Wanting to get advice on next step

[investor2009]

Hi all

As some of you may be aware, I've been selling down some assets in order to pay off the majority of my mortgage. Once this is done we'd like to re-invest into something more productive and continue on investing into the future. We still have a couple IP's that are positive after tax also.

We've considered the usual suspects (buy and hold for the long term, work to pay for the shortfall) but this doesn't quite suit what we're after. We'd like to look more into commercial property. My question is regarding the finance: If we can find a half mil or so property for sale thats returning say quite a bit more than what the loan outgoings are, what are our chances of getting a loan through?

We both have jobs, have quite a bit of equity available for the 45% deposit (if banks will only lend max 60%lvr still for the major loan?)

I figure if we can get into a good comm property and the loan costs $600p/w and we pull $1,200p/w then it's providing us with a good income stream. Hope someone can help let us know if this is a real possibility

Thank you (all)

 

[alexlee]

Looking at your numbers, you're saying you want 30k income from this?

If you have 500k in net proceeds from selling, a share portfolio would easily give you 30k a year after tax.

Shouldn't the thinking that led to the decision to sell also have included what you were going to do next?

 

[Rolf Latham]

Comm lending is more fluffy than resi

A bunch will rely on the tennant and lease quality, which will be reflected in the price.

If you don't want the usual annual endoscopy find a lender that provides a non reviewable term loan

Ta
Rolf

 

[investor2009]

Hi Alex,

This will all be borrowed funds so this won't be ideal. Yed I did think of thr next step and that is to get out of debt, semi retire and reinvest with 100% borrowed funds into whatever adds up. Im open to suggestion? Sure we can buy hold and work but bugger that. I'd rather be smarter this time around. Normal buy n hold is just a backup if we find theres no better investment available. All we want is stability in wealth. Low debt and a bit of spending money not having to work so much. The low debt achieves this part already

 

[Mick C]

Hi Alex,

This will all be borrowed funds so this won't be ideal. Yed I did think of thr next step and that is to get out of debt, semi retire and reinvest with 100% borrowed funds into whatever adds up. Im open to suggestion? Sure we can buy hold and work but bugger that. I'd rather be smarter this time around. Normal buy n hold is just a backup if we find theres no better investment available. All we want is stability in wealth. Low debt and a bit of spending money not having to work so much. The low debt achieves this part already

Not sure exactly what your trying to achieve, but let me throw some "possible" options/solutions your may;

1. Instead of sell, re-draw on the equity? and gain your deposit that way

2. 60% LVR for comm property is an big 4 bank thing ...you can easily get away with 70% LVR with a non-bank or a tier 2 lender + better conditions, terms and rates

3. I highly highly suggest you speak to a broker for comm loans as there are so many variables and options, and the big 4 are not always the best for some com deals.

4. Trying to achieve rental return or Capital growth from this property?

 

[TPI]

Hi Alex,

This will all be borrowed funds so this won't be ideal. Yed I did think of thr next step and that is to get out of debt, semi retire and reinvest with 100% borrowed funds into whatever adds up. Im open to suggestion? Sure we can buy hold and work but bugger that. I'd rather be smarter this time around. Normal buy n hold is just a backup if we find theres no better investment available. All we want is stability in wealth. Low debt and a bit of spending money not having to work so much. The low debt achieves this part already

If you want to semi-retire right now, you need to focus on learning more about shares, forget about leveraging into more property, especially direct commercial property.

On a semi-retired average income, even if there is two of you, your capacity to leverage becomes affected, unless you can semi-retire and still be generating $150-200k+ pa from your employment.

If you can't get past share price volatility, you may need to investigate indirect commercial property.

Using 100% borrowed funds does make everything a bit riskier though.

And if you are looking at a single 500k commercial property fully geared, remember there is the risk of the 8-10% yield (or rather that 12% yield at $1200/week on a 500k property you mention) becoming 0% with vacancy and then you may need to go back to working full-time again.

 

[investor2009]

Thanks all so far.

We really only need to earn $30k each at this stage so working for a few months can cover that I think. Although, we're 36 years young so thats why we want some growth for later on. Im really open to ideas though like stated earlier. Some good stuff coming in so far!

Ideally we'd like to be making passive income to cover that $60k but I'm not sure we're quite there yet

 

[Marty McDonald]

36 and already wanting to wind down work? I assumed you must have be in your late 50's!? Perhaps you should be looking do to something else for work as well.

 

[investor2009]

Well I'm sure I'll find something for a crust cause were not quite free just yet.

Just good to have the option cause I dislike work for the most part. It's pretty well the only reason I invest

 

[Rolf Latham]

Well I'm sure I'll find something for a crust cause were not quite free just yet.

Just good to have the option cause I dislike work for the most part. It's pretty well the only reason I invest

perhaps another soln is to find "work"you dont dislike ?

ta
rolf

 

[Aaron_C]

If you're going to do commercial property it's best to go for good quality ones even if they stretch your budget.

 

[investor2009]

Definitely Rolf,

I just know that the things I've done so far I'm not supposed to do. On a spiritual level. I feel I need to help others. Animals. Etc and I need time to find out what that is. Money also helps because it gives me time. Maybe this is part of my plan. Maybe I need money in order to do the things I'm yet to come across. It's the only thing that makes sense

Building prisons does nothing for me (thats what I do for a crust)

perhaps another soln is to find "work"you dont dislike ?

ta
rolf

 

[investor2009]

Thanks Aaron, I have heard that said before too

If you're going to do commercial property it's best to go for good quality ones even if they stretch your budget.

 

[investor2009]

Just so it's all a bit clearer. In 6 months we'll only require around $22k to get by basically witgout holidays, doo dads n stuff. Still not sure where to next but I think I need the time out to search myself for answers first before going any further

 

[TPI]

How much equity will you have in your remaining IPs (or are you selling all of them)?

How much equity will you have in your PPOR?

 

[investor2009]

We'll have around 450k equity all up before the finance of any new investment

 

[Aaron_C]

We'll have around 450k equity all up before the finance of any new investment

Then take time to do your research. In your Sydney area you will be hard pressed to find many CIPs of value at that $1m-$1.5m mark but it takes time to find the gems. Maybe something that is empty/vacant/underlet and needs some TLC to make it good for a new tenant? CIP yields on the East coast tend to be pretty low so you need to be creative to get good returns and retire.

 

[TPI]

We'll have around 450k equity all up before the finance of any new investment

That's great, but this may not be that helpful if your annual household income is very low - how much do you anticipate this to be in semi-retirement working part-time?

 

[investor2009]

We'd need $50k between us to be semi comfortable, almost half that if we we're in actual retirement eith $0 mortgage. More would be luxury money like holidays etc

By semi I mean maybe work half the year.

 

[TPI]

We'd need $50k between us to be semi comfortable, almost half that if we we're in actual retirement eith $0 mortgage. More would be luxury money like holidays etc

By semi I mean maybe work half the year.

Ok so I guess the question is if you are earning 50k pa in total between the two of you and have 450k equity, how much are you likely to be able to borrow from a lenders perspective... ?