Property Investing Tips in a Changing Market..

Discussion in 'Property Market Economics' started by sash, 11th Aug, 2018.

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  1. sash

    sash Well-Known Member

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    I get asked of how I would invest in a changing market. Here are some of my tips below. I will continue to update these as time goes along. I will start with finance....which is the main game these days....

    OK Tip# 1......

    Interest Rates/Financing
    • If you are planning to continue to invest in property need to take head of changes in financing. Here are some of my tips:
    1. I/O is the way to go.....any broker who directs you to P/I upfront does not understand property investment.
    2. Have an offset against I/O....via compounding this you will save thousands possible tens of thousands over the years.
    3. Assess your portfolio and if possible get them converted to I/O for at least ten years. My premise on buying has always been to take 10 or 15 years I/O only upfront. A lot of people did not do this now this window is closing. As a result a lot of so called experienced investors will be backed into selling some of their properties prematurely. This could result in a loss. As I said finance is more important then property selection.
    4. Assess your portfolio and find which properties you will keep for at least 5 years and fix the rates (preferably I/O) for 2 or 3 year rates. These offer the best value and in most instance are at least 40 to 80 basis points under the current variable rates for fixed interest. This will give you Cash Flow.
    5. When you establish new loans always take 30 year terms...this will save your bacon as the P/I payment differences between a 25 and 30 year term is significant.
    6. Treat brokers as better informed sources they are not always the best options. Sometimes you will negotiate a better deal with banks directly.
    7. Do not follow the herd in terms of using brokers .....treat brokers on their merits. If they only want to deal with the majors...ask why? Most brokers will eventually have a limitation.If you want a social setting...join a social club.
    8. Do be afraid to consider other lenders who brokers do not generally recommend - i.e RAMS, Bluestone, Liberty, Pepper Money, Latrobe. They have a place depending on your exist strategy. These can open more options are your servicing gets tighter. Make sure you know your exit strategy as these lenders are not to be putting the longer terms hold onto.
    9. Get educated on financing and how it works. If you leave it to brokers you may hit a ceiling.
    10. Finally...learn to question...learn...and grow....without this you cannot increase the velocity of the growth in your wealth.
    I will post another tip shortly. Feel free to comment and discuss the tips above.
     
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  2. MTR

    MTR Well-Known Member

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    Good thread Sash

    Here are 2 tips from Steve McK I thought were good in a changing market

    1. The possibility of financial loss is increasing, and that means investment risk is increasing too. Now is not the time for wild, or super speculative, property investing.

    2. Debt is getting harder to get. In my case, even though it is a little more expensive than the headline interest rates being advertised, I’m happy to hang on to an existing debt facility that was written under more favourable conditions than what might be offered today.
     
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  3. devank

    devank Well-Known Member

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    "I/O is the way to go.."
    The differences between the 'higher rate of interest only' and 'discounted rate of P&I' seem a little small. To me, it makes sense to go P & I in this current environment.
    Banks access is at much higher rate (~7%) anyway. So going P & I doesn't reduce the serviceability much anyway.
     
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  4. sash

    sash Well-Known Member

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    On point 1.....that is an under statement. By this time next year some of the people on this forum will be serious ******...if they do not take corrective action. Some are thinking moving to P/I is okay...in some instances their repayment could double (i.e. coming off a 10-15 year I/O term)!!

    Point 2....maybe....but I am getting creative .and have found another $1.3m to keep me going.....:D ...via a funder. This could change as policies are consistently changin' but apparently my credit score is 1000.!

     
  5. sash

    sash Well-Known Member

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    That is not correct....who ever you dealing with is an amateur.

    Still lenders out there assessing on actuals.....going P/I is nuts from my perspective. It will kill any further investments. You need to look at your strategy.
     
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  6. icic

    icic Well-Known Member

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    great post @sash! very educating.
    I got a question that I want to consult you. Almost all of my investments are in IO, a few of them will expire by 2022(refinanced at the same time to get a bigger discount) and one of them will be by the end of the year. most of those are with Commbank. I've talk the bank account manager, and he said that I can get it to extended for another 5 years after that. I am not sure if his words could be trusted given the on going changes with the financial regulations. Whats your thoughts in this and how can I mitigate this risk if there is any? Thanks in advance.
     
  7. sash

    sash Well-Known Member

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    Commbank is the least ethical bank...of the Big 4....their word is worth less than toilet paper.

    I too have a loan expiring around Feb 2019...I plan to extend for another 5 years I/O...lets see what happens. They could change policies any moment an disallow...so like ANZ and NAB you might need to do a serviceability assessment.

    If you are variable and can still service look to getting 10 years I/O upfront. I hear that WBC group is limiting this now ....

     
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  8. icic

    icic Well-Known Member

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    I see, I will need to keep an close eye on those loans. Maybe get it refinanced at some point so they don't all expire at the same time. Refinancing is probably no go atm as those properties were purchased pre apra.
     
  9. Connor

    Connor Well-Known Member

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    I couldn't agree more!!

    Over the years I've dealt with a few brokers, but the best thing I did was get educated in lender policy, and keep updated.

    There are plenty of lenders out there that don't deal with brokers, hence they never get mentioned. But if an investor wants to continue having access to funding, then this route must be explored.

    The other alternative is mortgage managers. These businesses have access to their own wholesale funding. And I've found with low doc scenarios, they have considerably less hoops to jump through.
    Their rates and fees are higher than the majors though...but i put that down as a cost of doing business.
     
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  10. sash

    sash Well-Known Member

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    Ditto works well for people looking at selling on properties and works well for dhem also as they have their money back in 2 years or less....

     
  11. MTR

    MTR Well-Known Member

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    Excellent points
     
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    I'd do that today.........

    Like today

    Ta

    Rolf
     
  13. sash

    sash Well-Known Member

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    Yeah know what ya mean...already on it...as they sent some info out the other day.....I reckon they will reassess...soon....

    That is the ar $e covering they do before major changes.

    What are youse hearin?
     
  14. Angel

    Angel Well-Known Member

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    No 8. Is that Do or Dont consider?
     
  15. sash

    sash Well-Known Member

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    Do consider these lenders...but make sure you have an exit strategy for these.

    Use them where you will turn over the property in a couple of years.

    RAMS is okay but care needs to be had with others...in particular Low-Docs.
     
  16. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    I'd say so the extensions today

    Ta

    Rolf
     
  17. sash

    sash Well-Known Member

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    I tried to call the line today...it looks like a lot of people are calling in.

    I don't expect them to extend in again...as I will be 10 years I/O into a 30 yr term.

    The last time I enquired I was offered 3.99% for 2 and 3 years P/I I dare say they will match Suncorp. My loan is small so the repayment should be about $1400/mth on a 226k loan P/I fixed or about $500 month (interest almost fully offset) on variable rate of 4.5% which will go towards paying principle.
     
  18. devank

    devank Well-Known Member

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    " - i.e RAMS, Bluestone, Liberty, Pepper Money, Latrobe. They have a place depending on your exist strategy. "
    Can you please expand on this point?
     
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  19. sash

    sash Well-Known Member

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    Already have.

    RAMS is very similar to banks and about to become more so soon.

    But others may be options for short terms hold and sells. Rates are off course high 5.5 to 7% if a low doc.
     
  20. d_walsh

    d_walsh Well-Known Member

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    @sash, any advice on how to achieve >5 years IO upfront? Have found Credit teams often unwilling & unaccepting