you also need to calculate in the cost of management fee mate, so in the end you still end up negative geared just not as bad as,the Sydney unit property
Hello search property i just have a quick question. Based on your calculations for purchasing the 3 properties in this scenario, if i was to use a buyers agent, where do the costs of your fees play out in this situation? If the 3 properties are achieving a positive cash flow position of roughly $4300, if your fees where say 30-40k for all 3 in up front costs, it would take about 8-9 years to pay off the buyers agents fees? I don't want to pay for it out of my pocket I want the property to earn it over time. Therefore a quick calculation shows that length of time to recover the initial agent cost I'd really like some help understanding this . I want to use a BA , but if it takes that long for the property to pay for it how does that work? Thanks alot
Hey bud, thanks for reaching out with your question and engaging. I'd say it's a matter of perspective in how you view the BA FEE. It should be viewed as a purchasing cost like stamp duty however with stamp duty you get no return. With a good BA, they should save you hours in research time as well as buy under market value. So if a BA FEE is $10k/property and you purchase it for $15k under market value, well then the service paid for itself. Not to mention, the ongoing capital growth and cashflow you will gain as a result of having a property purchased in a high growth area. Does that make sense? Happy to chat in further detail if you like via email or phone call? Regards, Ravi
Hi Ravi, Very good video! However, I reckon you forgot to mention that if someone owns 3 properties, he/she has to rent another for himself/herself. So, an extra cost will be added into this calculation. Am I correct?
Yes either that or live in one of the three mentioned! I was thinking the same thing! I think his evaluation was based on a young market that would in fact have the ability to go home and live with Mum/Dad rent free whilst he gets his financial bearings.
Hi Ravi, thanks for the video and for sharing your tips! Is there a particular reason why you've used 10% as your upfront deposit on the property? This would result in a LVR of 90% which more often than not, would trigger the borrower to take our mortgage insurance (an additional annual expense) which hasn't been accounted for in the calculations. If you were to run the calculation again on an 80% LVR, the borrower would avoid taking out mortgage insurance and have lower monthly loan repayments resulting in a better cash flow position (while still negatively geared). Thanks!
Hi Ravi, just a follow up - do you know what percentage of loans these days have an LVR of 90% vs 80%? It would be good to understand the sentiment of banks these days and further, whether 90% LVR loans are a realistic option (factoring in LMI). Thanks mate!
Hey Rahul, thanks for the comments and questions bud. You are 100% correct and I mentioned I hadn't included the LMI costs and also property management costs in these examples. In terms of using 90% LVR, while people are in the first phase of their strategies (Acquire) the aim should be to acquire as many assets as required in their strategy. I would much rather be using 10% deposits to secure multiple assets while debt becomes useless in the coming time than to have it tied up in 1 asset. This however is personal choice, when I was building my foundation properties in the first phase, I was leveraged at 90 - 95% LVR loans but have soon come to 70 - 80% LVR loans because I've moved into the 2nd phase of my strategy (Consolidation). While the cashflow position will be better, the question will come to an individual's position and strategy. Hope that helps bud 🤙
There is an upward trend as lending becomes easier in the residential market for higher leveraged loans. Now with 5% deposits for first home buyers, that is where I see too much risk. These buyers are Owner occupiers and are driven by high levels of emotion on this purchase. At 95% LVR, you really can't afford to buy a dud property but most do and sit in negative equity territory for some time however with all my properties I've been successful with 80% or 90% loans with a buffer of buying under market value which means 6 months later with the new valuation, instant equity available which then gets pulled and sits in the offset account. I think we are going into a time where we will see alot more 90 - 95% loans and a similar lending condition to 5 - 10 years ago 🤑🤑 Hope that answers your questions ✌️
Hey Ravi! Thanks a lot for clarifying mate - agree with your sentiment and approach towards wealth creation by way of securing assets! I'm currently planning to expand my portfolio (with an intent to buy my second property in 12-18 months rather than in the short term given the ongoing volatility in the market) so will continue to stay updated with your market updates and tips for success! Keep up the great work mate!
Thanks for this mate! Appreciate the info - there's actually been a similar trend in London at the moment with a tonne of first home buyers entering the market with a 5% deposit matched by a government scheme that provides 15% of the deposit (in the form a loan) to service the initial 20% of a loan at 80% LVR - I can see how emotion would totally play into decision making and it's where you really need to try and look at making the decision independently based on the numbers (sneaky ebook plug :p) and being honest enough with yourself to know whether it's the right time to jump into the market or not!
