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From: Mike .
Choices
From: Mike
Date: 3/29/00
Time: 2:28:02 PM
Greetings all, just looking for a few opinions on my current situation.
I've been going a little berserk on the investment property scene over the past two years or so and at present things stand as such. I have 3 investment properties and a 4th currently being built & due for completion by 30.06.00.
Gross income from all 4 properties is 39K . Full debt exposure is 421K on a portfolio value of 600K (Based on conservative bank valuations) for a current LVR of 70%. Int. rates are all fixed for 5 years, shortest to mature in 3.5 years. Interest expenses are 34.3K with prop. Mangt. Exp. Of 5.8% (avg.).
The properties basically pay their own way with minimal input from me. I live rent free with friends earning 55K and have no other debts. I use depreciation and a 221D to maximise tax returns so I'm in a fairly enviable situation.
I have been sticking to a fairly strict saving regime for the past 12 months in an effort to save 35K to renovate my principal, inner city property. This plan requires 70K and I had intended to borrow half from my lender. Due to a somewhat austere lifestyle and a few speculative forays into the share market (not for the faint hearted let me tell you!), I should have very close to the required amount without having to approach my bank.
My rationale in renovating is that by spending the 70K, I will add at least 170K value to the house based on comparable sales. I have planned & costed the additions and will do the majority of work myself hence big savings. This scenario will drop my LVR to 57% and allow greater invest. flexibility with the bank.
My dilemma is that 35K could buy me another inner city property now (5.8% gross yield) or two new 3 b/rm homes in a large country city (8.4% gross yield) for a total outlay of 280K(less 35K deposit). This would bump my current LVR up to the high 70's. Serviceability is still well within limits and I maintain a safety net of 5% of full loan exposure in cash/stocks. Both options have great rental markets and good cap growth. Inner city option presents outstanding Cap Growth (20% present, 8.7% compound avg. over past 10 years). Tax benefits etc are also great.
Both the renovate/purchase scenarios have distinct benefits and any decision is based on a long-term outlook. The bank wants me to go Margin Lending with them (yeah yeah) but I am addicted to, & feel better with property. Any advise/opinions greatly appreciated.
Choices
From: Mike
Date: 3/29/00
Time: 2:28:02 PM
Greetings all, just looking for a few opinions on my current situation.
I've been going a little berserk on the investment property scene over the past two years or so and at present things stand as such. I have 3 investment properties and a 4th currently being built & due for completion by 30.06.00.
Gross income from all 4 properties is 39K . Full debt exposure is 421K on a portfolio value of 600K (Based on conservative bank valuations) for a current LVR of 70%. Int. rates are all fixed for 5 years, shortest to mature in 3.5 years. Interest expenses are 34.3K with prop. Mangt. Exp. Of 5.8% (avg.).
The properties basically pay their own way with minimal input from me. I live rent free with friends earning 55K and have no other debts. I use depreciation and a 221D to maximise tax returns so I'm in a fairly enviable situation.
I have been sticking to a fairly strict saving regime for the past 12 months in an effort to save 35K to renovate my principal, inner city property. This plan requires 70K and I had intended to borrow half from my lender. Due to a somewhat austere lifestyle and a few speculative forays into the share market (not for the faint hearted let me tell you!), I should have very close to the required amount without having to approach my bank.
My rationale in renovating is that by spending the 70K, I will add at least 170K value to the house based on comparable sales. I have planned & costed the additions and will do the majority of work myself hence big savings. This scenario will drop my LVR to 57% and allow greater invest. flexibility with the bank.
My dilemma is that 35K could buy me another inner city property now (5.8% gross yield) or two new 3 b/rm homes in a large country city (8.4% gross yield) for a total outlay of 280K(less 35K deposit). This would bump my current LVR up to the high 70's. Serviceability is still well within limits and I maintain a safety net of 5% of full loan exposure in cash/stocks. Both options have great rental markets and good cap growth. Inner city option presents outstanding Cap Growth (20% present, 8.7% compound avg. over past 10 years). Tax benefits etc are also great.
Both the renovate/purchase scenarios have distinct benefits and any decision is based on a long-term outlook. The bank wants me to go Margin Lending with them (yeah yeah) but I am addicted to, & feel better with property. Any advise/opinions greatly appreciated.
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