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New Member Climbing the Bank Wall

Discussion in 'Introductions' started by gcncbc, 14th Jun, 2006.

  1. gcncbc

    gcncbc Member

    Joined:
    9th Jun, 2006
    Posts:
    12
    Location:
    seymour victoria
    Hi Everyone,
    In 2002 at 55 years I was made redundant with $100k super, going backwards, owned ppor and nothing else.

    Read Jan Somers book and started running. Now my wife and I have:
    Combined salary $92000
    PPOR, no debt, Value $250000
    5 IP's Value $990000, owe $6ooooo, gross rent $41000py
    Block of land Value $55,000 no debt
    $70000 in Navra, owe $70000, use income to help neg gearing costs
    LOC $150000, used up $115000
    We need to keep going as we now have no Super and whatever we do will obviously dictate how our retirement will be, am now 59.
    Went to the (which) bank to discuss the next property purchase but told we can no longer afford to buy, not enough income

    If there are any ideas on where, or how to head next, advice from inerested and/or experienced members would be appreciated
    Cheers and Thank You :)
     
  2. -T-

    -T- Well-Known Member

    Joined:
    2nd Apr, 2006
    Posts:
    194
    Hey gcncbc

    No doc loans. No questions (well not many), just sign the stat dec and away you go. They're becoming more popular with less and less of a rate premium. Low 7s available I believe. If you haven't got a mortgage broker, you should check one out re: this. They won't only be able to help you structure debt for growth, but they'll get rate discounts for you.

    By the way, that's some impressive progress! :)
     
  3. Jacque

    Jacque Team InvestEd

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    Hi Gc (what is with all you members with too many initials? Sorry but I just have to abbreviate.... :))

    When you say combined salary, does this mean you're also working now?
     
  4. gcncbc

    gcncbc Member

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    Thanks both of you, yes am working so we each earn @ $46k, me with a community health service and therefore 1st 15k tax free :), my wife as a teacher :confused:
     
  5. Glebe

    Glebe Well-Known Member

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    You might want to talk to a mortgage broker who could possibly find a bank willing to lend cheaper than lo-doc. Your cashflow looks good - $140 000 per year in, $50050 out.

    Best of luck.
     
  6. Jacque

    Jacque Team InvestEd

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    Hi again GC

    The problem appears to probably be the no. of income earning years that the lenders view you as having left. A good mortgage broker should, however, be able to investigate your options as well as a raft of lenders who are flexible and may be able to accommodate your personal situation, should you wish to invest in more property.
    PM me if you want the name of a good Melb based broker, should you head down this path :)

    I'm curious, however, as to why you would want to invest in more property at this stage, as you've built up quite a portfolio there. Have you considered diversifying even more into super options or looked at the benefits of salary sacrificing? Especially if you're going to retire within 6 yrs or so....

    I'm sure others more educated on such matters as super will impart their words of wisdom here so watch this space :)
     
  7. Rolf Latham

    Rolf Latham Well-Known Member

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    Location:
    Gold Coast and Sydney
    Hiya

    Suggest you have a chat with a goo Melbourne based fellow, the other Rolf :O)

    http://www.rjafinance.com.au/

    Rolf S knows his stuff an comes highly recommended - and not JUST for his grey hair :)

    ta
    rolf
     
  8. gcncbc

    gcncbc Member

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    Location:
    seymour victoria
    Thank you all again.
    Jacque, I originally went to the bank for more IP funds believing we had a need for more properties to secure at least a manageable retirement.
    Since then I have read the LOE parts 1 to 4 and a post by Rixter re Cashbonds
    We have a 16 yo teenager who costs as much as we earn, only half kidding, and had to fund 3months no rent twice, new balcony, 2 new heaters, various repairs etc and have been struggling to make ends meet. we've used up $115k of loc and that's bad debt
    Maintenance is over now but I am attempting to find a way for someone/thing else to help fund all our neg costs and help me to start sleeping at night, my wife says I forgot to tell her Property Investing may be a white knuckle ride.
    I thought a pos geared property may help but reading the LOE seems a better way to go altho I've not understood all of the theory yet
     
  9. Medine

    Medine Active Member

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    Hi GCNCBC,

    What can I say? Hang in there!!

    You've made great progress in four years. We all go through trying times, so it's important to remember why you started this journey at times like these. Did you aim for immediate income or for capital growth over a full property cycle?

    Cheers, Medine
     
  10. TryHard

    TryHard Well-Known Member

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    Mate, keep being as studious and creative as you have been to date (with the help of one of the Rolf's :) ) because that's some great runs you got on the board already. Well done !! :D
     
  11. seaview

    seaview Well-Known Member

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    Location:
    NEWCASTLE
    Hi GC,

    Your situation sounds a bit like ours, except you probably avoided "the development debacle" (refer to my post under Ralton / Managed Funds for a long blurb on "how not to develop"). We have vaguely similar property holdings and income to you and were neutrally geared until I dabbled too much in development. Now we are negatively geared: asset rich and cash poor. Most of our properties are old (but in good areas) and we have had to replace an endless array of toilets, Hot Water Systems etc over the past 2 years which is a real drain on cash flow and LOC, but we still think it was worth it. (Our houses are half renovated now and it was tax deductible as repairs.) We also started all this in about 2002 and lucked out in the boom with values doubling in 2 years.

