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lukentel said:Interesting
You sure youre 18?
young_gun said:I was analyzing my sittuation and looking at a few options and I came up with a pretty good idea.
To start off I am 18 years old I am a new property investor , At the moment I can save around $15 k - $20 k a year but dont have much saved up at the moment I need to save money for a deposit. One of the ways I could get around this is through my dads DIY super fund. One of the options that comes with a DIY funds is the ability to become part owners in property through his super.
If say i wanted to invest 50 / 50 in a property for $350,000 with my dad I could use a lump sum of $45,000 from his DIY fund and get loan for the remainging $305,000. Because I can save aprox $15, 000 a year an attractive option is for me to make additional payments to the loan and in 3 years both parties will own 50 % of the equity. Below is a table showing how much interest I would save cuting a loan down from 15 years to 8 years and 6 months .
Initial Calculator Results
You originally borrowed: $305,000
Loan term: 15 years
At an interest rate of: 7%
Monthly repayment figure: $2,741
With a final payment of: $2,741
Total interest paid: $188,457
Updated Calculator Results
You originally borrowed: $305,000
New loan term: 8 years 6 months
At an interest rate of: 7%
Monthly repayment figure: $3,991
With a final payment of: $836
Total interest paid: $98,970
Total interest saved: $89,486
Time saved: 6 years 6 months
As evident above my interest has been cut down $89,486.
By making larger loan repayments we are also making a large loss (negatively gearing ) which is supplement by my $15,000 of savings. Due to this the large ammount of money lost is claimed as a tax deduction. The property would also be positively geared in 8 years and 6 months because the loan is totally paid off.
I know some people will be thinking your tieing up too much money into the property , you have to remeber we are using my dads super money and he is a first time property investor like me. He doesnt want it to be to highly geared. Also after a few years we can use the equity to fund more properties. Either way if I dont buy a an IP the money that I save will be tied up in the bank doing nothing , or if i pruchased a 50 / 50 joint venture with my dad atleast the money will be in the equity of the IP.
With the intial ammount funded by my dad , half of it $22,500 could be finance by himself and the $22,500 by his super fund. Of which the $22,500 funded by my dad could be used as the amount for the deposit effectively not using the DIY for gearing.
alexlee said:I have to point out that I would never mix money with family. Too many potential emotional issues and I prefer to invest without emotions.
Alex
dtraeger2k said:Instead of messing around with all that stuff, why not get a 105% loan? (no additional security required). If it's for a first PPOR you'd also qual for the FHOG so you'd need hardly anything, or if it's an investment you'd only have to chip in a couple of grand.
dtraeger2k said:It does have heaps of criteria, but it'd get you into the market right away. So by time your friends have saved up their deposit, or begged their parents into helping them out so that they can get a slightly cheaper interest rate, your house has already increased in value and you've paid chunks of it off and almost ready to buy the 2nd.
Very sound advice Maggie. At 18 you have the world at your feet. Don't rush into things & risk your parents retirement income. Take your time & do it yourself. Save! If you have been working for a while you should have a nice little nest egg by now if you are focused on where you want to go.Maggie said:Just quickly read through this thread and you have interesting ideas Young_Gun but no offence but I do feel you're taking a 'quick' way out by looking at using some of your fathers super.
You're only 18, 19 soon save $20,000 and then maybe look at the super idea or save another year and have $30,000 and then you'll be able to buy it on your own and what a huge accomplishment you'll feel if you do, you'll be able to sit back and say 'I did it' note the 'I'...
alexlee said:Two points: gearing magnifies both returns and losses and increases risk. In a flat market like this one, I'd argue that you shouldn't gear to the hilt because the risk that the market will fall is higher than before.
alexlee said:Second, and in my opinion even more important, is that I think an investor should have a savings habit in place BEFORE they start buying property. Easy credit and lack of discipline results in over-leveraging, which isn't apparent until the market turns down. It happens to big companies and it happens to investors. IP investing is supposed to be a conservative, long-term strategy, and you have to prepared for the inevitable downturns. That means keeping LVR low and/or keeping a cash cushion in case interest rates go up, you get vacancies, repairs, etc.
alexlee said:Current market suggests the house will probably stay flat (not necessarily an issue if you plan to hold long term). Re paying it off, does that mean you would use a P&I loan? At 105% wouldn’t that kill the cashflow even further?
Alex
alexlee said:Interesting. Do you charge any ongoing fees for financial coaching after the loan is drawn down?
alexlee said:Banks are a business. And a business is supposed to be run for its shareholders. That's why I like having bank shares. I don't believe banks have any responsibility to educate people about managing their finances to pay off their home loans faster.
dtraeger2k said:However, why should banks' irresponsibility prevent us from reaching our own goals?