new member needs advice and investing partner

[capitalist]

Hi everyone. I recently discovered this forum, have found some excellent advice and am happy to know that there are many like minded people out there who don't want to rely on the pension for retirement.
This is my first post on here and I was wanting some advice about what to do next in my grand plan of becoming financially independent. My aim is to retire early (don't we all) before i'm 50 yo so i can indulge in my love of travel.
To give you some background information - in a nutshell, I am a single 32 yo unemployed guy who is asset rich but cash poor.
I have 4 IP's in Melbourne valued at just over $1m, all tenanted and returning $45k gross pa.
I owe almost $400k on a discounted 5.76% I.O. loan on these properties which are slightly positively geared and I am eligible for a $50k redraw.
I also have a 25% share in a unit on the Gold Coast valued at $170k (returning $11,700 pa) and a 25% share in an older block of 5 units also on the Gold Coast which was recently purchased for $770k (returning $43k pa). I have been approved a loan for $940k for the block of units and to refinance the other unit (which will give me free title). I will be using the block of units and my parents PPOR (valued at $775k) as security.
This property and loan is about to settle and is in 4 names, I.O. at 5.87% (7% discounted from the standard variable). The loan on these 2 properties is $940k and we also have been approved a LOC for $295k.
I want to move to the Gold Coast (from Melbourne) within the next 6 weeks and buy a PPOR ($160k max).
My questions are:
1) Should I sell a property down here to finance the purchase of my PPOR? I am ineligible for a loan because I am currently unemployed (the loan and LOC was approved because of the income of others on the loan).
However, i have been travelling overseas for the last 12 months and haven't worked - so it may be a good time to realise any capital gains this financial year.
2) When i move to the Gold Coast i'd like to start buying old properties, renovating them and reselling them for a living. But because I cannot service a loan on my own (no job), maybe i should rent and use the proceeds of the property sold (about $170k) to start me off?
3) I also want to redevelop the block of units in the next 3-5 years and would like to hear from anyone who has experience with this, or would like to become a partner in it. I'm thinking of demolishing it and doing a boutique type development with some shops on ground level and 4-6 units on top. The land is 761 sq metres and 50 metres to the Broadwater.

Also is there anyone out there who would consider going into a partnership with me to do some small deveopments in South East QLD?

PS: Can anyone recommend an independent consultant who can advise me on my plans?
Any advice would be greatly appreciated.
Thanks folks.

 

[Jakk]

Originally posted by capitalist
[

...you know when you're sitting on a chair and you lean back so you're just on two legs, then you lean too far and you almost fall over but at the last second you catch yourself?
I feel like that all the time.

...and aint that the only way to live
but dont try it when you've had too many stubboirs, experience tells me it's not quite the same feeling then.

regards

 

[sctpc]

Do Steve Navras corse that will give you more lending power

 

[beech]

good to see your back Slum Lord.

 

[Jakk]

Originally posted by beech
good to see your back Slum Lord.

....my fronts not too bad either beech.......and it's great to see your still here.......

regards

 

[TheBacon]

>PS: Can anyone recommend an independent consultant who can advise me on my plans?

Michael Yardney?

Be very particular. You may find more than a few people want to be your 'advisor' with the dollars you are talking about.

Good Luck.

TheBacon

 

[NickM]

Capitalist

You may consider moving some of your properties to a trust since CGT will be at a low rate this year.

This will enable you to release some equity to be able to purchase your new PPOR.

A trust will also help you to protect some assets just in case you get involved with the "wrong" person.

Good Luck

NIckM

 

[capitalist]

Thanks for the advice people.
Jakk: I'm not sure what stubboirs are, but i'll be careful.

sctpc: I want to do Steve's weekend course, but the next one in Melbourne isn't until mid June and i'll be on the Gold Coast by then - so i also miss the Brisbane one coming up dammit
I rang his office and was told that i can't have any one-on-one advice without doing the course.

TheBacon: Thanks for the tip, but who is Michael Yardney and how can i get in touch with him?

NickM: Thanks for your advice. I'd love to trasfer all of the IP's into a trust or company but i know i'll be hit up for lots of CGT and stamp duty. I'm also not really familiar with the adantages/disadvantages of using this type of structure so i'll need to do some more homework first.

I've been pretty lucky with my property investments (nil vacancies, good tenants and good capital growth) but have also had some shocking losses in the sharemarket. My property manager is also pretty slack and needs reminding about his job description at times.
I have been taking a slow approach to my investments unlike some stories where i hear of peple buying 5 IP's in a year!
That sounds unbelievable to me. I bought my first at the age of 19 in 1990 as my PPOR and renovated it while i lived here. I then got the other 3 over the last 10 years and rented elsewhere.
I probably could have accelerated this process but it wasn't a priority for me at the time.
However, i'm now at the stage where i'd like to "crank" it up and be more active. As mentioned, i'm also unemployed so i have a lot of spare time on my hands. I'm also pretty handy and have done most of my renovations.

Anyway, if i can offer any advice about Melbourne or the Gold Coast property market to anyone, i'd be happy to pass it on.

