Methods to reduce gap between rents and repayments

[mitchp]

Hi,
Qu: what are some of the strategies investors use to reduce the gap between rents and repayments? Eg looking at Geraldton property to buy c.325k. After fees etc cost would be 350k. Repayments would be on an interest free loan $975 f/n. Rent would probably be c.$550 f/n. This leaves $425 f/n short. I've heard investors say they can reduce a gap of $200 a week to less than $100 after a variety of strategies. What are the particular strategies to reduce the actual out of pocket outlay to less than $100 a week? Thanks in advance.
Cheers
Mitch

 

[The Y-man]

Qu: what are some of the strategies investors use to reduce the gap between rents and repayments?

Personal exertion income.....

Cheers,

The Y-man

 

[MickInvestor]

Tax variation so you get the extra money resulting from your losses in your pay packet.

Cheers

Mick

 

[boods99]

you could also take out a line of credit to take up the shortfall...it would cost you about 11k for the year plus the compound interest on the 11k. hopefully your IP appreciates by more than this figure in the year. If you have bought for CG then this should not be a problem (although there is still some risk)
some people on these forums might disagree with this tecnique but it is just one of heaps of different strategies used by people.
hope this helps
Boods

Also, as MickInvestor suggested, that figure can be reduced further using the tax variation...it all depends on how old the property is and what tax bracket you are in
Boods

 

[Qlds007]

A thorough review of your current finances.

Be suprised how existing lenders seem to forget to tell you about rate discounts, ways of savings money etc etc when you are a client.

When you leave because you can do better elsewhere then they all of a sudden become interested.

Most clients tell them "thanks" but 'no thanks" at this point.

 

[cougar_01]

interest free?

Repayments would be on an interest free loan $975 f/n. Rent would probably be c.$550 f/n. This leaves $425 f/n short.

do you mean interest only which i think most of us assume or have you found something new?

 

[alexlee]

As y-man said, save money from your salary and make up the shortfall.
Alex

 

[mitchp]

do you mean interest only which i think most of us assume or have you found something new?

yeah, sorry - interest only... Interest free would be fun of course.
Cheers
Mitch

 

[mitchp]

Personal exertion income.....

Cheers,

The Y-man

What is this Y-man? Are you talking about tax on your salary, or does your response have a bit of sarcasm in it?
Cheers
Mitch

 

[pieman]

I do believe he means adding value so you could possibly get more rent. Your own physical exertion is desirable because you dont have to pay someone else to do the work, so costs will be lower.
pieman

 

[The Y-man]

I do believe he means adding value so you could possibly get more rent. Your own physical exertion is desirable because you dont have to pay someone else to do the work, so costs will be lower.
pieman

Sorry, I was being very simple - and did certainly did not imply anything as complex

I meant nothing more fancy than "working at a job".

Despite everyone's apparent urge to leave the "day job" as fast as possible, it is for many still the easiest (or maybe "quick and nasty"?) way to make short term money.

So to make up shortfalls:
1. get a higher paying position
2. work overtime (if available)
3. work a second job

Cheers,

The Y-man

p.s. the "day job" also seems to be the income of choice when it comes to banks assesing your serviceabiltiy....

 

[Aimjoy]

Hi,
Qu: what are some of the strategies investors use to reduce the gap between rents and repayments?

Hi mitchp,

Yep as others have said here....there are really only 2 ways:
1. Decrease your expenses
2. Increase your income, or both.

In regard to decreasing your expenses:
1. Only do loans IO not P&I
2. Negotiate a discounted % interest rate. Consider fixing rate.
3. Negotiate a lower REA property management rate
4. Consider self-managing (yikes! - I wouldn't but some do and like it )
5. Buy the IP at a discount (if possible) so you don't borrow as much on the mortgage

Regards increasing your income:
1. Maximise the rental return - always keep pace with market rents (don't fall for the "I'll keep the rent low because they're such good tenants" line
2. Decrease vacancy - choose PM carefully. Buy an IP in a desirable area with high rental demand. Tenant selection.
4. Consider a cosmetic makeover to get more rent (do the numbers carefully to see if is good payback)
5. Claim tax back weekly - don't wait till end of year when doing tax return.
6. Consider dual income properties - like a house and granny flat (my favourite)

All the best with your investing,

Aimy