The Week That Was: 24-30/11

From: Mike .

Hi Again,

A relatively quiet week leading into the 4th month of the forum. Only 13 posts were registered, very low on the Richter Scale.

Topics Included: Renting Your PPR, The 6 Year Rule, Growth Rates.

Quotable Quotes:

From Les: "When I first saw this question from you, my immediate reaction was "Where's my 40 foot pole?"

Me: Us blokes DO exaggerate from time to time, but 40 foot, Les? I wouldn't have thought 40 INCHES was believable! In fact, I've never gone over 40 CENTIMETRES, myself. (Sorry, if I got the context wrong.)

From Les: "One thing with moving in yourself; you would guarantee no "tenant from Hell" problems, eh?"

From Les: "I LOVE a bunch of numbers."

From Les: "And now that someone has "got up to dance", maybe others will follow .... ;^)"

Me: The "gentle" hints are starting to surface. See next quote, as well. Les, it seems to me that those early days of the forum, for you, must have been like playing solitaire. Am I right?

From Les: "I, too, would be interested to see what other forum members have to say on this one."

From Les: "How's about an easy question, like "What is the 47th root of pi?" I've looked at this question of yours for a few days, thought "WHOA" and moved on. Then I got to thinking, and reading .... and since you only asked for ideas, and not "the answer", I thought "What the hell ... I'll give it a go"

Me again: Les, this expresses beautifully the attitude I'd like all newbies to have on this forum. You openly admit that many of your answers are researched and that's great. I've done the same thing myself on many occasions. That's the beauty of this forum...when someone asks a question I hadn't thought of myself, and I think it's important, I'll try and research it. If I find something worthwhile, I'll post it, to help others. Way to go!

Research & URL's:

From Kym: "FreeOL has a great home loan comparison site that compares different home loan products offered by lenders." or

Classic Post:

Another smorgasbord of posts this week from Les to choose from. And since I usually "pig out" at buffets I'm going to do the same with two posts for the price of one. Here are the questions:

From Leon:

"I have been reading with interest the previous articles and comments relating to the issues of renting out your own property. The most recent comments indicate that it is possible & that the interest on the loan & other associated expenses incurred are a tax deduction ( as confirmed by ATO booklet, will get copy ASAP ).

I am trying to determine the best course of action based on our current scenario. Own property valued at $400K (Inner West Syd) Mortgage $152K 25yrs at 6.55% P&I Estimated rental return $410/week Combined incomes $95,000 We have 2 children & require a larger house. This would mean purchasing for at least $550K ie sell with net profit$215K and new loan $335K. However I don't want to sell our current property & want an alternative to committing to $2,500 mortgage repayment each month.

1.Is it best to rent out current property and find larger property & rent it for ourselves( even at $350-$400/wk) and use current equity of $248,000 to purchase 1 or more investment properties?

My calculations (rough estimates) show that renting new house would be equivalent to interest charged on $335k loan! Is this still an advantage?

2.Our cashflow appears to better ie $1400-1600 rent v's $2500 mortgage = $1100-$900 better off. Does this appear to be correct & does this put us in a better situation?

3.I have taken on board comments re Temporary absence up to 6 years. Does this mean you can relocate to a suburb 5Km's away?

4.Will the PIA software help me calculate all of this? I have already booked an appointment to see an accountant & want the facts before I go because it sounds like not all accountants understand the princples we are discussing-would that be a correct assumption?

My gut feeling is that by keeping our current home & renting it out & renting out new house to live in & investing in more property is the best possible avenue for wealth creation, but I need to convince my wife who still has her mind set on 'owning our own home' and wants to see the figures & is concerned about the legality of it all. Comments appreciated."

From John Millar:

"In forecasting annual growth rates what are the best correlated indicators. Eg: Bank Bill rates, CPI, Treasury Rates etc. In Sydney growth rates tend to vary widely by suburb. What I'm looking for is a forecast growth rate better than straightline trend of the median "glass ball". Any Ideas?"
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