Suffering analysis paralysis!!!

Discussion in 'Investment Strategy' started by Neitz, 1st Jan, 2017.

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  1. Neitz

    Neitz Member

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    Hi, I'm new to this forum but just looking for a pointer in the right direction here as my husband and I are going around in circles. We are 37yo looking to start an investment portfolio for retirement purposes. We have $270k in combined super and a house bank valued at $750k ($450k owing) and combined income of $190k. We've attended a multitude of property seminars (flippers/holders/renovators etc) and have decided we are looking for long term capital growth in neutrally geared (or almost) properties. This has led us to signing up with a buyers Corp who are recommending off the plan townhouses/villas in regional nsw (moonee beach near coffs harbour and wauchope near port macquarie) for the purpose of having great tax deductions and steady capital growth (aiming for min 5%). We are also looking at setting up a SMSF. My concerns are obviously they have a vested interest in the properties they're selling so are we paying too much? ($429 for 3bed/2 garage), should we buy a house rather than a villa/townhouse? Has this area of regional nsw peaked? Pop'n growth predictions indicate an increase and both have a multitude of industries supporting employment. Is it preferable to stick to melbourne sth eastern areas house and land packages??? (We know this area) should we aim for some cash positive properties to offset negatively geared ones perhaps closer to a capital city? Should we buy an existing house and try manufacturing equity? (Bear in mind we have 2 young kids) how do we find a truly independent property adviser?? Im starting to feel pressure from this buyers agent and I know this isn't ideal. Any ideas would be welcome, thanks.
     
  2. Sackie

    Sackie Well-Known Member

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    That'sthe biggest issue right there. Personally I think it's a minefield, this type of company but since you already have engaged them the best thing you can do is to do your own due diligence on the types of property and area they are recommending to see if the numbers stuck up for yourself so your not blindly listening to them..I would also want to know what kickbacks they are receiving etc. The conflict of interest imo is just massive so make sure to do your DD and at the end of the day don't purchase anything your not comfortable with.


    Further to.that...just make the time to self educate so you don't need to be in.a vulnerable position. Sounds like your already doing the work so in all likelihood they are just your confidence boost.
     
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  3. MTR

    MTR Well-Known Member

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    what Leo said, and
    what have you paid BA so far? what does your contract state.

    Yes Melb has been brilliant.
    Start reading posts by @melbournian and @sash

    I have been developing in Melb, you may be interested in reading about my projects

    Educate yourself and save money
     
  4. Neitz

    Neitz Member

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    Thanks MTR for this. Yes I'm slowly becoming more confident in trusting my instincts and research. We've only paid $1 to secure the contract so far and nothing signed yet. The gut feel wasn't right. Will start following your threads, thanks.
     
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  5. Neitz

    Neitz Member

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    Thanks Leo, it wasn't sitting right and as we haven't out laid any money as yet or signed a contract all is ok to walk away. It's a minefield alright. Thanks for your reply.
     
  6. MTR

    MTR Well-Known Member

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    Now start educating yourself and networking. I believe there are investors in Melb that meet monthly this may be very helpful

    MTR:)
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    @Neitz - Plenty of new houses to choose from up there - AV Jennings. Judging by these listings, you're paying $50-100k too much.

    Emerald Beach - 575m2 vacant land $375k
    Moonee Beach - 1.3ha land $275k
    Woolgoolga - new 4/2/2 - $458k

    So do your homework - it might pay to cut your losses with this mob and save yourself a few $100k, a loss that you will never recover.
     
    Last edited: 1st Jan, 2017
  8. Gockie

    Gockie Life is good ☺️ Premium Member

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    Welcome @Neitz. I believe you can see what the rest of us can see. Well done for posting your very valid concerns before outlaying any money. I would say they have one priority in their business and I'm pretty sure it's not "to make you rich".... Otherwise if it was really such a great deal they might as well keep it all for themselves....
     
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  9. Sackie

    Sackie Well-Known Member

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    np..

    My advice - don't walk, run. $1 is a bargain to pay for a good lesson. Could have been many more '0s' behind it.
     
    Last edited: 1st Jan, 2017
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  10. Neitz

    Neitz Member

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    Thanks for this, yes blindly following these "experts" is not what I'll be doing.... I knew something was suss when the urgency to buy was applied....
     
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  11. Perthguy

    Perthguy Well-Known Member

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    Good instincts. I have been to some seminars where the first 50 people who signed up got some kind of incentive. As the crowds rushed up the front, I escaped out the back ;)

    If you are not sure about certain areas, post a thread. People around here love talking about property :)
     
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  12. euro73

    euro73 Well-Known Member Business Member

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    I would start by saying that whatever you decide, you need to treat your personal portfolio and anything you do within an SMSF as separate entities.

