How to maximise current financial position - pls advise

[evie]

Hi all - Would really appreciate some advise. My parents have told me not to talk to strangers about money, but i think all of you are funny, sensible and intelligent (from reading the other posts)... I would really like to hear your thoughts.

$200k cash - (another $50K in reserve)

Home mortgage $350k; CV $850k (sea views on both levels except garage, 5bedroom 3bathrooms, 3levels, 3 car garage, full section, great neighbourhood, nice house). Neighbouring houses sold for over $1M+

Goal: $1M + cash before I turn 49 (that is 8 years away)

How do I maximise my current financial position?

Thanks!

[PTILoveYou]

Where do you live and also what's your income level?

If you are on an average income, high rental yielding property is for you.

If you are on a good income, ie $150k+, then average to negative yielding but with high capital gain maybe better suited, but only if you live in Auckland. If outside of Auckland, higher rental yielding property is for you.

First step I think you should repay as much of the $350k mortgage as you can with your $250k cash. No point having a term deposit or savings when you have personal mortgages. At the same time apply for $300kish revolving credit facility for emergencies.

[Damap]

Obviously you are asking for financial advice which you shouldn't be getting from a forum but the general 101 strategy would be.
Pay off as much on your own home as you can then get the biggest revolving credit facility you can on it to use for deposits.
To minimise your risk I would buy as many rentals in Auckland as you can, the best quality you can afford in terms of yield and location. When you are ready to "retire" cash out of the lowest performing ones and keep the rest. You will have not only a mil in cash but at least 2 maybe as many as 4 or 5 rentals as well!!

[evie]

Gary: thank you for your reply! (I have replied as below)
Damap: you are right, but sadly I have not been able to "talk" to any financial advisors who weren't going to sell me insurance.... Have had 2-3 of them over at my house and they were just pushing me to buy their products

I just needed some guidance as really want to make my first steps right... (calculated risk) and have talked to different people, but a lot of them really have no idea, or are trying to sell me something
I like back to basics sort of ideas. General 101 strategy (which book can I buy to read 101 strategies?) I did try googling too... I have bought Martin Hawes books. Somehow, I don't seem to be able to find where I fit in.
My income is between $80k - $100k.
Yes - I was looking at rentals in Auckland. I live in Auckland on the North Shore in Torbay (just a few minutes drive to Browns bay, Long bay, Albany, quite strategic)
Lets say if I paid up $100k of my mortgage to bring in down to $200K mortgage, I would only have $100k cash left for a deposit? That wouldn't be much isn't it?
How could I buy more than 1 rental?
Mortgage: $200k; CV $850k
Cash: $100k ($50k in reserve)
RC: $90k
Apply for more Revolving Credit? (How much? I have never applied one before. the current RC is because of the home loan)

I bank with ASB, BNZ and TSB - all the three banks love me. My mortgage is with ASB. They are happy to discuss Revolving Credit, but I have never applied for $300k before, just $90k at the moment (part of the home loan). It is not used at the moment. what is the max I should apply for using the equity from my home ($650k)?
Tx x

[Damap]

Talk to a decent investment broker then. You haven't had any real advisors talk to you by the sounds of it. It really is worth sitting down and getting things sorted in your head with someone who knows what they are talking about.
I am sure someone will recommend somebody good to talk to. I am a little out of touch these days with brokers.

[evie]

Thank you Damap - I will wait and hope someone can recommend someone decent.
I tried to ring Roy Fung (I think that is his name) last year, but no luck - so I "KIV"it and just got stuck into work....

[PTILoveYou]

Evie, you should really pay down the other $100k mortgage...

Your deposit will then come out of the RC, that's why you need $300k, if not more (but too much will reduce your borrowing power). Your RC should be enough to fund the 20% deposit for a rental plus any renovation money required, and add a little like $50k as contigency money. The advantage of this is you pay no interest rate when you don't use your RC, and only pay interest when you have purchased. If you use the same bank, you can even buy 100% financed using the equity from your existing home. So you don't need to use cash for deposit in your situation.

I would suggest buying something that's not very expensive atm, like an unit or a half section stand alone house in the shore, probably west of the motorway like Glenfield or Birkdale where it's still comparably affordable.

You will need to top up the mortgage though, you won't find any cashflow properties in the shore these days, not even central & east auckland.

But the main thing is just get started and take advantage of the remaining increases during this boom.

If you want a property that covers itself while lending on 100% purchase price, you will probably looking for rentals in poor social economic areas, and you need to do a lot of home work to invest in those areas.

[PTILoveYou]

Thank you Damap - I will wait and hope someone can recommend someone decent.
I tried to ring Roy Fung (I think that is his name) last year, but no luck - so I "KIV"it and just got stuck into work....

Ron Hoy Fong you mean? You need to call & text him multiple times if you really want to speak to him, he's a busy man! (he's driving a lot of the time).

[Damap]

If they are still around contact Kris Pedersen or one of his team or Tina Webb. They are both good brokers who are also investors and can help you sort RC's etc.

[evie]

Hi Gary - so use the $200K cash and pay down the mortgage of $350k to $150k..

Mortgage: $150k; CV $850k (equity $700k)
Cash: $0 (reserve $50k)
RC: $90k increase to $300k

Does the above look right?
Is it about "having cash & average mortgage" versus ""No cash & low mortgage"- or is it basic 101 to practice "no cash & low mortgage"

I have a preapproval at the moment for $650k.... I have not done anything to it.

[PTILoveYou]

Mortgage: $100k; CV $850k (equity $750k)
Cash: $0 (reserve $0k, your RC is your reserve!)
RC: $90k increase to $350k (add $50k just for reserve)

I think it's all about having a mortgage level where your personal income via job/business and your rental income are a level that you are comfortable with and not impacting on the quality of life, but also recession proof, ie not paying too much in mortgage interest out of your own pocket.

If you don't want to top up the mortgage on your rentals, then you have to buy high cashflow properties like West or South auckland. If you don't mind topping up a little, say $50-100/week, then buy in the average working class suburbs with better capital gain.

At this market unfortunately it's very hard to get started, everything feels expensive and no good deals around, but it's always better to have rental properties than have none. Hope this makes sense lol

As for mortgage, keep your personal mortgage as low as possible, and maximise the mortgage on your rentals, but not exceeding 100% of purchase price.

[evie]

Yes - I can imagine that he is busy!
I don't want millions lol lol ... just wanting to know what best to do with my position to achieve my goal.

[evie]

If they are still around contact Kris Pedersen or one of his team or Tina Webb. They are both good brokers who are also investors and can help you sort RC's etc.

OK I will try them. Thank you....!
I am not intending to be a slum lord or wanting to have $2M lol lol
I would just like to be self sufficient, and not depend on govt help when I am ill or "old"

[PTILoveYou]

OK I will try them. Thank you....!
I am not intending to be a slum lord or wanting to have $2M lol lol
I would just like to be self sufficient, and not depend on govt help when I am ill or "old"

It's not very hard, an easy way is buy 4 rentals, wait 10-20 years when they double, sell down 2, and have 2 freehold properties giving you say $900-1000/week gross income.

Right now you want to have 1 or 2 properties, get yourself in the door, and position yourself when the next slump comes, that's when you start buying more when the market conditions are more favourable like 2000-2003 & 2008-2011!

[evie]

Ron Hoy Fong you mean? You need to call & text him multiple times if you really want to speak to him, he's a busy man! (he's driving a lot of the time).

Yes - I can imagine that he is busy!
I don't want millions lol lol ... just wanting to know what best to do with my position to achieve my goal.