Starting over again...

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From: Paul Hendriks


Hi All.

I posted recently about the crystal ball, 9/25/01 & got some great response & have decided to seriously do something about our future now, & not be negative about a looming recession. As stated on that post, I have sold my home worth $400k. Owe $130k which includes all debts in total (car, personal, etc).

I have around $270k of my own funds to play with, or I can transfer the $130k loan (all as one) with me. I want to buy at least 1 if not 2 I/P's with these funds & rent a home for ourselves for around $300 p/w

My dilemma is, do I use the 270k to purchase 2 I/P's (135k each) buying around the 225k to 325k mark, so as to make these I/P's positively geared (I don't want any extra pays to make on I/P's) & easier to get finance for.

Income is low at present (combined 30k) due to building business to eventually produce passive income (hopefully 15k year) My wife works part time & we have 2 beautiful young girls to look after. Hence the need for neutral or positive cashflow properties.

I'm now 38 & feel like I am starting over again, after reading lot's of your much appreciated knowledge on this great forum, & reading many, many books I think it's time to act.

So in closing, does this sound sensible, to rent a home whilst immediately building a portfolio of investment properties that will help in future years, or should I buy our own home & then borrow to buy the I/P's.
(we come off acres & would find it very restricting on a small block, we can rent a nice property worth more than we could afford to buy ourselves)

Looking forward to your comments...

PS: I am a HK graduate, but have found his system too sophisticated & complex for my true liking, I would much prefer to get into stress free investing (or as much as possible). Henry makes it sound all so easy, but I feel you have to be 100% into it or it will not work, but I have learned a fair bit from the course but prefer Jan's & RK's plain english investment strategies, & good money habits as opposed to the bad ones of 90% of people, me included - until now!

Starting Over
Regards Paul
 
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Reply: 1
From: Les .



G'day Paul,

A few thoughts that may help you decide:-

Check out the old forum (one example attached - hopefully). This is the bookmark I have - still works for me - http://www.somersoft.com.au/disc_frm.htm

Search for "own home" - it leads to a heap of "Do I purchase my own home, or buy IP's" types of questions.

It sounds you have put yourself into a great position to "regroup". And the number of possibilities for you are almost endless ...

The way you are proposing will certainly be a very safe way to go (50% LVR) - so that would make ANY property +ve geared.

You might want to consider using your "cash heavy" position to buy a "great deal" (i.e. you could settle in 24 hours on an IP up to $270k by writing a cheque, in exchange for a terrific discount). Having locked in a great deal, you can then refinance it at your leisure, getting the best rates etc, and release a bunch of cash for the next one.

Note that this would want to be a "steal" (and sometimes steals can work in reverse) so know your area, values, rental returns, etc. before embarking on such a course.

If any of the "car loan, personal loan" are at higher interest rates, consider paying them out (that will help future borrowings no end).

Paul, I've never used "attach file" before, so if there is no file attached, use the link above, and either Search, or go to the early part of the forum. The file I am wanting to attach is called something like "Buying to live in, or buying to rent out" - posting date is 10/3/99 (3rd Oct 99).

I'm crossing my fingers ;^)

Regards,


Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.1
From: The Wife


Hi Paul

I agree with Les,

Also, your starting over in a new phase, in reality your way ahead of most people, your in a good position, just be cautious, making the money is easy, hanging onto it is a whole other ball game.

Cheers, TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1.1
From: Paul Hendriks


Thankyou
The Wife & Les

Life is queer with its twists & turns, as every one of us sometimes learns...

The teacher arrives when the student is ready... well I'm ready & I think this forum of fantastic advise & experiences from selfless people like yourselves is definitely my teacher.

Regroup is the word Les, so better late than never, & yes I will be careful & do my research/due diligence for the I/P's. I like the advice on very quick settlement for a bargain cash price only...

I also got thru on your link Les (thankyou) & read the 10 positive & 2 negative pointers & it looks like I am heading back in the right direction at last. Let me explain...