    We also thought of going for cash flow positive property but realized through research and forums like this one and Somersoft that we really need to diversify our portfolio with some other investment classes. We were delighted to discover Managed Funds like Navra, and best of all: Margin Lending, which can be a bit scary at first. But if you adapt a low LVR the use of margin loans enables you to buy lots more income producing Funds and grow your wealth much faster. We used low doc loans against some of our equity (even on our PPOR) to buy lots of Navra Wholesale Oz fund, and margined that up about 50% (though we aim to lower it to around 40%).

    This has solved our cashflow crisis (at last). ... and now we sleep at night. Navra seems to fare better than others in falling stock market and with the cream of blue chip stock in the fund we feel fairly secure. We are even looking to diversify a bit into some growth funds to balance out the Navra. If we get enough growth in growth funds such as Platinum Asia we will be able to capitalize the interest on our Margin Loan i.e. not pay it ! - which took me a LONG time to get my head around, but if debt is growing at 8% and income growing at 20%+ the compounding principle means your equity grows very quickly, and far outgrows your debt, creating a nice buffer and low LVR so you can keep sleeping at night.

    This is all a big change for us - until recently we considered anything to do with shares as gambling. But our properties are rather like children now, and it is a shame to let any one of them go. Hopefully they will look after us in our old age. Anyway, that is my 2 bobs worth if it is of any help.
    Cheers
    Seaview
     
  12. gcncbc

    gcncbc Member

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    Thanks to all of you, these responses have blown away some dark clouds v/quickly. I have started the process of following up a number of these ideas.
    Cheers :) :D
     
  13. Terryw

    Terryw Well-Known Member

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    I think you may find that 'which' bank discriminates based on age, or the number of years untill your retirement. They used to assess loans on a PI basis over the remaining years left, making the repayments very high, making people fail serviceability.

    It is best to keep the No Doc loans to be used later, and try to go full doc now if you can.
     
  14. gcncbc

    gcncbc Member

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    This is Mrs gcncbc who shares the bed as he thrashes around at night to come up with solutions! Have just read all your posts... Thankyou. What a lovely group of people, I value the shared expertise and the encouragements,
    good luck to you, to us all
     
  15. Jacque

    Jacque Team InvestEd

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    The beauty of a forum like this, Mrs Gc, is that many have been in similar situations or at least can identify with what you're going through at a particular time in your investing journey. That's why it's nice to know that you're not alone, and there's always a solution for every problem :)
    You're well ahead most of the population, in that you're planning ahead for a self funded retirement and have learnt so much already. It's an ongoing and changing process, however, and one that needs constant refinement, alteration and encouragement along the way.
    Welcome to the InvestEd community and please continue to keep us posted as to your progress- whilst frustrating at times, it can also be very exciting and we all do love to share in each other's successes, as well as the more difficult aspects of the journey. :)
     
  16. See Change

    See Change Well-Known Member

    Joined:
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    I'd be wary about buying more property at this stage of the cycle especially as you're looking at retiring ( From work ) in a few years . You don't want to stuff things up when youv'e done so well in the last few years.

    You are obviously negatively geared. The chances of buying a seriously positive cash flow property at the moment are remote ( exceedingly ) . So is buying another house at the moment going to benifit your short term finance hiccoughs ? Do you see places you can buy where you have a good expectation of good capital growth in the next five years ? I don't know many people who are veeery confident over that time frame.

    Maybe spreading some more money in managed funds would be one thing to look at , but diversify into different funds after doing some DD. Property will become more affordable in the next years and that would be the time to look at buying more .

    See Change
     
    Last edited by a moderator: 19th Jun, 2006
  17. gcncbc

    gcncbc Member

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    See Change

    Yes you are right. We are Neg Geared and after reading these threads and reassessing what we have, we are asking a broker recommended in this thread to 'redo' our banking to release potential funds. From that we plan to go into diversified shares to have them deal with the neg gearing whilst we wait for growth and to finally settle on a formula that offers fair retirement
     
  18. Redwing

    Redwing Well-Known Member

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    Interesting post

    How are things going now GC?
     
  19. gcncbc

    gcncbc Member

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    Location:
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    Thanks for asking.
    We noted some advice from postings and called Rolf Schaefer a broker in Melbourne who has done a great job working with an alternative bank. We are just about to shift to the new bank with an big increase in LOC. Also just about each property will now stand on its own rather than the other (which) banks demand for all properties to be heaped together,:mad: ie all properties cross collateralised The extra LOC will be directed to investing depending on what Navra say, we have contracted Mark, in shares.
    The upshot is we will shift banks soon, release more monies for balanced investing, have each property 'stand alone' and work with Navra with some focus on LOE
    An interesting side issue is that my wife, a teacher, has gone off to work each day unhappy, she has just been offered a job as an estate agent rep and is as happy as can be, though more IP's are not on the horizon for now we are 'close' to the market just in case :D
    Cheers
    GC
     
  20. Redwing

    Redwing Well-Known Member

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    Great News..especialy about the wife finding something she's happy with as well- as thats what its all about at the end of the day.