Woohoo, goal #1 achieved, PPOR paid off in only 5 years!

[MichaelW]

Thanks again everyone for all the support.

But I think I need to clarify what I meant by thanking Thommo and KiethJ as a couple among many that have assisted me in my equities education. I didn't mean to suggest that they were fans of Navra, just that some of the stuff they've posted over time has helped me to understand the equities market a bit better. I paricularly liked the discussion around LICs and LPTs for example.

But, I personally AM a fan of Navra. And to answer the original question as to why I like them given they're underperforming the ASX of late, here's a bit of info I posted on it over on InvestEd. The quote below is from post #7 in the linked thread.

The fundamental premise of investing is risk = return. But in the instance of Navra I believe we are getting a nice return premium over its risk profile. That is, if I were to invest in a fund that mirrored the ASX50 and held 40% in cash then I should expect a much lower return than a 100% invested ASX200 tracker. So I'm getting quite a nice return premium for my risk profile. I get a really good SANF due to its conservativeness but a really healthy return despite its conservativeness

Navra, at the time of posting, was predominately invested in the ASX50 and holding 40% in cash but was matching the returns of the ASX200.

And thanks Bill for the words of caution. Rest assured that I am not oblivious to the macro-economic environment and continue to be aware that there is no such thing as a risk-free investment (as I hope my linked post above illustrates). But I still believe the ASX is at fair value and has some life in it yet. Should it go crazy I will re-assess my exposure to it. But for now, I'm just going to rebalance the LVR on that investment to build a bigger buffer and see what happens over the coming year.

Cheers,

Michael.

 

[Shadow]

Congratulations Michael, good to see a fellow 'Northern Beacher' doing well!

You may be interesting in the stats below (I collect these from the Manly Daily each week)

Northern Beaches Five Year Capital Growth Forecast (avg per annum)

11% 2094 Fairlight
12% 2095 Manly
10% 2096 Curl Curl
11% 2096 Harbord
11% 2096 Queenscliff
11% 2097 Collaroy
08% 2097 Collaroy Plateau
10% 2099 Dee Why
10% 2099 Cromer
09% 2099 Narraweena
09% 2100 North Manly
13% 2101 Narrabeen
09% 2101 Elanora Heights
12% 2102 Warriewood
09% 2103 Mona Vale
11% 2104 Bayview
13% 2105 Church Point
11% 2106 Newport
10% 2107 Avalon
09% 2107 Bilgola
10% 2107 Whale beach
07% 2108 Palm Beach

Cheers, Shadow.

 

[BoatBoy]

Congratulations Michael, good to see a fellow 'Northern Beacher' doing well!

You may be interesting in the stats below (I collect these from the Manly Daily each week)

Northern Beaches Five Year Capital Growth avg per annum)

11% 2094 Fairlight
12% 2095 Manly
10% 2096 Curl Curl
11% 2096 Harbord
11% 2096 Queenscliff
11% 2097 Collaroy
08% 2097 Collaroy Plateau
10% 2099 Dee Why
10% 2099 Cromer
09% 2099 Narraweena
09% 2100 North Manly
13% 2101 Narrabeen
09% 2101 Elanora Heights
12% 2102 Warriewood
09% 2103 Mona Vale
11% 2104 Bayview
13% 2105 Church Point
11% 2106 Newport
10% 2107 Avalon
09% 2107 Bilgola
10% 2107 Whale beach
07% 2108 Palm Beach
[/FONT]
Cheers, Shadow.

Is that what they have done or what they forecast.???

BB

 

[Shadow]

Is that what they have done or what they forecast.???
BB

Hi BB... this is the forecast for the next five years. These are Residex stats, but the Manly Daily profiles a couple of suburbs each week, and includes the Residex forecast in the profile, so I just collect them each week, and eventually I got all the suburbs. This saves me having to pay Residex $90 per suburb for their postcode forecast reports .

If I miss any editions of the Manly Daily, I can view them online here...

http://property.manlydaily.com.au/

Cheers, Shadow.

 

[MichaelW]

Hi BB... this is the forecast for the next five years. These are Residex stats, but the Manly Daily profiles a couple of suburbs each week, and includes the Residex forecast in the profile, so I just collect them each week, and eventually I got all the suburbs.