I am in envy of the young 26 year old guru's who control 2 or 3 rentals at such a young age.
At 17 I bought 2 blocks of land in the Hunter Valley but lost out on the buy thru some legal wrangle with the developers. At 21 (1985) my future wife & I (when engaged banks took both incomes into consideration, not so when your actually married) we bought some land in the Hawkesbury & built a house on it 2 years later (1987) to move into when we married. At 24 we bought 1 I/P at lake Macquarie for 44k & rented it out for a year or so before interest rates hit 18% & we had to sell in 1990 (10k profit). We had sold our first home also (it doubled in 2.5 yrs - 75k profit) & bought 5 acres with an old home at age 26.
I then went pig headed & declared we wouldn't buy any I/P's again before we paid our own home off. We did get down to 45k owing on a 250k property by 94 & we took a year off & traveled Australia (rented out our home which covered the mortgage)

It seams to me starting a family in 95 & a new & unusual business in 97 has just threw us completely off track from 95 & the last 7 yrs we have aquired bad spending habits & lack of decision making confidence that has seen us go backwards financially, & that makes me feel absolutely slack & very regretful over lost time...
So you can see now why I called the post Starting over again...

Anyway Les & TW, I really appreciate your advice to steer us in the right direction & no doubt i will feel very confident soon as I get back on track with I/P's & business.

Both your thoughts on this situation would also be appreciated.
I actually have secured 3 I/P's off the plan in Dee Why in NSW (Northern Beaches) using HK's strategies, used an expression of interest to hold them, but now feel very uncomfortable with them (out of my reach) 1 @ 550k, 1 @450k, & 1 @ 350k. They have increased in CG by around 5% in just a few months, which is around 65k or so. I am trying to figure a way to profit from them instead of just dumping them. 1 is a 1 bd in a block of 9 boutique units, 1 is a 2bd with 2 car parking spaces in block of 30, & 1 is a 2bd with a 100m2 terrace in block of 30 upmarket units. All to be completed in around 12 to 14 mths, area capital gain is around 15%, with around 5% rental yield. Units are on east side of Pittwater Rd & 1km walk to Beach, & 1 - 200m walk to cafes & restraunts, etc
I did do my research in this area & they are in one of the best streets, plus restrictions on height, population, & council spending millions on redeveloping Dee Why they are good I/P's for someone wanting Tax benefits & depreciation.

Any ideas on these, as I have to make a final decision soon???

Thanks again
Paul
 
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Reply: 1.1.1.1
From: Les .



G'day Paul,

I have had very limited experience with OTP stuff so I'm guessing that you must place a deposit soon, or walk. Then, when buildings are completed, you will take up the necessary mortgages, etc. Is this right?

Assuming it is, then (from your previous post) it is obvious you can handle the deposits - and, being a HK graduate, they will be Deposit Bonds anyway - Yes? A couple of grand to control $1.2m of RE - that's not bad .....

So, you now have 12 months to "make your play" - and one of the options available would be to sell your interest(s) just before, or at, building completion.

If things so far look pretty right, then your next thoughts should be toward "how much can I borrow after 12 months" - this could allow you to maybe keep 1 or 2 of the 3, and flip the others (putting another $20k - 60k in your pocket). If this were possible, would you like to have 1 or 2 of these as the IP's you want to buy? I think you were preferring something more +ve in cashflow? So, maybe you flip all 3 and pocket the profits.

A good crystal ball might be useful too - how long can RE continue to grow at these rates? Will you end up taking a loss after 12 months? Of course, this is all part of the risk you take on, and knowledge minimises risk - so, how confident are you that your choices are going to appreciate by a useful amount? Dee Why has certainly had its supporters (API mag is one I remember) so there may be virtually no risk at all - but its your call.

The way I see it, you have 12 months to decide (give or take a month) - but my lack of knowledge of OTP's might be showing here e.g. When DO you have to get a Bank Loan? Do you have to qualify 12 - 14 months BEFORE you are going to use it? In that case, I suspect you would be pushing to buy even 2 of them, given your income, even with all of your cash into the deal....

As you can see, I can't answer your questions with any authority, but I hope my thoughts might give you food for thought. And I'm confident that others with more experience will step in and present more possibilities, and even correct me where needed (gasp!!! ;^) Please keep us in touch, Paul - this sounds like a very interesting scenario - and good luck,

Regards,



Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.1.1.1.1
From: The Wife


Hi Paul,

I dont do OTP's either, right now.

