PPOR reno

@euro73 now its time for your ( if you haven't already done one) first development project

 

Let me know if you need supplier or tradies details... the guys who did the work here were all first class.

 

Oh, there are always several 50/50 calls on tiles, paint colours etc... you could do your head in with the range of choices... I think if we did 10 reno's we would get 10 different but equally good results... But you have to make calls on things.

In the end, we are really pleased with the results so we would probably change nothing about this ... we wanted to achieve a modern/luxury Hamptons type of look with a colour scheme that would be fairly timeless ... we wanted to avoid looking like every renovation ever done ... we wanted the house to have flow and continuity with each bathroom being a little different, but kind of the same. We wanted to have a few wow factor lighting features throughout. We think we pretty well got most of it pretty right.

The most difficult aspect of pulling it all together is time . Time to be on site. Time to do all the trawling around online looking for ideas. Time to do all the driving around looking at all the different tiles, artwork, furniture, appliances etc... Time for some of the pendant lighting to be delivered. It's all consuming - all day, every day.

Fortunately we were able to stay in our previous PPOR while this was being done. It allowed us to have the entire reno going on simultaneously instead of having to do room by room. Would not want to try a reno of this size while living in the house. No thanks. We were also fortunate that I'm self employed and was able to be on site all the time..that made a huge difference as well.

And I have to say that we also feel we struck gold with the trades. Our data and electrical guys were truly awesome. Our plumber was too. Painter , joinery guys ( kitchen and vanities and laundry) ... the stone guys, tiler... all of them really. We didnt have any problems with any of the trades being unreliable or creating any disasters...

Biggest disaster happened the day after we moved in. Car was parked in the driveway. Wifey jumped in, put the car in D rather than R by mistake, and drove 6 feet forward straight into the garage pillar. However she managed it, the car has been written off but the bricks were only chipped. But my faithful, reliable, beloved Honda Accord Euro - (hence the EURO73 moniker) is no more...

 

That's a tragedy mate! R.I.P.

Love the Euro or Hondas in general? Know what you're going to replace it with?

 

Yeah I really liked that Euro. Excellent car. Never had any problems with that car until it met its demise. I managed to salvage the EUR073 plates..

I have handed the 12 year old ML350 over to wifey (it only has 65K on the clock and runs and looks and feels like newish) and have replaced old mate Euro with something I have had my eye on for a little while now... it took up its position in the garage 3 days ago.....

 

Not all bad then

 

Not all bad

 

Kitchen company hired a photographer to do a series of pictures for HOUZZ...

Here are the results...

 

The professional photos look amazing! Do they capture the light realistically, or is it really more like your pics? It looks lovely and bright in the pro shots.

 

Pretty bright house... we put LED lighting throughout that can run at warm white, cool white or daylight... we run it at cool white

But the photographer definitely used lighting...

 

Nice work!

 

So how are you raking in from this NRAS thing again?

 

Just beautiful!

 

I dont understand the question.....

 

Sorry was a bad joke re how well your business was going. And just noticed i had a typo in my post...I meant 'how MUCH...'

 

Ah, ok...gotcha now. Yeah, the cash cows for debt reduction concept has resonated strongly with a lot of investors over the past few years, including many PC members.

In my own case, I've simply done exactly what I talk about here. I have employed a dividend reinvestment plan approach to my portfolio. ie I have accumulated a large number of cash cows and for the past several years I have reinvested every dollar from the cash cows and from the business towards paying down the debt on my previous PPOR rapidly so that I could retain it ( and its income stream ) and upgrade PPOR's without having to sell everything down.

I've been very aggressive in pursuing this as I had formed a strong view quite some time ago ( well before APRA) that borrowing capacity in the future would centre around debt reduction work done now...

Im just very logical in my approach. I have a high level understand how mortgages are funded, how debt to income ratios work, how the mechanics of servicing calculators work , and came to what I consider to be the only logical conclusion... the credit environment that has generated rapid borrowing capacity expansion for 25-30 years, allowing the pre APRA generation of investors to run a business model based exclusively on speculative outcomes, had run its course. So I wholly embraced a different philosophy, which is to purchase income ( cash cows) and create equity and borrowing capacity via debt reduction.

Really, anyone can do the same thing to one degree or another. Maybe not to the same levels I have - not everyone has the income level to be as aggressive as I was able to be, and I was also the beneficiary of pre APRA policies... something I took great advantage of- quite deliberately....but certainly anyone can deploy their remaining borrowing capacity to shift in the same direction , get 1 or 2 cash cows working for them and at least maximise their own position based on their particular circumstances. But they can only do that if they can make the psychological switch from a pre disposed bias towards speculative growth to an acceptance that cash flow for debt reduction will reap certain compounding medium to long term benefits. And that's tough for most . 25-30 years of exceptional growth has made most investors blind to the value of debt reduction. After all, its never mattered before and they have seen friends, family and colleagues reap massive rewards using a model that they dont realise has now been disrupted...

You'll notice a little line under my profile that says "volunteers not prisoners". Just like anyone who has ever worked in a role where large scale change occurred, we are seeing all the same human reactions and behaviours now in relation to the APRA and ASIC regulatory changes. There has been anger, and now there is denial and resistance to the changes happening to investor credit, and even a belief in some quarters that the changes will go away...... but as time passes and the realisation that post APRA policies are here to stay, slowly attitudes will change..... the early adopters ( volunteers) will be well ahead of those who resist ( prisoners)

 

What gross yield on purchase price does a typical NRAS property return?

 

What is "typical"... ? NRAS is a tax credit not a property type, so the premise of the question is kinda wrong. NRAS credits were available on almost any dwelling type and at any price point from 200K - 750K at various times over multiple years...there is no "typical" per se.

As an example, I have some 250K NRAS approved properties generating over 10K CF+ on 40K invested ( 12% + stamp duty) Thats a 25% tax free return on 40K .

I also have some 600K properties generating 6-7K CF+ on 95K invested ( 12% + stamp duty) . That's closer to a 7% tax free return on 95K invested. Just as an aside, those properties have also grown to 850K + in @ 3 years ( a friendly call out to old mate @sash... just a reminder that all NRAS is horrible, yeah?... No growth will ever come... blah blah blah....)

To your question though; if you were to use 350K - 400K as an example , you'd be looking at a typical yield of 8-9K CF+ at rates of 4.5% I/O and marginal tax rate of 37% . Based on a 20% deposit + stamps, that's a less impressive return on equity than you could get at 90% LVR or at 95% LVR...but it still generates at least 8 or 9K more than a non NRAS will produce..... which is kinda the whole point. ie buy surplus income, reinvest it towards debt reduction = PPOR mortgage gone faster, borrowing capacity improved/restored faster, and (useable) equity created even in periods of no growth ( which are inevitable in the next few years as the P&I cliff arrives ) because of the debt reduction you've achieved.

Of course if you had used 95% I/O lending when it was still around, you get a different answer to 90% I/O, and a different answer to 80% I/O .... But under every equation a cash cow ( whether NRAS or dual occ ) offers superior cash flow to a non cash cow, facilitating debt reduction .