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From: Mike .


Doing things differently.
From: PETER.L
Date: 17 Oct 2000
Time: 07:01:10

A year ago this time we were not even thinking about IP's. It still truly amazes me how in the space of a couple of months we acquired 2 IPs and a debt of $410K. I remember distinctly not too long ago when we said (we hate debt) and (with a big debt we would not be able to sleep at night). Boy things have changed for the better.

Now this is where we have broken the rules. We have decided to purchase our 3rd IP but it will be negatively geared. (sorry). The reason for this is we are buying our dream block of land 130K and building our dream home 220K. Instead of living in it straight away we will be renting it out for around $450 p.w.

We cannot afford to live in this house ourselves at the moment because we would have problems with the repayments. We were always planning to move into a larger home in about 3-4 years and decided to buy at 2000 price now instead of 2004 price. We know for a fact that this suburb has and will continue to have a huge capital growth and that in 3 - 4 years there will be nothing under $500k. This is where we really want to live and bring up the family.

We will be out of pocket $102p.w. But I feel that this is O.K. only because its our future dream home and because the capital growth is so strong. Prices in this suburb just keep going Up! Do you think we are doing the right thing because when we hypothetically mentioned this idea to some friends they thought it was a crazy idea.

 

[WebBoard]

DuncanM

Reply: 1
From: Mike .


Re: Doing things differently.
From: DuncanM
Date: 17 Oct 2000
Time: 10:58:52

>A year ago this time we were not even thinking >about IP's.It still truly amazes me how in the >space of a couple of months we acquired 2 IPs >and a debt of $410K.

Haha, I know how you feel, once we'd decided to go a certain route it happened very quickly indeed.

>Now this is where we have broken the rules. We >have decided to purchase our 3rd IP but it will >be negatively geared. (sorry). The reason for >this is we are buying our dream block of land >130K

You seem to have two focuses in your life, establishing a good portfolio of property and improving your lifestyle. To some degree the two don't go together. About 3-4months ago we were also considering a substantial upgrade for our family home, from a value of about $200K to about $350K. After reading "The Millionaire Next Door" we decided against it. We're going to concentrate on getting a flow of cash from our portfolio up to a level where we can a) live off it and then b) use it to fund our own dream home (20+ acres, large house, views etc).

We can have our dream home, later.

You want to do it slightly differently but your dream home may result in you being in the rat race a lot longer, as ours would have.

I guess my advice is think long and hard about it, its a constant battle between our "I Wants!" and building our passive income. Perhaps the effect on your LVR might mean that you cant add 3-4 more income producing properties to your portfolio in the next 12months.

Cheers, Duncan.

Residential Property Record Keeping Software.
http://www.otter-software.com.au

 

[WebBoard]

Bob

Reply: 1.1
From: Mike .


Re: Doing things differently.
From: Bob
Date: 17 Oct 2000
Time: 11:48:16

Although Duncan makes some valid points, Peter is making a choice about a number of significant things which presumably can't be delayed. You can't say to kids, don't grow up yet, we're not rich enough. In my view, it's an attempt to buy a non-cash return - children's happiness and safety.

If you assume that the property is offering Peter what he wants, then you can analyse whether this is a good way of achieving it, and in short, my answer is yes - this will deliver the house you can't currently afford.

Another option is to move in, but with lodgers, and claim a proportion of all expenses, including interest. I did this and now have the asset that I use to help secure my IPs.

Don't count on the capital growth, though. And if interest hikes are a worry, fix your interest rates.

 

[WebBoard]

DuncanM

Reply: 1.1.1
From: Mike .


Re: Doing things differently.
From: DuncanM
Date: 17 Oct 2000
Time: 12:01:22

I agree, the motivation for the upgrade needs to be thought about. We personally have more than enough room to bring our two (1 to come still) children up for the next 5-10yrs. Peter situation could well be different or indeed dire.

Perhaps a purchase into trust and a commercial transaction to rent the property back to yourself can be achieved I forget the actual test case that established that it could be done.. Doctor someone or other from memory (Redwood, Redmond? maybe).. Here goes another thread

Regards, Duncan.

Residential Property Record Keeping Software.
http://ww.otter-software.com.au

 

[WebBoard]

AnonymousCoward

Reply: 1.1.1.1
From: Mike .


Re: Doing things differently.
From: AnnonymousCoward
Date: 17 Oct 2000
Time: 07:44:15

What is your plan if interest rates were to rise to say 14 or 17%? Do not think it can not happen. ie How are your loans structured? I believe, in a high interest rate environment it is more difficult to sell a property because less people can afford it. More so a property in a higher price bracket. ie You have to take a loss.

 

[WebBoard]

Peter L

Reply: 1.1.1.1.1
From: Mike .