But there is a whole swag of people on this forum who DO, do OTP's.

Come you people, where are you? Paul needs some ideas here!

TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1.1.1.1.1
From: Paul Hendriks


Thanks
Les & TW again,

It looks like you 2 are the only ones with any ideas TW, never mind, you have both given me great food for thought & I think I have a lot to chew over...

Les, your assumptions are pretty spot on & I will sit down to consider carefully which way to go on the OTP's. It looks to me we can be very greedy sometimes & may end up with cake ALL OVER our face, not just eating it if we can...

I will let you both know which way I decide to go as well as the results, which I hope will be good...

Regards
Paul

PS:I think I'm becoming addicted to this forum, & maybe one day I will be able to help out with my own opinions, maybe!!!
 
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Reply: 1.1.1.1.1.1.1
From: The Wife


Paul, I changed the title, maybe it might attract some of the OTP people, snobby bunch they are :eek:)

OTP people, please read entire thread, thanks

TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1.1.1.1.1.1.1
From: Michael Croft


Hi Paul,

Many here have lots of good ideas to share. However you have asked for advice specific to your situation, which is why you aren't getting a lot of replies. Many will think twice, and rightly so, about 'advising' you for obvious reasons.

Your first post in this thread told only part of the story, your second post a bit more. Quite frankly anyone who offers you advice without the whole picture is nuts!

So here is my blunt two bobs worth. The 5% or $65k gain on your units is worth the paper its probably not written on. It can evaporate and turn into a 5% loss over night. So lose the attachment to it before it costs you REAL money and pain.

By all means investigate creative ways of realising the paper gain but be prepared to walk from it and don't look back. There's plenty out there.

I'm sure this post will **** you off and I'll be char grilled by Les and TW for being less than supportive; so be it.

Michael Croft
 
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Reply: 1.1.1.1.1.1.1.1.1
From: Dale Gatherum-Goss


Hi

I see a lot of different issues such as this and inevitably there is no right answer. It will all depend upon YOUR comfort levels emotionally and psychologically as well as fitting into your YOUR financial plan.

Yes, I'm avoiding the question!

You see, we each need to develop our own financial plan based around:

what we want to achieve
how quickly we wish to achieve it
our comfort with risk
our own levels of integrity
our own morals (note emotive discussion a week or two ago about profiting from Sept 11 issues)
and, our own current financial situation.

I have seen people sell up their family home (at some cost in R/E fees) and rent a home only to later on reverse the process because emotionally they felt uncomfortably paying rent to someone else.

In short, I strongly encourage you to develop a plan of where you wish to be in the future; what level of assets that you would like and what level of income you would like those assets to generate; and what time frame you would like to see this goal achieved.

Then, you should set down YOUR rules by which you will play this wonderful game.

Once done, you will have a blueprint for your success and it is only a matter of continuing your financial education and implementing that plan.

Then you get to roll naked in the money!!!

Dale
 
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Reply: 1.1.1.1.1.1.1.1.2
From: The Wife


Michael,

I wouldnt char grill you, I value your opinion, I think its a good opinion, I think people are nuts if they only want to hear the good side of things, I am sure Paul will take in what you said, and add it to his thoughts and add it to see what is best for him.

Cheers, TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1.1.1.1.1.1.1.1.1
From: The Wife


Rolling naked in the money??? Dale, I wanna come to one of your parties!

TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1.1.1.1.1.1.1.2.1
From: Sergey Golovin


I'll agree with Dale,

I do know someone who had house worth about $600K and yacht $500K.
He sold his house and lives on the boat.
When I asked him - Why?...
He said - it just kills me, the repayments on yacht...

He is happy now. I'm still recovering from that shock.

Serge.
 
