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How to make the most of a good income

Discussion in 'Property Finance' started by bob shovel, 12th Dec, 2015.

  1. bob shovel

    bob shovel Well-Known Member

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    Hi party people

    For the next 6-12 months we'll be on an increased income (~+60k) What's the best way to take action while it's coming in? More with finance and purchases I'm thinking - there is saving and super I guess.
    But while it's coming in and with lending tightening it could help us get ahead.

    I'm thinking buy cf+ properties so that when the income goes back to "normal", that it will help servicing down the track, plus with some short term equity gains that will put us in a good position in the next few years.
    Equity avail is looking to be 150-170k, is it best to use every cent of that while we have the good payslips? Then sit back for the growth and look to go again with next set of numbers, new job, probation periods etc

    Also we may look at upgrading our caravan ~20k from equity to help keep us going at this income longer. May throw another spanner in the works though
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I'd suggest leveraging as much as you can while you can. The lending environment isn't very friendly right now and to get ahead a high income is more and more necessary.

    Get specific advice on your borrowing capacity. Release the equity as cash and use it. Make sure you can afford the investments when your income reduces again, although with the level of conservatism built into calculators these days I doubt this will be a significant problem.

    When your income reduces, you may not get this opportunity again. 12 months is enough time to set yourself up for life if you're willing to go hard at it.
     
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  3. Xenia

    Xenia Adelaide Property Manager Business Member

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    I love Perer's idea.

    Another idea, and depending on how much debt you already have, you could look at paying down as much debt as possible, this is not a great market for huge debt exposure.

    Reducing your LVR will also put you in a good financial position and make your current portfolio more positively geared.
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I would at the very least access as much of your equity as possible.

    The important thing is making sure you can afford what ever you decide to buy after the income normalizes again.
     
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  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    CF+ today might not be CF+ tomorrow so you need to ensure that you can afford this after the extra income goes.
    But I think the general idea to make some hay whilst the sun shines is valid.
    My voice of reason would be to temper the CF+ risk management by purchasing those in a good area (ie not all in one risky regional)
    You could further hedge your bets by finding IPs that you could further value add down the track when (or just before) income drops - ie do some renovation, subdivide off a rear block.
     
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  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I would suggest as Peter suggests. Leverage like buggery - but keep reserves in offset accounts.

    if you haven't already paid off the main residence then consider paying this down and reborrowing - debt recycle - which should help save money and increase borrowing power.

    Also consider whether you should extend IO periods on existing loans - and perhaps loan terms.

    Consider splitting the PPOR loan into multiple portions for debt recycling without contaminating.

    And plan which name(s) the next ones will be in. Keep in mind long term issues such as when the PPOR is paid off you might want to store cash in a loan attached to the IP owned by the lower earner of you and the spouse.
     
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  7. willair

    willair Well-Known Member Premium Member

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    Good to see you say "WE",because if your both on the same page you are half way there,otherwise you end up sitting on a pile of dynamite and the fuse is lit..
     
  8. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Depends on what your goals are but in terms of capitalising on the higher income:
    • Talk to your broker about borrowing capacity, work out a plan of attack
    • Squeeze out as much equity as you can
    • If it makes sense, utilise LMI – gear up and look at the bigger picture
    • Ensure you can comfortably cover holding costs when income drops back
    [​IMG]
     
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  9. bob shovel

    bob shovel Well-Known Member

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    @Terry_w we're renting so thats also in our favour atm.

    Thanks guys! I plan to go hard while we can! Then revaluate once things settle. Plus leaving room for a ppor buy, but I'd like the IP's to help contribute to that. Broker is onto it to maximise our situation and more than happywith his help and support! (I can't hound him all the time so I share the love here!)

    @willair I say "we" cause we'll do it together but there is some hesitation and cautiousness the other "we". I think once it gets going there will be more push from we2! (not a fan of the paperwork side, that's my department)
     
  10. willair

    willair Well-Known Member Premium Member

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    Who knows,15 years time you could be sitting in the Winnebago out the back of nowhere thinking when you wake up,the plan did work..
     
  11. bob shovel

    bob shovel Well-Known Member

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    That's the plan! The kids outside in a tent :D
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    You've hit the question on the nail ;)

    Head up to the Cross with a fist full of readdies. Guaranteed to get all sorts of action and interaction.
     
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  13. bob shovel

    bob shovel Well-Known Member

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    I'm running scenarios and numbers to have minimal holding costs, if any. Good equity at present to play with and focusing on cf+ to help servicing
     
  14. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    Well @bob shovel, squeeze out that equity and go shopping ;)
     
  15. Leo2413

    Leo2413 Well-Known Member Premium Member

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    GRAB the cash and as much of it as possible now. I would not read another post until I get onto my broker or whomever to start the ball rolling to GET THAT CASH OUT :D