How affected are you by the bank's need for principal payments

Discussion in 'Investment Strategy' started by Beano, 27th Oct, 2017.

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How affected are you by principal payments ? IE How much would change your CF+ve to cf-ve ?

  1. Unaffected ..I have no debt

    12 vote(s)
    19.4%

  2. Already cf-ve

    11 vote(s)
    17.7%

  3. $1 to $1,000 per month

    15 vote(s)
    24.2%

  4. $1,001 to $5,000 per month

    21 vote(s)
    33.9%

  5. $5,001 to $10,000 per month

    0 vote(s)
    0.0%

  6. $10,001 to $30,000 per month

    0 vote(s)
    0.0%

  7. $30,001 to $50,000 per month

    1 vote(s)
    1.6%

  8. $50,001 to $70,000 per month

    0 vote(s)
    0.0%

  9. $70,001 to $100,00 per month

    0 vote(s)
    0.0%

  10. Over $100,000 per month

    2 vote(s)
    3.2%
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  1. skater

    skater Well-Known Member

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    I'm VERY cf+, and have offsets against a high proportion of my debt. Put all my loans P&I and double the interest rates & we'd still be living off rent with no need to sell anything.
     
    skater, 30th Oct, 2017
    #21
    Propagate, Ben_j, dodger21 and 2 others like this.
  2. Beano

    Beano Well-Known Member

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    Brisbane
    Will you be clicking in the $100k + bracket ? :)
     
    Beano, 30th Oct, 2017
    #22
  3. skater

    skater Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    10,282
    Location:
    Sydney? Gold Coast?
    Now? Or if all my loans were P&I on double the interest rates?
     
    skater, 30th Oct, 2017
    #23
  4. Beano

    Beano Well-Known Member

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    Brisbane
    If your principal payments totalled $100k pm and it pushed your net cash flow to negative.
    Ie you would be $100k positive cash flow if all your loans were interest only
     
    Beano, 30th Oct, 2017
    #24
  5. skater

    skater Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    10,282
    Location:
    Sydney? Gold Coast?
    Yeah....I get what you're saying, but my principal payments are very, very small. With the use of offsets, my remaining debt is negligible.
     
    skater, 31st Oct, 2017
    #25
  6. Luke_melb

    Luke_melb Member

    Joined:
    10th Aug, 2017
    Posts:
    12
    Location:
    Melbourne
    At present the banks have quotas or a maximum/limit for the number of IO loans they have on their books. However, from an investor's point of view, there is a very strong argument for having IO loans on property, where the property is only held for medium term - eg. going to be developed and/or subdivided and sold for profit after a few years. Sure, on the other hand, if your intention is to hold the investment property for life, the banks have a good argument to say you should be paying interest and principle.
     
    Luke_melb, 13th Nov, 2017
    #26
  7. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    14,020
    Location:
    Brisbane
    We have had four of seven loans go from IO to P&I in the past year or so, one just this month.

    Each time, our cashflow did suffer but I also feel good that we are finally paying off some principal. If we had a choice, we would still be IO because we have some renovations to do and then our whole portfolio will change, maybe sell something to do the build, use redraw as part of the build cost, move into shares, too many variations to ponder...

    I fixed three loans at 3.88% and another over the weekend at 4.19%, all for two years. So in 18 months three come off fixed and in two years the fourth one.

    It is a PITA to have to make bigger payments but the three remaining IO loans expire in June 2019, July 2025 and November 2035 (according to the bank). I'm doubtful we will still have those loans by then. :eek:
     
    wylie, 13th Nov, 2017
    #27
    Beano likes this.
  8. Beano

    Beano Well-Known Member

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    7th Apr, 2016
    Posts:
    3,359
    Location:
    Brisbane
    Eighty one percent of investors are CF+ve according to our survey
    Sample of 59 investors
     
    Beano, 13th Nov, 2017
    #28
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