Hi Rabi, amazing video as always. I wish I saw this video a year earlier. I have exactly done what you’ve told not to do in this video(i.e. buying a unit in melbourne). Not sure if there’s any remediation that I can do at this point to fix this ? Thanks again, keep up the great work. Cheers.
Hi Ravi, Thank you for sharing your wisdom. 🙂 I just paid $1200.00 for landlord & building insurance with a company that used to advertise alot. Iv never payed so much. I used to pay $850.00 with an $800.00 ,excess. What are your thoughts ? Am I being ripped off? Thank you. Blessings to you.
Thank you Vanessa for engaging :) I'd suggest shopping around because that does seem a little high. Although at the moment it might be difficult with so many insurance companies not offering landlord rental protection
Hello Ravi, pretty interesting video. It my biggest interogation oing for the FHOG or invest. I got your point with the one bedroom appartment as the PPOR not interesting but your point doesnt really make sense to me as, I can borrow 250k Im looking to buy a first homeout of the city at that range price (new) with 250k I cannot buy 3 different propreties and fit to your plan. So if you have to chose between investing in one proprety or buy a PPOR what would be your choice
I personally wouldn't buy my PPOR with debt. I would much rather buy productive assets with the debt and then later go on to buy my PPOR debt free with the strategy. Hope that makes sense :)
Hi Ravi, thanks for Grt stuff!! Could you please help with a query: I am single renting an one bedroom apartment in Melbourne CBD. I am thinking to buy a 1 bedroom property and live there for couple of years till next phase of life. The properties I am liking are in range of 300k to 350k. Is it ok to uplift the strategy from 200k to 350k considering the future rental returns as well in Melbourne CBD area ?
Hi Ravi, you doing great job mate👍🏻Wanna meet you in person to discuss my investment portfolio. Apart from strategy session , is there any chance we could come and see you in person, in your office? Happy to pay your service charge. Thanks😀
Hi Deepa :) If you are keen to discuss options, the best way to do that would be via a strategy session. Unfortunately, I’m not doing any face to face meetings :)
you also need to calculate in the cost of management fee mate, so in the end you still end up negative geared just not as bad as,the Sydney unit property
Yeah in this older video I believe I forgot to add it in, my bad. Management fees are usually about 8% of the rentals :) thanks for watching
Hello search property i just have a quick question. Based on your calculations for purchasing the 3 properties in this scenario, if i was to use a buyers agent, where do the costs of your fees play out in this situation? If the 3 properties are achieving a positive cash flow position of roughly $4300, if your fees where say 30-40k for all 3 in up front costs, it would take about 8-9 years to pay off the buyers agents fees? I don't want to pay for it out of my pocket I want the property to earn it over time. Therefore a quick calculation shows that length of time to recover the initial agent cost
I'd really like some help understanding this . I want to use a BA , but if it takes that long for the property to pay for it how does that work? Thanks alot
Hey bud, thanks for reaching out with your question and engaging.
I'd say it's a matter of perspective in how you view the BA FEE. It should be viewed as a purchasing cost like stamp duty however with stamp duty you get no return. With a good BA, they should save you hours in research time as well as buy under market value. So if a BA FEE is $10k/property and you purchase it for $15k under market value, well then the service paid for itself. Not to mention, the ongoing capital growth and cashflow you will gain as a result of having a property purchased in a high growth area.
Does that make sense? Happy to chat in further detail if you like via email or phone call?
Regards,
Ravi
Hi Ravi,
Very good video! However, I reckon you forgot to mention that if someone owns 3 properties, he/she has to rent another for himself/herself. So, an extra cost will be added into this calculation. Am I correct?
Yes either that or live in one of the three mentioned! I was thinking the same thing! I think his evaluation was based on a young market that would in fact have the ability to go home and live with Mum/Dad rent free whilst he gets his financial bearings.
Hi Ravi, thanks for the video and for sharing your tips! Is there a particular reason why you've used 10% as your upfront deposit on the property? This would result in a LVR of 90% which more often than not, would trigger the borrower to take our mortgage insurance (an additional annual expense) which hasn't been accounted for in the calculations. If you were to run the calculation again on an 80% LVR, the borrower would avoid taking out mortgage insurance and have lower monthly loan repayments resulting in a better cash flow position (while still negatively geared). Thanks!
Hi Ravi, just a follow up - do you know what percentage of loans these days have an LVR of 90% vs 80%? It would be good to understand the sentiment of banks these days and further, whether 90% LVR loans are a realistic option (factoring in LMI). Thanks mate!