Re: Doing things differently.
From: PETER.L
Date: 17 Oct 2000
Time: 10:59:01

What we have at the moment are cash reserves and hopefully this will tide us through the 14 -15% rises, and of course we can maybe drop the rent. But by reading all the expert commentary it looks unlikely that they will go up to those highs.

As for loan structures, that is the major problem. I know what I am capable of and what I have and my bank has not been that helpful with revaluations etc. Our lending officer is all by the book and cannot offer any expertise to our soon to be $950K portfolio.

I have tried calling CBA but they will send a mobile banker and frankly I believe that I need to deal with someone at a higher level who will treat my business in a quick and professional manner. The block of land is on a $500 hold.

Can anyone please recommend a Name and number of a very professional investment banker who wants to look after our property portfolio and look after us full stop? This will be greatly appreciated.

 

[WebBoard]

Alston

Reply: 1.1.1.1.1.1
From: Mike .


Re: Doing things differently.
From: Alston
Date: 17 Oct 2000
Time: 12:18:36

Good on you. It is all about finding the things in life we really want and then getting them in the smartest way possible. Generally this involves NOT FOLLOWING THE SHEEP.

Most people would have a) bought their dream home before considering IP; b) mortgaged over their heads and then had family tension over money; or b) said "we can never afford it" and continue to live their life defeated.

It takes guts to say "I want that, how can I get it" (note: I am not talking about converting cash to trash, but real meaningful life decisions)

Another option that I have used and that you may like to consider is to have your trust or company build the house and you rent from the trust/company. The trust/company then 'negatively gears' the house, using the 'tax losses against any cash positive assets in the trust. These tax losses can be carried forward if the trust/company is not currently earning sufficient income. There are a lot of details about this path that I have skipped over and it does not suit all circumstances, so talk to your account/tax solicitor first.

Good Luck (Remember: If it is the way most people do it, then it is probably not the best way because most people are broke)

 

[WebBoard]

Peter L

Reply: 1.1.1.1.1.1.1
From: Mike .


Re: Doing things differently.-To Alston
From: PETER.L
Date: 17 Oct 2000
Time: 23:17:25

Alston , I wholeheartedly agree with you. We need to be smarter than the average person and get things in the smartest possible way.

We know quite a few people who are building their dream home now with in excess of $300,000 debt. They will be paying this off for the rest of their lives all on their own and be in the rat race for a very very long time. This is what the norm do. We have decided not to do what every one else does and do the complete opposite.

So in the meantime we will go ahead with this purchase and let the taxman and tenant pay for it for 3-4 years. As they say Patience is the key to success. The problem with people these days is they only think about today and keeping up with the Jones's.

 

[WebBoard]

AntC

Reply: 1.1.1.1.1.1.1.1
From: Mike .



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Re: Doing things differently. To ant.c.
From: AntC
Date: 19 Oct 2000
Time: 13:32:44

If you're in Melbourne, my contact is Blair Powell 03 9432 2051. He is the "High Value Client Relationship manager" at the Commonwealth bank. This is his serious title, he is a nice guy, very quick and knowledgeable and has IP himself.

He did organise .15 discount on the advertised IO fixed rate for me. Tell him Anthony C. Sent you. (not that I'll get any kickbacks but I like to help the good guys).

Regards, Anthony C

 

[WebBoard]

DuncanM

Reply: 1.1.1.1.1.1.1.1.1
From: Mike .


Re: Doing things differently.
From: DuncanM
Date: 17 Oct 2000
Time: 11:08:30

I have been MOST impressed with NAB, our first introduction to them was with a Mobile Banker. He had a very good grasp of all the issues, had frank answers to all questions and understood in a lot of detail Trusts. The changeover from Australian Central to NAB was hassle free, we had maybe 1-2 calls to check things after the initial meeting with the guy then 3 weeks later all the paperwork was ready, they had dealt with ACCU and it all just happened.

Since then we've had a chance to do some further business and I've been really impressed with the Personal Banker whom they've assigned to us.

Don't be afraid to move around to secure the finance you want, banks are MUCH more willing to do business to secure a Customer, ie you are MORE likely to get finance from someone taking over all of your other business than from someone you already have business with, stupid really but that's how it seems to work.

Regards, Duncan.

Residential Property Record Keeping Software.
http://www.otter-software.com.au

 

[WebBoard]

Peter L

Reply: 1.1.1.1.1.1.1.1.1.1
From: Mike .


Re: Doing things differently.
From: PETER.L-Thankyou to everyone.
Date: 17 Oct 2000
Time: 23:27:29

Thankyou to everyone for their positive advice and encouragement. It really is great to know that there are people who are willing to share ideas, encourage and motivate. Thanks Duncan for the case study.

 

[WebBoard]

Pierre

Reply: 2
From: Mike .