Hi Shadow,

I know its still postcode 2101, but do they split out North Narrabeen separately from Narrabeen? 13% sounds great, as my PPOR is in postcode 2101, but its North Narrabeen not Narrabeen...

Cheers mate,
Michael.

 

[wish-ga]

Congratulations!

That is a great achievement.

 

[Shadow]

Hi Shadow,

I know its still postcode 2101, but do they split out North Narrabeen separately from Narrabeen? 13% sounds great, as my PPOR is in postcode 2101, but its North Narrabeen not Narrabeen...

Cheers mate,
Michael.

Hi Michael... I haven't seen a North Narrabeen property profiled in the paper yet... it's just pot luck which ones they do each week, and they often do the same suburb several weeks in a row, so it takes a while to get them all.

However since North Narrabeen is right between Narrabeen (13%) and Warriewood (12%), and it's coming off a much lower current median price compared to Narrabeen, I'd would say North Narra's prospects are very good.

In fact, that's the general area I'm looking into for my first IP purchase... Narra, Nth Narra, Warriewood, and also Newport.

Cheers, Shadow.

 

[MJK]

Michael,

Well done mate. It takes courage and conviction to achieve results like these. The last distribution was a beauty wasn't it.

MJK

 

[Jacque]

Well done, Michael
Definitely a chaser and keeper of dreams

 

[perky29]

Love your posts Michael.
Belated Congrats from me too, I thought that last distribution was going to come close to paying off your PPOR (I was thinking of you when I got that nice distribution myself). In my case, the money just went back into my investment LOC (as the bad debt went almost 2 years ago) , so its just circulating !! - but what a wonderful achievement yours is.
See you next Monday at the SIG Meeting.

 

[Watermelon Man]

And it feels awesome!!

A BIG CONGRATULATIONS to you Michael on achieving your dreams! My 2nd IP Purchase in 4 months settled yesterday, so I'm very happy also! Never in my wildest dreams could I have imagined I would be in the financial position I am today when I quit my old job 10 months ago & at the time didn't have another job to go to; wondering what I was going to do job-wise. I have to scratch my head every now & then & wonder if this is all a dream??? Because my income's almost doubled to around $65,000; I've bought 2 IPs in the last 4 months for 15% under market both times; & feel fantastic at age 30!

Many thanks for sharing your story Michael!

 

[Shadow]

I guess the big thing that did it for me was to take on a problem that others couldn't solve and turn it into a nice little profit. The PPOR in Nth Narrabeen started out as the block that all builders looked at and got scared by into a modern house worth around $900K. Others were scared by the slope and limited access of the site and as a result I paid only $270K for the 1600m2 site and then another $350K to build the house. So for $620K I got a PPOR that was then valued at $750K. Today its closer to $900K and is now debt free.

Hi Michael,

I'd be really interested to hear the story of this house... I assume you built a pole home?

I've got my eye on a block (in the Pittwater area) with a similar story... quite steep, and lets say the block has a 'history' that would scare most people away, and for this reason it is on the market for a good price (has been for a couple of years).

I'd be very interested to hear about your experiences with such a difficult block, any issues working with Pittwater (or Warringah?) council, the builder you used, what type of house you built etc.

Apologies if this is already in another thread... if so you can point me in the right direction!

Cheers, Shadow.

 

[traveller]

Hi Michael,

Many congrats on achieving this so early… I find your posts really very educative.

However I have one question on paying off the PPOR. That is, what will be your approach if you wish to upgrade your PPOR, that is, buy another PPOR and put this one on rent?
In that case you will have rent coming from your 1st PPOR (now converted into IP and No loan outstanding on it) and in addition you have a bigger Non deductible PPOR loan.

Did you repay your entire PPOR loan or do you have that much amount in your Offset account? The reason I ask this because if you have repaid your entire PPOR loan then you might have the problem I stated above. However if you put money in your Offset then if you withdrew from it even for Investment purposes, still it does not become tax deductible as you never withdrew anything from the original loan. This is what is subject of my discussion on the other thread called ‘Interest Deductibility’.

Am I missing something? Is there a way out of this problem? As of now the only way I can see is that once I move out of existing PPOR, I sell and re-buy it paying the stamp duty again…

Thanks-

 

[MichaelW]

Hi Traveller,

Thanks for the support...