Remember, it's better to die on your feet than to live on your knees.

 

[TheBacon]

>TheBacon: Thanks for the tip, but who is Michael Yardney and how can i get in touch with him?

I dont know him personally, try doing a search on this forum. Just a suggestion from reputation, not advice or endorsement. I'm sure there are others out there (and in this forum also) who could help.

TheBacon.

 

[Topnotch]

Might be frustrating and difficult, but make the effort to get to one of Steve's seminars. Very enlightning but I'm sure that you'll find it extremely worthwhile

 

[capitalist]

Topnotch, i'll definitely try and get myself to one of Steve's seminars as i've heard a lot good things about them. I'll just have to wait another 6 months or so until the next one in Brisbane comes along.

Thanks TheBacon, I found Michael Yardney's site which is:
Metropole
His company assists people in doing their own property developments and i'll definitely get in touch with him and see what i can do with the block of units.
I'll also let people on here know what his services are like and what the outcome of the units is, as i'm thinking of developing it sooner.

An update for my questions 1 & 2:
I've decided to sell a unit down here and use the proceeds to buy my PPOR, add value to it and sell it after 12 months. It was either this or rent something up there and use the proceeds of the sale to start me off with buying, renovating and selling.
After much uhmming and ahhing (are they words?), i've signed up with an agent and will be auctioning the unit on March 29 at 11am on site at 15/12 Tivoli Rd, Sth Yarra.
If anyone is interested in a well located, solid investment that will show excellent growth, come along and make a bid!
Am i allowed to put down the details here? Anyway here i go:
Invest or Occupy: in this top floor North facing 1 bedroom apartment which has been freshly painted and recently carpeted. Features a sun drenched leafy outlook, direct access to Rockley Gardens and the South Yarra library, built-in-robes, laundry facilities and is in a sought after location in leafy Tivoli Rd. Literally minutes away from Toorak Road and Chapel Street - enjoy the cafes, restaurants, bars and shopping in this blue-chip location.

Sounds good ey?

This is truly an excellent investment and would really suit someone who is looking for their first investment property as i imagine it will sell for $150k+. It's also very low maintenance with low outgoings and a tenant who is very houseproud. The unit also has room to improve if someone wanted to add value to it to resell or increase the rent.

I really don't want to sell it, but sometimes you gotta do what you gotta do.

It was a very hard decision for me to make because of the CGT and stamp duty that i'll have to pay, but i figure that it's the only way i can buy my own place to live in without taking out a loan. As i mentioned, i haven't worked for the last year so it may also be a good time to realise those capital gains even though i believe that you should NEVER sell.
I like that strategy where you buy something that can have value added, revalue it and borrow again for the next IP.

If anyone is interested in going into a partnership or joint venture with me in property investing, please reply here or e-mail me at [email protected]

Cheers,
Mark

 

[NickM]

WHat is the rental return ?

 

[Glenn]

Hi Mark,

Welcome to our forum.

Good luck with everything you are doing, it seems as though you are just about ready to go ballistic!!

It may be worthwhile to watch the tone that the thread takes as this one is heading toward being something that belongs in the Caveat Emptor section...dedicated to discussing property deals available.

Good luck

Glenn

 

[geoffw]

Originally posted by Glenn
It may be worthwhile to watch the tone that the thread takes as this one is heading toward being something that belongs in the Caveat Emptor section...dedicated to discussing property deals available.

Fair point Glenn.

Mark will probably get more exposure to his property, as well as fitting with the forum ideals, if he posts the deal in Caveat Emptor, and for it to be torn to pieces- whoops, analysed, over there

But it's worth while to know in the context of this thread where he's come from.

 

[capitalist]

Hi people,

NickM - the unit currently returns $7,284pa ($607 pcm, $140pw) but is at mate's rates. Current market value would be closer to $8,328pa ($694pcm, $160pw). I know the yield isn't that great, but the trade off is capital gains and nil vacancies which you will certainly get in this location.

Glenn and geoffw - hope i haven't stepped over any boundaries here, and my apologies to anyone who i may have upset...hope the mod doesn't come down on me too hard. I haven't really looked around at the other forums on this site but just found the one you're talking about (Caveat Emptor). Think i might post an "ad" for it over there too

Yes Glenn, i do hope to go "ballistic" and make a go of it.
I've only recently decided that it's time i put some roots down and get some direction happening in my life as i'm getting old now and need to think about the future
I'd love to be able to retire at 45-50 and that's why i've recently discovered these property investing forums to get some advice...so i can indulge in my love of travelling. I can live really cheaply and don't need a fancy PPOR or all the fancy toys (but a Ducati would be nice). When i travel, i do it with a backpack, stay in dorms/hostels and eat street food.

I guess the main thing i want to know using "creative finance", is how i can avoid selling the unit (i'd prefer to hold onto it and i can abort the auction), and also buy my PPOR with little/no debt on it. Of course i don't want to pay interest on my PPOR which i cannot deduct.
I guess that would mean using my equity as extra security for the PPOR and take out a bigger loan - but... would i be able to get finance considering i don't have a job at the moment?