    Purchasing within your SMSF will require that you sign a personal guarantee, which will severely impact (negatively) on your personal borrowing capacity ... so always complete the purchases you wish to make in your personal name/s first. Set any SMSF purchases aside until you have exhausted your borrowing capacity in your personal name.

    I'm firmly of the view that the best thing anyone with a large PPOR mortgage can do is to pay it down as fast as possible. Owning a PPOR outright creates a safe and secure platform from which you can expand rapidly. It provides large amounts of equity for deposits and stamp duty and costs, and it maximises your possible borrowing capacity with lenders as all of the non income producing, non deductible debt is gone. With that in mind, I would not disregard what a very high yielding property can do to assist with that.

    I have long been an advocate of NRAS because of the 9-10K per annum in surplus tax free income it yields. But with NRAS opportunities almost fully exhausted, I also believe Dual Occupancy can do a similar job. A new house with granny flat in the 500K range should be able to generate 8K - 8.5K of surplus after tax income because of the high rental yield and depreciation benefits. Redeployed, here's what 8.5K per annum of extra repayments would do to your 450K PPOR mortgage


    Screen Shot 2017-01-01 at 11.07.10 pm.png

    As you can see, extra repayments of $700 per month ( 8.4K per annum) reduce a 30 year PPOR P&I mortgage by almost 11 years, saving over 124K of interest.

    Two such properties would have an even greater impact , reducing a 30 year loan to less than 15 years, and saving over 175K of interest

    Screen Shot 2017-01-01 at 11.14.16 pm.png

    Three such properties would reduce the loan to @ 12 years and save you almost 204K of interest

    Screen Shot 2017-01-01 at 11.14.38 pm.png

    The benefits of a strategy such as this is simple - you can pay down a PPOR without selling any of your INV properties. For example, by holding 3 properties such as those I have used in this example, and using the surpluses to pay down your PPOR , you would have zero non deductible debt by 49, and still have the 3 dual occ investment properties, which by then should be yielding significantly more than 8-8.5K surplus income per annum .

    With your combined incomes I would assume you have the capacity to make extra repayments from your post tax salaries as well, so in all probability you could achieve even faster results. And Im also assuming that at 37, you probably have good prospects for salary increases in your respective roles. Again, this would only further improve the results for you.

    And the real kicker is that the 3K per month you are likely spending on your PPOR P&I mortgage now, would also be freed up. Thats an additional 36K of money to play with. That could then be used to aggressively pay down INV #1, which should still be carrying a 450K loan ( 90% of 500K)

    The surpluses from the 3 properties ( lets be ultra conservative and keep using 8.4K per property) would equate to $25,200. The $36000 per annum no longer being used towards the PPOR mortgage would also be available to you. Thats a combined 61K of extra repayments you would be able to make. The 450K loan for INV property #1 would be paid off in less than 7 years. ( 56 years old)

    Screen Shot 2017-01-01 at 11.45.06 pm.png

    Then pay of INV #2 . Now you'd have another 36K available per annum, as you'd have paid off the 450K for INV #1.... ie the surpluses from the 3 properties ( lets be ultra conservative and keep using 8.4K per property) would equate to $25,200. The $36000 per annum no longer being used towards the PPOR mortgage would also be available to you, AND the $36000 per annum no longer being used towards the mortgage for INV #1 Thats a combined 97K of extra repayments you would be able to make. The 450K loan for INV property #2 would be paid off in less than 5 years. ( 61 years old)

    Screen Shot 2017-01-01 at 11.48.31 pm.png


    Then pay off INV #3. Now you'd have another 36K available per annum, as you'd have paid off the 450K for INV #2.... ie the surpluses from the 3 properties ( lets be ultra conservative and keep using 8.4K per property) would equate to $25,200. The $36000 per annum no longer being used towards the PPOR mortgage would also be available to you, AND the $36000 per annum no longer being used towards the mortgage for INV #1 AND the $36,000 per annum no longer being used towards the mortgage for INV #2. Thats a combined 133K of extra repayments you would be able to make. The 450K loan for INV property #3 would be paid off in less than 4 years. ( 65 years old)

    Screen Shot 2017-01-01 at 11.51.28 pm.png

    By 65 you'd own your PPOR , you'd own 3 x INV dual occs, producing ( conservatively ) $1000 per week each before expenses and tax. And even if you got zero growth, you get this outcome still. Its just a simple dividend reinvestment strategy using high yielding property instead of shares. And Ive used quite conservative figures. Its likely the results would be better than what I have used in these examples - especially if you added additional high yielding properties in 12 years , after paying down the PPOR in full. If at that time you added another 6 similar properties for example, and generated an additional 50K in surplus income from those, you could do far better than what I have outlined, and far quicker....

    The alternative is to chase growth of course, and hope that you can generate sufficient gains to sell them, pay the CGT and be left with sufficient profits to pay down the PPOR in full ... but even if you can achieve that, you will be left with 1 x PPOR and no INV properties generating no surplus income , requiring you to start over if you wish to retire with a passive income of some sort. So yes, growth can get you mortgage free, but it's unlikely to assist very much with a passive income.