NAB
From: Pierre
Date: 17 Oct 2000
Time: 16:20:12

I concur. As would Owen I suspect. I had a NAB mobile mortgage manager visit and set up a Professional Choice package. We then had a personal banker allocated and they have been most accommodating and helpful.

I briefly went through a period of sourcing finance for a couple of properties from other banks, and although got approval, decided that what they were going to offer me just wasn't what I wanted. So, I went back to the NAB personal banker, cap-in-hand, told her that I was coming back because I was not getting a good deal at the other banks, and offered her all my business. Not surprisingly, she jumped at the offer and has put together a very good finance structure that meets our needs.

It can't hurt to try them out. You may be surprised how flexible, helpful and knowledgeable your mobile mortgage manager is.

Pierre

 

[WebBoard]

Owen

Reply: 2.1
From: Mike .


Re: NAB
From: Owen
Date: 18 Oct 2000
Time: 09:47:59

Hi Pierre,

Haven't heard from you in a while. How's the new one coming along?

Agree about the NAB as you said. It has taken a little convincing and cajoling to get our personal banker around to our way of thinking but she's coming along nicely. The next IP is going to be the test though as she believes we reached our limit on the last one. We may have to get some other approvals and pretend to move all our account out to another lender. Then we'll see what deals we can come up with.

The bottom line of all this is building a good working relationship with your lender (and lawyer and accountant) means face to face negotiation. Filling out an internet application is fine but it's amazing what deals you can make if you sell your plan and goals to the people you need to help you achieve it.

 

[WebBoard]

Pierre

Reply: 2.1.1
From: Mike .


Re: NAB
From: Pierre
Date: 18 Oct 2000
Time: 13:08:00

Yep, I agree on the face-to-face application. I just dropped an application into my banker with my personal details filled in and a signature on the form. I crossed the rest of the form out telling her I was not able to include any relevant information in the application.

Attached to the form was a full financial statement, cashflow projection, statement of proposed loan structure and a load of other useful information that I thought the bank needed to make a proper decision on my application. She was most impressed and gladly accepted the package.

As an aside, I have been using MS Money for 2 1/2 years now and track every cent I spend. It is very useful when it comes to preparing financial statements - just print out a customised report. I would recommend Money or Quicken to anyone wanting to keep a good track of their finances and cashflow.

Pierre

 

[WebBoard]

Darren

Reply: 2.1.1.1
From: Mike .


Re: NAB
From: Darren
Date: 05 Nov 2000
Time: 14:23:34

I too have a good relationship with the NAB. My only negative is that they don't offer a no-frills IO loan for Investors.

If you want IO then you have to use there fixed rates (1 - 10 yrs) or their flexiplus mortgage (~8.06%).

 

[WebBoard]

Gee Cee

Reply: 2.1.1.1.1
From: Mike .


Re: NAB Any Contact Numbers
From: Gee Cee
Date: 18 Oct 2000
Time: 13:53:33

NAB sounds like the go. I am at present looking to put some re-financing together. Any phone numbers or contacts would be appreciated.

Thanks, Gee Cee

 

[WebBoard]

Owen

Reply: 2.1.1.1.1.1
From: Mike .


Re: NAB Any Contact Numbers
From: Owen
Date: 19 Oct 2000
Time: 08:46:18

Hi Gee Cee,

Look forward to seeing you again at the Black Stump...you know there famous for their steaks...or so I've heard somewhere.

Anyway, our personal banker is Mirrielle Bush at the Camperdown Branch in Sydney. Ph. 9519 4798. May be a bit far for you though.

Owen

 

[WebBoard]

Pierre

Reply: 2.1.1.1.1.1.1
From: Mike .


Re: NAB Any Contact Numbers
From: Pierre
Date: 18 Oct 2000
Time: 20:00:38

G'Day Gee Cee,

Duncan provided the NAB number - 132265. I just called that number and told them I wanted to talk to a lender and they wound up putting me onto a mobile lender. He set me up with the Professionals package and I was allocated a personal banker. My banker in Newcastle is Angie Bylstra 0249456209.

Sorry to see you ended up in hospital. I ended up the same way unfortunately recently with blood poisoning and an infected foot. Yuk!. What a crap way to spend the long weekend.

I believe all the big banks offer the Professionals packages, so if you don't like NAB and prefer another bank, I'm sure your favourite bank will set you up with a similar package.

Pierre

 

[WebBoard]

DuncanM

Reply: 2.1.1.1.1.1.1.1
From: Mike .


Re: NAB Any Contact Numbers - Adelaide.
From: DuncanM
Date: 18 Oct 2000
Time: 14:46:21

Anyone in Adelaide, if you're looking to deal with the NAB I would strongly recommend dealing with David Boemia. Contact via NAB 132265.

DuncanM.

Residential Property Record Keeping Software.
http://www.otter-software.com.au