From: Les .
This is for you, Gail H ;^)
From the thread re "Noel Whittaker newsletter, Gail said:-
"We should have a prize for who spots the most pieces of crap advice."
And I agree, Gail - for those that read a bit, there are some classic "howlers" out there.
And for newbies - don't believe everything you read - let me chuck in a couple to get the ball rolling....
#1. Remember, sometimes the author has "got carried away in the heat of the moment" and not done due diligence on the advice proffered. This one from an author that I have learnt a lot from, but used an example that could confuse readers:-
First a bunch of figures -
Value of own home $250k
Equity in own home $150k (40% LVR)
IP purchase price $180k
Costs for IP $20k
Borrowed amount $200k
Bank val. of IP $150k
"Your Equity has PLUNGED from 60% to 25%, and nett assets from $150k to $100k."
Les>> This author was showing how a Bank under-valuation could really hurt you. And his information IS accurate. But the point missed was that even if the Bank AGREED that the IP was worth $180k (instead of $150k), your Equity would STILL plunge to 29% !!!
Or, using more conventional terms, your LVR% has GROWN from 40% to 71% (or 75% in his original example).
The other half of the sentence, though, tells the true story - if Bank valuation agreed with your purchase price, then your nett assets would only drop by $20k (your costs) - and, if you had bought at a discount, your nett assets could INCREASE, but your Equity was ALWAYS going to plunge, unless you bought an IP at the SAME LVR% as your own home - i.e. 40%
So, don't take information on board without questioning the validity of the statement (i.e. do the numbers, to see what they REALLY tell you).
#2. A mis-print in an otherwise very good book.....
"The formula Banks use to calculate the percentage of equity you have in your home is:-
Amount Owed x 100 divided by Value of property."
Taken at face value, if I borrowed 95% to buy an IP, then my "percentage of Equity" would be 95% (I wish...)
#3. There is a website out there that tells how you can borrow to fund your retirement against your Equity in property. Just check the numbers they say you can achieve ... and make your own decision from there.
#4. An Investment group provided people with a spreadsheet which (thru a faulty cell in the spreadsheet) provided a BETTER income with NO tenants than WITH tenants.
Note that in 3 of these cases I have pointed out their error to the people concerned, so it is likely that changes have been made by now.
Just don't take any information at face value - do your own calculations, and question those that don't match your knowledge. The two possible outcomes are:-
1. You'll save yourself a bunch by filtering out incorrect advice, or
2. You'll learn a bit more and go ahead with what always was a good deal for you.
Regards,
Les
- "Eschew Obfuscation" - ;^)
This is for you, Gail H ;^)
From the thread re "Noel Whittaker newsletter, Gail said:-
"We should have a prize for who spots the most pieces of crap advice."
And I agree, Gail - for those that read a bit, there are some classic "howlers" out there.
And for newbies - don't believe everything you read - let me chuck in a couple to get the ball rolling....
#1. Remember, sometimes the author has "got carried away in the heat of the moment" and not done due diligence on the advice proffered. This one from an author that I have learnt a lot from, but used an example that could confuse readers:-
First a bunch of figures -
Value of own home $250k
Equity in own home $150k (40% LVR)
IP purchase price $180k
Costs for IP $20k
Borrowed amount $200k
Bank val. of IP $150k
"Your Equity has PLUNGED from 60% to 25%, and nett assets from $150k to $100k."
Les>> This author was showing how a Bank under-valuation could really hurt you. And his information IS accurate. But the point missed was that even if the Bank AGREED that the IP was worth $180k (instead of $150k), your Equity would STILL plunge to 29% !!!
Or, using more conventional terms, your LVR% has GROWN from 40% to 71% (or 75% in his original example).
The other half of the sentence, though, tells the true story - if Bank valuation agreed with your purchase price, then your nett assets would only drop by $20k (your costs) - and, if you had bought at a discount, your nett assets could INCREASE, but your Equity was ALWAYS going to plunge, unless you bought an IP at the SAME LVR% as your own home - i.e. 40%
So, don't take information on board without questioning the validity of the statement (i.e. do the numbers, to see what they REALLY tell you).
#2. A mis-print in an otherwise very good book.....
"The formula Banks use to calculate the percentage of equity you have in your home is:-
Amount Owed x 100 divided by Value of property."
Taken at face value, if I borrowed 95% to buy an IP, then my "percentage of Equity" would be 95% (I wish...)
#3. There is a website out there that tells how you can borrow to fund your retirement against your Equity in property. Just check the numbers they say you can achieve ... and make your own decision from there.
#4. An Investment group provided people with a spreadsheet which (thru a faulty cell in the spreadsheet) provided a BETTER income with NO tenants than WITH tenants.
Note that in 3 of these cases I have pointed out their error to the people concerned, so it is likely that changes have been made by now.
Just don't take any information at face value - do your own calculations, and question those that don't match your knowledge. The two possible outcomes are:-
1. You'll save yourself a bunch by filtering out incorrect advice, or
2. You'll learn a bit more and go ahead with what always was a good deal for you.
Regards,
Les
- "Eschew Obfuscation" - ;^)
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