Hey Rahul, thanks for the comments and questions bud. You are 100% correct and I mentioned I hadn't included the LMI costs and also property management costs in these examples. In terms of using 90% LVR, while people are in the first phase of their strategies (Acquire) the aim should be to acquire as many assets as required in their strategy. I would much rather be using 10% deposits to secure multiple assets while debt becomes useless in the coming time than to have it tied up in 1 asset. This however is personal choice, when I was building my foundation properties in the first phase, I was leveraged at 90 - 95% LVR loans but have soon come to 70 - 80% LVR loans because I've moved into the 2nd phase of my strategy (Consolidation).
While the cashflow position will be better, the question will come to an individual's position and strategy. Hope that helps bud 🤙
There is an upward trend as lending becomes easier in the residential market for higher leveraged loans. Now with 5% deposits for first home buyers, that is where I see too much risk. These buyers are Owner occupiers and are driven by high levels of emotion on this purchase. At 95% LVR, you really can't afford to buy a dud property but most do and sit in negative equity territory for some time however with all my properties I've been successful with 80% or 90% loans with a buffer of buying under market value which means 6 months later with the new valuation, instant equity available which then gets pulled and sits in the offset account.
I think we are going into a time where we will see alot more 90 - 95% loans and a similar lending condition to 5 - 10 years ago 🤑🤑
Hope that answers your questions ✌️
Hey Ravi! Thanks a lot for clarifying mate - agree with your sentiment and approach towards wealth creation by way of securing assets! I'm currently planning to expand my portfolio (with an intent to buy my second property in 12-18 months rather than in the short term given the ongoing volatility in the market) so will continue to stay updated with your market updates and tips for success! Keep up the great work mate!
Thanks for this mate! Appreciate the info - there's actually been a similar trend in London at the moment with a tonne of first home buyers entering the market with a 5% deposit matched by a government scheme that provides 15% of the deposit (in the form a loan) to service the initial 20% of a loan at 80% LVR - I can see how emotion would totally play into decision making and it's where you really need to try and look at making the decision independently based on the numbers (sneaky ebook plug :p) and being honest enough with yourself to know whether it's the right time to jump into the market or not!
Hi Rabi, amazing video as always. I wish I saw this video a year earlier. I have exactly done what you’ve told not to do in this video(i.e. buying a unit in melbourne). Not sure if there’s any remediation that I can do at this point to fix this ?
Thanks again, keep up the great work. Cheers.
With P&I loan, it is not negative geared property. You only need to take interest only component in to calculation.
Correct
Is investing possible if you have one income a wife and two kids… much harder I’m guessing especially to purchase the first house
hmmmm i was gonna ask about how do you get a property to appreciate. But good video i understand abit clearer now, Keep up the good work
Hi Ravi,
Thank you for sharing your wisdom.
🙂
I just paid $1200.00 for landlord & building insurance with a company that used to advertise alot. Iv never payed so much. I used to pay $850.00 with an $800.00 ,excess.
What are your thoughts ?
Am I being ripped off?
Thank you.
Blessings to you.
Thank you Vanessa for engaging :) I'd suggest shopping around because that does seem a little high. Although at the moment it might be difficult with so many insurance companies not offering landlord rental protection
Hello Ravi, pretty interesting video. It my biggest interogation oing for the FHOG or invest. I got your point with the one bedroom appartment as the PPOR not interesting but your point doesnt really make sense to me as, I can borrow 250k Im looking to buy a first homeout of the city at that range price (new)
with 250k I cannot buy 3 different propreties and fit to your plan.
So if you have to chose between investing in one proprety or buy a PPOR what would be your choice
I personally wouldn't buy my PPOR with debt. I would much rather buy productive assets with the debt and then later go on to buy my PPOR debt free with the strategy. Hope that makes sense :)
Hi Ravi, thanks for Grt stuff!! Could you please help with a query: I am single renting an one bedroom apartment in Melbourne CBD. I am thinking to buy a 1 bedroom property and live there for couple of years till next phase of life. The properties I am liking are in range of 300k to 350k. Is it ok to uplift the strategy from 200k to 350k considering the future rental returns as well in Melbourne CBD area ?
Thanks for watching :) I think it's best to discuss this through a strategy session which you can book via my website
Hi Ravi, you doing great job mate👍🏻Wanna meet you in person to discuss my investment portfolio. Apart from strategy session , is there any chance we could come and see you in person, in your office?
Happy to pay your service charge. Thanks😀
Hi Deepa :)
If you are keen to discuss options, the best way to do that would be via a strategy session. Unfortunately, I’m not doing any face to face meetings :)
@@PersonalFinancewithRaviSharma No worries, meet you soon in strategy session then😀
Have a good one👍🏻
@@deepasharma2561 Sounds good :)