    From what you have said, at 80% LVR you have @ 126K of available equity, and at 90% LVR you have @ 210K of available equity ( I have allowed for 2% LMI )

    210K is certainly enough to fund 3 x 12% deposits + stamp duty for 3 x 500K dual occ purchases. So subject to borrowing capacity of course, what I have outlined above is certainly something you could explore if this sort of strategy was appealing.

    Once those deals were in place , then you could consider what to do with your super...but it would be a mistake to go down that path too soon, as you will snooker yourself.
     
    Last edited: 2nd Jan, 2017
  13. Neitz

    Neitz Member

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    Wow thanks so much, that certainly is another way to play it. And I'm glad you've mentioned holding off on smsf. Our acct had recommended that too but this buyers Corp were the ones pushing it (obviously to allow us to buy more of their properties) but with little regard to how it would affect us in terms of borrowing capacity.

    Do you work with dual occ's in QLD only?
     
  14. Pier1

    Pier1 Well-Known Member

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    Hi Euro, just wondering where the Dual Occ for $500k would be located? TIA
     
  15. euro73

    euro73 Well-Known Member Business Member

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    Im putting together dual occ deals in regional NSW - Orange and Bathurst. Good sized populations , cheap land...keeps the price down to the 500K ish range
     
    Last edited: 2nd Jan, 2017
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  16. euro73

    euro73 Well-Known Member Business Member

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    You have to build a portfolio with a plan of some sort . Unfortunately for you, most the people here who are offering you advice have not reached a level of income from property where they can retire comfortably . They are only interested in growth, and have had all of their success pre APRA. If they havent been able to retire from property when they had all of the advantages of pre APRA, you have to ask yourself why you would believe anything they have done will serve you well in reaching your retirement income goals in a post APRA credit environment

    I believe debt reduction is THE key to building a portfolio, and therefore THE key to building the income you want.

    You'll notice that the scenario outlined above provides a real plan to deliver a real result and is supported by real evidence. You'll also notice it targets debt reduction before growth, specifically because this approach caters for improving rather than diminishing your borrowing capacity over the life of the plan, and being able to hold rather than sell properties- thereby retaining the income from those properties.
     
    Last edited: 2nd Jan, 2017
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  17. the world is your oyster

    the world is your oyster Well-Known Member

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    Hi great use having a go
    I would be a bit hesitant with a buyers agent selling of the plan like that , I only say that as I done that and have lost 200k due to poor advice it's amazing what the agents get in kick backs and stuff most of the time it works well for them and bad for the client . That's my two cents worth

    I have since spent time and effort into education and have been doing a mentoring program where I'm now on the right track and starting to make money :) once I knew where to look and how to look it was all pretty easy I found
     
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  18. Neitz

    Neitz Member

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    Thanks for your input, i know the more I hear and read the more uneasy I feel about it. Just wasn't adding up. Good to hear you're on a good path now. The thing is I probably know how to find a good property as ive been researching for many months now, but wasn't trusting myself. Important lesson to learn....
     
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  19. trinity168

    trinity168 Well-Known Member

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    The old somersoft site has an interviews portion, my favorite being @keithj's interview. @LeoT's interview right up there as well. They tell their stories on how they got to where they are.

    Immerse yourself in the forum, lots of good mentors here. Surround yourself with a team, not a one stop shop.

    Run ... I dislike pressure sellers. Good luck.
     
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  20. Jacque

    Jacque Jacque Parker Premium Member

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    There's your problem right there: As @Leo2413 and others have rightly pointed out, this spruiker is nothing more than a selling agent in disguise, NOT an independent buyers agent. Independent buyers agents receive their fees only from their clients ie: buyers, and not from any other sources. If this "buyers corporation" are receiving fees/commissions from anyone else associated with the properties they are urging you to buy, they cannot refer to themselves as buyers' agents.

    Always check who is paying whom, what referral/kickback fee system is in place, and who benefits. Full disclosure is required by law.
    Duty of disclosure - NSW Fair Trading

    A licence is required for any person to act on your behalf in the transaction of real estate here in NSW whether that be for selling or buying.
    Check NSW real estate licences here:
    OneGov Mobile | Public Register

    Be aware of what a genuine buyers' agent actually does and how they are remunerated
    Buyer’s Agents | Real Estate Buyers Agents Association of Australia (REBAA) Inc

    Lastly, remember that ultimately the decision for any property investment purchase is yours to make. Of course professionals in the property field can assist you with buying, sourcing, assessing, negotiating, bidding, managing, financing, accounting for, renovating, selling and building- it's all about how much work you want to put into your own portfolio expansion. Best of luck with your investment journey :)
     
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