Join Australia's most dynamic and respected property investment community

Newbie Investor

Discussion in 'Introductions' started by Jog21, 19th Jul, 2015.

  1. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    Hi everyone,

    I live in Tasmania and am wanting to educate myself on property investing. My husband and I already have one investment property in Ballarat which we purchased with the help of an advisor a few years ago. We haven't received any follow up help or advice in relation to our investment (because this was going to cost us lots of $$ that we currently can't afford) which has left us high and dry.

    So we have recently been to a Financial Services company who have helped us refinance our current mortgages / debts so that we can pay it all off much faster and in turn be able to buy another investment property. We really want to invest in more property because we see it as a great way to save for retirement and financial security.

    I realise that we need a great "team" behind us (ie an accountant who knows all the ins and outs - which is a mission in itself!) but apart from that I have no idea who to talk to or where to start. So that is how I have stumbled across this forum - doing a bit of online research and hoping to be able to get some advice from others who have been there, done that!

    We were originally going to pay off our home mortgage, and then go to a firm who can guide us through investing in another property. But after reading some posts on another page I am now not so sure this is the best way forward? We are quite nervous about investing which is why we wanted someone to hold our hands as we go through the process but maybe if I do enough of my own research I can confidently purchase my next property on my own?

    Anyway, just wanted to say hello and introduce myself. I haven't yet looked through the other posts on here - there are probably heaps around already giving advice to others in my situation so I will sift through the forum when I get a chance. But in the meantime, if anyone can offer me a good place to start - ie books to read, maybe a short course to enrol in? And whether you have had a good or bad experience with wealth advisors I would be very appreciative!
     
    bob shovel likes this.
  2. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    G'day. You're in the right place to educate yourself about property investing so welcome aboard! :)

    Thanks for explaining your situation too. I'm sure a number of members on here would have some input.

    I'm curious about the plan to pay off your debt faster to buy another property. Was this the idea of the Financial Services company? As you've noticed by reading the forum, usually investors don't do that. They generally have loans set to interest only, park spare money in an offset account and top up the loan when the property value has increased and/or combine with the funds in offset to make a deposit for the next place rather than taking the old school (and much, much slower) approach of paying one off before buying another.

    Keep reading and asking questions on here and you'll fill in 95% of your knowledge gap. It'd be worth subscribing to some property magazines too as they cover a lot of topics you might not even know you don't know about!

    You'll be able to confidently buy your next place if you just be a sponge and absorb everything you can until you know you're ready.

    There are some threads on books here already but I'd recommend just two: More Wealth from Residential Property by Jan Somers and Four Green Houses And A Red Hotel by Pete Wargent. Good starting points.

    As for wealth advisors... I can't comment as I've never had a reason to see one..but I do have some input:

    First question to ask a wealth advisor is what their net worth is. Second is how much recurring income they have. Third is why they're still working. The answers (or their reaction) may say a lot.
     
  3. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    Hi Steven,

    Thank you for your input!

    I'm curious about the plan to pay off your debt faster to buy another property. Was this the idea of the Financial Services company?

    Yes it was their idea. We have been set up with a Global Limit Product which sounds like it will do what you have suggested. Instead of paying all spare money in an offset account, we pay it directly to the interest only mortgage account and live off a credit card which gets paid in full by the mortgage account at the end of each month. So as our available funds in the mortgage become greater, we use that (and top up if necessary) to purchase more property.

    I will grab a copy of those books you recommended and start researching through this forum. The original plan was to get our available funds up enough to be able to buy one of "their properties" however I am now going to do my own research and see if I can be confident enough to go it alone when the time comes. I figure we have a good couple of years before we are in the position to buy again so that gives me PLENTY of time!

    Thanks again,

    Jo
     
  4. Digitalism

    Digitalism Active Member

    Joined:
    2nd Jul, 2015
    Posts:
    32
    Location:
    Perth
    I think you need to re-read what Steven has posted again in regards to you paying your debt off faster.

    He states that most investors put all spare money into an offset account not into the interest only account.

    You should also check out somersoft.com, all threads are now archived but there is A LOT of useful information.
     
    Jog21 likes this.
  5. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    Smells very fishy..
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    641
    Location:
    Sydney
    The structure that they have recommend is old school and has tax implications. Utilising an offset is a far cleaner approach.

    It also sounds like they have set you up with a LOC - just understand the implications which such a structure.

    I hope they didn't cross the securities when providing you with the GL.
     
    Jog21 likes this.
  7. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    oh geez, who can I go to to find out the implications of a LOC? I have no idea if they crossed the securities but will find out. This is why I have put my head in the sand for so long - it's so complex!
     
  8. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,858
    Location:
    Sydney
     
  9. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    641
    Location:
    Sydney
    LOC isn't bad per se but there may be more efficient ways of doing something.

    A LOC is a repayable loan so the lender can recall the loan at anytime time. Most lenders will also charge a premium on a LOC product.

    It may make more sense to set yourself up with a term loan. You need to ensure that you do not contaminate the tax deductibility of the loans.
     
    Jog21 likes this.
  10. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    We literally settled the refinance last week. So we are going to have to make it work for now. And yes, they did cross the securities... Stress levels rising!! Is this really bad??
     
  11. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    Yes Leo2413 it was the plan of the advisor. My husband and I know absolutely nothing about investing which is why we went with a "professional" in the first place.
     
  12. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    641
    Location:
    Sydney
    Look how can I say this - its all really bad. I would recommend fixing it before it becomes a showstopper. Just get them to uncross it and switch it to a term loan. Its not hard to fix.
     
    Jog21 likes this.
  13. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,858
    Location:
    Sydney
    What's done is done. As shahin said, get it uncrossed and switch. Tell you something. I know really only the basic stuff re finance, loans , which banks are best for my needs, lowest rates etc etc..I wouldn't have the foggiest idea,but I was able to build a substantial portfolio. Not knowing that stuff is not so important. What's important is you find yourself a fantastic finance broker and work with them for your finance needs and goals re moving forward with your investing. Don't let it scare you. Once you have the right team in place it becomes much less daunting and a lot of it will fall into place. I would start by using people that come to you highly recommended by other property investors. With regards to property 'advisors', 'professionals', etc etc. Just ignore them and stay away. Most of them have an agenda and or/have no clue what they doing.
     
    Jog21 likes this.
  14. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    Thanks guys for your help. I was freaking out big time as this post was progressing, but it is simmering down a bit now. Now to find a good finance broker. We have been conned by a few of these in the past too so I am really nervous about who to trust moving forward.
     
  15. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    Don't stress.

    You've landed in the right place :)
     
  16. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    I have just learned of the tax implications of the structure of this new loan facility and, honestly, I am absolutely gutted that I didn't research this before we went ahead. I really hate complicating things that should be simple and this loan structure seemed like a great idea at the time (based on what they told us) but now knowing about the Taxation Determination 2012/1 it just sounds like we are in the middle of a messy tax situation! grrrrr....
     
  17. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    641
    Location:
    Sydney
    Don't sweat its fixable - just get them to do uncross it and set you up on term loans. Get them to extract the equity against each property and do not do a top up on the loans - keep them separate.
     
    Jog21 likes this.
  18. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,787
    Location:
    Perth WA
    You're not the first to put your trust in 'experts' and get less than expert advice - don't beat your self up. It's survivable :)
     
    Jog21 likes this.
  19. Jog21

    Jog21 Active Member

    Joined:
    19th Jul, 2015
    Posts:
    44
    Location:
    Tasmania
    Thanks everyone. I am staying positive - despite all our hurdles we still want to keep investing in property so we'll get past this and things will get better and better.