What would you do?

Discussion in 'Investment Strategy' started by johnpendlebury, 20th Dec, 2015.

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  1. johnpendlebury

    johnpendlebury Well-Known Member

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    yeh, buying a property that is already under lease would mitigate that risk somewhat, but i guess they aren't easy to come by.

    good luck with your new broker.
     
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  2. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    We're paying $1400 per week off the IP ($955 inc $955 in rent) at the moment and renting our PPOR on the cheap. Principal is coming down quickly and we're hoping to purchase up to $600k once we release equity but we're going to have to go through an non APRA lender to get that loan (No luck with Aussie and CBA so far) and the next purchase has to be neutral or positive otherwise it will be years before we can purchase again.
     
  3. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Thanks :)

    If I find another commercial pearl like that I think I'll jump on it and take the risk.
     
  4. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Liberty is the one who we are going through at the moment.

    My job is very safe however promotion is incredibly competitive and not much of a pay increase. I just finished up a Masters degree with a DI average, I could try jump ship for a job on an extra $30 - $50k p.a. but it will mean I lose job security, commuting at least an extra hour per day and working a solid 20 hours per week extra. I worked a second job a while back (20 hours per week) and the impact on the kids was massive. While they are young I don't think it's worth the sacrafice.
     
  5. euro73

    euro73 Well-Known Member Business Member

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    Even if its neutral, wont improve your capacity... Your issue is assessment rates on existing debt - just about everyone is sensitising to 7-7.5% these days , or more... Liberty arent sensitising. Pepper adds 20% to existing debt. NAB adds 28% to existing debt, as long as it's not NAB funded debt - that means NAB, Homeside, UBank, Advantedge...

    Without a big income increase, or significant debt reduction, even a CF neutral property wont help much. Lots of investors are finding themselves in this position, or will find themselves in this position soon enough. These forums are full of war stories of post APRA borrowing capacity being severely reduced. There's no easy fix - other than a windfall of some kind or a big pay rise - or debt reduction. You could consider NRAS - it would inject @ 8K -10K to your annual cash flow. Within a few years you will have made big inroads into your debt, and that will assist in creating borrowing capacity again...
     
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  6. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Can you point me in the direction of further NRAS information? A couple of years back I had someone point me toward the NRAS as a prospective tenant, from memory our income was too high and we were on cheaper rent privately.

    Once my wife goes back to work we should be right but we're still 2 - 3 years off that. She has a good little business but the banks won't include the income and we will be selling it next year when we move into our IP
     
  7. euro73

    euro73 Well-Known Member Business Member

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  8. Sackie

    Sackie Well-Known Member

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    Property development is also an option.you can create large chunks of equity.
     
  9. sanj

    sanj Well-Known Member Premium Member

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    im a developer myself and absolutely love it but in this case i think it's an inappropriate option to take based on his circumstances and goals.

    between 2 probably really full on jobs (to justify the salaries), planning on having a kid, very high future income, there is no need to take on the risk, headache and extra hours that developing would bring. he also doesnt need the capital that it would bring, he's after income, he's got over $1m in cash and shares already, the challenge is to turn that into income instead of growing the equity and then realising you havent tackled your initial goal.

    just my opinion of course but that's what id say to a friend or relative in a similar situation. it's sometimes important to remember the principle of occam's razor, if a simpler, lower risk option requiring a lot less hours spent on it is in front of you and looks like it could help you achieve your goal why look for a more complicated and riskier one?
     
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  10. Sackie

    Sackie Well-Known Member

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    Hi @sanj,

    Was just an option I was throwing out there but your right, based on his goals and situation may not be ideal or needed for him. I know a guy who is on a very high income and doesn't want the hassle of managing a development so pays a PM to do everything from site finding to build to sale. It works well for him so that's why I thought it may be an option here. But commercial property does sound very interesting!
     
  11. D.T.

    D.T. Specialist Property Manager Business Member

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    Yep. He has the capital but not the income.

    I probably wouldn't bother with nras in his league, but could do very well on commercial based on the numbers Sanj provided.

    I'd probably use a BA for this as its not an area you're familiar with yet.
     
  12. johnpendlebury

    johnpendlebury Well-Known Member

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    Do you know of one you would recommend?
     
  13. trinity168

    trinity168 Well-Known Member

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    Depends on which state you are interested in. Must still have an idea of a certain area. And, always go with a local BA. There are heaps of good ones who are active in this forum.
     
  14. johnpendlebury

    johnpendlebury Well-Known Member

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