Also are there any thoughts on what's the best way to retire on property investments - i.e through rental income or capital growth?

I've always thought that rental income would be the way to go, but that would mean having little debt and/or cashflow +ive properties, plus paying tax. I figure that to get to this point, i'll need to do some renovations and sells to pay off some debt, or accumulate more properties that are cashflow +ive...but then again i have that tax thingy (PAYE?)
I guess using capital growth could be done be either selling a property when i need some cash and living off the proceeds (paying CGT...yuk ), or drawing on a LOC to live off.

Not sure which is the best way to go here...any suggestions on what you think is the best way to do it?
Has anyone come to any conclusions?

Muchas gracias,
Mark

 

[Les]

G'day Capitalist,

If I were you, (and didn't want to sell the unit), I'd be finding another way of catching up with Uncle Steve Navra - SOON !!!

A quick tot-up shows you have <50% LVR on property around $1.3m. Since you live frugally, how long would $100k last you if you "drew it down" as a Cashbond? As long as your holdings increased by at least that amount (over the period of time that your Cashbond would last you), you could simply do it again.....

Or, if cashbonds could (a) provide you with a living, AND (b) allow more borrowings for IPs - perhaps for lower cost homes or units that you could then reno, over the next 6 months (say), then why wouldn't you?

My thoughts are - don't wait until SN is "in your area" - go seek the man out. YOU are in the kind of situation where his techniques can shine !! i.e. heaps of equity, with little DSR.


Edited by Les later - my use of "DSR" is incorrect in the last sentence above - so, before doing too much head-scratching, please reread the last sentence using this correction....

Quote reworded:-YOU are in the kind of situation where his techniques can shine !! i.e. heaps of equity, with little Income.

With apologies for any confusion caused

Regards

 

[capitalist]

Hi Les, thanks for the post.
I've done a search for cashbonds on this site and found a lot of info, but the concept still hasn't gelled with me yet
I found some links to info on Steve's site about cashbonds but they no longer work and it seems he's deleted those pages. I can't find any info at all on cashbonds on his site.

Since you live frugally, how long would $100k last you if you "drew it down" as a Cashbond?

...i reckon about 4-5 years doing it pretty comfortably. Looks like i will have to seek him out and pump him for more info about cashbonds relating to my circumstances.
I think you're right about Steve's course - i'll have to book myself into one even if it means flying back to Melbourne for it in June. I read a lot of good things about his course in other posts and the cashbonds are now making me curious.

YOU are in the kind of situation where his techniques can shine !! i.e. heaps of equity, with little DSR.

What does DSR mean?

Thanks,
Mark

 

[Les]

G'day Mark,

Re my quote:-

YOU are in the kind of situation where his techniques can shine !! i.e. heaps of equity, with little DSR.

In answering this, I noted my words (quoted above) were mis-leading, and have edited the previous post to prevent problems for other readers.

Quote reworded:-YOU are in the kind of situation where his techniques can shine !! i.e. heaps of equity, with little Income.

DSR is Debt Service Ratio - in short, do you have enough income to be able to afford a mortgage. DSR is a ratio used by lenders to determine whether they want to lend you any money - it differs somewhat between lenders, but a rough guide would be to allow 30% of gross income + 80% of rental income. This income total should be more than the TOTAL of all your loans - inc. personal loans, car loans, credit cards, and mortgages.

Keep in mind this DIFFERS between lenders, AND can be negotiable - so don't take the above as gospel....

I've heard that the lenders consider your Income to be :-
30% go in Taxes, 40% to live, and 30% to pay loans - this indicates the "negotiable" part - e.g. would someone with a total income of $200k have a food bill 8 times bigger than someone on $25k ?? What does it cost YOU to live? Is it demonstrable to a lender?

Some lenders will allow over 40% of Income to be considered !!!

Food for thought .....

And for some REALLY good news - talk to Steve N re the lenders' view of cashbonds and the Income they produce


Regards,

 

[geoffw]

Originally posted by capitalist
Hi Les, thanks for the post.
I've done a search for cashbonds on this site and found a lot of info, but the concept still hasn't gelled with me yet
I found some links to info on his site about cashbonds but it seems he's deleted those pages. I can't find any info at all on cashbonds on his site.

Mark,

The info on cashbonds is still there- it's just at a different place than originally (it looks reorganised).

The article on cashbonds is at http://www.navra.com.au/articles/cashbondfirst.html

He's now got some links to other asrticles, not just those he's written- check out http://www.navra.com.au/articles.html

 

[capitalist]

Thanks Les,
Sounds exactly like me:

Quote reworded:-YOU are in the kind of situation where his techniques can shine !! i.e. heaps of equity, with little Income.

...especially the bit about little income

When you say:

...a rough guide would be to allow 30% of gross income + 80% of rental income. This income total should be more than the TOTAL of all your loans - inc. personal loans, car loans, credit cards, and mortgages.

i assume you're talking about the income total being more than the total of all the loan repayments ?

Thanks for the links Geoff, i managed to get onto them and have a read but i won't be asking questions about cashbonds here... looks like it's been done to death in a lot of posts.