock on your keyboard when entering an article. Capital letters are considered to be SHOUTING. ;^)

    Regards, Les
     
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