My Story... So far... (Somersoft Diary)

MickStephens

MickStephens

G'day everyone,

I thought I would create a thread to share my experiences and get the ball rolling on documenting my IP journey. (When it finally begins)

Kind of like a diary entry but keep the content Property, IP and Investment related...

I've lived in Werribee for the past 7 years or so with my lovely Wife - Well, not legally married but I call her my Wife - , and have seen the area pick up and become super busy. We have two lovely kids, our eldest girl is now 5yrs old and youngest girl is now 1yrs old. Yep, i have 2 daughters so ill need two shot guns for when they are teenagers haha

Anyhoo, we live in a house which was built in 1952 by my Wifes Grandparents. This house has now housed 4 generations !!! My Wife has lived in this house for almost 20 years now. She was paying rent to her Auntie who inherited the house when the Grandparents passed away up until 7 years ago. My Wife has grown very attached to this house and there is a lot of history here.

We have been trying to repair/renovate the house since we purchased it together about 5 & 1/2 years ago. Buying it for $180,000 in joint names in 2009 we thought we got a pretty good deal. We borrowed through a mortgage broker, I think it was Mortgage Choice who found us a loan via Commonwealth Bank. Being our first house purchase together we did not investigate much into who the best lender was or what interest rate we would get, we just wanted to buy our first house together A.S.A.P.

To be continued...
 
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Since buying the house we have been doing little bits and peices to the house and have borrowed a further $30,000 against the mortgage to fund mainly repairs.

So our loan total now is $213,000 which we refinanced over a 30 year period. So we have a higher loan with a house which needs so many more repairs haha... The extra $33,000 has gone towards things like painting the interior, having the roof repaired and re-capped (Not sprayed), building a new garage out in the back yard, purchase of a second hand car and bits and pieces along the way.

Paying off the mortgage from week to week is something which looks like it will never end. We pay about $250 a week from memory. Id say there is easily another $50,000 to be spent on the house including the front and backyard. The house currently does not have any main heating or cooling in it, (We use a portable heater in the lounge room and wear jackets in the house)

Our plans for IP? Id like to buy another house using a loan from the bank. At the current rate we are going though, it "feels" like we cannot afford it. Always seeming to fall short each week or month on bills and it seems all an IP will do is pull money out of our pocket.

To be continued...
 
Hi Stig ,sorry MickStephens :p ,

Your loan btw,is that setup as IO only with OS attached or P&I?

Cheers Spades.
 
Hi Mick

To look at options from Forum members, you're probably going to have to give out some details

What's the current value of the PPoR

Your Loan is at $213k, getting the value of the property will establish what equity you have within it

Median in Weribee looks to be around $310k and rents at $280 per week

REA.com.au tells me
You may be interested to know within Werribee during July 2014 there were a total of 40 properties sold. Prices ranged from $300,000 for a three bedroom house, through to $687,500 for the sale of a three bedroom house.
Click to expand...
 
Spades said:
Hi Stig ,sorry MickStephens :p ,

Your loan btw,is that setup as IO only with OS attached or P&I?

Cheers Spades.
Click to expand...

P&I with offset account...

redwing said:
Hi Mick

To look at options from Forum members, you're probably going to have to give out some details

What's the current value of the PPoR

Your Loan is at $213k, getting the value of the property will establish what equity you have within it

Median in Weribee looks to be around $310k and rents at $280 per week

REA.com.au tells me
Click to expand...

Thanks. Last refinance the bank valued at 310k...


Mr. Fabulous said:
www.mrmoneymustache.com
Click to expand...

WOW !!! Just been reading this site and it does make a lot of sense !!!
 
Other than the roof, you haven't listed any other repairs. You painted, but paint is cheap assuming you did it yourself. The new garage wasn't a repair but an unnecessary addition. You bought a secondhand car, fair enough. Where did the rest of the 30-33k (you mention both figures, I'm not sure which correct) go?

For 30-33k, you should have been able to get the house in order but you say there is 50k in repairs still to go? It seems like you increased your mortgage without much to show for it. You could have used that money as a deposit for an IP.

Get in the 'adding value' subforum and have a read through and ask any questions you might have. You'll be amazed at how tight a budget some of the members manage to complete a renovation on.

You're not even exactly sure how much your mortgage repayments are. You should know this figure and all the other boring figures in your life and sit down and draw up a budget.

You have about 100k equity in your home which could be used to purchase IP/s but you really need to draw up a budget, research your options and set clear goals.

What areas would you like to invest in? Local, regional, interstate? What is your price range? What's the expected rental return? Are you interested in cashflow or capital gains or both? What are vacancy rates like? What will your outgoings be? These are the questions you need to ask yourself.

You say you're afraid an IP will be a drain on your finances but that needn't be the case if you go the CF+ route.

There are a number of mortgage brokers on here who can help you out with loan capacity and refinancing but you really need to wrap your head around your own finances first.
 
Kudos to Fifth on strait forward sensible reply.

Your P & I loan with offset that maybe the best approach for someone that doesn't monitor and waste all in goings/outgoings.

If you put your pants on,so to speak,you would monitor your spending habits for one,convert your loan to interest only with your offset attached,smart way to go.

Keep your savings in the offset account and get yourself a credit card,pay all monthly outgoings via credit card Eg:2k,pay off monthly,no fees during the interest free period..and save interest on your home loan at the same time.

Keep cash in your offset as a buffer and utilize the equity in your home as a deposit + costs on an IP,preferably cashflow/neutral with capital gains prospects.Picking up a development site will only further your progress as well.

