Our 1st equity Mil.

[gooram]

Very well said ArJay...

I often question why I am investing, why is it so important to me that I become financially independant?

I'm quite sure that it's because my chosen profession bores me to tears at times, and the "thought" of the freedom that I could have quite excites me. Whether it will be the same in reality only time will tell.

"Better than the deed, better than the memory... the moment of anticipation"

I think it's more about replacing my income rather than being rich enough to buy million dollar properties and cars and whatever else.

If I was doing something that I really loved, and something that I lept out of bed for and something I'd love to do forever, would this investment gig be so important... I doubt it.

So why don't I go out and find something that fits this description? Good question... apathy? fear? complacency? This I'm still getting to the bottom of.

For me it's not about the journey, its about the finish line. That's when the real journey begins. I do admit however, that it is fun, exciting, at times boring, frustrating and a learning process which is always good, and really it's only just begun for me... maybe that's the frustrating part, or maybe it's a flaw in the plan... holding out for the finish line that has not yet been defined.

I guess I'm still working it all out but trying to be equally inward and outward focussed along the way.

 

[MJK]

Then we sat down with some scrap paper and he showed me how I could buy another property, using some LVR from my PPOR, and fund both the cost of the IP and the IO loan repayments for the new IP. So in essence the bank was lending me the money to pay their own IO loan. And it is tax deductable....bonus.

Then he explained LOE. For example: buy an IP using the above strategy. Wait (and maybe do some renos) until the property appreciates in value. LVR to the limit. Bank pays the IO loan for me, and I have some spare $$ to live on.

.


Hi Sailor,

I'm not totally sure what you mean by "the bank pays your IO payments or the bank pays the IO loan for you"?

Could you elaborate please.

MJK

 

[sailor]

Hi MJK, well for example if the property was worth $500K, I borrowed say $650K, and that covered the IO loan payments, as well as the purchase price.

 

[Jamie]

Hi MJK, well for example if the property was worth $500K, I borrowed say $650K, and that covered the IO loan payments, as well as the purchase price.

Now you own a property worth $500k and owe $650k.. what happens once you've spent the extra borrowings on loan repayments and the property hasn't appreciated in value?

Jamie.

 

[sailor]

Jamie, I'm assuming property doubles in value every 10 years. The IO loan is for 5 years. So after 5 years, the IO loan is taken out again.

 

[Rixter]

Jamie, I'm assuming property doubles in value every 10 years. The IO loan is for 5 years. So after 5 years, the IO loan is taken out again.

Ahhhh the old "Capitalizing Interest" trick.

Makes perfect sense providing its deployed on the right property located in the right marketplace as part of a long term investment strategy.

 

[Rixter]

Now you own a property worth $500k and owe $650k.. what happens once you've spent the extra borrowings on loan repayments and the property hasn't appreciated in value?

Jamie.

Jamie,

Why would one employ a strategy to purchase a property located in a market place that would create that sort of outcome over the long term, in the first instance?

 

[sailor]

Ocean front property!

 

[Pete]

Amen, Sailor!

 

[pete152]

Waterfront property in Perth would be having some decent gains now, Pete?
Cheers,
Peter

 

[Pete]

Well, Peter.

Beachfront places have done well for sure. Depending on the area, ~20% to 30% per annum for the last five years, I'd say - around Perth.

However, ALL Perth property has done exceptionally well in recent years. Consider recent annual growth rates - publicised in the media - of the order of 35% to 40% for 12 months. So although beachfront has done well, not really much different from other properties. And certainly the yields are lower.

I'm a fan of beachfront, hence my earlier post. Beachfront seems to be more reliably likely to outperform in the long term, with strong capital growth. Capital growth has been my primary focus. It has been working for me. And I still think that beachfront north of Mandurah, my area of interest, is still good long term buying.

Rather than veer off topic, thanks to Arjay and gooram for your excellent comments.

regards,

 

[BOO]

Beach Front

Hi Pete
I dont think you will have a problem outperforming in the future - beachfront which is as scarce as hens teeth is the way to go for capital growth, I have been monitoring this market for quite some time now. Beachfront outperforms, and next best is one street back and so on.

Unfortunately for me.... I think I need at least $1M beachfront (land value that is) to purchase in areas you have mentioned.

Lucky you, at the time many would not have realised the potential but you did.

Great stuff.

 

[Pete]

Unfortunately for me.... I think I need at least $1M beachfront (land value that is) to purchase in areas you have mentioned.

Hi, Boo. Hope you are well.

About two weeks ago a beachfront block came onto the market at Golden Bay; asking price $750,000.

The adjacent house was on the market about two months' ago asking $799,000. The house sold very quickly; I don't know if the land has sold. I doubt there will be many more sub-million dollar houses on the beachfront anywhere along the coast. The area is set to perform strongly in coming decades. And, even in the short term the future looks rosy - with the strong WA economy, strong local demand (wasn't it KPMG / Bernard Salt that forecast the Mandurah region to have the strongest housing numbers growth in percentage terms over the 30 years from 2001?) & new rail connection to Perth to be completed next year. Apologies if I'm a bit of a "broken record" on this subject....

regards,

 

[BOO]

Beach front

Hi Pete

What was interesting was a beachfront property I spotted a couple of months ago now. I think at the time was around $900,000, Golden Bay, which was probably a real bargain as it was the only beachfront property in Golden Bay which was also zoned for commerical purposes. Deli and upstairs some sought of unit which I think was rented out.

I contacted the selling agent who advised that it had been on the market for some time and she could not move it then suddenly she had 2 offers and other interested parties .

Beachfront and commerical - someone sitting a goldmine here.

 

[Pete]

That corner shop originally listed at a silly range of 1.3 to 1.6 million. I know it sold; guess it was under a million but haven't checked.

 

[BOO]

Hi Pete
Now I understand why it was on market for so long. When I viewed it on net I think asking price was around $900,000, now it makes sense why it did not sell.

What I find surprising is how some sellers place properties on market at unrealistic prices and then eventually shoot themselves in the foot by selling too low.

Cheers

 

[JIT]

Hi Pete
Now I understand why it was on market for so long. When I viewed it on net I think asking price was around $900,000, now it makes sense why it did not sell.

What I find surprising is how some sellers place properties on market at unrealistic prices and then eventually shoot themselves in the foot by selling too low.

Cheers

Yep, I've seen this so many times and took advantage of this to buy my first IP this way at well below the asking price and comparable market price. Right now I am involved in another purchase where the property was obviously overpriced and had not sold for 6 weeks, and now the asking price has dropped by 30K, and those watching closely are now fighting for a bargain.

GSJ

 

[Pete]

Hi Pete
Now I understand why it was on market for so long. When I viewed it on net I think asking price was around $900,000, now it makes sense why it did not sell.

What I find surprising is how some sellers place properties on market at unrealistic prices and then eventually shoot themselves in the foot by selling too low.

REIWA figures for the year ended June show that the highest price paid for any place in Golden Bay was 900k. So, the shop was overpriced at 1.3 -1.6 million but at 900k was still asking the same as the best price ever achieved for any property in the suburb. I doubt it sold for all that much under 900k, so it seems incorrect to say the vendors sold for too low a price.

regards,

 

[BOO]

Hi Pete

New owners pick it up at $900,000?? the only commerical beachfront in Golden Bay, yet they pay the same/similar prices for beachfront residential property.
Maybe I am seeing things differently but I would say they got a bargain.

 

[Pete]

I know very little about commercial. I guess that the yield would be very low - such as less than 2%. Why would the commercial be a bargain at that price compared to a house for the same price?