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Reply: 1.1.1.1.1.1.1.1.2.2
From: H D


Paul:

You've received great advise from Dale, set up your goals short and long term and then develop a strategy to achieve these goals that suits you.
If your question is where do I go from here? and how?, then I would seek advise from a qualified professional to assist. But make sure they have your best interest at heart and that they believe in your goals and not imposing their ideals on you.
In the short term it would seem that one of your obstacles would be borrowing capacity against your income. There are many methods to get around this problem, especially as it would seem that your income stream will improve. Good Luck on the journey!

hd
 
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Reply: 1.1.1.1.1.1.1.1.2.2.1
From: Paul Hendriks


Thanks to all,

What a surprise this morning, to get 6 more responses, & no Michael I am not offended in any way. I really appreciate everyones time & believe it or not my brain is getting much clearer as I read your thoughts. Lose the attachment before it costs you real money & pain, some great advise that I will take on board.

Dale, your advise I think is absolutely spot on, that's exactly what I have to do. Sit down & work out my plan of attack to get the results I want, using the methods & strategy which suit my personality & comfort zone.

I think this is what must throw people off course, trying to follow & copy other people's methods only because they see the results they may be getting, not realising the other persons strategy may well keep themselves awake at night whilst the person they are trying to copy is sleeping soundly. Did I just write that? It's only taken 4 decades to realise that... Thanks Dale.

Great advice from you all, it really makes you think. Which obviously not many people do, myself included up till now!!!

Rolling naked in cash...ummm! interesting thought.

Serge, the yacht scenario does sound odd, just like a big Doo Daa, sucking up the cash with no capital gain, but as you said HE is happy now...

Thanks again to you all, no more personal questions to you all anymore, unless absolutely necessary, but I will throw some scenario's of I/P's I will be looking at for you to punch in some No's & see if it works.

Regards
Paul

PS:I may have to look at Jan's PIA software down the track?
 
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Reply: 1.1.1.1.1.1.1.1.1.1.1
From: Yuch .



TW,

Are you gonna be rolling in the money naked in a gigantic jacuzzi?

I will come and join ya! ;)


Regards,

Yuchun Chen
Market Management Systems
NEMMCO Ltd
(02) 8838 5042

I am the Master of my FATE, the Captain of my SOUL, but a Slave of my
STOMACH






------------------------------------------
This e-mail is confidential. If you are not the intended recipient, any use, disclosure or copying of this document is unauthorised and prohibited. If you have received this document in error, please delete the email and notify me by return email or by phoning the NEMMCO Helpdesk on 1300 300 295.
 
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Re: need help with OTP questions

Reply: 1.1.1.1.1.1.1.1.2.2.2
From: Yuch .



Seek advice from a professional but don't invest ALL you money in managed
funds! ;)


Regards,

Yuchun Chen
Market Management Systems
NEMMCO Ltd
(02) 8838 5042

I am the Master of my FATE, the Captain of my SOUL, but a Slave of my
STOMACH






------------------------------------------
This e-mail is confidential. If you are not the intended recipient, any use, disclosure or copying of this document is unauthorised and prohibited. If you have received this document in error, please delete the email and notify me by return email or by phoning the NEMMCO Helpdesk on 1300 300 295.
 
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Re: need help with OTP questions

Reply: 1.1.1.1.1.1.1.1.2.2.2.1
From: Asy .


Room in the money jacuzzi for one more????

asy
 
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Re: need help with OTP questions

Reply: 1.1.1.1.1.1.1.1.2.2.2.1.1
From: Yuch .



There is always room for Asy of course! :)


Regards,

Yuchun Chen
Market Management Systems
NEMMCO Ltd
(02) 8838 5042

I am the Master of my FATE, the Captain of my SOUL, but a Slave of my
STOMACH






------------------------------------------
This e-mail is confidential. If you are not the intended recipient, any use, disclosure or copying of this document is unauthorised and prohibited. If you have received this document in error, please delete the email and notify me by return email or by phoning the NEMMCO Helpdesk on 1300 300 295.
 
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Reply: 1.1.1.1.1.1.1.1.1.1.2
From: Dale Gatherum-Goss


On 10/5/01 8:23:00 AM, The Wife wrote:
>Rolling naked in the money???
>Dale, I wanna come to one of
>your parties!
>
>TW
>~Life is a daring adventure,
>or nothing at all~

Hi

Did I mention the melted chocolate as well?

Ooops

Dale
 
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