I have still got a mortgage offset account attached to that PPOR mortgage, but the outstanding mortgage (and therefore the amount in the offset account now) are actually quite low at only $170K of the $900K valuation. The main reason for this is that I've drawn all the equity out of my PPOR for investing and the only way to do this was to pay down the mortgage and then take an LOC against the equity. If I had preserved it in the mortgage offset account then effectively the equity doesn't exist to borrow against as its actually held as cash. I could have used the cash but then it would have been non-deductable. So the best approach was pay down the mortgage and redraw to invest.

You're right though that this locks me into this place as my PPOR and makes it more difficult to convert to an IP. But effectively that equity is invested and deductable anyway. Its a good thing that I'm looking to stick around in that house for a few years yet. And if I change PPORs I'm likely to "trade up" by selling and re-buying anyway so it wouldn't matter that its all paid off.

Cheers,
Michael.

 

[MichaelW]

I'd be really interested to hear the story of this house... I assume you built a pole home?

Hi Shadow,

The more you post, the more similar we seem...

I'm not sure I've spelt out the gorey details of that build anywhere so I'll take a minute or two now and post the overview here. Its my thread right, so a bit "off topic" is OK!

Yep, its a pole house. We engaged a builder that was a specialist in pole homes. They won heaps of awards for pole homes and claim on their ad to be the "sloping site specialists". The guy's name is Bjorn Jensen and the company's name alludes me at the moment.

We engaged them under a fixed price contract to build it to lockup. We excluded cartage of materials to site to try and keep the cost down. So, we carried everything up there ourselves whenever Bjorn delivered it to street level. Kept me fit I can tell you lugging 100 sheets of yellow-tongue flooring up to the site. That and all the bearers, joists, studs, cladding, colorbond roofing, gyprock, blackbutt flooring, windows, fitout etc. Wouldn't do it again now, but it probably saved us $50K in labour.

We also then finished it ourselves from lock-up. So we sourced the sparky, plumber, gypy and tiler to do their bits, and I did a fair bit of the internal carpentry myself. I laid all the tongue and groove blackbutt flooring, I built the internal staircases from raw materials and I did a lot of the wiring pull-through that I could legally do. We also painted the entire house inside and out with three coats, and to be honest we're still not completely finished. There's the odd really high architrave in an awkward position that I still need to rig awkward scaffolding to get to yet.

But all in all, it was a really enjoyable project and the end product is fantastic. We brought the whole project in on budget at $350K and to a much higher level of finish than we would have achieved for that price had we engaged Bjorn to do the lot for us.

I guess you can argue that we built significant "sweat equity" into that house which gave us the launching pad for our other investments. But boy am I glad I don't have to go through that again.

Cheers,
Michael.

 

[handyandy]

Hi Micheal

Sounds like a lot of work you did on your house. As you say real sweat equity

We have a similar sort of site but our steel guys built a mechanised ramp with trolley to bring down all their steel and we have been using it ever since.

Maybe you should have done something similar.

Cheers

 

[MichaelW]

Hi Andreas,

In fact, we did have a mechanical inclinator in place on the block when we bought it which we used to carry all the materials up to the site. With us it was "up" to the site and not "down" to the site, so the mechanical inclinator was a must. But you still had to load and unload it, and its only relatively small so I had to rig a platform on it to carry the longer materials. I even carried a 4000ltr water tank precariously perched on top of the inclinator. I've got a photo of that at home somwhere which looks quite obsurd!

It was also a relatively slow process as a round trip took a couple of minutes. So, it was load, ride, unload, ride, repeat. Monotonous, but the job would have been impossible without it.

Your job looks great too. Where is your place again, nice views!

Cheers,
Michael.

 

[traveller]

You're right though that this locks me into this place as my PPOR and makes it more difficult to convert to an IP. But effectively that equity is invested and deductable anyway. Its a good thing that I'm looking to stick around in that house for a few years yet. And if I change PPORs I'm likely to "trade up" by selling and re-buying anyway so it wouldn't matter that its all paid off.

Cheers,
Michael.

Great..Thanks. That what I wanted to confirm exactly, that I can’t escape selling the fully–paid off PPOR in order to claim deduction for it as IP.

Thanks Michael.