The balls in your court and it's up to you act.How good is your mortgage broker?
Plenty of noble brokers on somersoft and you can go interstate,part and parcel of the digital age.Though if you need a face to face,i recommend Peter Tersteeg or Arron C who posts on this forum who are based in melbourne.

Again,the balls in your court,it's up to you the way you want to move forward,not only for yourself but your family as well.

Good luck Mick with the future,the 1st step may seem daunting but you'll find why in the hell i didn't do this earlier.

Either way,i wish you best,

Cheers Spades.
 
Fifth said:
you really need to wrap your head around your own finances first.
Click to expand...

Spades said:
If you put your pants on,so to speak,you would monitor your spending habits for one,convert your loan to interest only with your offset attached,smart way to go.
Click to expand...

As Fifth and Spades have said, you really need to get your finances in order. If you don't know where your money is going each week, you are only going to continue into an endless spiral and get nowhere.

Successful investors have control over their finances. This is the first step in your investing journey. You must get control in this area if you want to move forward.
 
Hi Mick

I would start out by tracking all income and expenses, so you know where you stand. Even if you only follow a budget for a month or two you'll learn a lot more about your spending habits

7 Rules to becoming Rich:

#1: Start thy purse to fattening
#2: Control thy expenditures
#3: Make thy gold multiply
#4: Guard thy treasures from loss
#5: Make of thy dwelling a profitable investment
#6: Insure a future income
#7: Increase thy ability to earn

"The Richest Man in Babylon"
Click to expand...

The loan has gone from $180k to $213k over the last 5 1/2 years, however Werribee has had some good Capital Growth (approx 25% in the last 5 years according to YIP) so you've made up some ground (on paper).

There was a Somersoft thread on Werribee some years ago Does Werribee still stink? :D
 
Thanks for the replies and the reality check.

In regards to what we spent the extra $30,000 on, I would not be able to write a list. We probably wasted $5,000 on due bills etc also. The car cost $9,000 so theres $14,000...

I confess. I am and would be a lazy investor. Trying to educate myself about investing and IP in particular for the last few years. Purchasing a PPOR and paying the mortgage seems like our first step. Should I just concentrate on paying that off as much as we can or should we dive into an IP right away?

I scroll through the threads in here and you all seem like property experts. What if I just don't have the aptitude for this? What if I just don't "Get it"? How will I know how to structure my loans? Where to put my money or even where to buy?

Is investing into property something you can only do if you yourself know it all? Do I rely on the bank for advice on loan structure ?

On another note, we are working on our house next Sunday. We have converted our laundry into a small extension of our kitchen. New floors go in, new paster and new trim also.

I think I think about it too much, should just start doing it...
 
Please note, this thread wasn't created to ask any specified questions, just somewhere to muse and share my thoughts. That's why I used the coffee lounge. Any specific questions will be asked in their respective areas :D
 
MickStephens said:
What if I just don't have the aptitude for this? What if I just don't "Get it"? How will I know how to structure my loans? Where to put my money or even where to buy?

Is investing into property something you can only do if you yourself know it all? Do I rely on the bank for advice on loan structure ?
Click to expand...

Can you operate a spreadsheet? If not, can you learn?
Can you read and write?
Are you prepared to spend some time reading the forum?

If you answer yes to the questions you will be fine - give yourself time to abosrb the information.
 
MickStephens said:
I confess. I am and would be a lazy investor. Trying to educate myself about investing and IP in particular for the last few years. Purchasing a PPOR and paying the mortgage seems like our first step. Should I just concentrate on paying that off as much as we can or should we dive into an IP right away?

I scroll through the threads in here and you all seem like property experts. What if I just don't have the aptitude for this? What if I just don't "Get it"? How will I know how to structure my loans? Where to put my money or even where to buy?
Click to expand...

Hi Mick, you don't really need to be an expert yet, not while you're learning. First of all find yourself a really good broker, a good one will not only get you the best loan and structure but they will also explain why they are doing it and teach you along the way. Another way of learning is to speak with Buyers Agents, you don't have to use them you can just go along to seminars they run. I went to a Wakelin seminar and I've learnt a lot from them (just make sure there is no pressure to buy, good BA's wont apply pressure). The most important decision you need to make is what type of investor are you - buy & hold, yield, renovator, developer, etc.

But most importantly stay on the forum and read and ask as many questions as you want, most people are more than happy to help. Don't worry that you don't 'get it', no one does in the beginning.
 
What a short story. You've got yourself a home and are thinking of getting an IP. Sounds unique and innovative :p

Hope there's several more chapters in the new future where there's more action.
 
Hi Mick

Just a suggestion..

Consider open a second offset account (but with no access card)
Change from P&I to IO.

Then pay what you used to pay for the principal component into the second offset.

Just like P&I but you can use the principal for your next PPOR without having to redraw (tax issues) since its a second offset. Or an IP or whatever, you get the picture..

Also cashflow is better and gives the confidence to buy more
 
MickStephens said:
Please note, this thread wasn't created to ask any specified questions, just somewhere to muse and share my thoughts. That's why I used the coffee lounge. Any specific questions will be asked in their respective areas :D
Click to expand...

FaceLamebook,a diary(not on the net)Or a blog would have been suffice.

Is this the place to share your diary without any input as you say?

Just saying.

Cheers Spades.
 
I agree with a number of posters when they write that you really, really need to know where all your money is going. 30k is a lot of money and if you can't remember how you spent that, then that's really worrying.

My advice is that you seem to be spending an awful lot on your PPOR. Why? Are these renovations necessary and will you be making it back when you choose to sell? If you are intending to sell, that is, which by the sounds of it you're not.

Im only very new to investing but I would think that any money that you have should be going towards your first IP rather than renovating.
 
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