Strategy 2017 and beyond

This is what I would like to do in the future taking into account the current lending environment.

At the moment it's being hard to build a big portfolio as banks are assessing other debt at higher interest rates etc... buy and hold (+/- reno) with the expectation of CG was what I was doing previously but now I need to chase the higher yields/cashflow if there is to be any further borrowing capacity.

Low yielding properties aren't going to get me far, and my feeling is that your average Sydney property is not so likely to go up a great deal in the next couple of years.

So I may sell 1 more in Sydney (next financial year as i'll already have a huge tax liability this year), put gains into PPOR as that's a debt that's really stopping any moving forward.

Then also look to buy commercial, and maybe put a cabin in our backyard and airbnb that.....
And also look to buy commerical in an SMSF structure.

I'll keep airbnbing, it's going well. It may or may not be included in servicing calculators, but it cashflows for me.

Also look for a higher paying job.

@Beano had success with commercial in NZ, maybe there's opportunity there?

 

Sounds like a good strategy Gockie.

pay down non-deductible debt aggressively
Debt recycle to speed up the process
Once PPOR is paid off consider PI for investment loans
Use a SMSF to extend borrowings once you max out.

 

Principal and interest? What's the advantage of doing this over offsets?

 

It will assist borrowing capacity because the repayment amount many lenders use will be small than IO.

 

You would think the opposite would be the case but here is an example.

X has a new loan with Bank A. IO for 10 years then PI for 20 years.
X goes to Bank B for the next loan.
Bank B assesses X's existing debt based on a PI loan over the remaining loan period excluding any IO period. So in this case Bank B will assume X is paying PI over 20 years for his existing loan. Because the term is just 20 years the period is short and the repayments high.

Y on the other had has the same situation but Y is paying PI over 30 years on an investment loan.
Y goes to Bank B and then they assess the repayments for existing loan as PI over 30 years (and not 20 years as per X). Y's servicing would be much better assuming all other aspects the same.

Dont' forger most lenders will assess at 7% plus so the effect is high.

 

This worked pretty well for me; debt-recycled IP sales proceeds to fund stock purchases and also free up some serviceability for topups on the rest of the portfolio (which were mostly used to buy even more stocks.) Even after capitalising expenses my IPs weren't creating significant cashflow so I felt I needed to accelerate things somewhat rather than entirely relying on CG.

Also the smaller portfolio allowed me to use just 1 bank so OFI rates weren't a concern... was a multi-step process though as I first had to bring everything over before topping up.

 

@Gockie not sure of your growth/wealth goals but if your interested to growth wealth faster and it meets your risk profile then perhaps look into value adding deals when you reduce some debt and get back into an actively free position to invest.

Just a suggestion

 

Gockie you are on the right track.. you took advantage of the boom, made some money, now reduce debt etc etc.

The next step will be a work in progress look at other options where you can bring cash flow/income streams into play whether that is a CIP, another asset class, a simple project to add value etc.

You are wise to reduce debt now that markets are changing.

MTR

 

Yep... absolutely not ruled out... if there's an opportunity....

 

Hmmm for me for 2017, it's going to be to save more money and build up a buffer because it seems like I am not well equipped to handle any potential issues even though I have income protection and etc. Would really love to go interstate finally and purchase an IP there but thanks to changes to LMI, borrowing restriction and etc, my progress has slowed.

I plan to hold all my IPs and don't intend to sell any now or for the foreseeable future. I would love to pass it down to my descendants and put in a clause/ caveat on the property ie not to sell for the next 200 years but extremely doubt you can do that under any sections under the Real Property Act 1900.

Personally and professionally would like to finally complete a degree or two for 2017 as some of them was commenced part time since 2011 and it's really starting to annoy me. Would like to increase my life knowledge and experience by travelling alittle to appreciate the customs and ways of life of people in other countries. Of course be a better son.

 

I don't think you can stop your descendants from selling after you go but yes great plan ...hold and never sell !

 

Possibly for a while you could via a testamentary trust in you felt so inclined?

 

Ditto... I want my home to never be sold within 80 years since I bought it as the original owners had it in their family for 80 odd years.
#scarcityfactor.

 

Till someone finds a way to sell or the law changes!

 

I think it might be easier if we just hang around and not go

 

Strategy ? same ATM.

Thinking of shares and commercial property should always have been in the mix if one has enough cash & or high income has been my belief.

Regarding property, well there must be things you can do, I know of property that had been gifted away, the recipient tried to sell some time later, I believe they were prevented because the gift had conditions of use attached, I can't be specific & do not have more detail.

 

Agree with @chylld and @MTR about stocks and other asset classes. I'm increasingly looking into shares etc etc as you can buy into these asset classes with smaller inputs - not too many locations that you could buy with $10,000 of funds! I also think diversification is important.

 

My focus for 2017 is to increase cashflow and capital.

Started buying in USA where building/developing has good margins and shorter timeframe to build. Will also be looking at securing commercial property for cashflow and where we can add value

Interesting, I found out today that a number of Melb developers are doing the same. One Purchased a street of old homes in US rezoning and building new.

 

I'm in a holding pattern but will keep stashing additional capital in my offsets or my share portfolio.

Will see how real estate markets go and strategise for the future.

That and take 7 more weeks of holidays in addition to my pending trip to Cuba .

 

Great stuff, sounds that the US is still strong with ability to up the value of properties.